2016 Annual Report & Proxy Statement
Vicor Corporation
25 Frontage Road
Andover, MA 01810 USA
978.470.2900
vicorpower.com
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VCRCM-AR-17
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Financial Highlights 2012 - 2016 (In thousands, except per share amounts)
2012
2013
2014
2015
2016
Net Revenues
$218,507
$199,160
$225,731
$220,194
$220,280
Loss from Operations
(2,785)
(20,467)
(14,763)
(267)
(6,314)
Net Income (Loss)
Attributable to Vicor Corporation
Net Income (Loss) Per Share
Attributable to Vicor Corporation
Weighted Average Shares
Working Capital
Total Assets
Total Liabilities
Total Equity
(4,077)
(23,640)
(13,887)
4,927
(6,247)
$(0.10)
$(0.60)
$(0.36)
$0.13
$(0.16)
41,811
$128,498
202,581
20,608
39,195
$97,869
165,640
23,303
38,569
$90,321
155,542
24,990
39,146
$94,905
157,545
21,460
38,842
$89,545
154,067
23,050
$181,973
$142,337
$130,552
$136,085
$131,017
Return on Average Equity
(2.2%)
(14.6%)
(10.2%)
3.7%
(4.7%)
Vicor’s Value Proposition =
Customers’ Competitive Advantage
At Vicor, we enable customers to effi ciently
convert and manage power from the wall
plug to point-of-load. We master the entire
power chain with a comprehensive portfolio
of high-effi ciency, high-density, power
distribution architectures addressing a broad
range of performance-critical applications.
Vicor’s approach gives power system architects
the fl exibility to choose from modular,
plug-and-play components ranging from bricks
to semiconductor-centric solutions.
By integrating our world-class manufacturing
and applications development, we can quickly
customize our power components to meet a
customer’s unique power system needs.
Vicor Corporation designs, manufactures
and markets innovative, high performance
modular power components, from bricks
to semiconductor-centric solutions, to enable
customers to effi ciently convert and manage
power from the wall plug to the point-of-load.
Complementing an extensive portfolio of
patented innovations in power conversion
and power distribution with signifi cant
application development expertise, Vicor off ers
comprehensive product lines addressing a broad
range of power conversion and management
requirements across all power distribution
architectures, including Centralized Power
Architectures, Distributed Power Architectures,
Intermediate Bus Architectures, Factorized Power
Architectures and Controlled Bus Architectures.
Vicor focuses on solutions for performance-
critical applications in the following markets:
aerospace and defense electronics, enterprise
and high performance computing, industrial
equipment and automation, telecommunications
and network infrastructure, and vehicles and
transportation.
This report contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). The words “believes,” “expects,” “antic-
ipates,” “intend,” “estimate,” “plans,” “assumes,” “may,” “will,” “would,” “should,” “con-
tinue,” “prospective,” “project,” and other similar expressions identify forward-look-
ing statements. Forward-looking statements also include statements regarding: the
transition of our business strategically and organizationally from serving a large
number of relatively low volume customers across diversifi ed markets and geog-
raphies to serving a small number of relatively large volume customers, typically
concentrated in computing and communications; the level of customer orders over-
all and, in particular, from large customers and the delivery lead times associated
therewith; the fi nancial and operational impact of customer changes to shipping
schedules; the derivation of a portion of our sales in each quarter from orders booked
in the same quarter; our ongoing development of power conversion architectures,
switching topologies, packaging technologies, and products; our plans to invest in
expanded manufacturing capacity and the timing and location thereof; our con-
tinued success depending in part on our ability to attract and retain qualifi ed per-
sonnel; our belief cash generated from operations and the total of our cash and cash
equivalents will be suffi cient to fund operations for the foreseeable future; our belief
that we have limited exposure to currency risks; our intentions regarding the decla-
ration and payment of cash dividends; our intentions regarding protecting our rights
under our patents; and our expectation that no current litigation or claims will have
a material adverse impact on our fi nancial position or results of operations. These
statements are based upon our current expectations and estimates as to the prospec-
tive events and circumstances that may or may not be within our control and as to
which there can be no assurance. Actual results could diff er materially from those
implied by forward-looking statements as a result of various factors, including our
ability to: develop and market new products and technologies cost eff ectively and
on a timely basis; leverage our new technologies in standard products to promote
market acceptance of our approach to power system architecture; leverage design
wins into increased product sales; continue to meet requirements of key customers
and prospects; enter into licensing agreements increasing our market opportunity
and accelerating market penetration; realize signifi cant royalties under such licens-
ing agreements; achieve sustainable bookings rates for our products across served
markets and geographies; improve manufacturing and operating effi ciencies; suc-
cessfully enforce our intellectual property rights; successfully defend outstanding
litigation; hire and retain key personnel; and maintain an eff ective system of internal
controls over fi nancial reporting, as well as those matters described in the Compa-
ny’s Annual Report on Form 10-K. You should read the risk factors that are set forth
in the Company’s most recent Form 10-K, presented herein. However, the risk factors
set forth may not be exhaustive. Therefore, the information in the Form 10-K should
be read together with other reports and documents that the Company fi les with the
Securities and Exchange Commission (the “SEC”) from time to time, including the
Company’s Forms 10-Q and 8-K and Proxy Statements, which may supplement,
modify, supersede or update those risk factors. Copies of the Company’s recent SEC
fi lings may be obtained without charge by contacting Investor Relations or through
the Investor Relations section of the Company’s website at vicorpower.com under
the section titled “SEC Filings”. The Company does not undertake any obligation to
update any forward-looking statements as a result of future events or developments,
except as required by law.
Corporate Officers
Sean Crilly
Corporate Vice President, Engineering, Power Systems
Philip D. Davies
Corporate Vice President, Global Sales and Marketing
Nancy L. Grava
Corporate Vice President, Human Resources
Alex Gusinov
Corporate Vice President, Engineering, Power Components
Joseph A. Jeff ery, Jr.
Corporate Vice President, Chief Information Offi cer
Michael S. McNamara
Corporate Vice President, General Manager, Operations
Richard J. Nagel, Jr.
Corporate Vice President, Chief Accounting Offi cer
James A. Simms
Corporate Vice President, Chief Financial Offi cer,
Treasurer, & Secretary
Claudio Tuozzolo
Corporate Vice President & President, Picor Corporation
Patrizio Vinciarelli, Ph.D.
Chairman of the Board, President & Chief Executive Offi cer
Board of Directors
Samuel J. Anderson
Chairman of the Board, President & Chief Executive Offi cer
IceMOS Technology Corporation
Jason L. Carlson
Chief Executive Offi cer
congatec, AG
Estia J. Eichten, Ph.D.
Senior Scientist
Fermi National Accelerator Laboratory
Liam K. Griffi n
President & Chief Executive Offi cer
Skyworks Solutions, Inc.
Common Stock
Vicor shares are traded on the NASDAQ Stock Market®
under the symbol “VICR”.
Transfer Agent
Computershare Trust Company NA
College Station, Texas, 1.877.282.1169
Counsel
Foley & Lardner LLP
Boston, Massachusetts
Auditors
KPMG LLP
Boston, Massachusetts
H. Allen Henderson
Retired and Former Corporate Vice President & President, VLT, Inc.
Barry Kelleher
Retired and Former Corporate Vice President & President,
Brick Business Unit
David T. Riddiford
Private Investor
James A. Simms
Corporate Vice President, Chief Financial Offi cer,
Treasurer, & Secretary
Claudio Tuozzolo
Corporate Vice President & President, Picor Corporation
Patrizio Vinciarelli, Ph.D.
Chairman of the Board, President & Chief Executive Offi cer
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Dear Stockholder:
You are cordially invited to attend the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) of
Vicor Corporation (the “Corporation”). The Annual Meeting will be held at the following date, time, and
location:
May 1, 2017
DATE:
TIME:
PLACE: Offices of Foley & Lardner LLP
Friday, June 16, 2017
9:00 a.m.
111 Huntington Avenue
Boston, Massachusetts 02199
The attached Notice of Annual Meeting and Proxy Statement cover the formal business of the Annual
Meeting and contain a discussion of the matters to be voted upon at the Annual Meeting. At the Annual Meeting,
the Corporation’s management also will report on the operations of the Corporation and be available to respond
to appropriate questions from stockholders.
We hope you will be able to attend the Annual Meeting, but in any event we would appreciate your
completing, dating, signing, and returning your Proxy Card(s) as promptly as possible. If you attend the Annual
Meeting and wish to vote your shares in person, you may revoke your proxy at that time.
Sincerely yours,
PATRIZIO VINCIARELLI
Chairman of the Board, President and
Chief Executive Officer
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VICOR CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, JUNE 16, 2017
NOTICE IS HEREBY GIVEN that the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) of
Vicor Corporation, a Delaware corporation (the “Corporation”), will be held on Friday, June 16, 2017, at 9:00
a.m., local time, at the offices of Foley & Lardner LLP, 111 Huntington Avenue, Boston, Massachusetts 02199,
for the following purposes:
1. To fix the number of Directors at nine and to elect the nine nominees named in the attached proxy
statement as Directors to hold office until the 2018 Annual Meeting of Stockholders and until their
respective successors are duly elected and qualified.
2. To hold an advisory vote on compensation of the Corporation’s named executive officers.
3. To hold an advisory vote on the frequency of stockholder votes on executive compensation.
4. To approve the amendment and restatement of the Vicor Corporation Amended and Restated 2000
Stock Option and Incentive Plan to increase the number of shares of common stock available for issuance
thereunder from 4,000,000 to 10,000,000 shares.
5. To approve the VI Chip Corporation Amended and Restated 2007 Stock Option and Incentive Plan.
6. To approve the Picor Corporation Amended and Restated 2001 Stock Option and Incentive Plan.
7. To approve the Vicor Corporation 2017 Employee Stock Purchase Plan.
8. To consider and act upon any other matters that may be properly brought before the Annual
Meeting and at any adjournments or postponements thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on the date specified above, or on
any date or dates to which, by original or later adjournment, the Annual Meeting may be adjourned or to which
the Annual Meeting may be postponed.
The Board of Directors has fixed the close of business on April 28, 2017, as the record date for determining
the stockholders entitled to receive notice of and to vote at the Annual Meeting and any adjournments or
postponements thereof. Only stockholders of record at the close of business on April 28, 2017 will be entitled to
receive notice of and to vote at the Annual Meeting and any adjournments or postponements thereof.
You are requested to authorize a proxy to vote your shares by completing, dating, and signing the enclosed
Proxy Card(s), which is being solicited by the Board of Directors, and by mailing it promptly in the enclosed
postage-prepaid envelope. Any proxy may be revoked by delivering a written revocation to the Corporation’s
Secretary stating that the proxy is revoked or by delivery of a properly executed, later dated proxy. Stockholders
of record who attend the Annual Meeting may vote in person by notifying our Corporate Secretary, even if they
have previously delivered a signed Proxy Card.
By Order of the Board of Directors
Andover, Massachusetts
May 1, 2017
James A. Simms
Corporate Secretary
Whether or not you plan to attend the Annual Meeting, please complete, sign, date, and
promptly return the enclosed Proxy Card(s) in the enclosed postage-prepaid envelope as
soon as possible. If you attend the Annual Meeting, you may vote your shares in person if
you wish, even if you have previously returned your Proxy Card.
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VICOR CORPORATION
25 FRONTAGE ROAD
ANDOVER, MASSACHUSETTS 01810
TELEPHONE (978) 470-2900
PROXY STATEMENT
FOR THE 2017 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, JUNE 16, 2017
May 1, 2017
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors
(the “Board” and each member thereof being a “Director”) of Vicor Corporation (the “Corporation”) from
owners of the outstanding shares of capital stock of the Corporation (the “Stockholders”, or as an individual, a
“Stockholder”) for use at the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) of the Corporation
to be held on Friday, June 16, 2017, at 9:00 a.m., local time, at the offices of Foley & Lardner LLP, 111
Huntington Avenue, Boston, Massachusetts 02199, and at any adjournments or postponements thereof. At the
Annual Meeting, Stockholders will be asked to consider and vote on the proposals set forth in this Proxy
Statement and to consider and act on any matters that may be properly brought before the Annual Meeting and at
any adjournments or postponements thereof.
In this Proxy Statement, we refer to Vicor Corporation as “Vicor,” “the Corporation,” “we,” “us,” or “our.”
In addition, the term “Proxy Solicitation Materials” includes this Proxy Statement, the Notice of Annual Meeting,
and the Proxy Cards.
The Proxy Solicitation Materials are first being sent to Stockholders of record on or about May 8, 2017. The
Board has fixed the close of business on April 28, 2017 as the record date for the determination of Stockholders
entitled to receive notice of and to vote at the Annual Meeting (the “Record Date”). Only Stockholders of record
at the close of business on the Record Date will be entitled to receive notice of and to vote at the Annual
Meeting.
As of March 31, 2017, there were 27,346,172 shares of Common Stock and 11,758,218 shares of Class B
Common Stock of the Corporation outstanding and entitled to vote. Each share of Common Stock entitles the
holder thereof to one vote per share (for an aggregate of 27,346,172 votes), and each share of Class B Common
Stock entitles the holder thereof to 10 votes per share (for an aggregate of 117,582,180 votes). Shares of
Common Stock and Class B Common Stock will vote together as a single class, reflecting their respective
voting entitlement, on each proposal at the Annual Meeting.
Stockholders are requested to complete, date, sign, and return the accompanying Proxy Card(s) in the
enclosed postage-prepaid envelope. Shares represented by a properly executed Proxy Card received prior to the
vote at the Annual Meeting and not revoked will be voted at the Annual Meeting as directed on the Proxy Card.
If a properly executed Proxy Card is submitted and no instructions are given, the shares so represented will be
voted FOR each of the Director nominees, FOR an advisory vote on executive compensation every three years
and FOR each of the other proposals set forth in this Proxy Statement. We do not anticipate any matters other
than those set forth in this Proxy Statement will be presented at the Annual Meeting. If other matters are properly
presented, proxies will be voted in accordance with the discretion of the proxy holders.
A Stockholder of record may revoke a proxy at any time before it has been exercised by: (1) delivering a
written revocation to our Corporate Secretary, James A. Simms, at the address of the Corporation set forth above;
(2) filing a duly executed Proxy Card bearing a later date; or (3) appearing in person, notifying the Corporate
Secretary of such revocation, and voting by ballot at the Annual Meeting. Any Stockholder of record as of the
Record Date attending the Annual Meeting may vote in person whether or not a proxy has been previously
submitted, but the presence (without further action) of a Stockholder at the Annual Meeting will not constitute
revocation of a previously submitted proxy.
The presence, in person or by proxy, of Stockholders representing a majority in interest of all capital stock
issued, outstanding, and entitled to vote at the Annual Meeting shall constitute a quorum for the transaction of
business at the Annual Meeting. Because of his ownership of shares of Class B Common Stock and shares of
Common Stock, representing 82.6% of the total voting shares, a quorum is assured by the presence of
Dr. Patrizio Vinciarelli, Chairman of the Board, President, and Chief Executive Officer, who will preside over
the Annual Meeting. Shares that reflect abstentions or “broker non-votes” (i.e., shares held by investment
brokerage firms or other nominees that are represented at the Annual Meeting, but, as to which, such brokers or
nominees have not received instructions from the beneficial owners or persons entitled to vote such shares and,
with respect to one or more but not all matters, such brokers or nominees do not have discretionary voting power
to vote such shares) will be counted for purposes of determining whether a quorum is present for the transaction
of business at the Annual Meeting.
The cost of solicitation of proxies in the form enclosed herewith will be borne by the Corporation. In
addition to the solicitation of proxies by mail, Directors, officers, and employees of the Corporation also may
solicit proxies personally or by telephone, e-mail, or other form of electronic communication without special
compensation for such activities. The Corporation also will request those holding shares in their names or in the
names of their nominees that are beneficially owned by others to forward proxy materials to and obtain proxies
from such beneficial owners. The Corporation will reimburse such holders for their reasonable expenses in
connection therewith.
The Corporation’s 2016 Annual Report (the “Annual Report”), including financial statements for the fiscal
year ended December 31, 2016, will be mailed to Stockholders concurrently with this Proxy Statement. The
Annual Report, however, is not part of the Proxy Solicitation Materials. The Corporation and certain
intermediaries (e.g., banks, brokers, and nominees) may deliver only one copy of the Annual Report and Proxy
Solicitation Materials to Stockholders sharing an address. The Corporation will deliver promptly, upon written or
oral request, a separate copy of the Annual Report or Proxy Solicitation Materials, as applicable, to a Stockholder
at a shared address. In order to receive such a separate document, please contact our Corporate Secretary,
Mr. Simms, at the address of the Corporation set forth above. If Stockholders sharing an address (i) currently
receive a single copy of the Annual Report and Proxy Solicitation Materials and wish to receive separate copies
of such materials in the future or (ii) currently receive separate copies of the Annual Report and Proxy
Solicitation Materials and wish to receive a single copy of such materials in the future, please contact
Mr. Simms, our Corporate Secretary, or the applicable intermediary, as the case may be.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING TO BE HELD ON JUNE 16, 2017:
The Proxy Solicitation Materials and Annual Report are available at www.vicorpower.com.
PROPOSAL ONE
ELECTION OF NINE DIRECTORS
In accordance with the requirements of the Corporation’s By-Laws, the Board recommends the number of
Directors be fixed at nine and has nominated all of the Nominees named below for election to the Board. Each of
the nine Nominees presently serves as a Director. Mr. Riddiford, a current independent Director, informed the
Board he would not stand for re-election at the Annual Meeting following his 33 years of service to the
2
Corporation. Accordingly, Mr. Riddiford will cease his service as a Director and as a member of the Audit
Committee and the Compensation Committee following the election of directors at the 2017 Annual Meeting.
After consideration of a number of factors, the Board concluded the vacancy that would be created due to
Mr. Riddiford’s pending retirement would not be filled, and the number of Directors would be reduced at the
Annual Meeting to nine from 10.
If elected, each Nominee will serve until the 2018 Annual Meeting of Stockholders and until his respective
successor is duly elected and qualified or until his death, resignation, or removal. Properly executed Proxy Cards
will be voted FOR the Nominees unless otherwise specified. Each Nominee has consented to stand for election
and the Board anticipates each of the Nominees, if elected, will serve as a Director.
However, if any person nominated by the Board is unable to serve or, for good cause, will not serve, proxies
solicited hereby will be voted for the election of another person designated by the Board, if one is nominated.
A plurality of the votes cast for a Nominee by the Stockholders of Common Stock and Class B Common
Stock, voting together as a single class, shall elect such Nominee. Accordingly, abstentions, broker non-votes,
and votes withheld from any Nominee will have no effect on this proposal. There is no cumulative voting.
Because the number of incumbent Directors standing for reelection (i.e., nine) is equal to the number of
Nominees, and the Corporation’s By-Laws provide for election by plurality, any number of votes cast for a
Nominee assures that Nominee of election as a Director. Dr. Vinciarelli beneficially owned, as of March 31,
2017, 9,828,272 shares of Common Stock and 11,023,648 shares of Class B Common Stock, together
representing 82.6% of the voting power of the outstanding stock of the Corporation, sufficient to elect each of the
Nominees named below. He has stated an intention to vote in favor of fixing the number of Directors at nine and
in favor of the election of all Nominees.
Information Regarding Nominees and Qualifications
The following sets forth certain information as of March 31, 2017, with respect to the nine Nominees for
election to the Board. The information presented includes information each Director has provided us about age,
all positions held, principal occupation and business experience for the past five years, and the names of other
publicly-held companies for which the Director currently serves as a director or has served as a director during
the past five years. In addition to the information presented below regarding each Nominee’s specific experience,
qualifications, and skills that led the Board as a whole to conclude the Nominee possessed the necessary
attributes to serve as a Director. In addition to the experience, qualifications and skills of each Director, the
Board as a whole also considers each Nominee’s reputation for integrity, honesty, and adherence to high ethical
standards.
Information regarding the beneficial ownership of shares of the capital stock of the Corporation by such
persons is set forth in the section of this Proxy Statement entitled “Principal and Management Stockholders.” See
also “Certain Relationships and Related Transactions.” There is no family relationship among any of the
Directors and/or executive officers of the Corporation.
Nominee
Director
Since
Age
Patrizio Vinciarelli
. . . . . . . . . .
70
1981
Background and Qualifications
Dr. Vinciarelli founded the Corporation in 1981 and has been
Chairman of the Board, President, and Chief Executive Officer
since that time. Prior to founding the Corporation, from 1977
until 1980, he was a Fellow at the Institute for Advanced Study
in Princeton, New Jersey. From 1973 through 1976, he was a
Fellow at the European Organization for Nuclear Research
(CERN), in Meyrin, Switzerland. Dr. Vinciarelli received his
doctorate in Physics from the University of Rome, Italy.
Dr. Vinciarelli holds more than 100 patents for power
conversion technology.
3
Nominee
Director
Since
Age
Background and Qualifications
Estia J. Eichten . . . . . . . . . . . . .
70
1981
Barry Kelleher . . . . . . . . . . . . . .
68
1999
Dr. Vinciarelli is qualified to serve on our Board given his role as
the Corporation’s founder, President, and Chief Executive
Officer, his role in the development of our patents and proprietary
technologies and the design of our products, and his standing as a
leading innovator in the power conversion industry.
Dr. Eichten, an early investor who contributed to the founding
of the Corporation, has held various positions with the Fermi
National Accelerator Laboratory since 1981, being named a
Senior Scientist in 1989. Earlier, he had been an Associate
Professor of Physics at Harvard University. Dr. Eichten
received both his B.S. and Ph.D. in Physics from the
Massachusetts Institute of Technology. He has been an Alfred
P. Sloan Foundation Research Fellow and currently is a Fellow
of the American Physical Society and the American
Association for the Advancement of Science. In 2011,
Dr. Eichten and three collaborators were awarded the
prestigious J. J. Sakurai Prize for Theoretical Particle Physics
in acknowledgement of outstanding achievement in particle
physics theory. While a Director of the Corporation, he has
served since July 2000 as a Director of VLT, Inc., a wholly-
owned subsidiary of the Corporation, which owns a majority
of the Corporation’s patents.
Dr. Eichten’s qualifications to serve on our Board include his
extensive knowledge of electronics and power conversion, as
well as the deep understanding of our products and
organization acquired in his 36 years of service as a Director.
Mr. Kelleher retired from the Corporation effective
December 31, 2016 after 23 years of service but continues to
serve as a Director following his retirement as an employee.
Until his retirement, Mr. Kelleher had served as the President
of the Corporation’s Brick Business Unit since 2006.
Mr. Kelleher previously served as Senior Vice President,
Global Operations, and General Manager of the Corporation’s
Brick Business Unit (from 2005 to 2006), Senior Vice
President, Global Operations (from 1999 to 2005), and Senior
Vice President, International Operations (from 1993 to 1999).
From 1981 until joining the Corporation in 1993, Mr. Kelleher
was employed by Computer Products Inc., a manufacturer of
power conversion products, where he held the position of
Corporate Vice President and President of the Power
Conversion Group. He received B.Eng. and M.B.A. degrees
from University College Cork and University College Dublin,
respectively.
Mr. Kelleher’s qualifications to serve on our Board include his
long-standing tenure as a senior executive in the power
conversion industry, his prior leadership role in the
Corporation, and his considerable experience in power
industry sales and operations management.
4
Nominee
Director
Since
Age
Samuel J. Anderson . . . . . . . . .
60
2001
Claudio Tuozzolo . . . . . . . . . . .
54
2007
James A. Simms . . . . . . . . . . . .
57
2008
Background and Qualifications
Mr. Anderson has been the Chairman of the Board, President,
and Chief Executive Officer of IceMOS Technology
Corporation, a privately-held developer and manufacturer of
specialized semiconductor substrates, as well as high voltage
power switching devices utilizing its proprietary technology,
since 2002. Mr. Anderson was the Chairman of the Board,
President, and Chief Executive Officer of Great Wall
Semiconductor Corporation (“GWS”), of which the
Corporation was an owner of non-voting convertible preferred
stock, from 2002 to September 2015, when GWS was acquired
by Intersil Corporation. Previously, Mr. Anderson was Vice
President of Corporate Business Development of ON
Semiconductor Corporation, a supplier of semiconductors
(from 1999 to 2001) and held various positions within the
semiconductor operations of Motorola, Inc., the predecessor
organization (from 1984 to 1999). Mr. Anderson also served,
from 2001 to 2011, as non-executive Chairman of the Board of
Directors of Advanced Analogic Technologies Inc., a supplier
of power management semiconductors, when the company was
acquired by Skyworks Solutions, Inc. Mr. Anderson holds
numerous U.S. patents for semiconductor technologies. He
received an M.S. in Microelectronics from Arizona State
University, an M.S. in Physics from Queen’s University of
Belfast, and a B.S. in Electronics from the University of
Ulster.
Mr. Anderson is qualified to serve on our Board given his
acknowledged technical expertise, understanding of power
conversion technologies, and his experience as an executive
and director of other companies in the semiconductor and
power management industries.
Mr. Tuozzolo has been President of Picor Corporation, a
subsidiary of the Corporation, since 2003. Previously, he had
been Director of Integrated Circuit Engineering for the
Corporation, from February 2003 to November 2003, and
Manager of Integrated Circuit Design, from 2001 to February
2003. Before joining the Corporation in 2001, Mr. Tuozzolo
was a Principal Design Engineer for SIPEX Corporation, from
1999 to 2001. Mr. Tuozzolo has authored nine U.S. patents in
semiconductor design. He attended the University of Rome
and holds B.S. and M.S. degrees in Electrical Engineering
from the University of Rhode Island.
Mr. Tuozzolo is qualified to serve on our Board given his
leadership role within the Corporation, his extensive
experience in the semiconductor and power management
industries, and his technical expertise regarding our products.
Mr. Simms has been our Chief Financial Officer, Treasurer,
and Corporate Secretary since 2008. In 2016, Mr. Simms was
appointed President and Chief Executive Officer of VLT, Inc.,
5
Nominee
Director
Since
Age
Background and Qualifications
Jason L. Carlson . . . . . . . . . . . .
55
2008
a wholly-owned subsidiary of the Corporation that owns a
majority of the Corporation’s patents. From 2007 until 2008,
he was a Managing Director of Needham & Company, LLC,
an investment banking and asset management firm. Previously,
he had served as a Managing Director with the investment
banking firm of Janney Montgomery Scott LLC, a wholly-
owned subsidiary of The Penn Mutual Life Insurance
Company (from 2004 to 2007) and as a Managing Director of
the investment banking firm of Adams, Harkness & Hill, Inc.
(from 1997 to 2004). Mr. Simms served as a member of the
Board of Directors of PAR Technology Corporation (from
2001 to 2014), a publicly-held provider of information
technology solutions in the hospitality and specialty retail
industries and a provider of advanced technology systems and
support services to the United States military and other
governmental agencies. Mr. Simms received a B.A. from the
University of Virginia and an M.B.A. from the University of
Pennsylvania’s Wharton School.
Mr. Simms is qualified to serve on our Board given his prior
career in investment banking, his familiarity with corporate
finance and securities markets, his expertise with complex
financial and regulatory matters, and his experience as a
director of other companies.
Mr. Carlson has been the Chief Executive Officer of congatec
AG, a technology and service provider for embedded
computing solutions, since 2015. Previously, Mr. Carlson was
President and Chief Executive Officer, as well as a member of
the Board of Directors, of QD Vision, Inc., a privately-held
developer of nanomaterial-based solutions for advanced
display and lighting applications, from 2010 to 2015. From
2010 to 2011, Mr. Carlson also served as a member of the
Board of Directors of Advanced Analogic Technologies, Inc.,
a publicly-traded developer of power management
semiconductors, which was acquired by Skyworks Solutions,
Inc. in January 2012. From 2006 until joining QD Vision in
2010, he was President and Chief Executive Officer of Emo
Labs, Inc., a privately-held developer of innovative audio
speaker technology. From 2002 to 2005, Mr. Carlson was
President and Chief Executive Officer of Semtech
Corporation, a publicly-traded vendor of analog and mixed-
signal semiconductors, with an emphasis on power
management applications. From 1999 to 2002, he was Vice
President & General Manager for the Crystal Product Division
and the Consumer Products & Data Acquisition Division of
Cirrus Logic, Inc. a publicly-traded vendor of analog and
mixed-signal semiconductors for consumer and industrial
applications. Mr. Carlson joined Cirrus Logic in 1999 when
that company acquired AudioLogic, Inc., of which he had been
Chief Executive Officer. He began his career as a founder of
6
Nominee
Director
Since
Age
Background and Qualifications
Liam K. Griffin . . . . . . . . . . . . .
50
2009
H. Allen Henderson . . . . . . . . .
69
2014
ReSound Corporation, a pioneering developer of digital
hearing aids, which completed its initial public offering in
1993.
Mr. Carlson’s qualifications to serve on our Board include his
experience as both a public company executive and as an
entrepreneur, his experience as a director of other companies,
his understanding of the evolution of technical innovation in
the semiconductor and power conversion industries, and his
financial expertise. Mr. Carlson has served as Chairman of the
Audit Committee of the Board since joining the Board in 2008.
Mr. Griffin has been President and Chief Executive Officer
and a director of Skyworks Solutions, Inc., a global designer
and manufacturer of a broad portfolio of proprietary analog
semiconductor solutions, most notably for enabling wireless
communications, since May 2016. Prior to his appointment as
Chief Executive and to the Skyworks Solutions Board of
Directors, he had served as President, since 2014. Previously,
Mr. Griffin served as Executive Vice President and Corporate
General Manager from 2012 to 2014, with responsibility for all
of Skyworks Solutions’ business units. Since joining Skyworks
Solutions in 2001, Mr. Griffin previously held the positions of
Executive Vice President and General Manager of High
Performance Analog and Senior Vice President of Sales and
Marketing. Before joining Skyworks Solutions, he was the
Vice President of Worldwide Sales at Dover Corporation and
held product management and process engineering positions at
AT&T’s Microelectronics and Network Systems’ businesses.
Mr. Griffin received B.S. and M.B.A. degrees from the
University of Massachusetts and Boston University,
respectively.
Mr. Griffin’s qualifications to serve on our Board of Directors
include his experience as a public company executive, and in
building and managing sales and marketing organizations in
technology-driven, global organizations.
Mr. Henderson retired from the Corporation in February 2016,
having served in various leadership roles since joining the
Corporation in 1985. He served as a Corporate Vice President
from 1999 until his retirement and was President of our
Westcor Division from 1999 to until its closure in 2014.
Mr. Henderson also served, from 2000 until his retirement, as
President and Chief Executive Officer of VLT, Inc., a wholly-
owned subsidiary of the Corporation that owns a majority of
the Corporation’s patents. Prior to joining the Corporation,
Mr. Henderson was employed at Boschert, Inc., a
manufacturer of power supplies, since 1984, serving as
Director of Marketing. Mr. Henderson received a B.A.E.E.
from Brown University and an M.B.A. from Duke University.
7
Nominee
Director
Since
Age
Background and Qualifications
Mr. Henderson’s qualifications to serve on our Board include
his long-standing leadership role within the Corporation, his
extensive experience in the power conversion industry and
knowledge of our products from his 32 years with the
Corporation.
The Board unanimously recommends a vote FOR fixing the number of Directors at nine and the
election of all of the Nominees.
8
CORPORATE GOVERNANCE
Status as a Controlled Company
As of March 31, 2017, there were 27,346,172 shares of Common Stock and 11,758,218 shares of Class B
Common Stock of the Corporation outstanding and entitled to vote. Our Common Stock is listed for trading on
the NASDAQ Global Select Market (“NASDAQ-GS”) and, as such, we are subject to the listing requirements set
forth in the Marketplace Rules of the NASDAQ Stock Market LLC (the “Nasdaq Rules”). The Corporation is a
“controlled company” in accordance with the governance provisions of the Nasdaq Rules, because
Dr. Vinciarelli, Chairman of the Board, President, and Chief Executive Officer, holds more than 50% of the
voting power of our outstanding capital stock. Accordingly, the Corporation relies on certain exemptions from
corporate governance requirements available to us under the Nasdaq Rules for a controlled company.
Dr. Vinciarelli owned, as of March 31, 2017, 9,828,272 shares of our Common Stock and 11,023,648 shares
of our Class B Common Stock. Each share of Class B Common Stock, which entitles the holder thereof to 10
votes per share, is exchangeable on a one for one basis into a share of Common Stock, which entitles the holder
thereof to one vote per share. As of March 31, 2017, Dr. Vinciarelli owned 35.4% of our Common Stock and
93.7% of our Class B Common Stock, which together represent 82.6% of total voting power, giving him
effective control of our governance.
Because of the Corporation’s status as a controlled company, we are not required to comply with listing
standards requiring a majority of independent Directors on our Board, the determination of the compensation of
our executive officers solely by independent Directors, and the recommendation of nominees for Director solely
by independent Directors. Upon consideration of the independence criteria under the Nasdaq Rules, the Board
has determined that four of our current 10 Directors (Messrs. Carlson, Eichten, Griffin and Riddiford) and three
of our Nominees (Messrs. Carlson, Eichten, and Griffin) are independent as defined by the Nasdaq Rules. As
noted above, Mr. Riddiford will not be standing for re-election to the Board at the 2017 Annual Meeting and his
service as a Director and as a member of the Audit and Compensation Committees will cease following the
election of Directors at the 2017 Annual Meeting.
While we do rely on an exemption, as a controlled company, from the Nasdaq Rules requirement that our
Board be comprised of a majority of independent Directors, the Nasdaq Rules nevertheless require our Board to
have an Audit Committee comprised of no fewer than three Directors, all of whom are independent. The Nasdaq
Rules further require all members of the Audit Committee have the ability to read and fully understand financial
statements and at least one member of the Audit Committee possess financial sophistication (i.e., qualify to be
identified as a “Audit Committee Financial Expert” under Section 407 of the Sarbanes-Oxley Act of 2002).
Messrs. Carlson, Eichten, Griffin and Riddiford each serve on the current Audit Committee, and the Board has
determined each of the members of the current Audit Committee are independent under the Nasdaq Rules and
Messrs. Carlson and Riddiford each qualify as Audit Committee Financial Experts under Section 407 of the
Sarbanes-Oxley Act of 2002. Messrs. Carlson, Eichten, and Griffin are standing for reelection to the Board and,
if reelected, intend to serve as members of the Audit Committee for the coming one-year term.
We rely on an exemption, as a controlled company, from the Nasdaq Rules requirement that the
compensation of our executive officers, including Dr. Vinciarelli, our Chief Executive Officer, be determined
solely by independent Directors. However, all four members of the current Compensation Committee of the
Board, Messrs. Carlson, Eichten, Griffin and Riddiford, are considered independent, and Messrs. Carlson,
Eichten, and Griffin are standing for reelection to the Board and, if reelected, intend to serve as members of the
Compensation Committee for the coming one-year term. The Compensation Committee is solely responsible for
the administration of the Corporation’s stock option plans, with authority delegated by the Board to approve all
recommended stock option awards.
We also rely on an exemption, as a controlled company, from the Nasdaq Rules requirement that the Board
have a standing committee responsible for Director nominations and other governance matters. The Board
9
believes it, as a whole, is in the best position to evaluate potential candidates for nomination as Director and,
therefore, the full Board performs the function of such a committee.
Finally, while we rely on the exemptions from certain Nasdaq Rules requirements described above, we are
not exempt from the requirement that independent Directors have regularly scheduled meetings at which only
independent Directors are present. At each meeting of the Board, the independent Directors conduct such
“executive sessions,” frequently with our outside counsel as an invited guest. In addition, at each meeting of the
Audit Committee, which is comprised solely of the current four independent Directors, the independent Directors
conduct private meetings with representatives of our independent registered public accounting firm, KPMG LLP
(“KPMG”).
The Board and Its Committees
Our Board has two standing committees: the Audit Committee and the Compensation Committee.
The Board held three in-person meetings and acted by written consent in lieu of meetings on three other
occasions during 2016. Each of the Directors attended 75% or more of the total number of meetings of the Board
and meetings of the committees thereof on which each such Director serves. Directors are expected to attend
each year’s Annual Meeting in person unless doing so is impracticable due to unavoidable conflicts. All of the
Directors, except Mr. Griffin, attended the 2016 Annual Meeting of Stockholders.
Information regarding the functions performed by the Audit Committee is set forth in the section of this
Proxy Statement entitled “Report of the Audit Committee.” The Audit Committee is governed by a written
charter, approved by the Board on February 3, 2007, and reviewed each year. As stated above, the Board has
determined all four members of the current Audit Committee are independent under the applicable Nasdaq Rules
and Securities and Exchange Commission (“SEC”) regulations. Messrs. Carlson, Eichten, and Griffin are
standing for reelection to the Board and, if reelected, intend to serve as members of the Audit Committee for the
coming one-year term. As stated above, the Board also has determined Mr. Carlson meets the definition of
“Audit Committee Financial Expert” as defined by Item 407(d) of Regulation S-K. The Audit Committee charter
is posted on the Corporation’s website, www.vicorpower.com, under the heading “About Vicor” and the
subheading “Corporate Governance.” The Audit Committee held six meetings during 2016.
The Compensation Committee is responsible for approving, based on the recommendation of
Dr. Vinciarelli, the compensation for the executive officers of the Corporation, approving all grants of stock
options by the Corporation and its subsidiaries, and administering the Corporation’s stock option plans pursuant
to authority delegated to it by the Board. The Compensation Committee is governed by a written charter,
approved by the Board on October 18, 2013, and subject to review each year. The Compensation Committee held
five meetings during 2016 and acted by written consent in lieu of meeting on 15 other occasions to approve stock
option awards granted during 2016. The Compensation Committee charter is posted on the Corporation’s
website, www.vicorpower.com, under the heading “About Vicor” and the subheading “Corporate Governance”.
Board Leadership and Role in Risk Management
Given the Corporation’s status as a controlled company and Dr. Vinciarelli’s leadership of the Corporation
since its founding, he fulfills both the roles of Chairman of the Board and Chief Executive Officer. As Chairman of
the Board, Dr. Vinciarelli presides over meetings of the Board and, in collaboration with Mr. Simms, in his capacity
as Corporate Secretary, establishes an agenda for each meeting. The Board does not have a lead independent
Director. As Chief Executive Officer, Dr. Vinciarelli is responsible for setting the strategic direction of the
Corporation, the leadership of the organization, and the operational and financial performance of the Corporation.
The Board advises and oversees executive management, which, under Dr. Vinciarelli’s leadership, is
responsible for the day-to-day operations of the Corporation’s affairs. The Board reviews, assesses, and directs our
long-term strategic plans and provides oversight and guidance on all matters influencing the Corporation’s well-
being.
10
The Board has an active role, as a whole and also at the committee level, in overseeing identification,
analysis, and management of the Corporation’s risks. The Board regularly reviews information regarding the
Corporation’s strategy, operations, financial performance and position, and legal and regulatory affairs,
addressing the risks associated with each. Messrs. Kelleher, Simms, and Tuozzolo, in their capacities as former
President of the Brick Business Unit, Chief Financial Officer, and President of Picor Corporation, respectively,
provide first-hand information and insight to the Board regarding all enterprise risks. Mr. Anderson, as the
former Chief Executive Officer of an important supplier to the Corporation, provides valuable external
perspectives on a range of challenges facing the Corporation, including evolving technology and intensifying
competition. The independent Directors, given their breadth of experience and expertise, as well as their
governance responsibilities as the sole members of the Audit Committee and the Compensation Committee,
contribute to an ongoing assessment of the integrity of our financial reporting processes and systems and the
appropriateness and effectiveness of our compensation programs.
While the Board is ultimately responsible for the Corporation’s risk management, the Audit Committee,
comprised of independent Directors, plays a primary and important role in assisting the Board in overseeing such
responsibilities, with particular focus, as mandated by the Sarbanes-Oxley Act of 2002, on the integrity and
effectiveness of the Corporation’s financial reporting processes. The Audit Committee reviews our guidelines
and policies on management of enterprise risks, including assessment and management of the Corporation’s
major financial exposures and management’s monitoring and control of such exposures. At each meeting of the
Audit Committee, members of management, led by Mr. Simms, in his capacity as Chief Financial Officer,
present information addressing issues related to risk identification, analysis, and mitigation. Also at each meeting
of the Audit Committee, the committee members meet privately with representatives of our independent auditors,
KPMG.
In addition to the risk oversight role undertaken by the Audit Committee, the Compensation Committee
assists the Board in overseeing the Corporation’s compensation policies and practices as they relate to the
Corporation’s risk management and risk-taking incentives. The Compensation Committee has determined the
compensation policies and practices for the Corporation’s employees are not reasonably likely to have a material
adverse effect on the Corporation, as the incentives of the Corporation’s compensation programs are believed to
be aligned with our strategic, operational, and financial goals and the interest of our Stockholders.
Upon learning from Mr. Riddiford of his intent to not stand for reelection to the Board, the Board concluded
the Board’s effectiveness in overseeing the identification, analysis, and management of the Corporation’s risks
will not materially change due to Mr. Riddiford’s retirement.
Director Nomination Process
As indicated above, the full Board performs the Director nomination function for the Corporation. The
Board does not have a charter governing the Director nomination process, although it has established Director
nomination procedures setting forth the process for identifying and evaluating Director nominees. The
Corporation’s By-Laws require that our Stockholders approve the number of Directors for the coming year at
each Annual Meeting of Stockholders, although the By-Laws also allow the Board to reduce the number of
Directors in the event of a vacancy on the Board and to increase the number of Directors at any time by majority
vote of the Directors then serving.
Board Membership Criteria — At a minimum, the Board must be satisfied each candidate for nomination
has high personal and professional integrity, has demonstrated exceptional ability and judgment, and is expected,
in the judgment of the Board, to be highly effective, in collaboration with the other nominees to the Board, in
collectively serving the interests of the Corporation and our Stockholders. In addition to the minimum
qualifications set forth above, the Board seeks to select for nomination persons possessing relevant industry or
technical experience and, in order to comply with the Nasdaq Rules regarding independence of Audit Committee
members is maintained, persons meeting the independence requirements of the Nasdaq Rules and SEC
regulations.
11
Identifying and Evaluating Nominees — The Board may solicit recommendations from any sources it deems
appropriate. The Board will evaluate all candidates for nomination in the same manner, evaluating the
qualifications of any recommended candidate and conducting inquiries it deems appropriate, without
discrimination on the basis of race, religion, national origin, sexual orientation, disability, or any other basis. In
identifying and evaluating candidates for nomination, the Board may consider, in addition to the minimum
professional qualifications discussed above and other criteria for Board membership approved by the Board from
time to time, all facts and circumstances it deems appropriate or advisable, including, among other things, the
breadth of experience, geographic representation, and backgrounds of other nominees. Based on these
considerations, the Board may nominate a candidate it believes will, together with the other nominees, best serve
the interests of the Corporation and our Stockholders.
Stockholder Recommendations — The Board’s policy is to review and consider, in accordance with the
procedures described above, any candidates for nomination recommended by Stockholders entitled to vote for the
election of Directors. All Stockholder recommendations of candidates for nomination must be submitted to our
Corporate Secretary, Mr. Simms, at the address of the Corporation set forth above.
All Stockholder recommendations for Director candidates must include the following information:
• the name and address of record of the Stockholder;
• a representation that the Stockholder is a record holder of shares of capital stock of the Corporation
entitled to vote in the election of Directors, or if the Stockholder is not a record holder, evidence of
ownership in accordance with Rule 14a-8(b)(2) promulgated under the Securities Exchange Act of 1934,
as amended, ( the “Exchange Act”);
• the name, age, business and residential address, educational background, current principal occupation or
employment, and principal occupation or employment for the preceding five full fiscal years of the
candidate for nomination;
• a description of the qualifications and background of the candidate for nomination that addresses the
minimum qualifications and other criteria for Board membership approved by the Board from time to
time;
• a description of all arrangements or understandings between the Stockholder and the candidate for
nomination;
• the written consent of the candidate for nomination (a) to be named in the proxy statement relating to the
Corporation’s next annual meeting and (b) to serve as a Director if elected at such annual meeting; and
• any other information regarding the candidate for nomination required to be included in a proxy statement
filed pursuant to the rules of the SEC.
Any stockholder seeking to present a Director nomination at an annual meeting must comply with the notice
procedures in our By-Laws as described herein under “Stockholder Proposals.”
Communications with the Board
If a Stockholder wishes to communicate with any Director or the Board as a whole, he or she may do so by
addressing such communications to:[Name(s) of Director(s)/Board of Directors of Vicor Corporation], c/o James
A. Simms, Corporate Secretary, Vicor Corporation, 25 Frontage Road, Andover, MA 01810. All correspondence
should be sent via certified U.S. mail, return receipt requested. All correspondence received will be forwarded
promptly to the addressee(s).
Code of Business Conduct
The Corporation has established and adopted a Code of Business Conduct. This Code of Business Conduct
is posted on the Corporation’s website, www.vicorpower.com, under the heading “About Vicor” and the
subheading “Corporate Governance”.
12
Executive Officers
Executive officers of the Corporation (designated as our “corporate officers” in accordance with our
By-Laws) are appointed annually by the Board and hold office until the first meeting of the Board following the
next annual meeting of Stockholders and until their successors are elected and qualified, or until their earlier
death, resignation, or removal. The following persons are the Corporation’s executive officers:
Patrizio Vinciarelli, Ph.D., 70, Chairman of the Board, President, and Chief Executive Officer.
Dr. Vinciarelli’s background and experience is contained in the section of the Proxy Statement entitled
“Information Regarding Nominees.”
Sean Crilly, 59, Corporate Vice President, Engineering, Power Systems since June 2015. From December
2012 to May 2015, Mr. Crilly served as Vice President, Engineering, VI Chip. From 2006 to 2012, Mr. Crilly
held the position of Director of Sustaining Engineering, and, from 2000 to 2006, the position of Manager, Test
Engineering. Previously, Mr. Crilly held the positions of Project Manager, from 1996 to 2000, and Senior Test
Engineer, from 1993 to 1996. Prior to joining the Corporation in 1993, Mr. Crilly was Vice President of
Applications Engineering at Intepro Systems, specializing in power electronics test equipment. Earlier, he was
employed in engineering roles at Schaffner and Nixdorf Computer. Mr. Crilly received a B.Eng. in Electronics
from the Limerick Institute of Technology, Limerick, Ireland.
Philip D. Davies, 57, Corporate Vice President, Global Sales and Marketing, since February 2011. Prior to
joining the Corporation, Mr. Davies was employed by the Solid State Light Engine business unit of OSRAM
Sylvania as Business Creation Team Leader from September 2010 to February 2011. From 2006 to 2010,
Mr. Davies held the position of Vice President, Sales and Marketing, with NoblePeak Vision Corporation, a
developer of night vision camera cores. From 1995 to 2006, Mr. Davies served in various positions with Analog
Devices, Inc., a manufacturer of high-performance analog, mixed signal and digital signal processing integrated
circuits, most recently as Director of World Wide Business Development. From 1987 to 1995, Mr. Davies served
in a number of positions with Allegro MicroSystems, Inc., a manufacturer of high-performance power and Hall-
effect sensor integrated circuits, most recently as Vice President, Engineering. Mr. Davies received a B.S.E.E.
and a Masters degree in Power Electronics from the University of Glamorgan.
Nancy L. Grava, 46, Corporate Vice President, Human Resources, since July 2015. From 2009 to June
2015, Ms. Grava held the position of Director, Human Resources. From 2002 to 2009, Ms. Grava held the
position of Senior Manager, Compensation and Benefits and, from 1999 to 2002, the position of Manager,
Compensation and Benefits. Previously, Ms. Grava held various other positions within Human Resources since
joining the Corporation in 1993. Ms. Grava received a B.A. from the Massachusetts School of Liberal Arts and
an M.B.A. from Bentley University.
Alex Gusinov, 53, Corporate Vice President, Engineering, Power Components since June 2015. From 2006
to 2015, Mr. Gusinov served as Vice President of Design Engineering for Picor Corporation. He joined Picor in
2004 as Director of IC Design. Prior to joining Picor, Mr. Gusinov was employed by SIPEX Corporation from
1996 to 2004, most recently as Vice President of Design Engineering, Power Management. From 1986 to 1996,
he was employed by Analog Devices, Inc., developing integrated circuits for telecom, fiber optics, video, and
related applications. Mr. Gusinov received a B.S.E.E. from Boston University and an M.S. in Engineering
Management from Gordon Institute of Tufts University.
Joseph A. Jeffery, Jr., 66, Corporate Vice President and Chief Information Officer since September 2015.
From 2009 to 2015, Mr. Jeffery served as Vice President, Applications Development. From 1999 to 2009,
Mr. Jeffery held the position of Director of Manufacturing Systems. Prior to joining the Corporation, Mr. Jeffery
was employed for 27 years by M/A-COM Technology Solutions, serving in a variety of technical and
management positions in their microwave, millimeter wave semiconductor, and IC business units. Mr. Jeffery
received an Associate’s degree (EEE) from the Wentworth Institute of Technology.
13
Michael S. McNamara, 56, Corporate Vice President, General Manager, Operations, since June 2015.
Mr. McNamara held the positions of Corporate Vice President, Quality and Technical Operations, from May
2011 to May 2015, Vice President, Quality and Technical Operation of the Corporation’s Brick Business Unit
from 2008 to April 2011, Vice President, Quality of the Corporation’s Brick Business Unit from 2006 to 2008,
Senior Director of Quality from 2001 to 2008, Manager of Quality, Data and Analysis from 1999 to 2001 and
Senior Quality Engineer from 1995 to 1999. Prior to joining the Corporation in 1995, Mr. McNamara was
employed by Alpha Industries Inc., the predecessor to Skyworks Solutions, Inc. Mr. McNamara received a B.S.
in Industrial Technology from the University of Lowell.
Richard J. Nagel, Jr., 60, Corporate Vice President, Chief Accounting Officer, since May 2006. From
December 2007 to April 2008, Mr. Nagel also held the position of Interim Chief Financial Officer. From 2005 to
2006, Mr. Nagel held the position of Senior Director, Corporate Controller, and, from 1996 to 2005, Director,
Corporate Controller. Prior to joining the Corporation in 1996, Mr. Nagel was employed by Ernst & Young LLP,
an international public accounting firm, serving in a variety of positions from 1982 to 1996, most recently as
Senior Manager. Mr. Nagel received a B.A. from Amherst College and an M.B.A. from the University of
Rochester.
James A. Simms, 57, Corporate Vice President, Chief Financial Officer, Treasurer, and Corporate Secretary.
Mr. Simms’ background and experience is contained in the section of the Proxy Statement entitled “Information
Regarding Nominees.”
Claudio Tuozzolo, 54, Corporate Vice President and President of Picor Corporation, a subsidiary of the
Corporation. Mr. Tuozzolo’s background and experience is contained in the section of the Proxy Statement
entitled “Information Regarding Nominees.”
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth the beneficial ownership of the Corporation’s Common Stock and Class B
Common Stock held by (1) each person or entity known to the Corporation to be the beneficial owner of more
than five percent of the outstanding shares of either class of the Corporation’s common stock, (2) each Director
and Nominee, (3) each executive officer of the Corporation, and (4) all Directors and executive officers as a
group, in each case based on representations of the Directors and executive officers as of March 31, 2017, and a
review of filings on Schedules 13D and 13G under the Exchange Act. Except as otherwise specified, the named
beneficial owner has sole voting and investment power over the shares set forth opposite such beneficial owner’s
name. The information in the table reflects shares outstanding of each of the two classes of common stock on
March 31, 2017, and does not, except as otherwise indicated below, take into account conversions after such
date, if any, of shares of Class B Common Stock into Common Stock, which, if they were to occur, would
increase the voting control of persons who retain shares of Class B Common Stock.
The percentages shown have been determined as of March 31, 2017, in accordance with Rule 13d-3 under
the Exchange Act, and are based on a total of 39,104,390 shares of common stock that were outstanding on such
date, of which 27,346,172 were shares of Common Stock, entitled to one vote per share, and 11,758,218 were
shares of Class B Common Stock, entitled to 10 votes per share. Each share of Class B Common Stock is
convertible into one share of Common Stock at any time upon the election of the holder thereof.
Pursuant to the provisions of our certificate of incorporation, shares of Class B Common Stock are
transferrable only under the limited circumstances set forth therein and generally must be converted into shares
of Common Stock in order to be sold. Such conversion may be effected by the delivery of the certificate(s)
representing shares of Class B Common Stock, accompanied by a written notice of the election by the record
holder thereof to convert, to either Mr. Simms, in his capacity as Corporate Secretary, c/o Vicor Corporation, 25
Frontage Road, Andover, MA 01810, or to the then-current transfer agent for our Common Stock. Any transfer
14
of shares of Class B Common Stock not permitted under the provisions of our certificate of incorporation will
result in the automatic conversion of those shares of Class B Common Stock into an equal number of shares of
Common Stock.
Total
Number of
Shares Beneficially
Owned(2)(3)
Percent of
Common Stock
Beneficially
Owned
Percent of
Class B
Common Stock
Beneficially
Owned
Percent
of Voting
Power
Name of Beneficial Owner(1)
Patrizio Vinciarelli . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estia J. Eichten . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
James A. Simms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David T. Riddiford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Philip D. Davies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Barry Kelleher
Michael S. McNamara . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Claudio Tuozzolo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jason L. Carlson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
H. Allen Henderson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liam K. Griffin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Joseph A. Jeffery, Jr.
Richard J. Nagel, Jr
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sean Crilly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Samuel J. Anderson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nancy L. Grava . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Directors and executive officers
20,851,920(4)
1,093,067(5)
105,920
104,915(6)
99,704
48,966
39,000
32,943
22,008
17,141
13,008
12,588
10,000
9,720
8,135
7,180
35.4%
1.5%
*
*
*
*
*
*
*
*
*
*
*
*
*
*
38.2%
as a group (16 persons) . . . . . . . . . . . . . . . . . . . . . . . . . .
22,476,215
Ashford Capital Management, Inc.(7)
One Walker’s Mill Road
Wilmington, DE 19807 . . . . . . . . . . . . . . . . . . . . . . . . .
BlackRock, Inc.(8)
1,698,600
6.1%
55 East 52nd Street
New York, NY 10055 . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,941,933
7.0%
* Less than 1%
93.7%
5.9%
*
*
*
*
*
*
*
*
*
*
*
*
*
*
82.6%
5.0%
*
*
*
*
*
*
*
*
*
*
*
*
*
*
99.6%
87.8%
*
*
1.2%
1.3%
(1) The address for each of the beneficial owners named in the table, but not specified therein, is: c/o Vicor
Corporation, 25 Frontage Road, Andover, MA 01810.
(2)
Includes shares issuable upon the exercise of options to purchase Common Stock that are exercisable or will
become exercisable within 60 days of March 31, 2017, in the following amounts:
Name of Beneficial Owner
Philip D. Davies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
James A. Simms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Barry Kelleher . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael S. McNamara . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Claudio Tuozzolo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jason L. Carlson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estia J. Eichten . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David T. Riddiford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
H. Allen Henderson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liam K. Griffin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Joseph A. Jeffery, Jr.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard J. Nagel, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sean Crilly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Samuel J. Anderson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nancy L. Grava . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
99,704
60,920
46,709
39,000
32,943
22,008
17,943
17,943
16,922
13,008
12,040
10,000
9,620
8,135
7,180
15
(3) The calculation of the total number of shares beneficially owned includes 11,023,648 shares of Class B
Common Stock owned by Dr. Vinciarelli and 690,700 shares of Class B Common Stock owned by
Dr. Eichten. No other executive officer, Director or 5.0% stockholder owns shares of Class B Common
Stock.
(4)
(5)
Includes 69,379 shares of Common Stock held by the Patrizio Vinciarelli Irrevocable Trust U/A, of which
Dr. Vinciarelli is a trustee.
Includes 8,750 shares of Common Stock beneficially owned by Dr. Eichten’s spouse. In addition, includes
31,145 shares of Common Stock held by the Belle S. Feinberg Memorial Trust, of which Dr. Eichten is a
trustee.
(6)
Includes 4,500 shares of Common Stock beneficially owned by Mr. Riddiford’s spouse.
(7)
(8)
Information reported is based upon a Schedule 13G filed with the SEC on February 14, 2017, reflecting
holdings as of December 31, 2016. All shares are held by Ashford Capital Management, Inc., which holds
sole voting power and sole dispositive power with regard to 1,698,600 shares.
Information reported is based upon a Schedule 13G filed with the SEC on January 27, 2017, reflecting
holdings as of December 31, 2016. All shares are held by BlackRock, Inc., which holds sole voting power
with regard to 1,917,060 shares and sole dispositive power with regard to 1,941,933 shares.
COMPENSATION DISCUSSION AND ANALYSIS
Philosophy
The primary objective of the Corporation’s compensation programs is to attract, motivate, and retain highly
qualified and productive employees using a combination of cash and equity based rewards intended to motivate
and reward superior performance. Salaries and, in appropriate circumstances, cash bonuses encourage effective
performance relative to current plans and objectives, while stock options may be utilized to attract new
employees, reward outstanding performers, promote longer-term focus, and more closely align the interests of
employees with those of Stockholders.
Stockholder Advisory Vote on Executive Compensation
At the Corporation’s annual meeting of Stockholders held in 2014, Stockholders approved, on an advisory
basis, the compensation of our Named Executive Officers as disclosed in our proxy statement for that annual
meeting (a “Say on Pay” vote). The Compensation Committee believes this affirmed our Stockholders’ support
of the Corporation’s approach to executive compensation and, therefore, did not change its approach during
2016.
At the 2011 annual meeting of Stockholders, Stockholders cast an advisory vote on the frequency of future
Say on Pay votes. The alternative receiving the highest number of votes was a frequency of every three years,
and, in accordance with the outcome of that advisory vote, our Board determined to hold a Say on Pay advisory
vote at the Annual Meeting. Our Board has proposed that Stockholders vote for an advisory vote on executive
compensation every three years, as described in Proposal Three herein.
Overview of Executive Compensation
Dr. Vinciarelli, with input from Ms. Grava, our Corporate Vice President, Human Resources, makes
periodic recommendations to the Compensation Committee with respect to the compensation of executives and
other employees in leadership positions. The Compensation Committee approves the annual salary of
Dr. Vinciarelli and other Named Executive Officers.
16
Potential elements of compensation for our executive officers include: a base salary, cash bonuses, stock
option awards, subsidized participation in group health, disability, and life insurance, cash contributions to a
401(k) tax-qualified retirement saving plan sponsored by the Corporation, and certain perquisites. All employees,
including our Named Executive Officers, are employees-at-will and, as such, do not have employment contracts
with the Corporation. In the future, the Board believes that the Vicor Corporation 2017 Employee Stock Purchase
Plan, referred herein as the “ESPP” (described herein in Proposal Seven), will become an important part of the
Corporation’s overall compensation program, as the ESPP is intended to improve the Corporation’s ability to
attract, retain, and motivate eligible employees, and further align the interests of eligible employees with those of
our Stockholders.
Each component of compensation is described in the following table:
Component
Characteristics/Frequency
Objective
We seek to attract and retain the best
available individual talent. We structure
salaries to provide a fixed amount of annual
compensation reflecting (a) the individual’s
performance, and (b) the performance of the
Corporation and the business unit within
which the individual is employed.
We seek to provide short-term, tangible
motivation for certain senior sales and
marketing personnel to meet objectives,
whether these objectives involve dollar
volumes, market penetration, or other
defined quantitative objectives.
We seek to motivate recipients to contribute
to achieving longer-term performance goals,
potentially contributing to an increase in the
value of the shares underlying the stock
option awards, thereby aligning economic
interests of recipients with Stockholders.
Base Salary
Cash Bonus
(Contingent)
Stock Option
Awards
(Contingent)
Salaries are established for a new hire based
on the qualifications of the individual, the
talents and skills sought for the position, and
the comparable market level of salaries paid
by position and/or geography. Salaries are
reviewed and revised annually, based on the
performance of the individual. Each year a
target percentage for an organization-wide
merit increase in salaries, based on the
Corporation’s performance and an assessment
of increases in the cost of living, is presented
to Dr. Vinciarelli for approval.
Certain senior sales and marketing personnel
are eligible to participate in sales incentive
programs, with cash bonuses paid based on
achievement of various objectives. These
programs generally are structured annually,
with payments made quarterly. The
Corporation does not have a policy regarding
or a program involving discretionary cash
bonuses for personnel outside of the sales or
marketing functions.
We generally award non-qualified stock
options to a new employee upon hiring.
Depending upon the business unit into which
the individual is hired, we award stock options
for the purchase of shares of Vicor
Corporation, VI Chip Corporation, or Picor
Corporation. Certain new hires have been
awarded stock options granted by all three
entities. From time to time, existing
employees will be rewarded for superior
performance through the award of stock
options. The Corporation does not have a
policy regarding or a program involving
discretionary awards of stock options.
17
Component
Characteristics/Frequency
Objective
Fringe
Benefits
Retirement
Benefits
Perquisites
We offer a package of fringe benefits to all
employees, including all Named Executive
Officers, and their dependents, portions of
which are paid for, in whole or in part, by the
employee. The benefits we offer include: life,
health, dental, vision, and long-term care
insurance; disability and workers’
compensation insurance; healthcare
reimbursement accounts; tuition
reimbursement; and paid time off.
The Corporation sponsors a 401(k)
tax-qualified retirement saving plan open to all
employees. In any plan year, the Corporation
will make a matching contribution equal to
50% of the first 3% of the participant’s
compensation that has been contributed to the
plan, up to a maximum matching contribution
of $3,975. Participants received up to $3,975 in
matching funds in 2016 from the Corporation.
All Named Executive Officers, with the
exception of Dr. Vinciarelli, participated in the
401(k) plan and received matching funds. The
Corporation does not provide any nonqualified
defined contribution plans, deferred
compensation plans, retirement health
insurance, or other post-employment benefits.
Executive officers, including all Named
Executive Officers, are eligible to participate in
supplemental health, dental, and vision
insurance, and receive a fixed cash automobile
allowance, as well as reimbursement for fuel
expenses. Amounts associated with automobile
allowances and fuel expense reimbursement are
considered taxable current income by the
recipient.
We seek to provide a competitive package of
benefits addressing the health and welfare
needs of employees, reflecting our overall
compensation philosophy of attracting and
retaining talented individuals.
We seek to provide retirement benefits that
are competitive with other companies of our
size and industry focus, reflecting our overall
compensation philosophy of attracting and
retaining talented individuals.
The limited perquisites we currently offer are
intended to provide benefits to our executives
comparable to those received by executives
of other companies of our size and industry
focus, or, as is the case with automobile
allowances and fuel reimbursement, to
support business purposes.
Stock Option Programs
As described above, discretionary awards of stock options for the purchase of shares of Vicor Corporation,
VI Chip Corporation, and Picor Corporation are a component of our compensation for executives and employees
considered by Dr. Vinciarelli to be important contributors to the Corporation’s success. The Compensation
Committee approves all stock option grants. We generally award a limited number of non-qualified stock options
to a new employee upon hiring. Depending upon the business unit into which the individual is hired, we award
stock options for the purchase of shares of Vicor Corporation, VI Chip Corporation, or Picor Corporation.
Certain new hires have been awarded stock options granted by all three entities. From time to time, existing
employees will be rewarded for superior performance through the award of additional stock options. The
Corporation does not have a policy regarding the composition or frequency of discretionary awards of stock
options or other forms of equity-based compensation.
18
During 2016, 2015, and 2014, options for the purchase of the Corporation’s Common Stock were awarded
under the Vicor Corporation Amended and Restated 2000 Stock Option and Incentive Plan (the “Vicor 2000
Plan”). The exercise price of stock options for the purchase of the Corporation’s Common Stock is set at the
closing price of a share of the Corporation’s Common Stock on NASDAQ-GS on the effective date of the grant.
Generally, these option grants vest evenly each quarter over five years and have a 10-year term.
During 2016, 2015, and 2014, options for the purchase of VI Chip Corporation (“VI Chip”) common stock
were awarded under the VI Chip Corporation Amended 2007 Stock Option and Incentive Plan (the “2007 VI
Chip Plan”). Generally, these option grants vest pro rata over five years and have a 10-year term. All awards
were reviewed and approved by the VI Chip Board of Directors, comprised of Dr. Vinciarelli and Mr. Simms,
and the Corporation’s Compensation Committee. VI Chip stock options are granted at a price not less than the
fair value of a share of VI Chip common stock on the date of grant, with such fair value determined by the VI
Chip Board of Directors and the Corporation’s Compensation Committee, consistent with the valuation
procedural requirements of Section 409A of the Internal Revenue Code.
During 2016, 2015, and 2014, options for the purchase of Picor Corporation (“Picor”) common stock were
awarded under the Picor Corporation Amended and Restated 2001 Stock Option and Incentive Plan (the “2001
Picor Plan”). Generally, these option grants vest pro rata over five years and have a 10-year term. All option
grants were reviewed and approved by the Picor Board of Directors, comprised of Dr. Vinciarelli, Mr. Tuozzolo,
Mr. Simms, and Mr. Andrew Durette, and the Corporation’s Compensation Committee. Picor stock options are
granted at a price not less than the fair value of a share of Picor common stock on the date of grant, with such fair
value determined by the Picor Board of Directors and the Corporation’s Compensation Committee, consistent
with the valuation procedural requirements of Section 409A of the Internal Revenue Code.
19
SUMMARY COMPENSATION TABLE FOR FISCAL 2016
Named
Executive
Officer(1)
Year
Salary(2)
Bonus
Option
Awards(3)
All Other
Compensation(4)
Patrizio Vinciarelli . . . . . . . . . . . . . . . . . . .
Chairman of the Board, President, and
Chief Executive Officer
James A. Simms . . . . . . . . . . . . . . . . . . . . .
Chief Financial Officer, Treasurer,
and Corporate Secretary
2016
2015
2014
2016
2015
2014
Philip D. Davies . . . . . . . . . . . . . . . . . . . . . 2016
2015
2014
Corporate Vice President, Global
Sales and Marketing
Michael S. McNamara . . . . . . . . . . . . . . . .
Corporate Vice President and General
Manager, Operations
Claudio Tuozzolo . . . . . . . . . . . . . . . . . . . .
Corporate Vice President and
President of Picor Corporation
2016
2015
2014
2016
2015
2014
$390,142
390,142
390,142
$ — $
—
—
—
—
—
$53,245
41,188
33,823
341,524
330,494
318,509
309,839
296,021
281,925
283,091
259,979
234,381
344,919
330,504
316,771
—
—
—
23,782
27,278
26,690
—
30,000
—
—
—
—
—
—
— 223,449
—
—
—
—
—
23,782
27,278
26,690
37,357
33,680
35,228
30,775
28,677
23,479
31,103
25,667
20,452
31,227
29,119
24,198
Total
$443,387
431,330
423,965
402,663
391,452
380,427
340,614
354,698
305,404
314,194
509,095
254,833
399,928
386,901
367,659
(1) As defined by Item 402 of Regulation S-K, “Named Executive Officers” are: (a) our principal executive
officer; (b) our principal financial officer; and (c) our three most highly compensated executives (other than
the principal executive officer and principal financial officer) serving as executives at the end of the last
completed fiscal year.
(2) The amounts shown reflect the actual salary amounts paid to the Named Executive Officers in each
respective year.
(3) The amounts shown reflect the aggregate grant date fair value of stock option awards in each year presented.
These values have been determined under the principles used to calculate the grant date fair value of equity
awards for purposes of the Corporation’s financial statements. These amounts do not correspond to the
actual value that may be recognized by each Named Executive Officer. Refer to Note 3, “Stock-Based
Compensation and Employee Benefit Plans,” in the Notes to Consolidated Financial Statements included in
our Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 7, 2017, for the
relevant assumptions used to determine the valuation of the Corporation’s option awards. The amounts
reported under “Option Awards” shown for Messrs. Simms and Tuozzolo, are stock options granted as
compensation for their service on the Corporation’s Board.
During the fourth quarter of 2014, the Corporation cancelled certain stock options previously awarded to
Messrs. Davies and Simms in 2013 and awarded to those executives new stock options representing an
equivalent value, as calculated using the Black-Scholes option-pricing model. In accordance with the
authoritative guidance for share-based compensation under the Financial Accounting Standards Board’s
Accounting Standards Codification Topic 718: Compensation — Stock Compensation, there was no
incremental increase in fair value associated with the New Grants to Messrs. Davies and Simms and
therefore no value is included under “Option Awards” with respect to the New Grants in 2014.
(4) “All Other Compensation” amounts include car allowance, fuel allowance, supplemental health, dental and
vision insurance, the taxable portion of life insurance benefits, and the Corporation’s matching 401(k) plan
contribution for each Named Executive Officer shown. Dr. Vinciarelli’s car allowance is $10,800.
20
Stock Option Plan Information
The following table sets forth certain aggregated information for the Corporation as of December 31, 2016
regarding equity securities underlying stock option awards made under the Vicor 2000 Plan, the 2007 VI Chip
Plan, and the 2001 Picor Plan. All equity compensation plans of the Corporation have been approved by
Stockholders.
Stock options issued under the Vicor 2000 Plan, the 2007 VI Chip Plan, and the 2001 Picor Plan carry a
change in control provision that automatically accelerates vesting and makes unvested options fully exercisable
upon a change of control, as defined in the applicable plan.
Number of Shares to
be Issued Upon Exercise of
Outstanding Stock Options
Weighted-Average
Exercise
Price of Outstanding
Stock Options
Number of Shares
Remaining Available for
Issuance under Stock
Option Plans
Vicor 2000 Plan . . . . . . . . . . . . . . . . . . . . . .
2007 VI Chip Plan . . . . . . . . . . . . . . . . . . . .
2001 Picor Plan . . . . . . . . . . . . . . . . . . . . . .
1,696,222
9,933,750
9,530,987
$8.82
1.00
0.62
923,440
2,059,650
7,654,533
GRANTS OF PLAN-BASED AWARDS FOR FISCAL 2016
The following table presents the Corporation’s grants of plan-based awards to Named Executive Officers
during 2016. All grants to Named Executive Officers during 2016 were under the Vicor 2000 Plan as follows:
Vicor 2000 Plan
Named Executive Officer
Number of
Shares
Underlying
Option
Award
Grant
Date(1)
James A. Simms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Claudio Tuozzolo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6/17/2016
6/17/2016
4,713
4,713
Exercise
Price per
Share of
Option
Award
$10.61
$10.61
Grant
Date Fair
Value of
Option
Award(2)
$23,782
$23,782
(1) The two awards shown were associated with the annual award to Directors, excluding Dr. Vinciarelli, of
non-qualified stock options as compensation for service on the Corporation’s Board of Directors
(2) Refer to Note 3, “Stock-Based Compensation and Employee Benefit Plans,” in the Notes to Consolidated
Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2016,
filed on March 7, 2017, for the relevant assumptions used to determine the valuation of option awards. For
the two awards shown, the formula used to calculate the number of stock options annually awarded to
Directors, excluding Dr. Vinciarelli, is $50,000 divided by the closing price of a share of Common Stock as
reported on the NASDAQ-GS on the day of the Annual Meeting of Stockholders. Accordingly, on June 17,
2016, the two Named Executive Officers who also serve as Directors were awarded non-qualified stock
options to purchase up to 4,713 shares of Common Stock at an exercise price of $10.61 per share.
21
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2016
The following tables present the outstanding equity awards at December 31, 2016 held by our Named
Executive Officers under the Vicor 2000 Plan, the 2007 VI Chip Plan and the 2001 Picor Plan as follows:
Vicor 2000 Plan
Named Executive Officer
Philip D. Davies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael S. McNamara . . . . . . . . . . . . . . . . . . . . . . . . . .
James A. Simms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Claudio Tuozzolo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Shares
Underlying
Unexercised
Options
Exercisable(1)
Number of
Shares
Underlying
Unexercised
Options
Unexercisable(1)(2)
Option
Exercise
Price per
Share
18,000
60,000
15,704
9,000
5,000
5,000
5,000
—
—
5,000
2,000
15,000
37,419
10,000
7,541
1,764
2,486
13,505
746
—
10,000
9,419
5,292
2,486
746
—
12,000
10,000
23,553
6,000
—
—
—
5,000
5,000
20,000
8,000
10,000
18,276
—
—
—
3,726
20,256
2,980
4,713
10,000
6,276
3,527
3,726
2,980
4,713
$ 5.35
6.29
11.42
5.35
6.29
7.34
8.38
9.43
10.48
12.61
9.76
5.35
6.29
7.34
8.38
5.67
8.05
11.42
13.42
10.61
5.35
6.29
5.67
8.05
13.42
10.61
Option
Expiration
Date
5/14/2023
6/17/2023
10/23/2024
5/14/2023
6/17/2023
6/17/2023
6/17/2023
6/17/2023
6/17/2023
2/24/2025
9/2/2025
5/14/2023
6/17/2023
6/17/2023
6/17/2023
6/21/2023
6/20/2024
10/23/2024
6/19/2025
6/17/2026
5/14/2023
6/17/2023
6/21/2023
6/20/2024
6/19/2025
6/17/2026
(1) Generally, stock options with time-based vesting provisions awarded under the Vicor 2000 Plan become
exercisable in five equal annual installments, beginning on the first anniversary of the date of grant.
(2) The unexercisable option vesting schedule under the Vicor 2000 Plan as of December 31, 2016, is as
follows:
Named Executive Officer
Grant Date
Underlying Shares
Vesting Date
Philip D. Davies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5/14/2013
5/14/2013
6/17/2013
10/23/2014
10/23/2014
10/23/2014
6,000
6,000
10,000
7,851
7,851
7,851
5/14/2017
5/14/2018
6/17/2017
10/23/2017
10/23/2018
10/23/2019
22
Named Executive Officer
Grant Date
Underlying Shares
Vesting Date
Michael S. McNamara . . . . . . . . . . . . . . . . . . . . . . . . .
James A. Simms . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Claudio Tuozzolo . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
5/14/2013
5/14/2013
6/17/2013
6/17/2013
2/24/2015
2/24/2015
2/24/2015
2/24/2015
9/2/2015
9/2/2015
9/2/2015
9/2/2015
5/14/2013
5/14/2013
6/17/2013
6/17/2013
6/17/2013
6/17/2013
6/17/2013
6/17/2013
6/17/2013
6/17/2013
6/20/2014
6/20/2014
6/20/2014
10/23/2014
10/23/2014
10/23/2014
6/19/2015
6/19/2015
6/19/2015
6/19/2015
6/17/2016
6/17/2016
6/17/2016
6/17/2016
6/17/2016
5/14/2013
5/14/2013
6/17/2013
6/17/2013
6/17/2013
6/17/2013
6/17/2013
6/17/2013
6/21/2013
6/21/2013
6/20/2014
6/20/2014
6/20/2014
3,000
3,000
5,000
5,000
5,000
5,000
5,000
5,000
2,000
2,000
2,000
2,000
5,000
5,000
6,000
6,000
855
854
639
639
1,645
1,644
1,242
1,242
1,242
6,752
6,752
6,752
745
745
745
745
943
943
943
942
942
5,000
5,000
855
854
1,645
1,644
639
639
1,764
1,763
1,242
1,242
1,242
5/14/2017
5/14/2018
6/17/2017
6/17/2018
2/24/2017
2/24/2018
2/24/2019
2/24/2020
9/2/2017
9/2/2018
9/2/2019
9/2/2020
5/14/2017
5/14/2018
6/17/2017
6/17/2018
6/17/2017
6/17/2018
6/17/2017
6/17/2018
6/17/2017
6/17/2018
6/20/2017
6/20/2018
6/20/2019
10/23/2017
10/23/2018
10/23/2019
6/19/2017
6/19/2018
6/19/2019
6/19/2020
6/17/2017
6/17/2018
6/17/2019
6/17/2020
6/17/2021
5/14/2017
5/14/2018
6/17/2017
6/17/2018
6/17/2017
6/17/2018
6/17/2017
6/17/2018
6/21/2017
6/21/2018
6/20/2017
6/20/2018
6/20/2019
Named Executive Officer
Grant Date
Underlying Shares
Vesting Date
6/19/2015
6/19/2015
6/19/2015
6/19/2015
6/17/2016
6/17/2016
6/17/2016
6/17/2016
6/17/2016
745
745
745
745
943
943
943
942
942
6/19/2017
6/19/2018
6/19/2019
6/19/2020
6/17/2017
6/17/2018
6/17/2019
6/17/2020
6/17/2021
2007 VI Chip Plan
Named Executive Officer
Michael S. McNamara . . . . . . . . . . . . . .
James A. Simms . . . . . . . . . . . . . . . . . . .
Patrizio Vinciarelli . . . . . . . . . . . . . . . . .
Number of
Shares
Underlying
Unexercised
Options
Exercisable(1)
Number of
Shares
Underlying
Unexercised
Options
Unexercisable(1)(2)
25,000
100,000
4,000,000
—
—
—
—
1,500,000
Option
Exercise
Price per
Share
$1.00
1.00
1.00
1.00
Option
Expiration
Date
5/14/2017
12/31/2020
6/4/2017
12/31/2020
(1) Under the 2007 VI Chip Plan, Mr. Simms and Dr. Vinciarelli have been awarded non-qualified stock
options with time-based vesting provisions. Mr. Simms was awarded 100,000 such options in 2010, and
Dr. Vinciarelli was awarded 4,000,000 such options in 2007. Such options possess a 10-year term and
became exercisable over five equal annual installments, beginning on the first anniversary of the date of
grant. Mr. McNamara was awarded 25,000 incentive stock options in 2008. Such options possess a 10-year
term and become exercisable over five equal annual installments.
(2) Under the 2007 VI Chip Plan, Dr. Vinciarelli, in 2010, was awarded 1,500,000 non-qualified stock options
with vesting provisions tied to achievement of certain margin targets by VI Chip. Each quarter, management
assesses the probability such margin targets will be achieved within the term of the options and records
stock-based compensation expense related to such options based on this assessment. However, the margin
targets have not been achieved and, accordingly, no such options have vested.
2001 Picor Plan
Named Executive Officer
James A. Simms . . . . . . . . . . . . . . . . . . . .
Claudio Tuozzolo . . . . . . . . . . . . . . . . . . .
Number of
Shares
Underlying
Unexercised
Options
Exercisable(1)
200,000
125,000
1,329,340
202,596
—
246,400
9,600
Number of
Shares Underlying
Unexercised
Options
Unexercisable(1)(2)
Option
Exercise
Price per
Share
—
—
—
50,648
150,000
369,600
14,400
$0.57
1.01
0.57
0.64
0.88
0.41
0.41
Option
Expiration
Date
11/1/2020
6/12/2018
11/1/2020
6/18/2022
9/13/2023
4/14/2024
9/10/2024
(1) Generally, stock options awarded under the 2001 Picor Plan become exercisable in five equal annual
installments beginning on the first anniversary of the date of grant.
24
(2) The unexercisable option vesting schedule under the 2001 Picor Plan is as follows as of December 31, 2016:
Named Executive Officer
Grant Date
Underlying Shares
Vesting Date
Claudio Tuozzolo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6/18/2012
4/14/2014
4/14/2014
4/14/2014
9/10/2014
9/10/2014
9/10/2014
9/13/2016
9/13/2016
9/13/2016
9/13/2016
9/13/2016
50,648
123,200
123,200
123,200
4,800
4,800
4,800
30,000
30,000
30,000
30,000
30,000
6/18/2017
4/14/2017
4/14/2018
4/14/2019
9/10/2017
9/10/2018
9/10/2019
9/13/2017
9/13/2018
9/13/2019
9/13/2020
9/13/2021
POTENTIAL PAYMENTS UPON TERMINATION, UPON A CHANGE OF CONTROL, AND
UPON TERMINATION FOLLOWING A CHANGE OF CONTROL
As all of our employees are employees-at-will, no amounts become due or payable to any of our executives
upon termination of employment, regardless of whether a change of control has occurred. However, each of the
Vicor 2000 Plan, the 2007 VI Chip Plan, and the 2001 Picor Plan provides that all unvested options thereunder will
become vested and exercisable as of a change of control, as defined in each of the plans. Accordingly, our Named
Executive Officers would have received the amounts set forth below based on the vesting of their unvested options
had a change of control of the Corporation occurred on December 31, 2016. All amounts below relate to unvested
stock options under the Vicor 2000 Plan because, on December 31, 2016, all stock options outstanding under the
2007 VI Chip Plan and the 2001 Picor Plan has an exercise price greater than the fair value of the shares.
Vicor 2000 Plan
Named Executive Officer
Number of Unvested
Options as of
December 31,
2016(1)
Intrinsic Value of
Unvested Options as of
December 31,
2016(2)
Philip D. Davies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael S. McNamara . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
James A. Simms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Claudio Tuozzolo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45,553
44,000
59,951
31,222
$291,775
202,470
385,490
238,487
(1) Excludes unvested options with exercise prices exceeding the market value of the Corporation’s stock as of
December 31, 2016.
(2) Calculated as the aggregate amount by which the fair market value as of December 30, 2016 (the last
business day of 2016) of the shares underlying the unvested options (i.e., the product of the closing price of
a share of Common Stock as reported on the NASDAQ-GS on that date, $15.10, and the number of
unvested options) exceeded the aggregate exercise price of the unvested options as of that date.
Overview of Director Compensation
DIRECTORS’ COMPENSATION FOR FISCAL 2016
The level of compensation of non-employee Directors is reviewed on an annual basis by the Board as a
whole. To determine the appropriateness of the current level of compensation for non-employee Directors, the
Board reviews data from a number of different sources including publicly available data describing director
compensation in peer companies.
25
Non-employee Directors are compensated through a combination of cash payments and awards of options
for the purchase of our Common Stock. Each non-employee Director receives a quarterly retainer of $7,500 for
his or her services. Expenses incurred by non-employee Directors in attending Board and committee meetings are
reimbursed by the Corporation.
Directors who are employees do not receive cash compensation for service on the Board.
Additionally, each Director (including Directors that are employees), other than any Director holding in
excess of 10% of the total number of shares of the capital stock of the Corporation (i.e., Dr. Vinciarelli), receives
an annual grant of non-qualified stock options following the Annual Meeting of Stockholders under the Vicor
2000 Plan. Currently, the formula to calculate the stock option award is $50,000 divided by the closing price of a
share of Common Stock as reported on the NASDAQ-GS on the day of the Annual Meeting of Stockholders.
Accordingly, on June 17, 2016, each Director, other than Dr. Vinciarelli, was awarded non-qualified stock
options to purchase up to 4,713 shares of Common Stock at an exercise price of $10.61 per share. Stock options
granted to Directors as compensation for their service on the Board vest at a rate of 20% per year on each of five
successive anniversaries of the date of award.
The table below reflects Director compensation for fiscal 2016:
Director
Samuel J. Anderson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jason L. Carlson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estia J. Eichten . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liam K. Griffin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
H. Allen Henderson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Barry Kelleher . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David T. Riddiford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Earned
or Paid
in Cash(3)
$30,000
30,000
30,000
30,000
26,465
—
30,000
Option
Awards(1)(2)
Total
Compensation
$23,782
23,782
23,782
23,782
23,782
23,782
23,782
$53,782
53,782
53,782
53,782
50,247
23,782
53,782
(1) These amounts reflect the aggregate grant date fair value of stock option awards granted during 2016. Refer
to Note 3, “Stock-Based Compensation and Employee Benefit Plans”, in the Notes to Consolidated
Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2016,
filed on March 7, 2017, for the relevant assumptions used to determine the valuation of option awards.
(2) Option awards granted to James A. Simms and Claudio Tuozzolo, who are both employees and Directors,
are described in the Summary Compensation Table for Fiscal 2016 and the Grants of Plan-Based Awards
for Fiscal 2016 table.
(3) The cash component of Mr. Henderson’s compensation for 2016 reflects his retirement from the
Corporation in February of that year and his immediate appointment thereafter to the Board. Mr. Kelleher
did not receive Director cash compensation in 2016 as he was an employee of the Corporation for all of
2016.
26
(4) The aggregate grant date fair value and aggregate number of stock options awarded and outstanding as of
December 31, 2016 was as follows:
Name
Samuel J. Anderson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jason L. Carlson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estia J. Eichten . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liam K. Griffin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
H. Allen Henderson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Barry Kelleher . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David T. Riddiford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grant
Date Fair
Value of Stock
Options
Number of
Awards
Outstanding
$101,448
122,979
111,289
167,570
122,232
86,058
111,289
$822,865
29,357
45,941
39,165
45,941
36,378
20,927
39,165
256,874
PROPOSAL TWO
ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS
The Board is requesting non-binding, advisory approval by Stockholders of the compensation of the
Corporation’s Named Executive Officers, as disclosed in this Proxy Statement (referred to as “Say on Pay”),
including the Compensation Discussion and Analysis section (“CD&A”), compensation tables, and
accompanying narrative disclosures.
The primary objective of the Corporation’s compensation programs is to attract, motivate, and retain highly
qualified and productive employees using a combination of cash and equity based rewards intended to motivate
and reward superior performance. Salaries and, in appropriate circumstances, cash bonuses encourage effective
performance relative to current plans and objectives, while stock options may be utilized to attract new
employees, reward outstanding performers, promote longer-term focus, and more closely align the interests of
employees with those of Stockholders. The Board believes the Corporation’s approach to compensation provides
appropriate incentives and is aligned with profitable execution of our strategy and long-term financial and
operational goals.
The Compensation Committee has approved the compensation of our Named Executive Officers, and the
description thereof, as described herein.
Because this vote is advisory, its outcome will not be binding upon the Compensation Committee or the
Corporation. However, the Compensation Committee will take the outcome of the vote into account when
making future decisions regarding executive compensation. The affirmative vote of a majority in voting power of
the Common Stock and Class B Common Stock casting a vote on the proposal, voting together as a single class is
required to approve this proposal.
The Board unanimously recommends a vote FOR approval of the compensation paid to the
Corporation’s Named Executive Officers, as disclosed in this Proxy Statement pursuant to Item 402 of
Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative
discussion.
PROPOSAL THREE
ADVISORY VOTE ON THE FREQUENCY OF STOCKHOLDER VOTES
ON EXECUTIVE COMPENSATION
The Board is asking Stockholders to advise the Corporation as to how frequently they wish to cast an
advisory vote on the compensation of the Corporation’s Named Executive Officers: every year, every two years,
or every three years.
27
In 2011, the Corporation’s Stockholders voted to have an advisory vote on executive compensation every
three years. The Board continues to believe that setting a three year period between stockholder votes will
provide a clear, simple means for the Board to obtain information on investor sentiment about executive
compensation. An advisory vote every three years will be the most effective timeframe for the Board to respond
to stockholder feedback with sufficient time to engage with Stockholders to understand and respond to the vote
results. The Board is concerned an annual vote could encourage a short-term approach to the Corporation’s
compensation plans, based on short-term business or market conditions. The Board strives to encourage a long-
term focus among the Corporation’s executives by, for example, making equity awards that vest over long
periods (generally five years). The Board believes a vote on the Corporation’s compensation by its Stockholders
every three years will encourage Stockholders to take the same long-term approach to the Corporation’s
compensation programs taken by its executives and the Compensation Committee.
This is an advisory vote, which means this proposal is not binding on the Corporation. However, the
Corporation’s Compensation Committee values the opinions expressed by Stockholders and expects to
implement the frequency of vote receiving the most support from the Corporation’s Stockholders. While the
Board believes a vote once every three years is the best choice for the Corporation, you are not voting to approve
or disapprove the Board’s recommendation of three years, but rather to make your own choice among a vote once
every year, every two years or every three years. You may also abstain from voting on this item.
The Board unanimously recommends a vote FOR a vote on the Corporation’s executive compensation
program once every THREE years.
PROPOSAL FOUR
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE AMENDED AND RESTATED
2000 STOCK OPTION AND INCENTIVE PLAN OF VICOR CORPORATION
The Board is requesting approval by Stockholders of the amendment and restatement of the Vicor Corporation
Amended and Restated 2000 Stock Option and Incentive Plan (the “Vicor 2000 Plan”) to increase the total number
of shares of Common Stock reserved for issuance under the Vicor 2000 Plan from 4,000,000 to 10,000,000 shares.
On April 26, 2017, the Board approved the amendment and restatement of the Vicor 2000 Plan, subject to the
Stockholder approval sought with this proposal. The Board believes the proposed increase is necessary and prudent
to allow the Corporation to address possible future needs for higher volumes of awards under the Vicor 2000 Plan to
accommodate our compensation objectives or potential internal restructuring transactions.
The purpose of the Vicor 2000 Plan is to provide incentives to officers, key employees of the Corporation
and its subsidiaries and other persons who contribute and are expected to contribute materially to the success of
the Corporation. The Vicor 2000 Plan provides a means of rewarding performance and to enhance the interest of
such individuals in the Corporation’s continued success and progress by providing them a tangible, proprietary
interest in the Corporation.
Summary of the Terms of the Vicor 2000 Plan
The following is a summary of the material provisions of the Vicor 2000 Plan. A copy of the Vicor 2000
Plan is attached hereto as Appendix A and is incorporated by reference herein. This summary is qualified in its
entirety by reference to the full and complete text of the Vicor 2000 Plan. Any inconsistencies between the
summary and the text of the Vicor 2000 Plan will be governed by the text of the Vicor 2000 Plan.
Eligibility. Individuals eligible for award(s) under the Vicor 2000 Plan include employees and directors of
the Corporation or its subsidiaries and independent third-parties considered by senior management to be
significant contributors to the performance of the Corporation. Such individuals shall be identified periodically
28
by the Corporation’s senior management, which shall recommend to the Administrator (as defined below) the
authorization of specific awards for those individuals. The Administrator shall have sole responsibility for
determining the eligibility of any individual subject to the senior management’s recommendation. Approximately
900 employees and four nonemployee directors are eligible to participate in the Vicor 2000 Plan.
Administration. The Vicor 2000 Plan is administered by the Board, the Compensation Committee or a
sub-committee of the Compensation Committee made up of not less than two independent directors (the
“Administrator”). The Administrator, in its discretion, may grant a variety of stock incentive awards based on the
Common Stock of the Corporation. The Administrator has full power to select, from among the individuals
eligible for awards, those to whom awards will be granted, to make any combination of awards to participants,
and to determine the specific terms and conditions of each award, subject to the provisions of the Vicor 2000
Plan. The Administrator may permit Common Stock, and other amounts payable pursuant to an award, to be
deferred. In such instances, the Administrator may permit interest, dividends or deemed dividends to be credited
to the amount of deferrals.
Shares Reserved under the Vicor 2000 Plan. Under the Vicor 2000 Plan prior to the currently proposed
amendment and restatement, an aggregate of 4,000,000 shares of Common Stock were reserved for issuance
under the Vicor 2000 Plan, subject to the adjustments described below. Following approval of the Vicor 2000
Plan, the number of shares of Common Stock issuable pursuant to all awards granted under the Vicor 2000 Plan
may not exceed 10,000,000 shares of Common Stock. This is a 6,000,000 increase in the number of shares
reserved from the number of shares that were previously reserved under the Vicor 2000 Plan. For purposes of
calculating the number of shares of Common Stock available for issuance under the Vicor 2000 Plan, if any
award is forfeited, canceled, lapses, or terminates for any reason other than exercise, the shares of Common
Stock associated with that award shall revert to and again become available for issuance under the Vicor 2000
Plan.
The Administrator will make appropriate adjustments in outstanding awards to reflect stock dividends, stock
splits and similar events. In the event of a merger, liquidation, sale of the Corporation or similar event, as of the
effective date of such transaction, all options and SARs shall become fully exercisable and all other awards shall
become fully vested, except as the Committee may otherwise determine with respect to particular awards. Unless
provision is made in connection with such a transaction for the assumption of outstanding awards or the
substitution of such awards with new awards, the Vicor 2000 Plan and all outstanding options and awards shall
terminate.
As of December 31, 2016, 1,696,222 shares of Common Stock were associated with stock options
outstanding under the Vicor 2000 Plan, possessing a weighted-average exercise price of $8.82 per share. As of
that date, 923,440 shares remained available for issuance under the Vicor 2000 Plan, out of the 4,000,000 shares
originally allocated. No other stock options or other equity-based awards granted under prior Corporation stock
option plans were outstanding as of that date.
Based solely on the closing price of Common Stock as reported on the NASDAQ-GS (as defined below) on
April 26, 2017 of $18.55 per share, the maximum aggregate market value of the additional 6,000,000 shares of
Common Stock reserved for issuance under the Vicor 2000 Plan as amended and restated would be
$111,300,000.
Award Limits. To qualify options granted under the Vicor 2000 Plan as “performance-based” compensation
under Section 162(m) of the Code, the Vicor 2000 Plan must establish limits on the number of options that may
be granted to a particular participant. Under the Vicor 2000 Plan, no more than 100,000 shares of Common Stock
may be issued to any one individual in the form of stock options or stock appreciation rights during any one
calendar year period or unrestricted stock awards, restricted stock awards or performance share awards, except to
the extent such awards are granted in lieu of compensation or fees, as determined by the Compensation
Committee.
29
Types of Awards. The Administrator may grant the following types of awards to eligible individuals:
• Stock Options. The Vicor 2000 Plan permits the granting of options to purchase Common Stock that do
not qualify as incentive stock options under Section 422 of the Code (“non-qualified options”). The
option exercise price of each option will be determined by the Administrator, but it may not be less than
85% of the fair market value of the Common Stock on the date of grant in the case of non-qualified
options or, in the case of non-qualified options intended to be qualified as performance-based
compensation under Section 162(m) of the Code, not less than 100% of such fair market value.
The term of each option will be fixed by the Administrator. The Administrator will determine at what
time or times each option may be exercised and, subject to the provisions of the Vicor 2000 Plan, the
period of time, if any, after retirement, death, disability or termination of employment during which
options may be exercised. Options may be made exercisable in installments, and the exercisability of
options may be accelerated by the Administrator. Upon exercise of options, the option exercise price must
be paid in full either in cash or by certified or bank check or other instrument acceptable to the
Administrator or, if the Administrator so permits, by delivery of shares of Common Stock that have been
beneficially owned by the optionee for at least six (6) months. The exercise price may also be delivered to
the Corporation by a broker pursuant to irrevocable instructions to the broker from the optionee.
At the discretion of the Administrator, stock options granted under the Vicor 2000 Plan may include a
“re-load” feature pursuant to which an optionee exercising an option by the delivery of shares of
Common Stock would automatically be granted an additional stock option (with an exercise price equal to
the fair market value of the Common Stock on the date the additional stock option is granted) to purchase
that number of shares of Common Stock equal to the number delivered to exercise the original stock
option. The purpose of this feature is to enable participants to maintain any equity interest in the
Corporation without dilution.
• Stock Options Granted to Independent Directors. The Administrator may grant non-qualified options to
Independent Directors in its discretion.
• Stock Appreciation Rights. The Administrator may award a stock appreciation right (“SAR”) either as a
freestanding award or in tandem with a stock option. Upon exercise of the SAR, the holder will be
entitled to receive an amount equal to the excess of the fair market value on the date of exercise of one
share of Common Stock over the exercise price per share specified in the related stock option (or, in the
case of a freestanding SAR, the price per share specified in such right, which price may not be less than
100% of the fair market value of the Common Stock on the date of grant) times the number of shares of
Common Stock with respect to which the SAR is exercised. This amount may be paid in cash, Common
Stock, or a combination thereof, as determined by the Administrator. If the SAR is granted in tandem
with a stock option, exercise of the SAR cancels the related option to the extent of such exercise.
• Restricted Stock. The Administrator may award shares of Common Stock to participants subject to such
conditions and restrictions as the Administrator may determine (“restricted stock”). These conditions and
restrictions may include the achievement of certain performance goals and/or continued employment (or
other business relationship) with the Corporation through a specified restricted period. The purchase price
of shares of restricted stock will be determined by the Administrator. If the performance goals and other
restrictions are not attained, the participants will forfeit their awards of restricted stock.
• Deferred Stock Awards. The Corporation may award phantom stock units to a participant, subject to such
conditions and restrictions as the Administrator may determine (“Deferred Stock Awards”). These
conditions and restrictions may include the achievement of certain performance goals and/or continued
employment. During the deferral period, the participant shall have no rights as a stockholder, but may be
credited with dividend equivalent rights (as described below) with respect to the phantom stock units
underlying his or her Deferred Stock Award. At the end of the deferral period, the Deferred Stock Award,
to the extent vested, shall be paid to the participant in the form of shares of Common Stock. In addition,
30
the Administrator may permit a participant to elect to receive a portion of the cash compensation or
restricted stock otherwise due to such participant in the form of a Deferred Stock Award, subject to such
terms and conditions as the Administrator may determine.
• Unrestricted Stock. The Administrator may grant shares (at no cost or for a purchase price determined by
the Administrator) that are free from any restrictions under the Vicor 2000 Plan. Unrestricted stock may
be issued to employees and key persons in recognition of past services or other valid consideration, and
may be issued in lieu of cash bonuses to be paid to such employees and key persons.
Subject to the consent of the Administrator, an employee or key person of the Corporation may make an
advance irrevocable election to receive a portion of his compensation in unrestricted stock (valued at fair
market value on the date the cash compensation would otherwise be paid).
• Performance Share Awards. The Administrator may grant performance share awards to employees or
other key persons entitling the recipient to receive shares of Common Stock upon the achievement of
individual or Corporation performance goals and such other conditions as the Administrator shall
determine (“performance share awards”).
• Dividend Equivalent Rights. The Administrator may grant dividend equivalent rights, which entitle the
recipient to receive credits for dividends that would have been paid if the recipient had held specified
shares of Common Stock. Dividend equivalent rights may be granted as a component of another award or
as a freestanding award. Dividend equivalents credited under the Vicor 2000 Plan may be paid currently
or be deemed to be reinvested in additional shares of Common Stock, which may thereafter accrue
additional dividend equivalents at fair market value at the time of deemed reinvestment or on the terms
then governing the reinvestment of dividends under the Corporation’s dividend reinvestment plan, if any.
Dividend equivalent rights may be settled in cash, shares, or a combination thereof, in a single installment
or installments, as specified in the award. Awards payable in cash on a deferred basis may provide for
crediting and payment of interest equivalents.
Tax Withholding. Participants under the Vicor 2000 Plan are responsible for the payment of any federal,
state or local taxes that the Corporation is required by law to withhold upon any option exercise or vesting of
other awards. Subject to approval by the Administrator, participants may elect to have the minimum statutory tax
withholding obligations satisfied either by authorizing us to withhold shares of Common Stock to be issued to an
option exercise or other award, or by transferring to the Corporation shares of Common Stock having a value
equal to the amount of such taxes.
Change Of Control. The Vicor 2000 Plan provides that in the event of a “Change of Control” (as defined in
the Vicor 2000 Plan) of the Corporation, all stock options and stock appreciation rights shall automatically
become fully exercisable. In addition, at any time prior to or after a Change of Control, the Administrator may
accelerate awards and waive conditions and restrictions on any awards to the extent it may determine
appropriate.
Amendment or Termination of Plan. The Board may at any time amend or discontinue the Vicor 2000 Plan
and the Committee may at any time amend or cancel outstanding awards for the purpose of satisfying changes in
the law or for any other lawful purpose. However, no such action may be taken which adversely affects any
rights under outstanding awards without the holder’s consent. Further, the Vicor 2000 Plan amendments shall be
subject to approval by the Corporation’s stockholders under circumstances specified in the Vicor 2000 Plan or
otherwise required by applicable laws or listing standards.
Certain U.S. Federal Tax Implications
The following summarizes certain federal income tax consequences relating to the Vicor 2000 Plan. The
summary is based upon the laws and regulations in effect as of the date of this proxy statement and does not
purport to be a complete statement of the law in this area. Furthermore, the discussion below does not address the
31
tax consequences of the receipt or exercise of awards under foreign, state or local tax laws, and such tax laws
may not correspond to the federal income tax treatment described herein. The exact federal income tax treatment
of transactions under the Vicor 2000 Plan will vary depending upon the specific facts and circumstances involved
and participants are advised to consult their personal tax advisors with regard to all consequences arising from
the grant or exercise of awards and the disposition of any acquired shares.
Options. The grant of a stock option under the Vicor 2000 Plan will create no income tax consequences to
the Corporation or the participant. A participant who is granted a non-qualified stock option will generally
recognize ordinary compensation income at the time of exercise in an amount equal to the excess of the fair
market value of the Common Stock at such time over the exercise price. The Corporation will generally be
entitled to a deduction in the same amount and at the same time as ordinary income is recognized by the
participant. Upon the participant’s subsequent disposition of the shares of Common Stock received with respect
to such stock option, the participant will recognize a capital gain or loss (long-term or short-term, depending on
the holding period) to the extent the amount realized from the sale differs from the tax basis, that is the fair
market value of the Common Stock on the exercise date.
Stock Appreciation Rights. The grant of a stock appreciation right under the Vicor 2000 Plan will create no
income tax consequences to the Corporation or to the recipient. A participant who is granted a stock appreciation
right will generally recognize ordinary compensation income at the time of exercise in an amount equal to the
excess of the fair market value of the Common Stock at such time over the grant price. We will generally be
entitled to a deduction in the same amount and at the same time as the participant recognizes ordinary income. If
the stock appreciation right is settled in shares of our Common Stock, upon the participant’s subsequent
disposition of such shares, the participant will recognize a capital gain or loss (long-term or short-term,
depending on the holding period) to the extent the amount realized from the sale differs from the tax basis (i.e.,
the fair market value of the Common Stock on the exercise date).
Restricted Stock. Generally, a participant will not recognize income and the Corporation will not be entitled
to a deduction at the time an award of restricted stock is made, unless the participant makes the election
described below. A participant who has not made such an election will recognize ordinary income at the time the
restrictions on the stock lapse in an amount equal to the fair market value of the restricted stock at such time. The
Corporation will generally be entitled to a corresponding deduction in the same amount and at the same time as
the participant recognizes income. Any otherwise taxable disposition of the restricted stock after the time the
restrictions lapse will result in a capital gain or loss (long-term or short-term, depending on the holding period) to
the extent the amount realized from the sale differs from the tax basis, i.e., the fair market value of the Common
Stock on the date the restrictions lapse. Dividends paid in cash and received by a participant prior to the time the
restrictions lapse will constitute ordinary income to the participant in the year paid and the Corporation will
generally be entitled to a corresponding deduction for such dividends. Any dividends paid in stock will be treated
as an award of additional restricted stock subject to the tax treatment described herein.
A participant may, within 30 days after the date of the award of restricted stock, elect to recognize ordinary
income as of the date of the award in an amount equal to the fair market value of such restricted stock on the date
of the award (less the amount, if any, the participant paid for such restricted stock). If the participant makes such
an election, then the Corporation will generally be entitled to a corresponding deduction in the same amount and
at the same time as the participant recognizes income. If the participant makes the election, then any cash
dividends the participant receives with respect to the restricted stock will be treated as dividend income to the
participant in the year of payment and will not be deductible by the Corporation. Any otherwise taxable
disposition of the restricted stock (other than by forfeiture) will result in a capital gain or loss. If the participant
who has made an election subsequently forfeits the restricted stock, then the participant will not be entitled to
deduct any loss. In addition, the Corporation would then be required to include as ordinary income the amount of
any deduction the Corporation originally claimed with respect to such shares.
Unrestricted Stock. Generally, a participant will recognize ordinary income, and the Corporation will be
entitled to a corresponding deduction in the same amount, at the time an award of unrestricted stock is made.
32
Upon the participant’s subsequent disposition of the shares of stock, the participant will recognize a capital gain
or loss (long-term or short-term, depending on the holding period) to the extent the amount realized from the sale
differs from the tax basis, the fair market value of the Common Stock on the grant date.
Performance Shares. The grant of performance shares will create no income tax consequences for the
Corporation or the participant. In general, upon the participant’s receipt of payment at the end of the applicable
performance period, the participant will recognize ordinary income equal to the cash or the fair market value of
the shares received. In addition, the participant will recognize ordinary compensation income equal to the
dividend equivalents paid on performance shares prior to or at the end of the performance period. We will
generally be entitled to a deduction in the same amount and at the same time as the participant recognizes
income. Upon the participant’s subsequent disposition of the shares, the participant will recognize a capital gain
or loss (long-term or short-term depending on the holding period) to the extent the amount realized from the
disposition differs from the shares’ tax basis (i.e., the fair market value of the shares on the date the participant
received the shares).
Dividend Equivalent Units. A participant who is paid a dividend equivalent with respect to an award will
recognize ordinary income equal to the value of cash or Common Stock paid, and we will be entitled to a
corresponding deduction in the same amount and at the same time.
Vote Required and Recommendation of the Board of Directors
The affirmative vote of a majority in voting power of the Common Stock and Class B Common Stock casting a
vote on the proposal at the Annual Meeting, voting together as a single class, is required to approve the amendment and
restatement of the Vicor 2000 Plan. Abstentions and broker non-votes will not affect the voting results for this proposal.
THE BOARD RECOMMENDS STOCKHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENT AND RESTATEMENT OF THE AMENDED AND RESTATED 2000 STOCK OPTION
AND INCENTIVE PLAN OF VICOR CORPORATION.
PROPOSAL FIVE
APPROVAL OF THE AMENDED AND RESTATED
2007 STOCK OPTION AND INCENTIVE PLAN OF VI CHIP CORPORATION
The Board has proposed approval of the Amended and Restated VI Chip Corporation 2007 Stock Option
and Incentive Plan (the “2007 VI Chip Plan”). VI Chip amended and restated the 2007 VI Chip Plan primarily to
increase the number of shares available for issuance under the 2007 VI Chip Plan by 2,000,000 shares, and
increase the maximum number of shares with respect to which options can be granted to a participant in any
given year.
Stockholder approval of the 2007 VI Chip Plan will also constitute approval of the material terms of the
performance goals under the 2007 VI Chip Plan for purposes of qualifying options granted under the 2007 VI
Chip Plan as “performance-based” within the meaning of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the “Code”), as described further below.
Summary of the Terms of the 2007 VI Chip Plan
The following is a summary of the material provisions of the 2007 VI Chip Plan. A copy of the 2007 VI
Chip Plan is attached hereto as Appendix B and is incorporated by reference herein. This summary is qualified in
its entirety by reference to the full and complete text of the 2007 VI Chip Plan. Any inconsistencies between the
summary and the text of the 2007 VI Chip Plan will be governed by the text of the 2007 VI Chip Plan.
33
Eligibility. Any person who is a current or prospective full or part-time officer, employee, consultant or
director of VI Chip and its affiliates, including the Corporation, is eligible for selection by the Administrator for
the grant of an award, including an option award, under the 2007 VI Chip Plan. Currently, there are
approximately 211 employees and 4 nonemployee directors eligible to participate in the 2007 VI Chip Plan.
There are currently no other service providers eligible to receive an award under the 2007 VI Chip Plan.
Administration. Currently, the Board of Directors of VI Chip has delegated administrative responsibility
under the 2007 VI Chip Plan to the Compensation Committee, with authority to act as the Administrator. The
Administrator is authorized, among other things, to select the participants to receive an award under the 2007 VI
Chip Plan, determine the terms of such awards, modify the terms and conditions of any award, and interpret the
terms and provisions of the 2007 VI Chip Plan.
Shares Reserved under the 2007 VI Chip Plan. Under the 2007 VI Chip Plan prior to the currently proposed
amendment and restatement, an aggregate of 12,000,000 shares of VI Chip common stock were reserved for
issuance under the 2007 VI Chip Plan, subject to the adjustments described below. Following approval of the
2007 VI Chip Plan, the number of shares of stock issuable pursuant to all awards granted under the 2007 VI Chip
Plan may not exceed 14,000,000 shares of VI Chip common stock. This is a 2,000,000 increase in the number of
shares reserved from the number of shares that were previously reserved under the 2007 VI Chip Plan.
The number of shares issued or reserved may be adjusted in certain circumstances, including stock splits,
stock dividends, reorganizations, recapitalizations, and similar events. Shares underlying awards that are
forfeited, canceled, reacquired by VI Chip, satisfied without issuance of stock or otherwise terminated will be
added back to the shares otherwise available for issuance under the 2007 VI Chip Plan. As of April 26, 2017,
there were 9,910,750 shares subject to outstanding awards under the 2007 VI Chip Plan (all of which were
subject to stock options) and 2,082,650 shares remaining available for future awards under the 2007 VI Chip
Plan. The weighted average exercise price of the outstanding stock options as of such date was $1.00 and the
average remaining term of such stock options was 1.6 years. The fair market value of a share of VI Chip common
stock as of such date was $0.96.
Award Limits. To qualify options granted under the 2007 VI Chip Plan as “performance-based”
compensation under Section 162(m) of the Code, the 2007 VI Chip Plan must establish limits on the number of
options that may be granted to a particular participant. Under the 2007 VI Chip Plan, no participant may be
granted stock options with respect to more than 5,500,000 shares of VI Chip common stock in any fiscal year of
VI Chip.
Types of Awards. The Administrator may grant the following types of awards to eligible individuals:
• Stock Options. A stock option permits the award holder to purchase shares of VI Chip’s common stock in
the future at a fixed price. The Administrator has the discretion to determine all terms and conditions of a
grant of stock options, including the exercise price, the vesting schedule, and the term of the option,
except that the exercise price must be at least equal to the fair market value of a share of VI Chip’s
common stock as determined on the date of grant.
• Restricted Stock. A holder of a restricted stock award immediately receives shares of VI Chip’s common
stock, which shares are subject to restrictions on transferability and subject to forfeiture based on certain
conditional events.
• Unrestricted Stock. The Administrator may also grant unrestricted stock, pursuant to which such recipient
may receive shares of stock free of any vesting restrictions.
Effect of Termination of Employment. In general, an award granted under the 2007 VI Chip Plan will be
forfeited upon the participant’s termination of employment, subject to certain exceptions found in the 2007 VI
Chip Plan.
34
Change Of Control. The 2007 VI Chip Plan provides that in the event of a merger or other change in control
transaction (as defined in the 2007 VI Chip Plan), all stock options will automatically become fully exercisable,
and all other awards will become fully vested.
Amendment or Termination of Plan. The Board of Directors of VI Chip may at any time amend or
discontinue the 2007 VI Chip Plan and the Administrator may at any time amend or cancel outstanding awards
for the purpose of satisfying changes in the law or for any other lawful purpose. However, no such action may be
taken which adversely affects any rights under outstanding awards without the holder’s consent.
Certain U.S. Federal Tax Implications
The following summarizes certain federal income tax consequences relating to the 2007 VI Chip Plan. The
summary is based upon the laws and regulations in effect as of the date of this proxy statement and does not
purport to be a complete statement of the law in this area. Furthermore, the discussion below does not address the
tax consequences of the receipt or exercise of awards under foreign, state or local tax laws, and such tax laws
may not correspond to the federal income tax treatment described herein. The exact federal income tax treatment
of transactions under the 2007 VI Chip Plan will vary depending upon the specific facts and circumstances
involved and participants are advised to consult their personal tax advisors with regard to all consequences
arising from the grant or exercise of awards and the disposition of any acquired shares.
Options. The grant of a stock option under the 2007 VI Chip Plan will create no income tax consequences to
the Corporation or the participant. A participant who is granted a non-qualified stock option will generally
recognize ordinary compensation income at the time of exercise in an amount equal to the excess of the fair
market value of VI Chip’s common stock at such time over the exercise price. The Corporation will generally be
entitled to a deduction in the same amount and at the same time as ordinary income is recognized by the
participant. Upon the participant’s subsequent disposition of the shares of VI Chip’s common stock received with
respect to such stock option, the participant will recognize a capital gain or loss (long-term or short-term,
depending on the holding period) to the extent the amount realized from the sale differs from the tax basis, that is
the fair market value of VI Chip’s common stock on the exercise date.
Restricted Stock. Generally, a participant will not recognize income and the Corporation will not be entitled
to a deduction at the time an award of restricted stock is made, unless the participant makes the election
described below. A participant who has not made such an election will recognize ordinary income at the time the
restrictions on the stock lapse in an amount equal to the fair market value of the restricted stock at such time. The
Corporation will generally be entitled to a corresponding deduction in the same amount and at the same time as
the participant recognizes income. Any otherwise taxable disposition of the restricted stock after the time the
restrictions lapse will result in a capital gain or loss (long-term or short-term, depending on the holding period) to
the extent the amount realized from the sale differs from the tax basis, i.e., the fair market value of VI Chip’s
common stock on the date the restrictions lapse. Dividends paid in cash and received by a participant prior to the
time the restrictions lapse will constitute ordinary income to the participant in the year paid and the Corporation
will generally be entitled to a corresponding deduction for such dividends. Any dividends paid in stock will be
treated as an award of additional restricted stock subject to the tax treatment described herein.
A participant may, within 30 days after the date of the award of restricted stock, elect to recognize ordinary
income as of the date of the award in an amount equal to the fair market value of such restricted stock on the date
of the award (less the amount, if any, the participant paid for such restricted stock). If the participant makes such
an election, then the Corporation will generally be entitled to a corresponding deduction in the same amount and
at the same time as the participant recognizes income. If the participant makes the election, then any cash
dividends the participant receives with respect to the restricted stock will be treated as dividend income to the
participant in the year of payment and will not be deductible by the Corporation. Any otherwise taxable
disposition of the restricted stock (other than by forfeiture) will result in a capital gain or loss. If the participant
35
who has made an election subsequently forfeits the restricted stock, then the participant will not be entitled to
deduct any loss. In addition, the Corporation would then be required to include as ordinary income the amount of
any deduction the Corporation originally claimed with respect to such shares.
Unrestricted Stock. Generally, a participant will recognize ordinary income, and the Corporation will be
entitled to a corresponding deduction in the same amount, at the time an award of unrestricted stock is made.
Upon the participant’s subsequent disposition of the shares of stock, the participant will recognize a capital gain
or loss (long-term or short-term, depending on the holding period) to the extent the amount realized from the sale
differs from the tax basis, the fair market value of VI Chip’s common stock on the grant date.
Code Section 162(m). Stockholder approval of the 2007 VI Chip Plan at the Annual Meeting will constitute
approval of the material terms of the performance goals of the 2007 VI Chip Plan for purposes of qualifying
compensation under the 2007 VI Chip Plan as “performance-based” within the meaning of Code Section 162(m).
This is important because Section 162(m) of the Code limits the corporate tax deduction to $1,000,000 for
compensation paid annually to any one of the Corporation’s Named Executive Officers (other than the Chief
Financial Officer), unless the compensation meets certain requirements to qualify as performance-based
compensation. One of the requirements that must be satisfied to qualify compensation as performance-based is
that the material terms of the performance goals under which the compensation is to be paid be disclosed to and
approved by the Corporation’s stockholders at least once every five years. Stockholder approval of the 2007 VI
Chip Plan will constitute approval of each of the material terms of the 2007 VI Chip Plan for purposes of Section
162(m) of the Code.
New Plan Benefits
The table below sets forth information concerning the option awards that will be granted under the 2007 VI
Chip Plan if the Corporation’s stockholders approve the 2007 VI Chip Plan.
Amended and Restated 2007 VI Chip Plan
Name & Position
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patrizio Vinciarelli
Chairman of the Board, President and Chief Executive Officer
Michael S. McNamara . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Vice President and General Manager, Operations
Joseph A. Jeffery, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Vice President, Chief Information Officer
Sean Crilly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Vice President, Engineering, Power Systems
Nancy Grava . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Vice President, Human Resources
Richard J. Nagel, Jr.
Corporate Vice President, Chief Accounting Officer
All executive officers as a group (6 persons) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All non-executive directors as a group (0 persons) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All employees, excluding executive officers, as a group (211 persons) . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strike Price
Per Share ($)
Number of
Options
$0.96
5,500,000
$0.96
125,000
$0.96
$0.96
$0.96
$0.96
$0.96
$0.96
50,000
30,000
30,000
25,000
5,760,000
0
4,075,000
Except for awards disclosed above, we cannot currently determine the awards that may be granted under the
2007 VI Chip Plan in the future to the executive officers named in this proxy or to other officers, employees or
other persons. The Administrator will make such determinations from time to time.
Vote Required and Recommendation of the Board of Directors
The affirmative vote of a majority in voting power of the Common Stock and Class B Common Stock
casting a vote on the proposal at the Annual Meeting, voting together as a single class, is required to approve the
36
2007 VI Chip Plan, including the terms of the material performance goals under the 2007 VI Chip Plan.
Abstentions and broker non-votes will not affect the voting results for this proposal.
THE BOARD RECOMMENDS STOCKHOLDERS VOTE FOR APPROVAL OF THE AMENDED
AND RESTATED 2007 VI CHIP PLAN, INCLUDING THE TERMS OF THE MATERIAL
PERFORMANCE GOALS UNDER THE 2007 VI CHIP PLAN.
PROPOSAL SIX
APPROVAL OF THE AMENDED AND RESTATED
2001 STOCK OPTION AND INCENTIVE PLAN OF PICOR CORPORATION
The Board has proposed approval of the Amended and Restated Picor Corporation 2001 Stock Option and
Incentive Plan (the “2001 Picor Plan”).
Stockholder approval of the 2001 Picor Plan will also constitute approval of the material terms of the
performance goals under the 2001 Picor Plan for purposes of qualifying options granted under the 2001 Picor
Plan as “performance-based” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”), as described further below.
Summary of the Terms of the 2001 Picor Plan
The following is a summary of the material provisions of the 2001 Picor Plan. A copy of the 2001 Picor
Plan is attached hereto as Appendix C and is incorporated by reference herein. This summary is qualified in its
entirety by reference to the full and complete text of the 2001 Picor Plan. Any inconsistencies between the
summary and the text of the 2001 Picor Plan will be governed by the text of the 2001 Picor Plan.
Eligibility. Any person who is a current or prospective full or part-time officer, employee, consultant or
director of Picor and its affiliates, including the Corporation, is eligible for selection by the Administrator for the
grant of an award, including an option award, under the 2001 Picor Plan. Currently, there are approximately 54
employees and 5 nonemployee directors eligible to participate in the 2001 Picor Plan. There are currently no
other service providers eligible to receive an award under the 2001 Picor Plan.
Administration. Currently, the Board of Directors of Picor has delegated administrative responsibility under
the 2001 Picor Plan to the Compensation Committee, with authority to act as the Administrator. The
Administrator is authorized, among other things, to select the participants to receive an award under the 2001
Picor Plan, determine the terms of such awards, modify the terms and conditions of any award, and interpret the
terms and provisions of the 2001 Picor Plan.
Shares Reserved under the 2001 Picor Plan. Under the 2001 Picor Plan, an aggregate of 20,000,000 shares
of Picor common stock were reserved for issuance under the 2001 Picor Plan, subject to the adjustments
described below.
The number of shares issued or reserved may be adjusted in certain circumstances, including stock splits, stock
dividends, reorganizations, recapitalizations, and similar events. Shares underlying awards that are forfeited,
canceled, reacquired by Picor, satisfied without issuance of stock or otherwise terminated will be added back to the
shares otherwise available for issuance under the 2001 Picor Plan. As of April 26, 2017, there were 9,529,987 shares
subject to outstanding awards under the 2001 Picor Plan (all of which were subject to stock options) and 7,655,533
shares remaining available for future awards under the 2001 Picor Plan. The weighted average exercise price of the
outstanding stock options as of such date was $0.62 and the average remaining term of such stock options was 4.2
years. The fair market value of a share of Picor common stock as of such date was $0.62.
37
Award Limits. To qualify options granted under the 2001 Picor Plan as “performance-based” compensation
under Section 162(m) of the Code, the 2001 Picor Plan must establish limits on the number of options that may
be granted to a particular participant. Under the 2001 Picor Plan, no participant may be granted stock options
with respect to more than 1,600,000 shares of Picor common stock in any fiscal year of Picor.
Types of Awards. The Administrator may grant the following types of awards to eligible individuals:
• Stock Options. A stock option permits the award holder to purchase shares of Picor’s common stock in
the future at a fixed price. The Administrator has the discretion to determine all terms and conditions of a
grant of stock options, including the exercise price, the vesting schedule, and the term of the option,
except that the exercise price must be at least equal to the fair market value of a share of Picor’s common
stock as determined on the date of grant.
• Restricted Stock. A holder of a restricted stock award immediately receives shares of Picor’s common
stock, which shares are subject to restrictions on transferability and subject to forfeiture based on certain
conditional events.
• Unrestricted Stock. The Administrator may also grant unrestricted stock, pursuant to which such recipient
may receive shares of stock free of any vesting restrictions.
Effect of Termination of Employment. In general, an award granted under the 2001 Picor Plan will be
forfeited upon the participant’s termination of employment, subject to certain exceptions found in the 2001 Picor
Plan.
Change Of Control. The 2001 Picor Plan provides that in the event of a merger or other change in control
transaction (as defined in the 2001 Picor Plan), all stock options will automatically become fully exercisable, and
all other awards will become fully vested.
Amendment or Termination of Plan. The Board of Directors of Picor may at any time amend or discontinue
the 2001 Picor Plan and the Administrator may at any time amend or cancel outstanding awards for the purpose
of satisfying changes in the law or for any other lawful purpose. However, no such action may be taken which
adversely affects any rights under outstanding awards without the holder’s consent.
Certain U.S. Federal Tax Implications
The following summarizes certain federal income tax consequences relating to the 2001 Picor Plan. The
summary is based upon the laws and regulations in effect as of the date of this proxy statement and does not
purport to be a complete statement of the law in this area. Furthermore, the discussion below does not address the
tax consequences of the receipt or exercise of awards under foreign, state or local tax laws, and such tax laws
may not correspond to the federal income tax treatment described herein. The exact federal income tax treatment
of transactions under the 2001 Picor Plan will vary depending upon the specific facts and circumstances involved
and participants are advised to consult their personal tax advisors with regard to all consequences arising from
the grant or exercise of awards and the disposition of any acquired shares.
Options. The grant of a stock option under the 2001 Picor Plan will create no income tax consequences to
the Corporation or the participant. A participant who is granted a non-qualified stock option will generally
recognize ordinary compensation income at the time of exercise in an amount equal to the excess of the fair
market value of Picor’s common stock at such time over the exercise price. The Corporation will generally be
entitled to a deduction in the same amount and at the same time as ordinary income is recognized by the
participant. Upon the participant’s subsequent disposition of the shares of Picor’s common stock received with
respect to such stock option, the participant will recognize a capital gain or loss (long-term or short-term,
depending on the holding period) to the extent the amount realized from the sale differs from the tax basis, that is
the fair market value of Picor’s common stock on the exercise date.
38
Restricted Stock. Generally, a participant will not recognize income and the Corporation will not be entitled
to a deduction at the time an award of restricted stock is made, unless the participant makes the election
described below. A participant who has not made such an election will recognize ordinary income at the time the
restrictions on the stock lapse in an amount equal to the fair market value of the restricted stock at such time. The
Corporation will generally be entitled to a corresponding deduction in the same amount and at the same time as
the participant recognizes income. Any otherwise taxable disposition of the restricted stock after the time the
restrictions lapse will result in a capital gain or loss (long-term or short-term, depending on the holding period) to
the extent the amount realized from the sale differs from the tax basis, i.e., the fair market value of Picor’s
common stock on the date the restrictions lapse. Dividends paid in cash and received by a participant prior to the
time the restrictions lapse will constitute ordinary income to the participant in the year paid and the Corporation
will generally be entitled to a corresponding deduction for such dividends. Any dividends paid in stock will be
treated as an award of additional restricted stock subject to the tax treatment described herein.
A participant may, within 30 days after the date of the award of restricted stock, elect to recognize ordinary
income as of the date of the award in an amount equal to the fair market value of such restricted stock on the date
of the award (less the amount, if any, the participant paid for such restricted stock). If the participant makes such
an election, then the Corporation will generally be entitled to a corresponding deduction in the same amount and
at the same time as the participant recognizes income. If the participant makes the election, then any cash
dividends the participant receives with respect to the restricted stock will be treated as dividend income to the
participant in the year of payment and will not be deductible by the Corporation. Any otherwise taxable
disposition of the restricted stock (other than by forfeiture) will result in a capital gain or loss. If the participant
who has made an election subsequently forfeits the restricted stock, then the participant will not be entitled to
deduct any loss. In addition, the Corporation would then be required to include as ordinary income the amount of
any deduction the Corporation originally claimed with respect to such shares.
Unrestricted Stock. Generally, a participant will recognize ordinary income, and the Corporation will be
entitled to a corresponding deduction in the same amount, at the time an award of unrestricted stock is made.
Upon the participant’s subsequent disposition of the shares of stock, the participant will recognize a capital gain
or loss (long-term or short-term, depending on the holding period) to the extent the amount realized from the sale
differs from the tax basis, the fair market value of Picor’s common stock on the grant date.
Code Section 162(m). Stockholder approval of the 2001 Picor Plan at the Annual Meeting will constitute
approval of the material terms of the performance goals of the 2001 Picor Plan for purposes of qualifying
compensation under the 2001 Picor Plan as “performance-based” within the meaning of Code Section 162(m).
This is important because Section 162(m) of the Code limits the corporate tax deduction to $1,000,000 for
compensation paid annually to any one of the Corporation’s Named Executive Officers (other than the Chief
Financial Officer), unless the compensation meets certain requirements to qualify as performance-based
compensation. One of the requirements that must be satisfied to qualify compensation as performance-based is
that the material terms of the performance goals under which the compensation is to be paid be disclosed to and
approved by the Corporation’s stockholders at least once every five years. Stockholder approval of the 2001
Picor Plan will constitute approval of each of the material terms of the 2001 Picor Plan for purposes of Section
162(m) of the Code.
39
New Plan Benefits
The table below sets forth information concerning the option awards that will be granted under the 2001
Picor Plan if the Corporation’s stockholders approve the 2001 Picor Plan.
Amended and Restated 2001 Picor Plan
Name & Position
Claudio Tuozzolo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Vice president and President of Picor Corporation
All executive officers as a group (1 persons) . . . . . . . . . . . . . . . . . . . . . . . . .
All non-executive directors as a group (0 persons) . . . . . . . . . . . . . . . . . . . .
All employees, excluding executive officers, as a group (31 persons) . . . . .
Strike Price
Per Share ($)
Number of
Options
$0.62
125,000
$0.62
$0.62
125,000
0
538,000
Except for awards disclosed above, we cannot currently determine the awards that may be granted under the
2001 Picor Plan in the future to the executive officers named in this proxy or to other officers, employees or
other persons. The Administrator will make such determinations from time to time.
Vote Required and Recommendation of the Board of Directors
The affirmative vote of a majority in voting power of the Common Stock and Class B Common Stock
casting a vote on the proposal at the Annual Meeting, voting together as a single class, is required to approve the
2001 Picor Plan, including the terms of the material performance goals under the 2001 Picor Plan. Abstentions
and broker non-votes will not affect the voting results for this proposal.
THE BOARD RECOMMENDS STOCKHOLDERS VOTE FOR APPROVAL OF THE AMENDED
AND RESTATED 2001 PICOR PLAN, INCLUDING THE TERMS OF THE MATERIAL
PERFORMANCE GOALS UNDER THE 2001 PICOR PLAN.
PROPOSAL SEVEN
APPROVAL OF ADOPTION
VICOR CORPORATION 2017 EMPLOYEE STOCK PURCHASE PLAN
The Board is requesting approval by Stockholders of the Corporation’s adoption of the Vicor Corporation
2017 Employee Stock Purchase Plan, (the “ESPP”). On April 26, 2017, the Board, with Directors Simms and
Tuozzolo abstaining due to their eligibility to participate in the ESPP, approved the adoption of the ESPP. If this
proposal is approved, the ESPP will be implemented effective as of the date of the Annual Meeting.
Through voluntary participation in an ESPP satisfying the requirements of Sections 421 and 423 of the U.S.
Internal Revenue Code of 1986, as amended (the “Code”), an employee subject to U.S. tax law may purchase
shares of stock of his or her employer at a discount from the fair market value of those shares and, if certain
holding period requirements are met, receive preferred tax treatment upon sale of such shares.
The Board believes the ESPP will become an important part of the Corporation’s overall compensation
program, as the ESPP is intended to improve the Corporation’s ability to attract, retain, and motivate eligible
employees, and further align the interests of eligible employees with those of our Stockholders. In its assessment
of the ESPP prior to voting on its approval, the full Board assessed, among other considerations: the overall
effectiveness of the Corporation’s compensation and benefits practices and policies; the historical levels of
employee participation in the Corporation’s existing stock option plans; the historical price performance of
shares of the Corporation’s common stock, relative to such plans and participation levels; the potential
40
participation in the ESPP, reflecting regulatory eligibility requirements, the regulatory limits on employee
contributions, and similar plans offered by public companies; the potential dilutive effect of adopting such a plan;
and the financial reporting and tax consequences of adopting such a plan. The Board also assessed the
implications for compliance with federal tax regulations if participation in such a plan were made available to
resident employees of the Corporation’s subsidiaries domiciled and operating in foreign jurisdictions.
The Board is seeking Stockholder approval of the ESPP to satisfy requirements of Sections 421 and 423 of
the Code, as the Corporation intends for the ESPP to qualify as an “employee stock purchase plan” under
Section 423 of the Code. Listing Rule 5635(c)(2) under the Nasdaq Rules states Stockholder approval is not
required for a tax qualified, non-discriminatory employee benefit plan (i.e., an employee stock purchase plan
meeting the requirements of Section 423 of the Code).
Because the following discussion is limited, it may not contain all the information that a Stockholder may
consider important. As such, a Stockholder should read carefully the full plan document, the text of which is
attached as Appendix D and incorporated into this Proxy Statement by reference, before deciding how to vote on
this proposal.
Summary of Key Terms of the ESPP
The following summary of the key terms of the ESPP is qualified in its entirety by reference to the plan
document, attached as Appendix D and incorporated into this Proxy Statement by reference. Certain important
terms used in this discussion are defined in the ESPP. Such terms, when used here, are shown initially in
quotation marks (e.g., “ESPP Shares,” used in reference to shares of the Corporation’s Common Stock issued
pursuant to the ESPP) and, throughout this summary, reflect the definitions set forth in the full text of the plan
document attached as Appendix D.
General. The purpose of the ESPP is to allow eligible employees of the Corporation and its designated
subsidiaries (the “Participants,” or, if an individual, the “Participant”) to voluntarily participate in the ESPP,
enabling Participants to purchase shares of the Corporation’s Common Stock (“ESPP Shares”) at a discount to
the market price at the time of such purchase. The ESPP is intended to qualify as an employee stock purchase
plan under Section 423 of the Code. Under such a plan, the Participants will not have reportable income, and the
Corporation is not entitled to a tax deduction related to compensation, upon the Option grant, the Option
exercise, or the purchase of the ESPP Share(s). However, a Participant will recognize federal taxable income in
the year in which such ESPP Shares are sold or transferred. (A summary of federal tax consequences is presented
below.)
Administration. The ESPP will be administered by the Board, which, by resolution at the time of the ESPP’s
adoption, designated the Compensation Committee of the Board as the “Administrator” under the ESPP. None of
the members of the Compensation Committee is an officer or employee, or former officer or employee, of the
Corporation or its subsidiaries. The Administrator has authority to establish rules and procedures for the
administration of the ESPP, to interpret the terms of the ESPP, to supervise the ESPP’s overall administration
and to take any other actions related to the ESPP it deems necessary or advisable. The interpretation and
decisions of the Board or the Administrator with regard to the ESPP will be final and conclusive.
Effective Date, Term. Subject to Stockholder approval of the ESPP, the ESPP will become effective as of
June 16, 2017, that is, as of the date of the annual meeting of Stockholders of the Corporation. The ESPP will
terminate upon the earlier of (i) the date on which all shares of Common Stock available for issuance have been sold
pursuant to purchase rights exercised under the ESPP or (ii) the date determined by the Board, in its sole discretion.
Function. The Administrator will determine the Offering Periods for the ESPP, which are currently
anticipated to include six distinct, sequential “Offering Periods” of approximately six months each. Each
41
Offering Period, during which payroll deductions will be held by the Corporation to purchase ESPP Shares on
behalf of a Participant, will begin on the designated “Grant Date”. At that time, the Corporation will grant to each
Participant an Option exercisable at the end of the Offering Period (on the “Exercise Date”). At the end of the
business day on the Exercise Date, the Administrator will determine the “Purchase Price” of an ESPP Share
associated with the exercise of that Offering Period’s Option. While the Administrator may determine the length
of an Offering Period and the applicable terms associated with an Option, under no circumstances may an
Offering Period or an Option’s term exceed 27 months. Subject to Stockholder approval of the ESPP, the first
six-month Offering Period is expected to begin on or about September 1, 2017.
Purchase Price. The ESPP provides for calculation of the Purchase Price of an ESPP Share using what is
commonly referred to as a “look-back.” Using a “look-back” approach, the Administrator, at the close of
business on the Exercise Date, calculates the Purchase Price of an ESPP Share to be issued to the Participant as
not less than the lower of (a) eighty-five percent (85.0%) of the “Fair Market Value” on the Grant Date
associated with the Offering Period or (ii) eighty-five percent (85.0%) of the Fair Market Value on that Exercise
Date. Generally, the Fair Market Value of an ESPP Share will be the reported closing price for a share of
Common Stock on the Nasdaq-GS for the date in question or the immediately preceding date. In the event such a
closing price is not available for the date in question, the Administrator may utilize any of the valuation methods
permitted under Treasury Regulation Section 20.2031-2.
Shares of Common Stock Reserved. Subject to Stockholder approval of this proposal, an aggregate of
2,000,000 shares of Common Stock has been initially reserved for issuance under the ESPP. This initial reserve
represents approximately 5.1% of the total number of shares of Common Stock currently outstanding (assuming
full conversion of outstanding shares of Class B Common Stock into shares of Common Stock). The shares of
Common Stock reserved for purchase under the ESPP will be shares of authorized, but unissued, shares or issued
shares held by the Corporation. If purchase rights granted under the ESPP terminate without being exercised, the
shares of Common Stock not issued will again become available for purchase under the ESPP. As of April 26,
2017, the fair market value of one share of Common Stock was $18.55, based upon the closing price for a share
of Common Stock on the Nasdaq-GS.
Eligibility. Any common law employee of the Corporation or one of the Corporation’s subsidiaries, to the
extent such subsidiary is designated by the Administrator for participation in the ESPP or an Offering (each a
“Designated Subsidiary”) who, in judgment of the Administrator (i) is customarily employed by the Company or
such Designated Subsidiary for more than 20 hours per week and for more than five months in a calendar year,
and (ii) has been so employed for at least the prior six weeks, will be eligible to participate in the ESPP.
Notwithstanding the foregoing, employees who are citizens or residents of a jurisdiction other than the United
States, may not be able to participate in the ESPP for a given Offering if such participation is prohibited under
any applicable law or regulation of such jurisdiction or if compliance with the laws of the foreign jurisdiction
would cause the ESPP to violate the Code Section 423 requirements.
If the ESPP is approved by Stockholders, approximately 875 of the employees, including nine of the
officers, would initially be eligible to participate in the ESPP. Members of the Board and members of the
board(s) of directors of any subsidiary of the Corporation, who are not employees as defined in the plan
document, are not eligible to participate in the ESPP. Dr. Vinciarelli, due to his ownership of capital stock
representing more than 5.0% of the voting control of the Corporation, shall not be eligible to participate in the
ESPP.
Limitations. Notwithstanding any provisions of the ESPP to the contrary, in no event may a Participant
purchase more than 2,500 ESPP Shares in any one Offering Period, irrespective of the total value of his or her
payroll deductions associated with the Offering Period or the Purchase Price of the ESPP Shares, unless
otherwise expressly provided by the Administrator in advance of that Offering Period.
No Participant will be granted an Option under the ESPP causing the Participant’s cumulative rights to
purchase shares of the capital stock associated with all statutory options awarded under the terms of all employee
42
stock purchase plans maintained by the Corporation and its Subsidiaries to exceed $25,000 of such shares of
capital stock (determined at the time such statutory options are granted) for each calendar year.
For any Offering Period, the Administrator may determine that any individuals considered “highly
compensated employees,” within the meaning of Section 414(q) of the Code, will be excluded from participating
in that Offering Period.
Participation. Each Participant may authorize recurring withholding of an amount, equal to between 1.0%
and up to and including 15.0% of his or her “Eligible Compensation” each pay period, to be used to purchase
ESPP Shares. The Corporation shall pay no interest on withheld amounts. Participants are permitted to withdraw
from the ESPP prior to the last day of an Offering Period. If a Participant does not withdraw from an Offering
Period, the amount withheld for the Participant for that Offering Period will be applied automatically to purchase
a whole number of ESPP Shares that may be purchased with such amount.
Withdrawal from Participation. A Participant may withdraw from participation in the ESPP at any time by
written notice. In addition, a Participant’s participation in the ESPP will immediately terminate upon the
Participant’s termination of employment. A Participant who withdraws from an Offering Period and remains
eligible for future participation may not re-commence participation within that same Offering Period. Upon
withdrawal from an Offering Period, cumulative amounts withheld in anticipation of a purchase of ESPP Shares
by a Participant will be delivered to him or her as soon as practicable after such withdrawal. In the event of the
termination of a Participant’s employment, cumulative amounts withheld in anticipation of a purchase of ESPP
Shares by a Participant will be delivered to him or her as soon as practicable after such termination.
Administrator Adjustment Due to Changes in Capitalization. Upon (i) any reclassification, recapitalization,
stock split (including a stock split in the form of a stock dividend) or reverse stock split, (ii) any merger,
combination, consolidation, or other reorganization, (iii) any spin-off, split-up, or similar extraordinary dividend
distribution in respect of the Common Stock, (iv) any exchange of Common Stock or other securities of the
Corporation, or (v) any unusual or extraordinary corporate transaction of a similar nature in respect of the
Common Stock, in each case, the Administrator shall equitably and proportionately adjust (1) the number,
amount, and type of shares of Common Stock (or other securities) that thereafter may be made the subject of
Options (including the specific share limits, maximums, and numbers of shares set forth in the ESPP), (2) the
number, amount, and type of shares of Common Stock (or other securities or property) subject to any outstanding
Options, (3) the Purchase Price associated with any outstanding Options, and/or (4) the securities, cash, or other
property deliverable upon exercise or payment of any outstanding Options, in each case to the extent necessary to
preserve (but not increase) the level of incentives intended by the ESPP and the then-outstanding Options.
Administrator Adjustment to Address Merger or Liquidation of Corporation. In the event the Corporation or
its Stockholders enter into an agreement to dispose of all or substantially all of the assets or outstanding capital
stock of the Corporation by means of a sale, merger, or reorganization in which the Corporation will not be the
surviving corporation (other than a reorganization effected primarily to change the jurisdiction in which the
Corporation is incorporated, a merger or consolidation with a wholly-owned Subsidiary, or any other transaction
in which there is no substantial change in the Stockholders of the Corporation or their relative ownership,
regardless of whether the Corporation is the surviving corporation) or in the event the Corporation is liquidated,
then all outstanding Options under the Plan shall automatically be exercised immediately prior to the
consummation of such sale, merger, reorganization, or liquidation (deemed the end of the Offering Period in such
case) by causing all amounts credited to each Participant’s Plan Account to be applied to purchase as many ESPP
Shares pursuant to the Participant’s Option as possible at the Purchase Price, subject to the limitations set forth
above.
Administrator Adjustment Required to Address Acquisitions, Sales, or Disposals. The Administrator may, in
accordance with provisions of Section 423 of the Code, create special Offering Periods for individuals who
become eligible to participate in the ESPP solely in connection with the acquisition of another corporation or
43
business by merger, reorganization, or purchase of assets. Similarly, the Administrator may provide for special
Exercise Dates for Participants who will cease to be Participants solely in connection with the sale or other form
of disposition of all or a portion of any Designated Subsidiary or a portion of the Corporation by which the
Participant is employed.
Amendment and Termination of the ESPP. The Board may, in its sole discretion, amend or terminate the
ESPP at any time; provided, however, unless required by law, no amendment may be retroactive or deprive any
Participants of amounts credited to his or her withholding account or any validly-purchased ESPP Shares. It is
intended, if possible, that any amendments or adjustments (as described herein and in the ESPP) be made in a
manner satisfying applicable legal, tax (including, without limitation and as applicable in the circumstances,
Section 424 and Section 409A of the Code), and accounting (i.e., financial reporting) requirements. If the Board
does not earlier terminate the ESPP, the ESPP shall terminate on the date on which all shares of Common Stock
available for issuance have been sold pursuant to purchase rights exercised under the ESPP.
Summary of Federal Income Tax Consequences
The following is only a summary of the principal U.S. federal income tax consequences to a Participant and
the Corporation with respect to the ESPP, based on advice received from counsel to the Corporation regarding
current federal income tax laws. The information is based on current deferral income tax rules and therefore is
subject to change. This summary is not intended to be exhaustive and, among other things, does not discuss the
tax consequences of a Participant’s death or the income tax laws of any city, state, or foreign country in which
the Participant may reside. This summary cannot describe all possible federal tax consequences of the ESPP or
such consequences based on particular circumstances. Because the tax consequences of participating in the ESPP
may vary with respect to individual circumstances, and because the Code and associated Treasury Regulations
are complex and subject to change, an eligible employee should consult with his or her tax advisor as to the
federal and other tax consequences of participating in the ESPP.
The ESPP is not qualified under the provisions of Section 401(a) of the Code and is not subject to any of the
provisions of the Employee Retirement Income Security Act of 1974, as amended. Options granted pursuant to
the ESPP shall be exempt from the application of Section 409A of the Code. Rights granted under the ESPP are
intended to qualify for favorable federal income tax treatment associated with rights granted under an employee
stock purchase plan that qualifies under provisions of Section 423 of the Code.
Tax Treatment for Participants
A Participant will be taxed on the amounts withheld from a Participant’s payroll to be used for the purchase
of ESPP Shares as if such amounts were actually received. The Participant will not recognize income upon
enrollment in the ESPP, the Grant Date (i.e., when the Option is granted to the Participant by the Corporation),
nor the Exercise Date (i.e., when the ESPP Shares are purchased by the Participant through exercise of the
Option). However, for the year in which occurs Participant sells or disposes of ESPP Shares, the Participant
generally will be subject to federal income tax that may vary in characterization, amount, and timing based on the
length of time such ESPP Shares are held by the Participant.
If the ESPP Shares are sold or disposed of earlier than two years after the Grant Date and less than one year
after the Exercise Date, the sale or disposition represents a “disqualifying disposition” under the Code. When
there is a disqualifying disposition, the Participant generally will recognize ordinary income equal to the excess
of the Fair Market Value of the ESPP Shares on the Exercise Date over the Purchase Price paid for those ESPP
Shares (i.e., the absolute amount of the price discount at Exercise Date). Any additional gain (or loss) on such
sale or disposition will be long-term or short-term capital gain, depending on the length of time the ESPP Shares
were held by the Participant.
If the ESPP Shares are sold or disposed of more than two years after the Grant Date and more than one year
after the Exercise Date, the Participant will recognize ordinary income for the year in which the sale or disposal
44
occurs, equal to the lesser of: (a) the excess of the Fair Market Value of the ESPP Shares at the time of such sale
or disposition over the Purchase Price paid for those ESPP Shares (i.e., the total absolute gain on the sale or
disposition); or (b) the excess of the Fair Market Value of the ESPP Shares on Grant Date over the Purchase
Price paid for those ESPP Shares. Any further gain (or loss) will be taxed as a long-term capital gain (or loss).
Tax Treatment for the Corporation
If a Participant recognizes ordinary income by selling or disposing of ESPP Shares in a disqualifying
disposition, the Corporation generally will be entitled to a tax deduction for compensation expense on its federal
tax return equal to the Participant’s ordinary income. Otherwise, the Corporation will not be entitled to any
federal income tax deduction with respect to the ESPP.
Benefits to Employees
The benefits to be received, if any, by eligible employees under the ESPP will depend on each individual’s
elections to participate and the fair market value of a share of the Corporation’s Common Stock at various dates
in the future. The actual number of ESPP Shares any Participant may purchase cannot be determined in advance.
Accordingly, it is not possible to determine the benefits that will be received by any participating employee.
Vote Required and Recommendation of the Board of Directors
The affirmative vote of a majority in voting power of the Common Stock and Class B Common Stock
casting a vote on the proposal at the Annual Meeting, voting together as a single class, is required to approve the
Vicor Corporation 2017 Employee Stock Purchase Plan. Abstentions and broker non-votes will not affect the
voting results for this proposal.
THE BOARD RECOMMENDS STOCKHOLDERS VOTE FOR APPROVAL OF THE ADOPTION
OF THE VICOR CORPORATION 2017 EMPLOYEE STOCK PURCHASE PLAN.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis
(“CD&A”) required by Item 402(b) of Regulation S-K for the year ended December 31, 2016, with management.
Based on the reviews and discussions referred to above, the Compensation Committee recommended to the
Board that the CD&A be included in this Proxy Statement and be incorporated by reference into our Annual
Report on Form 10-K for the year ended December 31, 2016, for filing with the SEC and distribution to
Stockholders.
Submitted by the Compensation Committee:
Jason L. Carlson, Chairman
Estia J. Eichten
Liam K. Griffin
David T. Riddiford
Compensation Committee Interlocks and Insider Participation
Messrs. Carlson, Eichten, Griffin, and Riddiford serve on the Compensation Committee. Messrs. Carlson,
Eichten, Griffin, and Riddiford are independent Directors, and the Board is not aware of any committee
interlocks or other relationships that would require disclosure pursuant to Item 407(e)(4) of Regulation S-K.
45
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Corporation’s financial reporting process on behalf of the Board.
Management has the primary responsibility for the financial statements and the reporting process including the
systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited
financial statements in the Annual Report with management, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.
The Audit Committee reviewed and discussed with our independent registered public accounting firm,
KPMG, which is responsible for expressing an opinion on the conformity of those audited financial statements
with U.S. generally accepted accounting principles, the quality, not just the acceptability, of the Corporation’s
accounting principles and such other matters as are required to be discussed with the Audit Committee in
accordance with standards established by the Public Company Accounting Oversight Board (“PCAOB”). In
addition, the Audit Committee has discussed with KPMG the auditors’ independence from management and the
Corporation, including the matters in the written disclosures from the independent auditors required by
applicable requirements of the PCAOB regarding independent accountant’s communications with the audit
committee concerning independence. The Audit Committee discussed with KPMG the overall scope and plans
for its audit. The Audit Committee periodically meets with KPMG, with and without management present, to
discuss the results of its audit, its evaluation of the Corporation’s internal controls and the overall quality of the
Corporation’s financial reporting.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board
(and the Board approved) that the audited financial statements be included in the Corporation’s Annual Report on
Form 10-K for the year ended December 31, 2016, for filing with the SEC, which occurred on March 7, 2017.
Submitted by the Audit Committee:
Jason L. Carlson, Chairman
Estia J. Eichten
Liam K. Griffin
David T. Riddiford
Certain Relationships and Related Transactions
The Corporation’s policy and procedures with respect to the review, approval, and/or ratification of related
party transactions are set forth in the Charter of the Audit Committee and, in summary, require the Audit
Committee to review and approve all related party transactions required to be disclosed pursuant to SEC
Regulation S-K, Item 404, and to discuss with management the business rationale for the transactions, whether
the transactions are on terms that are fair to the Corporation, and whether appropriate disclosures have been
made.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Corporation’s executive officers and Directors, and persons
who own more than 10% of a registered class of the Corporation’s equity securities (collectively, “Insiders”), to
file reports of ownership and changes in ownership with the SEC. Insiders are required by SEC regulations to
furnish the Corporation with copies of all Section 16(a) forms they file. To the Corporation’s knowledge, based
solely on a review of copies of such reports and written representations that no other reports were required during
the fiscal year ended December 31, 2016, all transactions in the Corporation’s securities that were engaged in by
Insiders, and therefore required to be disclosed pursuant to Section 16(a) of the Exchange Act, were timely
reported.
46
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee, acting under authorization of the Board of Directors, pursuant to the Audit
Committee Charter, and following the Corporation’s By-Laws, selected KPMG as the independent registered
public accounting firm for the Corporation for the fiscal year ending December 31, 2016. A representative of
KPMG is expected to be present at the Annual Meeting and will be given the opportunity to make a statement.
The representative is expected to be available to respond to appropriate questions from Stockholders.
The following table summarizes the fees for services rendered by KPMG for the fiscal years ended
December 31, 2016 and 2015 in each of the following categories:
Name
2016
2015
Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Related Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,053,000
28,000
141,000
$1,049,000
27,000
225,000
Total Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,222,000
$1,301,000
Audit Fees include services provided in connection with the audit of the Corporation’s consolidated
financial statements (including internal control reporting under Section 404 of the Sarbanes-Oxley Act of 2002),
the reviews of the Corporation’s quarterly reports on Form 10-Q, assistance with and review of documents filed
with the SEC, statutory audits required internationally and accounting consultations that relate to the audited
financial statements.
Audit-Related Fees include services provided in connection with audits of the 401(k) tax-qualified
retirement saving plan sponsored by the Corporation.
Tax Fees include services provided in connection with tax compliance, tax advice, tax planning, and
assistance with tax audits.
Pursuant to the provisions of the Charter of the Audit Committee, the Audit Committee must pre-approve all
auditing services and the terms thereof and non-audit services (other than non-audit services prohibited under
Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the PCAOB) to be provided to the
Corporation by our independent registered public accounting firm; provided, however, the pre-approval
requirement is waived with respect to the provision of non-audit services for the Corporation if the de minimus
provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied. Under the Charter, the authority to
pre-approve non-audit services may be delegated to one or more members of the Audit Committee, who are
required to present all decisions to pre-approve an activity to the full Audit Committee at its first meeting
following such decision. The Audit Committee approved all audit and non-audit services provided to the
Corporation by KPMG for fiscal years 2016 and 2015.
The Audit Committee has selected KPMG as the Corporation’s independent registered public accounting
firm for the fiscal year ending December 31, 2017.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2018 Annual Meeting of Stockholders must be
received by the Corporation on or before January 1, 2018, in order to be considered for inclusion in the
Corporation’s proxy statement and form of proxy. These proposals must also comply with the rules of the SEC
governing the form and content of proposals in order to be included in the Corporation’s proxy statement and
form of proxy and should be directed to: James A. Simms, Corporate Secretary, Vicor Corporation, 25 Frontage
Road, Andover, Massachusetts 01810. It is suggested that any Stockholder proposal be transmitted by certified
mail, return receipt requested.
47
In addition, our By-Laws provide that, for any Stockholder proposal or Director nomination to be properly
presented at the 2018 Annual Meeting of Stockholders, but not for inclusion in our proxy statement and form of
proxy, the Stockholder proposal or Director nomination must comply with the requirements set forth in our
By-Laws and we must receive notice of the matter not less than 90 nor more than 120 days prior to June 15,
2018. Thus, to be timely, notice of a Stockholder proposal or Director nomination for the 2018 Annual Meeting
of Stockholders must be received by our Corporate Secretary no earlier than February 20, 2018 and no later than
March 21, 2018. However, if the 2018 Annual Meeting of Stockholders is not scheduled to be held within a
period that commences on May 21, 2018 and ends on July 16, 2018, and instead, such meeting is scheduled to be
held on a date outside that period, notice of a Stockholder proposal or Director nomination, to be timely, must be
received by our Corporate Secretary by the later of 90 days prior to such other meeting date or 10 days following
the date such other meeting date is first publicly announced or disclosed.
Notwithstanding the foregoing notice deadlines under our By-Laws, in the event that the number of
Directors to be elected to our Board at the 2018 Annual Meeting of Stockholders is increased and either all of the
nominees for Director at the 2018 Annual Meeting of Stockholders or the size of the increased Board is not
publicly announced or disclosed by us by March 23, 2018, notice will be considered timely, but only with respect
to nominees for any new positions created by such increase, if the notice is delivered to our Corporate Secretary
no later than 10 days following the first date all such nominees or the size of the increased Board is publicly
announced or disclosed.
Proxies solicited by the Board will confer discretionary voting authority with respect to Stockholder
proposals, other than proposals to be considered for inclusion in the Corporation’s proxy statement described
above, that the Corporation receives at the above address after March 24, 2018. These proxies will also confer
discretionary voting authority with respect to Stockholder proposals, other than proposals to be considered for
inclusion in the Corporation’s proxy statement described above, that the Corporation receives on or before
March 24, 2018, subject to SEC rules governing the exercise of this authority.
48
APPENDIX A
Vicor Corporation Amended and Restated 2000 Stock Option and Incentive Plan
SECTION 1. General Purpose of the Plan; Definitions
The name of the plan is the Vicor Corporation Amended and Restated 2000 Stock Option and Incentive Plan
(the “Plan”). The purpose of the Plan is to encourage and enable those individuals upon whose judgment,
initiative, and efforts Vicor Corporation and its subsidiaries (the “Company”) largely depend for the successful
conduct of its business to acquire an ownership interest in the Company. It is anticipated providing such
individuals with a direct, quantifiable stake in the Company’s welfare will assure a closer identification of their
interests with those of the Company and its stockholders, thereby stimulating their efforts on the Company’s
behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
“Act” means the Securities Exchange Act of 1934, as amended.
“Administrator” is defined in Section 2(a).
“Award” or “Awards,” except when referring to a particular category of grant under the Plan, generally
shall include Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Deferred Stock
Awards, Restricted Stock Awards, Unrestricted Stock Awards, Performance Share Awards, and Dividend
Equivalent Rights.
“Board” means the Board of Directors of the Company.
“Change of Control” is defined in Section 16.
“Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules,
regulations and interpretations.
“Committee” means the Committee of the Board referred to in Section 2.
“Deferred Stock Award” means Awards granted pursuant to Section 8.
“Director” means a member of the Board.
“Dividend Equivalent Right” means Awards granted pursuant to Section 11.
“Effective Date” means the date on which the Plan is approved by stockholders as set forth in Section 18.
“Employee” means any individual employed by the Company or a Subsidiary (defined herein) as the term is
defined under the rules contained in Section 3401 of the Code. Neither service as a Director nor payment of a
director’s fee by the Company shall be sufficient by itself to constitute “employment” by the Company.
“Fair Market Value” of the Stock on any given date means the fair market value of the Stock determined in
good faith by the Administrator; provided, however, that (i) if the Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System (“NASDAQ”), the Fair Market Value on any
given date shall not be less than the average of the highest bid and lowest asked prices of the Stock reported for
such date or, if no bid and asked prices were reported for such date, for the last day preceding such date for
which such prices were reported, or (ii) if the Stock is admitted to trading on a national securities exchange or the
1
NASDAQ National Market System, the Fair Market Value on any date shall not be less than the closing price
reported for the Stock on such exchange or system for such date or, if no sales were reported for such date, for
the last date preceding the date for such a sale was reported.
“Incentive Stock Option” means any Stock Option designated and qualified as an “incentive stock option”
as defined in Section 422 of the Code.
“Independent Director” means a member of the Board who meets the requirements of NASDAQ Rule
5605(a)(2).
“Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.
“Participant” means (a) an employee or Director of the Company or its Subsidiaries, or (b) an third-party
individual (e.g., an independent consultant or contractor) granted an Award under the terms of this Plan.
“Performance Share Award” means Awards granted pursuant to Section 10.
“Principal Stockholder” means Patrizio Vinciarelli, members of his immediate family, any trusts of which
he is a trustee or in which he or members of his immediate family have substantial beneficial interest, and, upon
his death, his executors, administrators, personal representatives, heirs, legatees, or distributees.
“Restricted Stock Award” means Awards granted pursuant to Section 7.
“Secretary” means the capacity in which the Company’s Chief Financial Officer shall serve in support of
the Administrator.
“Stock” means the Common Stock, par value $.01 per share, of the Company, subject to adjustments
pursuant to Section 3.
“Stock Appreciation Right” means any Award granted pursuant to Section 6.
“Stock Option” means any option to purchase shares of Stock granted pursuant to Section 5.
“Subsidiary” means a “subsidiary corporation” as defined in Section 424(f) of the Code.
“Unrestricted Stock Award” means any Award granted pursuant to Section 9.
SECTION 2. Administration of the Plan
(a) Administration. The Plan shall be administered by the Board, the Compensation Committee thereof, or
a sub-committee of the Compensation Committee made up of not less than two Independent Directors
(in any case, the “Administrator”). The Company’s Chief Financial Officer shall serve as Secretary to
the Administrator, with responsibility for coordination and communication of the undertakings of the
Administrator, including the assessment of the implications for financial reporting, if any, prior to the
completion of any such undertakings.
(b) Powers of Administrator. The Administrator shall have the power and authority to grant Awards
consistent with the terms of the Plan, including the power and authority:
(i)
to select the individuals to whom Awards may from time to time be granted, based on
recommendations of the Company’s senior management;
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(ii)
to determine the time or times of grant, and the extent, if any, of Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Deferred
Stock Awards, Unrestricted Stock Awards, Performance Share Awards, and Dividend Equivalent
Rights, or any combination of the foregoing, granted to any one or more individuals;
(iii) to determine the number of shares of Stock associated with any Award;
(iv) to determine and modify from time to time the terms and conditions, including restrictions, not
inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ
among individual Awards and recipients, and to approve the form of written instrument(s)
evidencing the Awards;
(v)
to accelerate at any time the exercisability or vesting of all or any portion of any Award;
(vi) subject to the provisions of Section 5(a)(ii), to extend at any time the period in which Stock
Options may be exercised;
(vii) at any time to adopt, alter, and repeal such rules, guidelines, and practices for administration of the
Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written instrument(s)); to make all
determinations it deems advisable for the administration of the Plan; to decide all disputes arising
in connection with the Plan; and to otherwise supervise the oversight of the Plan by the Secretary.
All decisions and interpretations of the Administrator shall be binding on all Participants and the
Company.
(c) Delegation of Authority to Grant Awards. The Administrator, in its discretion, may delegate to the
Chief Executive Officer of the Company all or part of the Administrator’s authority and duties with
respect to the granting of Awards at Fair Market Value, to individuals who are not subject to the
reporting and other provisions of Section 16 of the Act or “covered employees” within the meaning of
Section 162(m) of the Code; provided, however, any exercise by the Chief Executive Officer of such
delegated authority and duties shall be approved by the Administrator prior to completion thereof. Any
such delegation by the Administrator shall include a limitation as to the amount of Awards that may be
granted during the period of the delegation and shall contain guidelines as to the determination of the
exercise price of any Stock Option, the conversion ratio or price of other Awards, and the vesting
criteria. The Administrator may revoke or amend the terms of a delegation at any time, but such action
shall not invalidate any prior actions of the Administrator’s delegate consistent with the terms of the
Plan.
(d)
Indemnification. Neither the Board, nor the Compensation Committee, nor any member of either or any
delegatee thereof, including the Secretary, shall be liable for any act, omission, interpretation,
construction, or determination made in good faith in connection with the Plan, and the members of the
Board and Compensation Committee (and any delegatee thereof, including the Secretary) shall be
entitled in all cases to indemnification and reimbursement by the Company in respect of any claim,
loss, damage, or expense (including, without limitation, reasonable attorneys’ fees) arising or resulting
therefrom to the fullest extent permitted by law and/or under any directors’ and officers’ liability
insurance coverage which may be in effect from time to time.
SECTION 3. Shares of Stock Issuable Under the Plan; Mergers; Substitution
(a) Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the
Plan shall be 10,000,000.
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Subject to this overall limitation, shares of Stock may be issued up to such maximum number pursuant
to any type or types of Award; provided, however, not more than 100,000 shares of Stock shall be
issued to any one individual in the form of:
(i) Stock Options or Stock Appreciation Rights granted during any one calendar year period, and
(ii) Unrestricted Stock Awards, Restricted Stock Awards, or Performance Share Awards, except to the
extent such Awards are granted in lieu of cash compensation or fees, as determined by the
Administrator.
The shares of Stock available for issuance under the Plan may be authorized but unissued shares of
Stock or shares of Stock reacquired by the Company and held in its treasury. For purposes of
calculating the number of shares of Stock available for issuance under the Plan, if any Award is
forfeited, canceled, lapses, or terminates for any reason other than exercise, the shares of Stock
associated with that Award shall revert to and again become available for issuance under the Plan.
(b) Changes in Stock. If, as a result of any reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, or other similar change in the Company’s capital stock, the outstanding
shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or
other securities of the Company, or additional shares or new or different shares or other securities of
the Company or other non-cash assets are distributed with respect to such shares of Stock or other
securities, the Administrator shall make an appropriate or proportionate adjustment in (i) the maximum
number of shares reserved for issuance under the Plan, (ii) the number of Stock Options or Stock
Appreciation Rights that can be granted to any one individual Participant, (iii) the number and kind of
shares or other securities subject to any then outstanding Awards under the Plan, and (iv) the price for
each share subject to any then outstanding Stock Options and Stock Appreciation Rights under the
Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of
Stock Options and Stock Appreciation Rights) as to which such Stock Options and Stock Appreciation
Rights remain exercisable. The adjustment by the Administrator shall be final, binding, and conclusive.
No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but the
Administrator in its discretion may make a cash payment in lieu of fractional shares.
The Administrator may also adjust the number of shares subject to outstanding Awards and the
exercise price and the terms of outstanding Awards to take into consideration material changes in
accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock or
property, or any other event if it is determined by the Administrator that such adjustment is appropriate
to avoid distortion in the operation of the Plan, provided, however, no such adjustment shall be made in
the case of an Incentive Stock Option, without the consent of the Participant, if it would constitute a
modification, extension or renewal of the Stock Option within the meaning of Section 424(h) of the
Code.
(c) Mergers and Other Transactions. In the case of (i) the dissolution or liquidation of the Company,
(ii) the sale of all or substantially all of the assets of the Company on a consolidated basis to an
unrelated person or entity, (iii) a merger, reorganization or consolidation in which the holders of the
Company’s outstanding voting power immediately prior to such transaction do not own a majority of
the outstanding voting power of the surviving or resulting entity immediately upon completion of such
transaction, (iv) the sale of all of the Stock of the Company to an unrelated person or entity, or (v) any
other transaction in which the owners of the Company’s outstanding voting power prior to such
transaction do not own at least a majority of the outstanding voting power of the relevant entity after
the transaction (in each case, a “Transaction”), as of the effective date of such Transaction, all Stock
Options and Stock Appreciation Rights that are not exercisable shall become fully exercisable and all
other Awards which are not vested shall become fully vested, except as the Administrator may
otherwise specify with respect to any such other Awards. Upon the effectiveness of the Transaction, the
Plan and all outstanding Stock Options, Stock Appreciation Rights, and other Awards granted
hereunder shall terminate, unless provision is made in connection with the Transaction for the
4
assumption of Awards heretofore granted, or the substitution of such Awards of new Awards of the
successor entity or parent thereof, with appropriate adjustment as to the number and kind of shares and,
if appropriate, the per share exercise prices, as provided in Section 3(b) above. In the event of such
termination, each Award recipient shall be permitted to exercise for a period of at least 15 days prior to
the date of such termination all outstanding Stock Options and Stock Appreciation Rights held by such
Award recipient then exercisable (or that become exercisable upon the effectiveness of the
Transaction).
(d) Substitute Awards. The Administrator may grant Awards under the Plan in substitution for Stock and
Stock-based awards held by employees of another corporation who become employees of the Company
or a Subsidiary as the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the
employing corporation. The Administrator may direct that the substitute awards be granted on such
terms and conditions as the Administrator considers appropriate in the circumstances. Any substitute
Awards granted under the Plan shall not count against the share limitations set forth in Section 3 (a).
SECTION 4. Eligibility
Individuals eligible for Award(s) under this Plan include (a) Employees and Directors of the Company (or
its subsidiaries) and (b) independent third-parties considered by senior management to be significant contributors
to the performance of the Company. Such individuals shall be identified periodically by the Company’s senior
management, which shall recommend to the Administrator the authorization of specific Awards for those
individuals. The Administrator shall have sole responsibility for determining the eligibility of any individual
subject to the senior management’s recommendation.
SECTION 5. Stock Options
Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time
approve.
Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock
Options. Incentive Stock Options may be granted only to Employees. Non-Qualified Stock Options may be
granted to Employees, Directors, or independent third-parties.
No Incentive Stock Option shall be granted under the Plan after March 9, 2012.
To the extent that any Stock Option does not qualify as an Incentive Stock Option, it shall be deemed a
Non-Qualified Stock Option.
(a) Stock Options Terms and Conditions. Stock Options granted pursuant to this Section 5(a) shall be
subject to the following terms and conditions and shall contain such additional terms and conditions,
not inconsistent with the terms of the Plan, as the Administrator shall deem desirable. If the
Administrator so determines, Stock Options may be granted in lieu of cash compensation at the
Participant’s election, subject to such terms and conditions as the Administrator may establish, as well
as in addition to other compensation.
(i) Exercise Price. The exercise price per share for the Stock covered by a Stock Option granted
pursuant to this Section 5(a) shall be determined by the Administrator at the time of grant but shall
not be less than 100 percent of the Fair Market Value on the date of grant in the case of Incentive
Stock Options, or 85 percent of the Fair Market Value on the date of grant, in the case of
Non-Qualified Stock Options; provided that, in the case of Non-Qualified Stock Options intended
to qualify as performance-based compensation under Section 162(m) of the Code, the exercise
price per share shall not be less than 100 percent of the Fair Market Value on the date of grant. If
an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10 percent of the combined voting power of all classes of stock of the Company
5
or any parent or subsidiary corporation and an Incentive Stock Option is granted to such
employee, the option price of such Incentive Stock Option shall be not less than 110 percent of the
Fair Market Value on the grant date.
(ii) Stock Option Term. The term of each Stock Option shall be fixed by the Administrator, but no
Incentive Stock Option shall be exercisable more than ten years after the date the option is
granted. If an employee owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of
the Company or a Subsidiary corporation and an Incentive Stock Option is granted to such
employee, the term of such option shall be no more than five years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall become exercisable at such time or
times, whether or not in installments, as shall be determined by the Administrator at or after the
grant date; provided, however, Stock Options granted in lieu of compensation shall be exercisable
in full as of the grant date. The Administrator may at any time accelerate the exercisability of all
or any portion of any Stock Option. An Award recipient shall have the rights of a stockholder only
as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or in part, by giving written notice
of exercise to the Company, specifying the number of shares to be purchased. Payment of the
purchase price may be made by one or more of the following methods:
(A) In cash, by certified or bank check or other instrument acceptable to the Administrator;
(B) Through the delivery (or attestation to the ownership) of shares of Stock that are not then
subject to restrictions under any Company plan and that have been beneficially owned by the
Award recipient for at least six months or have been purchased by the Participant on the open
market, if permitted by the Administrator in its discretion. Such surrendered shares shall be
valued at Fair Market Value on the exercise date; or
(C) By the Award recipient delivering to the Company a properly executed exercise notice
together with irrevocable instructions to a registered broker-dealer to promptly deliver to the
Company cash or a check payable and acceptable to the Company for the purchase price;
provided, however, in the event the Award recipient chooses to pay the purchase price as so
provided, the Award recipient and the broker-dealer shall comply with such procedures and
enter into such agreements of indemnity and other agreements as the Administrator shall
prescribe as a condition of such payment procedure.
Payment instruments will be received subject to collection. The delivery of certificates
representing the shares of Stock to be purchased pursuant to the exercise of a Stock Option will be
contingent upon receipt from the Award recipient (or a purchaser acting in his or her stead in
accordance with the provisions of the Stock Option) by the Company of the full purchase price for
such shares and the fulfillment of any other requirements contained in the Stock Option or
applicable provisions of laws.
(v) Annual Limit on Incentive Stock Options. To the extent required for “incentive stock option”
treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the
time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its parent and subsidiary corporations become
exercisable for the first time by an Award recipient during any calendar year shall not exceed
$100,000. To the extent that any Stock Option exceeds this limit, it shall constitute a
Non-Qualified Stock Option.
(b) “Reload Options”. At the discretion of the Administrator, Stock Options granted under the Plan may
include a “reload” feature pursuant to which an Award recipient exercising a Stock Option by the
delivery of a number of shares of Stock in accordance with Section 5(a)(iv)(B) hereof would
automatically be granted an additional Stock Option (with an exercise price equal to the Fair Market
6
Value of the Stock on the date the additional Stock Option is granted and with such other terms as the
Administrator may provide) to purchase that number of shares of Stock equal to the number delivered
to exercise the original Stock Option with a term equal to the remainder of the original Stock Option
term unless the Administrator otherwise determines in the Award Agreement for the original Stock
Option grant.
(c) Stock Options Granted to Independent Directors. The Board, in its discretion, may grant Non-Qualified
Stock Options to Independent Directors. The terms and conditions of any such grant may vary among
individual Independent Directors. The ability of the Board to make such discretionary grants shall be in
lieu of any automatic grant of Stock Options under the Company’s 1993 Stock Option Plan and 1998
Stock Option and Incentive Plan.
(d) Non-transferability of Stock Options. No Stock Option shall be transferable by the Award recipient
otherwise than by will or by the laws of descent and distribution. All Stock Options shall be
exercisable, during the Award recipient’s lifetime, only by the Award recipient or by the Award
recipient’s legal representative or guardian in the event of the Award recipient’s incapacity.
Notwithstanding the foregoing, the Administrator, in its sole discretion, may provide in the Award
agreement regarding a given Stock Option that the Award recipient may transfer, without consideration
for the transfer, his or her Non-Qualified Stock Options to members of his or her immediate family, to
trusts for the benefit of such family members, or to partnerships in which such family members are the
only partners, provided the transferee agrees in writing with the Company to be bound by all of the
terms and conditions of this Plan, associated documents (e.g., the Stock Option Award Agreement),
and the applicable Stock Option.
(e) Termination. Except as may otherwise be provided by the Administrator either in the Award
agreement, or subject to Section 14 below, in writing after the Award agreement is issued, an Award
recipient’s rights in all Stock Options shall automatically terminate upon the Participant’s termination
of employment (or, in the case of independent third-parties, cessation of the business relationship) with
the Company and its Subsidiaries for any reason.
SECTION 6. Stock Appreciation Rights.
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an Award entitling the recipient to
receive an amount in cash or shares of Stock or a combination thereof having a value equal to the
excess of the Fair Market Value of the Stock on the date of exercise over the exercise price Stock
Appreciation Right, which price shall not be less than 100 percent of the Fair Market Value of the
Stock on the date of grant (or more than the exercise price per share, if the Stock Appreciation Right
were granted in tandem with a Stock Option) multiplied by the number of shares of Stock with respect
to which the Stock Appreciation Right shall have been exercised, with the Administrator having the
right to determine the form of payment.
(b) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be granted by the
Administrator in tandem with, or independently of, any Stock Option granted pursuant to Section 5 of
the Plan. In the case of a Stock Appreciation Right granted in tandem with an Incentive Stock Option,
such Stock Appreciation Right may be granted only at the time of the grant of the Incentive Stock
Option. In the case of a Stock Appreciation Right granted in tandem with a Non-Qualified Stock
Option, such Stock Appreciation Right may be granted either at or after the time of the grant of such
Non-Qualified Stock Option.
A Stock Appreciation Right or applicable portion thereof granted in tandem with a Stock Option shall
terminate and no longer be exercisable upon the termination or exercise of the related Stock Option.
7
(c) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such
terms and conditions as shall be determined from time to time by the Administrator, subject to the
following:
(i) Stock Appreciation Rights granted in tandem with Stock Options shall be exercisable at such time
or times and to the extent that the related Stock Options shall be exercisable.
(ii) Upon exercise of a Stock Appreciation Right, the applicable portion of any related Stock Option
shall be surrendered.
(iii) All Stock Appreciation Rights shall be exercisable during the Participant’s lifetime only by the
Participant or the Participant’s legal representative.
(d) Termination. Except as may otherwise be provided by the Administrator either in the Award
agreement, or subject to Section 14 below, in writing after the Award agreement is issued, an Award
recipient’s rights in all Stock Appreciation Rights shall automatically terminate upon the Participant’s
termination of employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
SECTION 7. Restricted Stock Awards
(a) Nature of Restricted Stock Awards. A Restricted Stock Award is an Award entitling the recipient to
acquire, at par value or such other higher purchase price determined by the Administrator, shares of
Stock subject to such restrictions and conditions as the Administrator may determine at the time of
grant (“Restricted Stock”). Conditions may be based on continuing employment (or other business
relationship) and/or achievement of pre-established performance goals and objectives. The grant of a
Restricted Stock Award is contingent on the award recipient executing the Restricted Stock Award
agreement. The terms and conditions of each such agreement shall be determined by the Administrator,
and such terms and conditions may differ among individual Awards and Participants.
(b) Rights as a Stockholder. Upon execution of a written instrument setting forth the Restricted Stock
Award and payment of any applicable purchase price, a Participant shall have the rights of a
stockholder with respect to the voting of the Restricted Stock, subject to such conditions contained in
the written instrument evidencing the Restricted Stock Award. Unless the Administrator shall
otherwise determine, certificates evidencing the Restricted Stock shall remain in the possession of the
Company until such Restricted Stock is vested as provided in Section 7(d) below, and the Participant
shall be required, as a condition of the grant, to deliver to the Company a form of stock power
(endorsed in “blank”).
(c) Restrictions. Restricted Stock may not be sold, assigned, transferred, pledged, or otherwise encumbered or
disposed of except as specifically provided herein or in the Restricted Stock Award agreement. If a
Participant’s employment (or other business relationship) with the Company and its Subsidiaries terminates
for any reason, the Company shall have the right to repurchase Restricted Stock that has not vested at the time
of termination at its original purchase price, from the Participant or the Participant’s legal representative.
(d) Vesting of Restricted Stock. The Administrator at the time of grant shall specify the date or dates and/or
the attainment of pre-established performance goals, objectives, and other conditions on which the
non-transferability of the Restricted Stock and the Company’s right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such pre-established performance
goals, objectives, and other conditions, the shares of Stock on which all restrictions have lapsed shall
no longer be Restricted Stock and shall be deemed vested. Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 14 below, in writing after the
Award agreement is issued, a Participant’s rights in any shares of Restricted Stock that have not vested
shall automatically terminate upon the Participant’s termination of employment (or other business
relationship) with the Company and its Subsidiaries and such shares shall be subject to the Company’s
right of repurchase as provided in Section 7(c) above.
8
(e) Waiver, Deferral, and Reinvestment of Dividends. The Restricted Stock Award agreement may require
or permit the immediate payment, waiver, deferral, or investment of dividends paid on the Restricted
Stock.
SECTION 8. Deferred Stock Awards
(a) Nature of Deferred Stock Awards. A Deferred Stock Award is an Award of “phantom stock” units to a
Participant, subject to restrictions and conditions as the Administrator may determine at the time of
grant. Conditions may be based on continuing employment (or other business relationship) and/or
achievement of pre-established performance goals and objectives. The grant of a Deferred Stock
Award is contingent on the Participant executing the Deferred Stock Award agreement.
The terms and conditions of each such agreement shall be determined by the Administrator, and such
terms and conditions may differ among individual Awards and Participants. At the end of the deferral
period, the Deferred Stock Award, to the extent vested, shall be paid to the Participant in the form of
shares of Stock.
(b) Election to Receive Deferred Stock Awards in Lieu of Compensation. The Administrator may, in its
sole discretion, permit a Participant to elect to receive a portion of his or her cash compensation or
Restricted Stock Award otherwise due to such Participant in the form of a Deferred Stock Award. Any
such election shall be made in writing and shall be delivered to the Company no later than the date
specified by the Administrator and in accordance with rules and procedures established by the
Administrator. The Administrator shall have the sole right to determine whether and under what
circumstances to permit such elections and to impose such limitations and other terms and conditions
thereon as the Administrator deems appropriate.
(c) Rights as a Stockholder. During the deferral period, a Participant shall have no rights as a stockholder;
provided, however, the Participant may be credited with Dividend Equivalent Rights with respect to the
“phantom stock” units underlying the Deferred Stock Award, subject to such terms and conditions as
the Administrator may determine.
(d) Restrictions. A Deferred Stock Award may not be sold, assigned, transferred, pledged, or otherwise
encumbered or disposed of during the deferral period.
(e) Termination. Except as may otherwise be provided by the Administrator either in the Award agreement
or, subject to Section 14 below, in writing after the Award agreement is issued, a Participant’s right in
all Deferred Stock Awards that have not vested shall automatically terminate upon the Participant’s
termination of employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
SECTION 9. Unrestricted Stock Awards
Grant or Sale of Unrestricted Stock. The Administrator may, in its sole discretion, grant (or sell at par value
or such higher purchase price determined by the Administrator) an Unrestricted Stock Award to any eligible
party pursuant to which such party may receive shares of Stock free of any restrictions (“Unrestricted Stock”)
under the Plan. Unrestricted Stock Awards may be granted or sold as described in the preceding sentence in
respect of past services or other valid consideration, or in lieu of cash compensation due to such party.
SECTION 10. Performance Share Awards
(a) Nature of Performance Share Awards. A Performance Share Award is an Award entitling the recipient
to acquire shares of Stock upon the attainment of specified performance goals. The Administrator may
make Performance Share Awards independent of or in connection with the granting of any other Award
under the Plan. The Administrator, in its sole discretion, shall determine whether and to whom
Performance Share Awards shall be made, the performance goals, the periods during which
performance is to be measured, and all other limitations and conditions.
9
(b) Rights as a Stockholder. A recipient of a Performance Share Award shall have the rights of a
stockholder only as to shares of Stock actually received under the Plan and not with respect to shares of
Stock subject to the Award but not actually received by the Participant. A Participant shall be entitled
to receive a stock certificate evidencing the acquisition of shares of Stock under a Performance Share
Award only upon satisfaction of all conditions specified in the Performance Share Award Agreement
(or in a documented performance plan duly adopted by the Administrator).
(c) Termination. Except as may otherwise be provided by the Administrator either in the Performance
Share Award Agreement or, subject to Section 14 below, in writing after the Performance Share Award
Agreement is executed, a Participant’s rights in all Performance Share Awards shall automatically
terminate upon the Participant’s termination of employment (or cessation of business relationship) with
the Company and its Subsidiaries for any reason.
(d) Acceleration, Waiver, Etc. At any time prior to the Participant’s termination of employment (or other
business relationship) by the Company and its Subsidiaries, the Administrator, in its sole discretion,
may accelerate, waive or, subject to Section 14, amend any or all of the goals, restrictions, or
conditions applicable to a Performance Share Award.
SECTION 11. Dividend Equivalent Rights
(a) Dividend Equivalent Rights. A Dividend Equivalent Right is an Award entitling the recipient to receive
credits based on cash dividends that would have been paid on the shares of Stock specified in the
Dividend Equivalent Right (or other Award to which it relates) if such shares of Stock had been issued
to and held by the recipient. A Dividend Equivalent Right may be granted hereunder to any Participant
as a component of another Award or as a freestanding Award. The terms and conditions of Dividend
Equivalent Rights shall be specified in the grant documentation. Dividend equivalents credited to the
recipient of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in
additional shares of Stock, which may thereafter accrue additional equivalents. Any such reinvestment
shall be at Fair Market Value on the date of reinvestment or such other price as may then apply under a
dividend reinvestment plan sponsored by the Company, if any. Dividend Equivalent Rights may be
settled in cash, shares of Stock, or a combination thereof, and in a single installment or multiple
installments. A Dividend Equivalent Right granted as a component of another Award may provide that
such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of
restrictions on, such other Award, and that such Dividend Equivalent Right shall expire or be forfeited
or annulled under the same conditions as such other Award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from such other Award.
(b)
Interest Equivalents. Any Dividend Equivalent Right Award under this Plan that is settled in whole or
in part in cash on a deferred basis may provide in the grant for interest equivalents to be credited with
respect to such cash payment. Interest equivalents may be compounded and shall be paid upon such
terms and conditions as may be specified by the grant.
(c) Termination. Except as may otherwise be provided by the Administrator either in the Dividend
Equivalent Right Award Agreement or, subject to Section 14 below, in writing after the Dividend
Equivalent Right Award Agreement is executed, a Participant’s rights in all Dividend Equivalent
Rights or interest equivalents shall automatically terminate upon the Participant’s termination of
employment (or cessation of business relationship) with the Company and its Subsidiaries for any
reason.
SECTION 12. Tax Withholding
(a) Payment by Participant. Each Participant shall, no later than the date as of which the value of an
Award, any shares of Stock, or other amounts received thereunder first becomes includable in the gross
income of the Participant for Federal income tax purposes, pay to the Company, or make arrangements
10
satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind
required by law to be withheld with respect to such income. The Company and its Subsidiaries shall, to
the extent permitted by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Participant. The Company’s obligation to deliver stock certificates to any
Participant is subject to and conditioned on tax obligations being satisfied by the Participant.
(b) Payment in Stock. Subject to approval by the Administrator, a Participant may elect to have the
minimum statutory required tax withholding obligation satisfied, in whole or in part, by (i) authorizing
the Company to withhold from shares of Stock to be issued pursuant to any Award a number of shares
with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the
withholding amount due, or (ii) transferring to the Company shares of Stock owned by the Participant
with a minimum aggregate Fair Market Value (as of the date the withholding is effected) that would
satisfy the minimum statutory withholding amount due.
SECTION 13. Transfer, Leave of Absence, Etc.
For purposes of the Plan, the following events shall not be deemed a termination of employment:
(a)
a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary,
or from one Subsidiary to another; or
(b) an approved leave of absence for military service, sickness, or for any other purpose approved by the
Company, if the Employee’s right to re-employment is guaranteed either by a statute or by contract or
under the policy pursuant to which the leave of absence was granted, or if the Administrator otherwise
so provides in writing.
SECTION 14. Amendments and Termination
The Board may, at any time, amend or discontinue the Plan. The Administrator, at any time, may amend or
cancel any outstanding Award for the purpose of satisfying changes in law or for any other lawful purpose, but
no such action shall adversely affect rights under any outstanding Award without the Participant’s consent. The
Administrator may provide substitute Awards at the same or reduced exercise or purchase price or with no
exercise or purchase price in a manner not inconsistent with the terms of the Plan, but such price, if any, must
satisfy the requirements that would apply to the substitute or amended Award if it were then initially granted
under this Plan, but no such action shall adversely affect rights under any outstanding Award without the
Participant’s consent.
If and to the extent determined by the Administrator to be required by the Code to ensure that Incentive
Stock Options granted under the Plan are qualified under Section 422 of the Code or to ensure that compensation
earned under Stock Options and Stock Appreciation Rights qualifies as performance-based compensation under
Section 162(m) of the Code, if and to the extent intended to so qualify, Plan amendments shall be subject to
approval by the Company stockholders entitled to vote at a meeting of stockholders.
Nothing in this Section 14 shall limit the Board’s authority to take any action permitted pursuant to
Section 3(c).
SECTION 15. Status of Plan
With respect to the portion of any Award that has not been exercised and any payments in cash, shares of
Stock, or other consideration not received by a Participant, a Participant shall have no rights greater than those of
a general creditor of the Company, unless the Administrator shall expressly determine otherwise in connection
with any Award or Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other
arrangements to meet the Company’s obligations to deliver shares of Stock or make payments with respect to
Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the
foregoing sentence.
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SECTION 16. Change of Control Provisions
Upon the occurrence of a Change of Control as defined in this Section 16:
(a) Except as otherwise provided in the applicable Award Agreement, each outstanding Stock Option and
Stock Appreciation Right shall automatically become fully exercisable.
(b) Each outstanding Restricted Stock Award and Performance Share Award shall be subject to such terms,
if any, with respect to a Change of Control as have been provided by the Administrator in the
associated Award Agreement, or subject to Section 14 above, in writing after the Award Agreement is
executed.
(c) “Change of Control” shall mean the occurrence of any one of the following events:
(i)
any “person,” as such term is used in Sections 13(d) and 14(d) of the Act (other than the
Company, any of its Subsidiaries, or any trustee, fiduciary, or other person or entity holding
securities under any employee benefit plan or trust of the Company or any of its Subsidiaries),
together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the
Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company representing 25 percent or
more of the combined voting power of the Company’s then outstanding securities having the right
to vote in an election of the Company’s Board (“Voting Securities”) (in such case other than as a
result of an acquisition of securities directly from the Company); or
(ii) persons who, as of the Effective Date, constitute the Company’s Board (the “Incumbent
Directors”) cease for any reason, including, without limitation, as a result of a tender offer, proxy
contest, merger, or similar transaction, to constitute at least a majority of the Board, provided that
any person becoming a director of the Company subsequent to the Effective Date shall be
considered an Incumbent Director if such person’s election was approved by or such person was
nominated for election by either (A) a vote of at least a majority of the Incumbent Directors or
(B) a vote of at least a majority of the Incumbent Directors who are members of a nominating
committee comprised, in the majority, of Incumbent Directors; or
(iii) the stockholders of the Company shall approve (A) any consolidation or merger of the Company by
which the stockholders of the Company, immediately prior to the consolidation or merger, would not
beneficially own (as such term is defined in Rule 13d-3 under the Act), immediately after the
consolidation or merger, directly or indirectly, shares representing in the aggregate 50 percent or more of
the voting shares of the entity issuing cash or securities in the consolidation or merger (or of its ultimate
parent organization, if any), (B) any sale, lease, exchange, or other transfer (in one transaction or a series
of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the
assets of the Company or (C) any plan or proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred for
purposes of the foregoing clause (i) solely as the result of an acquisition of securities by the Company
which, by reducing the number of shares of Voting Securities outstanding, increases the proportionate
number of shares of Voting Securities beneficially owned by any person to 25 percent or more of the
combined voting power of all then outstanding Voting Securities; provided, however, that if any person
referred to in this sentence shall thereafter become the beneficial owner of any additional shares of
Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction or as a
result of an acquisition of securities directly from the Company), then a “Change of Control” shall be
deemed to have occurred for purposes of the foregoing clause (i).
SECTION 17. General Provisions
(a) No Distribution; Compliance with Legal Requirements. The Administrator may require each person
acquiring shares of Stock pursuant to an Award to represent to and agree with the Company in writing
that such person is acquiring the shares without a view to distribution thereof.
12
No shares of Stock shall be issued pursuant to an Award until all applicable securities laws and other
legal and stock exchange or similar requirements have been satisfied. The Administrator may require
the placement of stop-orders and restrictive legends on Stock certificates or related Award
documentation as it deems appropriate.
(b) Delivery of Stock Certificates. Stock certificates to Participants under this Plan shall be deemed
delivered for all purposes when the Company or a stock transfer agent of the Company shall have
mailed such certificates in the United States mail, addressed to the Participant, at the Participant’s last
known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall
prevent the Board from adopting other or additional compensation arrangements, including trusts, and
such arrangements may be either generally applicable or applicable only in specific cases. The adoption
of this Plan and the grant of Awards do not confer upon any Employee any right to continued
employment with the Company or any Subsidiary.
(d) Trading Policy Restrictions. Stock Option exercises and other transactions associated with Awards
under the Plan shall be subject to Company policies associated with insider trading and trading
restrictions, as well as terms and conditions established by the Administrator from time to time.
(e) Designation of Beneficiary. Each Participant to whom an Award has been made under the Plan may
designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any
Award payable on or after the Participant’s death. Any such designation shall be on a form provided
for that purpose by the Administrator and shall not be effective until receipt is acknowledged by the
Administrator. If no beneficiary has been designated by a deceased Participant, or if the designated
beneficiaries have predeceased the Participant, the beneficiary shall be the Participant’s estate.
SECTION 18. Effective Date of Plan
This Plan shall become effective upon approval by the holders of a majority of the votes cast at a meeting of
stockholders at which a quorum is present. Subject to such approval by the stockholders and to the requirement
that no shares of Stock may be issued hereunder prior to such approval, Stock Options and other Awards may be
granted hereunder on and after adoption of this Plan by the Board.
SECTION 19. Governing Law
This Plan, all Awards, and actions taken hereunder shall be governed by, and construed in accordance with,
the laws of the State of Delaware, applied without regard to conflict of law principles.
On April 26, 2017, the Board approved, subject to Stockholder approval, the amendment and restatement of
the Vicor Corporation Amended and Restated 2000 Stock Option and Incentive Plan (the “Vicor 2000 Plan”).
The full text of the Vicor 2000 Plan is presented above. Any reference within the text to an “exhibit” or an
“attachment” refers to documents associated with the administration of the Vicor 2000 Plan that are not a part
of the Vicor 2000 Plan and, therefore, not included in this Proxy Statement.
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APPENDIX B
VI Chip Corporation Amended and Restated 2007 Stock Option and Incentive Plan
SECTION 1. General Purpose of the Plan; Definitions
The name of the plan is the VI Chip Corporation Amended and Restated 2007 Stock Option and Incentive
Plan (the “Plan”). The purpose of the Plan is to encourage and enable the employees, directors, consultants and
other key persons of VI Chip Corporation (the “Company”) and its Affiliates upon whose judgment, initiative
and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s
welfare will assure a closer identification of their interests with those of the Company, thereby stimulating their
efforts on the Company’s behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
“Act” means the Securities Act of 1933, as amended, and the rules and regulations there under.
“Administrator” is defined in Section 2(a).
“Affiliate” means (1) a corporation which, for purposes of Section 424 of the Code, is a parent or subsidiary
of the Company, direct or indirect or (2) a foreign partnership, corporation, firm, joint venture, limited liability
company or other entity that, directly or indirectly through one or more intermediaries, is controlled by the
Company or its parent, where the term “controlled by” means the possession, direct or indirect, of the power to
cause the direction of the management and policies of such entity, whether through ownership of voting interests
or voting securities, as the case may be, by contract or otherwise.
“Award” or “Awards,” except where referring to a particular category of grant under the Plan, shall include
Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards, Unrestricted Stock Awards, or
any combination of the foregoing.
“Board” means the Board of Directors of the Company.
“Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules,
regulations and interpretations.
“Committee” means the Committee of the Board referred to in Section 2.
“Compensation Committee” means the Compensation Committee of the Board of Directors of Vicor
Corporation, with the duties and responsibilities set forth in Section 2(a).
“Director” means a member of the Board.
“Effective Date” means the date on which the Plan is approved by stockholders as set forth in Section 13.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
“Fair Market Value” of the Stock on any given date means the calculated hypothetical value of a share of
the Stock assuming an arm’s length transaction between willing and informed buyers and sellers, as determined
in good faith by the Administrator; provided, however, that if the Stock trades on a national securities exchange,
the Fair Market Value on any given date is the closing sale price on such date or, if no such closing sale price
1
information is available, the average of the highest bid and lowest asked prices for the Stock reported on such
date. For any date that is not a trading day, the Fair Market Value of the Stock for such date will be determined
by using the closing sale price or the average of the highest bid and lowest asked prices, as appropriate, for the
immediately preceding trading day. The Administrator can substitute a particular time of day or other measure of
closing sale price if appropriate because of changes in exchange or market procedures. Notwithstanding the
foregoing, if the date for which Fair Market Value is determined is the first day when trading prices for the Stock
are trading on a national securities exchange, the Fair Market Value shall be the “Price to the Public” (or
equivalent) set forth on the cover page for the final prospectus relating to the Company’s Initial Public Offering,
if applicable.
“Incentive Stock Option” means any Stock Option designated and qualified as an “incentive stock option”
as defined in Section 422 of the Code.
“Initial Public Offering” means the consummation of the first fully underwritten, firm commitment public
offering pursuant to an effective registration statement under the Act covering the offer and sale by the Company
of its equity securities, or such other event as a result of or following which the Stock shall be publicly held and
the Company required to comply with the registration requirements of the Act.
“Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.
“Restricted Stock Award” means Awards granted pursuant to Section 6.
“Retirement” means the employee’s termination of employment with the Company and its Affiliates after
attainment of the age of 62.5 years.
“Stock” means the Common Stock, par value $.01 per share, of the Company, subject to adjustments
pursuant to Section 3.
“Stock Option” means any contractual option to purchase shares of Stock granted pursuant to Section 5.
“Transaction” is defined in Section 3(c).
“Unrestricted Stock Award” means any Award granted pursuant to Section 7.
SECTION 2. Administration of the Plan
(a) Administration of Plan. The Plan shall be administered by the Board or, at the discretion of the Board,
a committee of the Board comprised, except as contemplated by Section 2(c), of not less than two
directors (in either case, the “Administrator”); provided, however, that for as long as the Company is a
subsidiary of Vicor Corporation, the Board shall delegate to the Compensation Committee all
administrative and oversight responsibilities in connection with the Plan, including the authority to take
all such actions of the Administrator as described herein, and to review and approve actions with
respect to the adoption, amendment, and termination of the Plan.
(b) Powers of Administrator. Subject to the provisions set forth immediately above, the Administrator shall
have the power and authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
i.
ii.
to select the individuals to whom Awards may from time to time be granted;
to determine the time or times of grant, and the extent, if any, of Incentive Stock Options,
Non-Qualified Stock Options, Restricted Stock Awards, Unrestricted Stock Awards or any
combination of the foregoing, granted to any one or more participants;
2
iii.
iv.
v.
vi.
to determine the number of shares of Stock to be covered by any Award;
to determine and modify from time to time the terms and conditions, including restrictions, not
inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ
among individual Awards and participants, and to approve the form of written instruments
evidencing the Awards;
to accelerate at any time the exercisability or vesting of all or any portion of any Award;
to impose any limitations on Awards granted under the Plan, including limitations on transfers of
Awards (or Stock held as a result of exercise of an Award);
vii. subject to the provisions of Section 5(a)(ii), to extend at any time the period in which Stock
Options may be exercised;
viii. to define and disseminate provisions regarding purchase by the Company of an Award (or Stock
held as a result of exercise of a Stock Option), and to exercise such provisions in a reasonable
manner;
ix.
x.
to determine at any time whether, to what extent, and under what circumstances distribution or the
receipt of an Award and other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the grantee and whether and to what extent the Company shall
pay or credit amounts constituting interest (at rates determined by the Administrator) or dividends
or deemed dividends on such deferrals; and
at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the
Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written instruments); to make all
determinations it deems advisable for the administration of the Plan; to decide all disputes arising
in connection with the Plan; and to otherwise supervise the administration of the Plan.
Notwithstanding the foregoing, prior to the Initial Public Offering, no Award shall be granted under the Plan
unless the recipient of such Award has executed and delivered a Stock Restriction Agreement in substantially the
form attached hereto as Exhibit A or such other form as the Administrator may determine from time to time.
All decisions and interpretations of the Administrator shall be binding on all persons, including the
Company and Plan participants.
(c)
Indemnification. Neither the Board nor the Administrator, nor any member of either, shall be liable for
any act, omission, interpretation, construction or determination made in good faith in connection with
the Plan, and the members of the Board, the Committee and the Compensation Committee shall be
entitled in all cases to indemnification and reimbursement by the Company in respect of any claim,
loss, damage, judgment, settlement or expense (including, without limitation, reasonable attorneys’
fees) arising or resulting there from to the fullest extent permitted by law and/or under any directors’
and officers’ liability insurance coverage which may be in effect from time to time.
SECTION 3. Stock Issuable Under the Plan; Mergers; Substitution
(a) Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the
Plan shall be 14,000,000 shares, subject to adjustment as provided in Section 3(b). For purposes of this
limitation, the shares of Stock underlying any Awards which are forfeited, canceled, reacquired by the
Company, satisfied without the issuance of Stock or otherwise terminated (other than by exercise) shall
be added back to the shares of Stock available for issuance under the Plan. Subject to such overall
limitation, shares of Stock may be issued up to such maximum number pursuant to any type or types of
Award; provided, however, Stock Options with respect to no more than 5,500,000 shares of Stock may
be granted to any one individual participant during any taxable year of the Company. The shares of
Stock available for issuance under the Plan may be authorized but unissued shares of Stock or shares of
Stock reacquired by the Company and held in its treasury.
3
(b) Changes in Stock. Subject to Section 3(c) hereof, if, as a result of any reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other similar change in the
Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged
for a different number or kind of shares or other securities of the Company, or additional shares or new
or different shares or other securities of the Company or other non-cash assets are distributed with
respect to such shares of Stock or other securities, or, if, as a result of any merger, consolidation or sale
of all or substantially all of the assets of the Company, the outstanding shares of Stock are converted
into or exchanged for a different number or kind of securities of the Company or any successor entity
(or a parent or subsidiary thereof), the Administrator shall make an appropriate or proportionate
adjustment in (i) the maximum number of shares reserved for issuance under the Plan, (ii) the number
of Stock Options that can be granted to any one individual participant, (iii) the number and kind of
shares or other securities subject to any then outstanding Awards under the Plan, and (iv) the exercise
price and/or exchange price for each share subject to any then outstanding Stock Options under the
Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of
Stock Options) as to which such Stock Options remain exercisable. The adjustment by the
Administrator shall be final, binding and conclusive. No fractional shares of Stock shall be issued
under the Plan resulting from any such adjustment, but the Administrator in its discretion may make a
cash payment in lieu of fractional shares.
The Administrator shall also make an appropriate or proportionate adjustment in the number of shares
subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into
consideration material changes in accounting practices or principles, extraordinary dividends,
acquisitions or dispositions of stock or property or any other event in order to avoid distortion in the
operation of the Plan, provided that no such adjustment shall be made in the case of an Incentive Stock
Option, without the consent of the participant, if it would constitute a modification, extension or
renewal of the Stock Option within the meaning of Section 424(h) of the Code.
(c) Mergers and Other Transactions. In the case of and subject to the consummation of (i) the dissolution or
liquidation of the Company, (ii) the sale of all or substantially all of the assets of the Company on a
consolidated basis to an unrelated person or entity, (iii) a merger, reorganization or consolidation in which
the holders of the Company’s outstanding voting power immediately prior to such transaction do not own a
majority of the outstanding voting power of the surviving or resulting entity immediately upon completion
of such transaction, (iv) the sale of all or a majority of the outstanding capital stock of the Company to an
unrelated person or entity or (v) any other transaction in which the owners of the Company’s outstanding
voting power prior to such transaction do not own at least a majority of the outstanding voting power of the
relevant entity immediately upon completion of the transaction (in each case, a “Transaction”), as of the
effective date of such Transaction, all Stock Options that are not exercisable shall become fully exercisable
and all other Awards that are not vested shall become fully vested. Upon the effectiveness of the
Transaction, the Plan and all outstanding Stock Options issued hereunder shall terminate upon the effective
time of any such Transaction, unless provision is made in connection with such Transaction in the sole
discretion of the parties thereto for the assumption or continuation of Stock Options theretofore granted
(after taking into account any acceleration hereunder) by the successor entity, or the substitution of such
Stock Options with new Stock Options of the successor entity or a parent or subsidiary thereof, with such
adjustment as to the number and kind of shares and the per share exercise prices as such parties shall agree
(after taking into account any acceleration if any, hereunder). In the event of such termination, each holder
shall be permitted, within a specified period of time prior to the consummation of the Transaction as
determined by the Administrator, to exercise all outstanding Stock Options held by such holder that are then
exercisable or will become exercisable as of the effective time of the Transaction; provided, however, that
the exercise of Stock Options not exercisable prior to the Transaction shall be subject to the consummation
of the Transaction. (The treatment of Restricted Stock Awards in connection with any such transaction shall
be as specified in the relevant Award agreement.) Notwithstanding the foregoing, and for the avoidance of
doubt, a “Transaction” shall not refer to any merger, reorganization or consolidation of the Company in
which the surviving or resulting entity is an Affiliate of the Company at the time of such transaction.
4
(d) Substitute Awards. The Administrator may grant Awards under the Plan in substitution for Stock and
Stock-based awards held by employees, directors or other key persons of another corporation in
connection with a merger or consolidation of the employing corporation with the Company or a
Affiliate or the acquisition by the Company or a Affiliate of property or stock of the employing
corporation. The Administrator may direct that the substitute Awards be granted on such terms and
conditions as the Administrator considers appropriate in the circumstances. Any substitute Awards
granted under the Plan shall not count against the share limitations set forth in Section 3(a).
SECTION 4. Eligibility
Participants in the Plan will be such full or part-time officers, employees, directors, consultants and other
key persons (including prospective employees) of the Company and its Affiliates who are responsible for or
contribute to the management, growth or profitability of the Company and its Affiliates as are selected from time
to time by the Administrator in its sole discretion.
SECTION 5. Stock Options
Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time
approve.
Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock
Options. Incentive Stock Options may be granted only to employees of the Company or any Affiliate that is a
“parent corporation” or “subsidiary corporation” within the meaning of Section 424(f) of the Code. To the extent
that any Stock Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock
Option.
No Incentive Stock Option shall be granted under the Plan after November 21, 2011.
(a) Terms of Stock Options. Stock Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not inconsistent with the terms
of the Plan, as the Administrator shall deem desirable. If the Administrator so determines, Stock
Options may be granted in lieu of cash compensation at the participant’s election, subject to such terms
and conditions as the Administrator may establish, as well as in addition to other compensation.
(i) Exercise Price. The exercise price per share for the Stock covered by a Stock Option shall be
determined by the Administrator at the time of grant but shall not be less than 100 percent of the Fair
Market Value on the date of grant. If an employee of the Company or an Affiliate owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the
combined voting power of all classes of stock of the Company or any parent or subsidiary corporation
and an Incentive Stock Option is granted to such employee, the exercise price of such Incentive Stock
Option shall be not less than 110 percent of the Fair Market Value on the grant date.
(ii) Term of Stock Option. The term of each Stock Option shall be fixed by the Administrator, but no
Incentive Stock Option shall be exercisable more than 10 years after the date the Stock Option is
granted. If an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d)
of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company
or any parent or subsidiary corporation and an Incentive Stock Option is granted to such employee, the
term of such Stock Option shall be no more than five years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall become exercisable at such time or
times, whether or not in installments, as shall be determined by the Administrator at or after the
grant date; provided, however, that Stock Options granted in lieu of compensation shall be
exercisable in full as of the grant date. The Administrator may at any time accelerate the
exercisability of all or any portion of any Stock Option. A holder shall have the rights of a
stockholder only as to shares of Stock acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.
5
(iv) Method of Exercise. Stock Options may be exercised in whole or in part, by giving written notice
of exercise to the Company, specifying the number of shares to be purchased. Payment of the
purchase price may be made by one or more of the following methods to the extent provided in
the Stock Option Award agreement or as otherwise provided by the Administrator:
(1)
(2)
(3)
In cash, by certified or bank check or other instrument acceptable to the Administrator;
If approved by the Administrator, through the delivery (or attestation to the ownership) of
shares of Stock that are not then subject to restrictions under any Company plan and that
have been beneficially owned by the holder for such period as may be required by the
Administrator or have been purchased by the participant on the open market. Such
surrendered shares shall be valued at Fair Market Value on the exercise date; or
If approved by the Administrator, by the holder delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a broker to promptly
deliver to the Company cash or a check payable and acceptable to the Company for the
purchase price; provided that in the event the holder chooses to pay the purchase price as so
provided, the holder and the broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the Administrator shall prescribe as a
condition of such payment procedure.
Payment instruments will be received subject to collection.
No certificates for shares of Stock so purchased will be issued to holder until the Company has
completed all steps required by law to be taken in connection with the issuance and sale of the
shares, including without limitation (i) receipt of a representation from the holder at the time of
exercise of the Stock Option that the holder is purchasing the shares for the holder’s own account
and not with a view to any sale or distribution thereof, (ii) the legending of any certificate
representing the shares to evidence the foregoing representations and restrictions, and
(iii) obtaining from holder payment or provision for all withholding taxes due as a result of the
exercise of the Stock Option. The delivery of certificates representing the shares of Stock to be
purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the
holder (or a purchaser acting in his or her stead in accordance with the provisions of the Stock
Option) by the Company of the full purchase price for such shares and the fulfillment of any other
requirements contained in the Stock Option Award agreement or applicable provisions of laws. In
the event a holder chooses to pay the purchase price by previously-owned shares of Stock through
the attestation method, the shares of Stock transferred to the holder upon the exercise of the Stock
Option shall be net of the number of shares attested to.
(v) Annual Limit on Incentive Stock Options. To the extent required for “incentive stock option”
treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the
time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its parent and subsidiary corporations become
exercisable for the first time by an holder during any calendar year shall not exceed $100,000. To
the extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.
(b) Non-transferability of Stock Options. No Stock Option shall be transferable by the holder otherwise
than by will or by the laws of descent and distribution and all Stock Options shall be exercisable,
during the holder’s lifetime, only by the holder or by the holder’s legal representative or guardian in the
event of the holder’s incapacity. Notwithstanding the foregoing, the Administrator, in its sole
discretion, may provide in the Award agreement regarding a given Stock Option that the holder may
transfer, without consideration for the transfer, his or her Non-Qualified Stock Options to members of
his or her immediate family, to trusts for the benefit of such family members, or to partnerships in
which such family members are the only partners, provided that the transferee agrees in writing with
the Company to be bound by all of the terms and conditions of this Plan and the applicable Stock
Option.
6
(c) Termination. Except as may otherwise be provided in this Section 5(c) or by the Administrator either in
the Award agreement, or subject to Section 10 below, in writing after the Award agreement is issued, a
participant’s rights in all Stock Options shall automatically terminate upon the participant’s termination
of employment with the Company and its Affiliates for any reason. Notwithstanding the foregoing, the
period within which to exercise the Stock Option shall be modified as set forth below:
(i) Termination Due to Death. If the participant’s employment terminates by reason of death, (1) any
Stock Option held by the participant, which, but for such participant’s death, would have vested
and become exercisable on or prior to the first anniversary of such termination, shall become fully
exercisable and (2) any Stock Option exercisable at the time of such termination may thereafter be
exercised by the participant’s legal representative or legatee for a period of 12 months from the
date of death or until the Expiration Date, if earlier.
(ii) Termination Due to Disability. If the participant’s employment terminates by reason of Disability
(as defined in Section 22(c)(3) of the Code), (1) any Stock Option held by the participant, which,
but for such participant’s Disability, would have vested and become exercisable on or prior to the
first anniversary of such termination, shall become fully exercisable and (2) any Stock Option
exercisable at the time of such termination may thereafter be exercised by the participant for a
period of 12 months from the date of termination or until the Expiration Date, if earlier. The death
of the participant during the 12-month period provided in this Section 5(c)(ii) shall extend such
period for another 12 months from the date of death or until the Expiration Date, if earlier.
(iii) Determination of Reason. The Administrator’s determination of the reason for termination of the
participant’s employment shall be conclusive and binding on the participant and his or her
representatives or legatees.
SECTION 6. Restricted Stock Awards
(a) Nature of Restricted Stock Awards. A Restricted Stock Award is an Award pursuant to which the
Company may, in its sole discretion, grant or sell, at such purchase price as determined by the
Administrator, in its sole discretion, shares of Stock subject to such restrictions and conditions as the
Administrator may determine at the time of grant (“Restricted Stock”), which purchase price shall be
payable in cash or other form of consideration acceptable to the Administrator. Conditions may be
based on continuing employment (or other service relationship) and/or achievement of pre-established
performance goals and objectives. The terms and conditions of each such agreement shall be
determined by the Administrator, and such terms and conditions may differ among individual Awards
and recipients.
(b) Rights as a Stockholder. Upon execution of a written instrument setting forth the Restricted Stock
Award and payment of any applicable purchase price, a holder shall have the rights of a stockholder
with respect to the voting of the Restricted Stock, subject to such conditions contained in the written
instrument evidencing the Restricted Stock Award. Unless the Administrator shall otherwise determine,
certificates evidencing the Restricted Stock shall remain in the possession of the Company until such
Restricted Stock is vested as provided in Section 6(d) below, and the holder shall be required, as a
condition of the grant, to deliver to the Company a stock power endorsed in blank.
(c) Restrictions. Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered
or disposed of except as specifically provided herein or in the Restricted Stock Award agreement.
Except as may otherwise be provided by the Administrator either in the Award agreement or, subject to
Section 10 below, in writing after the Award agreement is issued, if any, if a holder’s employment (or
other service relationship) with the Company and its Affiliates terminates for any reason, any
Restricted Stock that has not vested at the time of termination shall automatically and without any
requirement of notice to such holder from or other action by or on behalf of, the Company be deemed
to have been reacquired by the Company at the lesser of its original purchase price or Fair Market
Value (determined at the time of termination) from such holder or such holder’s legal representative
7
simultaneously with such termination of employment (or other service relationship), and thereafter
shall cease to represent any ownership of the Company by the holder or rights of the holder as a
stockholder. Following such deemed reacquisition of unvested Restricted Stock that are represented by
physical certificates, a holder shall surrender such certificates to the Company upon request without
consideration.
(d) Vesting of Restricted Stock. The Administrator at the time of grant shall specify the date or dates and/or
the attainment of predetermined performance goals, objectives and other conditions on which
Restricted Stock shall become vested, subject to such further rights of the Company or its assigns as
may be specified in the instrument evidencing the Restricted Stock Award.
(e) Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock Award agreement may require or
permit the immediate payment, waiver, deferral or investment of dividends paid on the Restricted Stock.
SECTION 7. Unrestricted Stock Awards
Grant or Sale of Unrestricted Stock. The Administrator may, in its sole discretion, grant (or sell at such
purchase price determined by the Administrator) an Unrestricted Stock Award to any recipient pursuant to which
such recipient may receive shares of Stock free of any vesting restrictions (“Unrestricted Stock”) under the Plan.
Unrestricted Stock Awards may be granted or sold as described in the preceding sentence in respect of past
services or other valid consideration, or in lieu of cash compensation due to such recipient.
SECTION 8. Tax Withholding
(a) Payment by Participant. Each holder shall, no later than the date as of which the value of an Award or
of any Stock or other amounts received there under first becomes includable in the gross income of the
holder for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the
Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to such income. The Company and its Affiliates shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind otherwise due to the holder.
The Company’s obligation to deliver stock certificates is subject to and conditioned on tax obligations
being satisfied by the recipient.
(b) Payment in Stock. Subject to approval by the Administrator, a recipient may elect to have the minimum
required tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to
withhold from shares of Stock to be issued pursuant to any Award a number of shares with an
aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the
withholding amount due, or (ii) transferring to the Company shares of Stock owned by the participant
with a minimum aggregate Fair Market Value (as of the date the withholding is effected) that would
satisfy the minimum withholding amount due.
SECTION 9. Transfer, Leave of Absence, Etc.
For purposes of the Plan, the following events shall not be deemed a termination of employment:
(a)
a transfer to the employment of the Company from a Affiliate or from the Company to a Affiliate, or
from one Affiliate to another; or
(b) an approved leave of absence for military service or sickness, or for any other purpose approved by the
Company, if the employee’s right to re-employment is guaranteed either by a statute or by contract or
under the policy pursuant to which the leave of absence was granted or if the Administrator otherwise
so provides in writing.
SECTION 10. Amendments and Termination
The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend
or cancel any outstanding Award for the purpose of satisfying changes in law or for any other lawful purpose, but
8
no such action shall adversely affect rights under any outstanding Award without the holder’s consent. The
Administrator may provide substitute Awards at the same or reduced exercise or purchase price or with no exercise or
purchase price in a manner not inconsistent with the terms of the Plan, but such price, if any, must satisfy the
requirements which would apply to the substitute or amended Award if it were then initially granted under this Plan,
but no such action shall adversely affect rights under any outstanding Award without the holder’s consent. If and to the
extent determined by the Administrator to be required by the Code to ensure that Incentive Stock Options granted
under the Plan are qualified under Section 422 of the Code or to ensure that compensation earned under Stock Options
qualifies as performance-based compensation under Section 162(m) of the Code, if and to the extent intended to so
qualify, Plan amendments shall be subject to approval by the Company or an Affiliate’s stockholders, as applicable,
entitled to vote at a meeting of stockholders. Payment of amounts intended to qualify as performance-based
compensation under Section 162(m) of the Code shall be contingent on applicable stockholder approval. Nothing in
this Section 10 shall limit the Board’s authority to take any action permitted pursuant to Section 3(c).
SECTION 11. Status of Plan
With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or
other consideration not received, a recipient shall have no rights greater than those of a general creditor of the
Company unless the Administrator shall otherwise expressly determine in connection with any Award or
Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to
meet the Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided
that the existence of such trusts or other arrangements is consistent with the foregoing sentence.
SECTION 12. General Provisions
(a) No Distribution; Compliance with Legal Requirements. The Administrator may require each person
acquiring Stock pursuant to an Award to represent to and agree with the Company in writing that such
person is acquiring the shares without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all applicable securities law and other
legal and stock exchange or similar requirements have been satisfied. The Administrator may require
the placing of such stop-orders and restrictive legends on certificates for Stock and Awards as it deems
appropriate.
(b) Delivery of Stock Certificates. Stock certificates under this Plan shall be deemed delivered for all
purposes when the Company or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the recipient, at the recipient’s last known address on
file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall
prevent the Board from adopting other or additional compensation arrangements, including trusts, and
such arrangements may be either generally applicable or applicable only in specific cases. The adoption
of this Plan and the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Affiliate.
(d) Trading Restrictions. Stock Option exercises and other Awards under the Plan shall be subject to the
Company’s trading restrictions, terms and conditions, including, without limitation, the restrictions,
terms and conditions set forth in a Stock Restriction Agreement executed and delivered pursuant to
Section 2 hereof, as may be established or required by the Administrator, or in accordance with policies
set by the Administrator, from time to time.
(e) Designation of Beneficiary. Each recipient to whom an Award has been made under the Plan may
designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any
Award payable on or after the recipient’s death. Any such designation shall be on a form provided for
that purpose by the Administrator and shall not be effective until received by the Administrator. If no
beneficiary has been designated by a deceased recipient, or if the designated beneficiaries have
predeceased the recipient, the beneficiary shall be the recipient’s estate.
9
SECTION 13. Effective Date of Plan
This Plan shall become effective upon approval by the stockholders in accordance with applicable law.
Subject to such approval by the stockholders and to the requirement that no Stock may be issued hereunder prior
to such approval, Stock Options and other Awards may be granted hereunder on and after adoption of this Plan
by the Board.
SECTION 14. Governing Law
This Plan and all Awards and actions taken there under shall be governed by, and construed in accordance
with, the laws of the State of Delaware, applied without regard to conflict of law principles.
On April 26, 2017, the Board approved the adoption, subject to Stockholder approval, of the VI Chip
Corporation Amended and Restated 2007 Stock Option and Incentive Plan (the “2007 VI Chip Plan”). The full
text of the 2007 VI Chip Plan is presented above. Any reference within the text to an “exhibit” or an
“attachment” refers to documents associated with the administration of the 2007 VI Chip Plan that are not a
part of the 2007 VI Chip Plan and, therefore, not included in this Proxy Statement.
10
APPENDIX C
Picor Corporation Amended and Restated 2001 Stock Option and Incentive Plan
SECTION 1. General Purpose of the Plan: Definitions
The name of the plan is the Picor Corporation Amended and Restated 2001 Stock Option and Incentive Plan
(the “Plan”). The purpose of the Plan is to encourage and enable the employees, directors, consultants and other
key persons of Picor Corporation (the “Company”) and its Affiliates upon whose judgment, initiative and efforts
the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the
Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a
closer identification of their interests with those of the Company, thereby stimulating their efforts on the
Company’s behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
“Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations thereunder.
“Administrator” is defined in Section 2(a).
“Affiliate” shall mean (1) a corporation which, for purposes of Section 424 of the Code, is a parent or
subsidiary of the Company, direct or indirect or (2) a foreign partnership, corporation, firm, joint venture, limited
liability company or other entity that, directly or indirectly through one or more intermediaries, is controlled by
the Company or its parent, where the term “controlled by” means the possession, direct or indirect, of the power
to cause the direction of the management and policies of such entity, whether through ownership of voting
interests or voting securities, as the case may be, by contract or otherwise.
“Award” or “Awards” shall mean, except where referring to a particular category of grant under the Plan,
shall include Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards, Unrestricted
Stock Awards, or any combination of the foregoing.
“Board” shall mean the Board of Directors of the Company.
“Code” shall mean the Internal Revenue Code of 1986, as amended, and any successor Code, and related
rules, regulations and interpretations.
“Committee” shall mean the Committee of the Board referred to in Section 2.
“Compensation Committee” shall mean the Compensation Committee of the Board of Directors of Vicor
Corporation, with the duties and responsibilities set forth in Section 2(a).
“Effective Date” shall mean the date on which the Plan is approved by stockholders as set forth in
Section 13.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
“Fair Market Value” shall mean the value of the Stock on any given date representing the calculated
hypothetical value of a share of the Stock, assuming an arm’s length transaction between willing and informed
buyers and sellers, as determined in good faith by the Administrator; provided, however, that if the Stock trades
on a national securities exchange, the Fair Market Value on any given date is the closing sale price on such date
or, if no such closing sale price information is available, the average of the highest bid and lowest asked prices
for the Stock reported on such date. For any date that is not a trading day, the Fair Market Value of the Stock for
1
such date will be determined by using the closing sale price or the average of the highest bid and lowest asked
prices, as appropriate, for the immediately preceding trading day. The Administrator can substitute a particular
time of day or other measure of closing sale price if appropriate because of changes in exchange or market
procedures. Notwithstanding the foregoing, if the date for which Fair Market Value is determined is the first day
when trading prices for the Stock are trading on a national securities exchange, the Fair Market Value shall be the
“Price to the Public” (or equivalent) set forth on the cover page for the final prospectus relating to the Company’s
Initial Public Offering, if applicable.
“Incentive Stock Option” shall mean any Stock Option designated and qualified as an “incentive stock
option” as defined in Section 422 of the Code.
“Initial Public Offering” shall mean the consummation of the first fully underwritten, firm commitment
public offering pursuant to an effective registration statement under the Act covering the offer and sale by the
Company of its equity securities, or such other event as a result of or following which the Stock shall be publicly
held and the Company required to comply with the registration requirements of the Act.
“Non-Qualified Stock Option” shall mean any Stock Option that is not an Incentive Stock Option.
“Restricted Stock Award” shall mean Awards granted pursuant to Section 6.
“Stock” shall mean the Common Stock, par value $.01 per share, of the Company, subject to adjustments
pursuant to Section 3.
“Stock Option” shall mean any contractual option to purchase shares of Stock granted pursuant to Section 5.
“Transaction” is defined in Section 3(c).
“Unrestricted Stock Award” shall mean any Award granted pursuant to Section 7.
SECTION 2. Administration of the Plan: Administrator Authority to Select Participants and Determine
Awards
(a) Administration of Plan. The Plan shall be administered by the Board or, at the discretion of the Board,
a committee of the Board comprised, except as contemplated by Section 2(c), of not less than two
directors (in either case, the “Administrator”); provided, however, that for as long as the Company is a
subsidiary of Vicor Corporation, the Board shall delegate to the Compensation Committee all
administrative and oversight responsibilities in connection with the Plan, including the authority to take
all such actions of the Administrator as described herein, and to review and approve actions with
respect to the adoption, amendment, and termination of the Plan.
(b) Powers of Administrator. The Administrator shall have the power and authority to grant Awards
consistent with the terms of the Plan, including the power and authority:
(i)
(ii)
to select the individuals to whom Awards may from time to time be granted;
to determine the time or times of grant, and the extent, if any, of Incentive Stock Options,
Non-Qualified Stock Options, Restricted Stock Awards, Unrestricted Stock Awards or any
combination of the foregoing, granted to any one or more participants;
(iii)
to determine the number of shares of Stock to be covered by any Award;
(iv)
to determine and modify from time to time the terms and conditions, including restrictions, not
inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ
among individual Awards and participants, and to approve the form of written instruments
evidencing the Awards;
2
(v)
(vi)
to accelerate at any time the exercisability or vesting of all or any portion of any Award;
to impose any limitations on Awards granted under the Plan, including limitations on transfers of
Awards (or Stock held as a result of exercise of an Award);
(vii)
subject to the provisions of Section 5(a)(ii), to extend at any time the period in which Stock
Options may be exercised;
(viii) to define and disseminate provisions regarding purchase by the Company of an Award (or Stock
held as a result of exercise of a Stock Option), and to exercise such provisions in a reasonable
manner;
(ix)
(x)
to determine at any time whether, to what extent, and under what circumstances distribution or
the receipt of an Award and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the grantee and whether and to what extent the
Company shall pay or credit amounts constituting interest (at rates determined by the
Administrator) or dividends or deemed dividends on such deferrals; and
at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the
Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written instruments); to make all
determinations it deems advisable for the administration of the Plan; to decide all disputes arising
in connection with the Plan; and to otherwise supervise the administration of the Plan.
Notwithstanding the foregoing, prior to the Initial Public Offering, no Award shall be granted under the
Plan unless the recipient of such Award has executed and delivered a Stock Restriction Agreement in
substantially the form attached hereto as Exhibit 2 or such other form as the Administrator may
determine from time to time. If no evidence of execution such form can be found at the time of exercise
of a Stock Option, the recipient of the Award shall execute the form attached hereto as Exhibit 2 before
a certificate for the shares of Stock purchased will be issued.
All decisions and interpretations of the Administrator shall be binding on all persons, including the
Company and Plan participants.
(c)
Indemnification. Neither the Board nor the Administrator, nor any member of either, shall be liable for
any act, omission, interpretation, construction or determination made in good faith in connection with
the Plan, and the members of the Board, the Committee and the Compensation Committee shall be
entitled in all cases to indemnification and reimbursement by the Company in respect of any claim,
loss, damage, judgment, settlement or expense (including, without limitation, reasonable attorneys’
fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors’
and officers’ liability insurance coverage which may be in effect from time to time.
SECTION 3. Stock Issuable Under the Plan; Mergers; Substitution
(a) Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the
Plan shall be 20,000,000 shares, subject to adjustment as provided in Section 3(b). For purposes of this
limitation, the shares of Stock underlying any Awards which are forfeited, canceled, reacquired by the
Company, satisfied without the issuance of Stock or otherwise terminated (other than by exercise) shall
be added back to the shares of Stock available for issuance under the Plan. Subject to such overall
limitation, shares of Stock may be issued up to such maximum number pursuant to any type or types of
Award; provided, however, Stock Options with respect to no more than 1,600,000 shares of Stock may
be granted to any one individual participant during any taxable year of the Company. The shares of
Stock available for issuance under the Plan may be authorized but unissued shares of Stock or shares of
Stock reacquired by the Company and held in its treasury.
(b) Changes in Stock. Subject to Section 3(c) hereof, if, as a result of any reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other similar change in the
Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged
3
for a different number or kind of shares or other securities of the Company, or additional shares or new
or different shares or other securities of the Company or other non-cash assets are distributed with
respect to such shares of Stock or other securities, or, if, as a result of any merger, consolidation or sale
of all or substantially all of the assets of the Company, the outstanding shares of Stock are converted
into or exchanged for a different number or kind of securities of the Company or any successor entity
(or a parent or subsidiary thereof), the Administrator shall make an appropriate or proportionate
adjustment in (i) the maximum number of shares reserved for issuance under the Plan, (ii) the number
of Stock Options that can be granted to any one individual participant, (iii) the number and kind of
shares or other securities subject to any then outstanding Awards under the Plan, and (v) the exercise
price and/or exchange price for each share subject to any then outstanding Stock Options under the
Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of
Stock Options) as to which such Stock Options remain exercisable. The adjustment by the
Administrator shall be final, binding and conclusive. No fractional shares of Stock shall be issued
under the Plan resulting from any such adjustment, but the Administrator in its discretion may make a
cash payment in lieu of fractional shares.
The Administrator shall also make an appropriate or proportionate adjustment in the number of shares
subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into
consideration material changes in accounting practices or principles, extraordinary dividends,
acquisitions or dispositions of stock or property or any other event in order to avoid distortion in the
operation of the Plan, provided that no such adjustment shall be made in the case of an Incentive Stock
Option, without the consent of the participant, if it would constitute a modification, extension or
renewal of the Stock Option within the meaning of Section 424(h) of the Code.
(c) Mergers and Other Transactions. In the case of and subject to the consummation of (i) the dissolution
or liquidation of the Company, (ii) the sale of all or substantially all of the assets of the Company on a
consolidated basis to an unrelated person or entity, (iii) a merger, reorganization or consolidation in
which the holders of the Company’s outstanding voting power immediately prior to such transaction do
not own a majority of the outstanding voting power of the surviving or resulting entity immediately
upon completion of such transaction, (iv) the sale of all or a majority of the outstanding capital stock of
the Company to an unrelated person or entity or (v) any other transaction in which the owners of the
Company’s outstanding voting power prior to such transaction do not own at least a majority of the
outstanding voting power of the relevant entity immediately upon completion of the transaction (in
each case, a “Transaction”), as of the effective date of such Transaction, all Stock Options that are not
exercisable shall become fully exercisable and all other Awards that are not vested shall become fully
vested. Upon the effectiveness of the Transaction, the Plan and all outstanding Stock Options issued
hereunder shall terminate upon the effective time of any such Transaction, unless provision is made in
connection with such Transaction in the sole discretion of the parties thereto for the assumption or
continuation of Stock Options theretofore granted (after taking into account any acceleration
hereunder) by the successor entity, or the substitution of such Stock Options with new Stock Options of
the successor entity or a parent or subsidiary thereof, with such adjustment as to the number and kind
of shares and the per share exercise prices as such parties shall agree (after taking into account any
acceleration if any, hereunder). In the event of such termination, each holder shall be permitted, within
a specified period of time prior to the consummation of the Transaction as determined by the
Administrator, to exercise all outstanding Stock Options held by such holder that are then exercisable
or will become exercisable as of the effective time of the Transaction; provided, however, that the
exercise of Stock Options not exercisable prior to the Transaction shall be subject to the consummation
of the Transaction. (The treatment of Restricted Stock Awards in connection with any such transaction
shall be as specified in the relevant Award agreement.) Notwithstanding the foregoing, and for the
avoidance of doubt, a “Transaction” shall not refer to any merger, reorganization or consolidation of
the Company in which the surviving or resulting entity is an Affiliate of the Company at the time of
such transaction.
4
(d) Substitute Awards. The Administrator may grant Awards under the Plan in substitution for Stock and
Stock-based awards held by employees, directors or other key persons of another corporation in
connection with a merger or consolidation of the employing corporation with the Company or a
Affiliate or the acquisition by the Company or a Affiliate of property or stock of the employing
corporation. The Administrator may direct that the substitute Awards be granted on such terms and
conditions as the Administrator considers appropriate in the circumstances. Any substitute Awards
granted under the Plan shall not count against the share limitations set forth in Section 3(a).
SECTION 4. Eligibility
Participants in the Plan will be such full or part-time officers, employees, directors, consultants and other
key persons (including prospective employees) of the Company and its Affiliates who are responsible for or
contribute to the management, growth or profitability of the Company and its Affiliates as are selected from time
to time by the Administrator in its sole discretion.
SECTION 5. Stock Options
Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time
approve.
Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock
Options. Incentive Stock Options may be granted only to employees of the Company or any Affiliate that is a
“parent corporation” or “subsidiary corporation” within the meaning of Section 424(f) of the Code. To the extent
that any Stock Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock
Option.
No Incentive Stock Option shall be granted under the Plan after November 21, 2011.
(a) Terms of Stock Options. Stock Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not inconsistent with the terms
of the Plan, as the Administrator shall deem desirable. If the Administrator so determines, Stock
Options may be granted in lieu of cash compensation at the participant’s election, subject to such terms
and conditions as the Administrator may establish, as well as in addition to other compensation.
Terms of an individual Stock Option award shall be set forth in a Stock Option Award Agreement
executed at the time of the award, a copy of which is set forth herein as Exhibit 1, between the
participant (i.e., the recipient of the award) and the Company.
(i) Exercise Price. The exercise price per share for the Stock covered by a Stock Option shall be
determined by the Administrator at the time of grant but shall not be less than 100 percent of the
Fair Market Value on the date of grant. If an employee of the Company or an Affiliate owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than
10 percent of the combined voting power of all classes of stock of the Company or any parent or
subsidiary corporation and an Incentive Stock Option is granted to such employee, the exercise
price of such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value
on the grant date.
(ii) Term of Stock Option. The term of each Stock Option shall be fixed by the Administrator, but no
Incentive Stock Option shall be exercisable more than 10 years after the date the Stock Option is
granted. If an employee owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of
the Company or any parent or subsidiary corporation and an Incentive Stock Option is granted to
such employee, the term of such Stock Option shall be no more than five years from the date of
grant.
5
(iii) Exercisability; Rights of a Stockholder. Stock Options shall become exercisable at such time or times,
whether or not in installments, as shall be determined by the Administrator at or after the grant date;
provided, however, that Stock Options granted in lieu of compensation shall be exercisable in full as of
the grant date. The Administrator may at any time accelerate the exercisability of all or any portion of
any Stock Option. A holder shall have the rights of a stockholder only as to shares of Stock acquired
upon the exercise of a Stock Option and not as to unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised, in whole or in part, by giving written notice
of exercise to the Company, specifying the number of shares to be purchased. Payment of the
purchase price may be made by one or more of the following methods to the extent provided in
the Stock Option Award agreement or as otherwise provided by the Administrator:
(1)
(2)
(3)
(4)
In cash, by certified or bank check or other instrument acceptable to the Administrator;
If approved by the Administrator, through the delivery (or attestation to the ownership) of
shares of Stock that are not then subject to restrictions under any Company plan and that
have been beneficially owned by the holder for such period as may be required by the
Administrator or have been purchased by the participant on the open market. Such
surrendered shares shall be valued at Fair Market Value on the exercise date;
If approved by the Administrator, through full or partial “net settlement”, whereby the holder
instructs the Administrator to utilize some portion of the gain realized on exercise (i.e., the
excess of the Fair Value of the share(s) of Stock purchased over the aggregate Exercise Price)
to fund (i) the purchase of the share(s) of Stock (i.e., the Exercise Price per share multiplied
by the number of shares to be purchased), (ii) the taxes due on the exercise, if any, or (iii) a
combination of (i) and (ii), resulting in settlement by issuance of that number of shares of
Stock representing the net value of the exercise after deduction of the value of (i) and/or (ii),
provided, however, such “net settlement” will only be permitted for the exercise of a Stock
Option in the tenth year of its term; or
If approved by the Administrator, by the holder delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a broker to promptly
deliver to the Company cash or a check payable and acceptable to the Company for the
purchase price; provided that in the event the holder chooses to pay the purchase price as so
provided, the holder and the broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the Administrator shall prescribe as a
condition of such payment procedure.
Payment instruments will be received subject to collection.
No certificates for shares of Stock so purchased will be issued to holder until the Company has
completed all steps required by law to be taken in connection with the issuance and sale of the
shares, including without limitation: (i) receipt of an executed Share Transfer Restriction
Agreement (presented herein as Exhibit 2) or similar form acceptable to the Administrator
including a representation from the holder at the time of exercise of the Stock Option that the
holder is purchasing the shares for the holder’s own account and not with a view to any sale or
distribution thereof; (ii) the printing of a legend on any certificate representing the shares to
evidence the foregoing representations and restrictions; and (iii) obtaining from holder payment or
provision for all withholding taxes due as a result of the exercise of the Stock Option. The
delivery of certificates representing the shares of Stock to be purchased pursuant to the exercise of
a Stock Option will be contingent upon receipt from the holder (or a purchaser acting in his or her
stead in accordance with the provisions of the Stock Option) by the Company of the full purchase
price for such shares and the fulfillment of any other requirements contained in the Stock Option
Award Agreement or applicable provisions of laws. In the event a holder chooses to pay the
purchase price by previously-owned shares of Stock through the attestation method, the shares of
Stock transferred to the holder upon the exercise of the Stock Option shall be net of the number of
shares to which the holder has attested ownership.
6
(v) Annual Limit on Incentive Stock Options. To the extent required for “incentive stock option”
treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time
of grant) of the shares of Stock with respect to which Incentive Stock Options granted under this
Plan and any other plan of the Company or its parent and subsidiary corporations become
exercisable for the first time by an holder during any calendar year shall not exceed $100,000. To the
extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option.
(e) Non-transferability of Stock Options. No Stock Option shall be transferable by the holder otherwise
than by will or by the laws of descent and distribution and all Stock Options shall be exercisable,
during the holder’s lifetime, only by the holder or by the holder’s legal representative or guardian in the
event of the holder’s incapacity. Notwithstanding the foregoing, the Administrator, in its sole
discretion, may provide in the Award agreement regarding a given Stock Option that the holder may
transfer, without consideration for the transfer, his or her Non-Qualified Stock Options to members of
his or her immediate family, to trusts for the benefit of such family members, or to partnerships in
which such family members are the only partners, provided that the transferee agrees in writing with
the Company to be bound by all of the terms and conditions of this Plan and the applicable Stock
Option.
(f) Termination. Except as may otherwise be provided in this Section 5(c) or by the Administrator either in
the Award agreement, or subject to Section 10 below, in writing after the Award agreement is issued, a
participant’s rights in all Stock Options shall automatically terminate upon the participant’s termination
of employment with the Company and its Affiliates for any reason. Notwithstanding the foregoing, the
period within which to exercise the Stock Option shall be modified as set forth below:
(i) Termination Due to Death. If the participant’s employment terminates by reason of death, (1) any
Stock Option held by the participant, which, but for such participant’s death, would have vested
and become exercisable on or prior to the first anniversary of such termination, shall become fully
exercisable and (2) any Stock Option exercisable at the time of such termination may thereafter be
exercised by the participant’s legal representative or legatee for a period of 12 months from the
date of death or until the Expiration Date, if earlier.
(ii) Termination Due to Disability. If the participant’s employment terminates by reason of Disability
(as defined in Section 22(c)(3) of the Code), (1) any Stock Option held by the participant, which,
but for such participant’s Disability, would have vested and become exercisable on or prior to the
first anniversary of such termination, shall become fully exercisable and (2) any Stock Option
exercisable at the time of such termination may thereafter be exercised by the participant for a
period of 12 months from the date of termination or until the Expiration Date, if earlier. The death
of the participant during the 12-month period provided in this Section 5(c)(ii) shall extend such
period for another 12 months from the date of death or until the Expiration Date, if earlier.
(iii) Determination of Reason. The Administrator’s determination of the reason for termination of the
participant’s employment shall be conclusive and binding on the participant and his or her
representatives or legatees.
SECTION 6. Restricted Stock Awards
(a) Nature of Restricted Stock Awards. A Restricted Stock Award is an Award pursuant to which the
Company may, in its sole discretion, grant or sell, at such purchase price as determined by the
Administrator, in its sole discretion, shares of Stock subject to such restrictions and conditions as the
Administrator may determine at the time of grant (“Restricted Stock”), which purchase price shall be
payable in cash or other form of consideration acceptable to the Administrator. Conditions may be
based on continuing employment (or other service relationship) and/or achievement of pre-established
performance goals and objectives. The terms and conditions of each such agreement shall be
determined by the Administrator, and such terms and conditions may differ among individual Awards
and recipients.
7
(b) Rights as a Stockholder. Upon execution of a written instrument setting forth the Restricted Stock
Award and payment of any applicable purchase price, a holder shall have the rights of a stockholder
with respect to the voting of the Restricted Stock, subject to such conditions contained in the written
instrument evidencing the Restricted Stock Award. Unless the Administrator shall otherwise determine,
certificates evidencing the Restricted Stock shall remain in the possession of the Company until such
Restricted Stock is vested as provided in Section 6(d) below, and the holder shall be required, as a
condition of the grant, to deliver to the Company a stock power endorsed in blank.
(c) Restrictions. Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered
or disposed of except as specifically provided herein or in the Restricted Stock Award agreement.
Except as may otherwise be provided by the Administrator either in the Award agreement or, subject to
Section 10 below, in writing after the Award agreement is issued, if any, if a holder’s employment (or
other service relationship) with the Company and its Affiliates terminates for any reason, any
Restricted Stock that has not vested at the time of termination shall automatically and without any
requirement of notice to such holder from or other action by or on behalf of, the Company be deemed
to have been reacquired by the Company at the lesser of its original purchase price or Fair Market
Value (determined at the time of termination) from such holder or such holder’s legal representative
simultaneously with such termination of employment (or other service relationship), and thereafter
shall cease to represent any ownership of the Company by the holder or rights of the holder as a
stockholder. Following such deemed reacquisition of unvested Restricted Stock that are represented by
physical certificates, a holder shall surrender such certificates to the Company upon request without
consideration.
(d) Vesting of Restricted Stock. The Administrator at the time of grant shall specify the date or dates and/or
the attainment of predetermined performance goals, objectives and other conditions on which
Restricted Stock shall become vested, subject to such further rights of the Company or its assigns as
may be specified in the instrument evidencing the Restricted Stock Award.
(e) Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock Award agreement may require
or permit the immediate payment, waiver, deferral or investment of dividends paid on the Restricted
Stock.
SECTION 7. Unrestricted Stock Awards
Grant or Sale of Unrestricted Stock. The Administrator may, in its sole discretion, grant (or sell at such
purchase price determined by the Administrator) an Unrestricted Stock Award to any recipient pursuant to which
such recipient may receive shares of Stock free of any vesting restrictions (“Unrestricted Stock”) under the Plan.
Unrestricted Stock Awards may be granted or sold as described in the preceding sentence in respect of past
services or other valid consideration, or in lieu of cash compensation due to such recipient.
SECTION 8. Tax Withholding
(a) Payment by Participant. Each holder shall, no later than the date as of which the value of an Award or
of any Stock or other amounts received thereunder first becomes includable in the gross income of the
holder for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the
Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to such income. The Company and its Affiliates shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind otherwise due to the holder.
The Company’s obligation to deliver share certificates is subject to and conditioned on tax obligations
being satisfied by the recipient.
(b) Payment in Stock. Subject to approval by the Administrator, a recipient may elect to have the minimum
required tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to
withhold from shares of Stock to be issued pursuant to any Award a number of shares with an
8
aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the
withholding amount due, or (ii) transferring to the Company shares of Stock owned by the participant
with a minimum aggregate Fair Market Value (as of the date the withholding is effected) that would
satisfy the minimum withholding amount due.
SECTION 9. Transfer, Leave of Absence, Etc.
For purposes of the Plan, the following events shall not be deemed a termination of employment:
(a)
(b)
a transfer to the employment of the Company from a Affiliate or from the Company to a Affiliate, or
from one Affiliate to another; or
an approved leave of absence for military service or sickness, or for any other purpose approved by the
Company, if the employee’s right to re-employment is guaranteed either by a statute or by contract or under
the policy pursuant to which the leave of absence was granted or if the Administrator otherwise so provides in
writing.
SECTION 10. Amendments and Termination
The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend
or cancel any outstanding Award for the purpose of satisfying changes in law or for any other lawful purpose, but
no such action shall adversely affect rights under any outstanding Award without the holder’s consent. The
Administrator may provide substitute Awards at the same or reduced exercise or purchase price or with no
exercise or purchase price in a manner not inconsistent with the terms of the Plan, but such price, if any, must
satisfy the requirements which would apply to the substitute or amended Award if it were then initially granted
under this Plan, but no such action shall adversely affect rights under any outstanding Award without the holder’s
consent. If and to the extent determined by the Administrator to be required by the Code to ensure that Incentive
Stock Options granted under the Plan are qualified under Section 422 of the Code or to ensure that compensation
earned under Stock Options qualifies as performance-based compensation under Section 162(m) of the Code, if
and to the extent intended to so qualify, Plan amendments shall be subject to approval by the Company or an
Affiliate’s stockholders, as applicable, entitled to vote at a meeting of stockholders. Payment of amounts
intended to qualify as performance-based compensation under Section 162(m) of the Code shall be contingent on
applicable stockholder approval. Nothing in this Section 10 shall limit the Board’s authority to take any action
permitted pursuant to Section 3.
SECTION 11. Status of Plan
With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or
other consideration not received, a recipient shall have no rights greater than those of a general creditor of the
Company unless the Administrator shall otherwise expressly determine in connection with any Award or
Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to
meet the Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided
that the existence of such trusts or other arrangements is consistent with the foregoing sentence.
SECTION 12. General Provisions
(a) No Distribution; Compliance with Legal Requirements. The Administrator may require each person
acquiring Stock pursuant to an Award to represent to and agree with the Company in writing that such
person is acquiring the shares without a view to distribution thereof. No shares of Stock shall be issued
pursuant to an Award until all applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Administrator may require the placing of such stop-orders and
restrictive legends on certificates for Stock and Awards as it deems appropriate.
(b) Delivery of Stock Certificates. Stock certificates under this Plan shall be deemed delivered for all
purposes when the Company or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the recipient, at the recipient’s last known address on
file with the Company.
9
(c) Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall
prevent the Board from adopting other or additional compensation arrangements, including trusts, and
such arrangements may be either generally applicable or applicable only in specific cases. The adoption
of this Plan and the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Affiliate.
(d) Trading Restrictions. Stock Option exercises and other Awards under the Plan shall be subject to the
Company’s trading restrictions, terms and conditions, including, without limitation, the restrictions,
terms and conditions set forth in a Share Transfer Restriction Agreement executed and delivered
pursuant to Section 2 hereof (presented herein as Exhibit 2), as may be established or required by the
Administrator, or in accordance with policies set by the Administrator, from time to time.
(e) Designation of Beneficiary. Each recipient to whom an Award has been made under the Plan may
designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any
Award payable on or after the recipient’s death. Any such designation shall be on a form provided for
that purpose by the Administrator and shall not be effective until received by the Administrator. If no
beneficiary has been designated by a deceased recipient, or if the designated beneficiaries have
predeceased the recipient, the beneficiary shall be the recipient’s estate.
SECTION 13. Effective Date of Plan
This Plan shall become effective upon approval by the stockholders in accordance with applicable law.
Subject to such approval by the stockholders and to the requirement that no Stock may be issued hereunder prior
to such approval, Stock Options and other Awards may be granted hereunder on and after adoption of this Plan
by the Board.
SECTION 14. Governing Law
This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance
with, the laws of the State of Delaware, applied without regard to conflict of law principles.
On April 26, 2017, the Board approved the adoption, subject to Stockholder approval, of the Picor
Corporation Amended and Restated 2001 Stock Option and Incentive Plan (the “2001 Picor Plan”). The full text
of the 2001 Picor Plan is presented above. Any reference within the text to an “exhibit” or an “attachment”
refers to documents associated with the administration of the 2001 Picor Plan that are not a part of the 2001
Picor Plan and, therefore, not included in this Proxy Statement.
10
APPENDIX D
Vicor Corporation 2017 Employee Stock Purchase Plan
SECTION 1. Purpose of the Plan.
The purpose of the Plan is to encourage and enable employees of the Corporation and certain of its
Subsidiaries to voluntarily acquire proprietary interests in the Corporation through the ownership of shares of the
Common Stock of the Corporation. The Corporation intends for the Plan to qualify as an “employee stock
purchase plan” under Section 423 of the Code. Although the Corporation makes no undertaking to maintain, nor
representation it will maintain, such qualified status of the Plan, the provisions of the Plan shall be construed so
as to extend and limit participation in a manner consistent with the requirements of that section of the Code.
SECTION 2. Definitions.
Unless otherwise provided in the Plan, capitalized terms, when used herein, shall have the following
respective meanings:
“Administrator” shall mean the Board, the Compensation Committee of the Board, or any other duly
authorized delegate appointed by the Board.
“Adoption Date” shall mean the date of the Vicor Corporation Annual Meeting of Shareholders scheduled
for June 16, 2017, or such date immediately thereafter as determined by the Administrator, upon which the Plan
shall be adopted if such adoption is approved by shareholders at such annual meeting.
“Applicable Laws” shall mean all applicable securities, tax, and securities trading exchange laws,
regulations, and rules, including, but not limited to, U.S. state corporate laws, U.S. federal and state securities
laws, the Code, the rules of any stock exchange or quotation system on which shares of the Common Stock are
listed or quoted, and the applicable securities, tax, and securities exchange laws, regulations, and rules of any
other country or jurisdiction in which Options are granted under the Plan or where Eligible Employees reside, as
such laws, regulations, and rules shall be in effect from time to time.
“Board” shall mean the Corporation’s Board of Directors.
“Code” shall mean the U.S. Internal Revenue Code of 1986, as amended, and the regulations and
interpretations promulgated thereunder.
“Common Stock” shall mean the Corporation’s common stock, $0.01 par value per share. For purposes of
the Plan, Common Stock shall refer to the total number of such shares outstanding assuming the conversion of all
outstanding shares of the Corporation’s Class B Common Stock into shares of Common Stock. As of March 31,
2017, 27,346,172 shares of Common Stock were outstanding and 11,758,218 shares of Class B Common Stock
were outstanding. The Corporation’s shares of Common Stock are registered with the Securities and Exchange
Commission and are listed on the Market. Shares of Class B Common Stock are neither registered nor listed, and
are subject to transfer restrictions under the Corporation’s Restated Certificate of Incorporation.
“Contributions” shall mean the after-tax payroll deductions from a Participant’s Eligible Compensation to
fund the exercise of Options granted pursuant to the Plan.
“Corporation” shall mean Vicor Corporation, a Delaware corporation.
“Designated Subsidiaries” shall mean any Subsidiary designated by the Administrator from time to time, the
Eligible Employees of which may participate in the Plan. A listing of Designated Subsidiaries shall be
maintained by the Administrator as Exhibit A to the Plan, which Exhibit may be updated by the Administrator
from time to time.
1
“Designated Transfer Agent” shall mean the Corporation’s share registrar and transfer agent, supervising the
issuance of ESPP Shares and documenting the ownership and transfers of outstanding ESPP Shares. The
Designated Transfer Agent shall initially be Computershare Trust Company, N.A., but may be changed by the
Administrator in its sole discretion.
“Designated Broker” shall mean the agent designated by the Administrator to maintain ESPP Share
Accounts on behalf of Participants who have purchased shares of Common Stock under the Plan. The Designated
Broker shall initially be E*Trade Financial Corporation (or a broker-dealer subsidiary thereof), but may be
changed by the Administrator in its sole discretion.
“ESPP Share Account” shall mean an individual trading and custodial account into which common stock
purchased with Contributions at the end of an Offering Period are held on behalf of a Participant.
“Eligible Compensation” shall mean, unless otherwise determined by the Administrator from time to time,
the Eligible Employee’s cash compensation, paid through the payroll system of the Corporation or a Designated
Subsidiary, for personal services actually rendered in the course of employment with the Corporation or a
Designated Subsidiary, before withholding for payment of income taxes, Social Security and Medicare (“FICA”),
and federal unemployment taxes (“FUTA”). Eligible Compensation shall be limited to amounts received by the
Eligible Employee during the period he or she is participating in the Plan and includes salary and other wages,
amounts contributed by the Eligible Employee to any benefit plan maintained by the Corporation or a Designated
Subsidiary (including contributions to a 401(k) plan or deductions under Section 125 plans), overtime pay,
commissions (net of draws against commissions), shift premiums, sick pay, vacation pay, holiday pay, and
shutdown pay, except to the extent the exclusion of any such item (or a sub-set of any such item) is specifically
directed by the Administrator for all Eligible Employees for an Offering Period. Notwithstanding the preceding,
Eligible Compensation does not include any incentive or other bonus payments (unless the inclusion of any
incentive or other bonus payment is specifically directed by the Administrator for all Eligible Employees for an
Offering Period), remuneration paid in a form other than cash, fringe benefits (including car allowances and
relocation payments), expense reimbursement, long-term disability payments, workmen’s compensation
payments, welfare benefits, and any contributions that the Corporation or any Designated Subsidiary makes to
any benefit plan (including a 401(k) plan or any other health, welfare, or retirement plan).
“Eligible Employee” shall mean any individual who is a common law employee providing services to the
Corporation or a Subsidiary and is customarily employed for more than twenty (20) hours per week and more
than five (5) months in any calendar year by the Corporation or Subsidiary; provided, however, such individual
has been so employed for at least six (6) weeks before the beginning of an Enrollment Period. For the avoidance
of doubt, a member of the Board or the Board of Directors of a Subsidiary who is not a full-time employee of the
Corporation or a Subsidiary is not an Eligible Employee. The Administrator, in its discretion, may modify the
definition of an Eligible Employee (on a uniform and nondiscriminatory basis or as otherwise permitted by
Treasury Regulation Section 1.423-2), prior to the start of any Enrollment Period, for Options to be granted on
the subsequent Grant Date associated with a specific Offering. For any Offering Period, the Administrator may
determine that any Eligible Employees considered “highly compensated employees,” within the meaning of
Section 414(q) of the Code, shall be excluded from participating in that Offering Period.
“Enrollment Agreements” shall mean the agreements, as determined by the Administrator, between an
Eligible Employee, the Corporation, and, in association with the Participant’s ESPP Share Account in such
written or electronic format (including Internet-based applications administered by third parties), pursuant to
participation in the Plan. Executable documents considered to be Enrollment Agreements may include the
Enrollment and Payroll Deduction Authorization Agreement, the Designation of Beneficiary, the Deduction
Change Election, and the Withdrawal Election.
“Enrollment Period” shall mean the period beginning thirty (30) calendar days before and concluding ten
(10) calendar days prior to a Grant Date, during which Eligible Employees may elect to participate in an Offering
2
Period by submitting executed Enrollment Agreements to the Administrator (or its duly authorized delegate). The
Administrator shall provide reasonable notice to Eligible Employees of a pending Enrollment Period. The
Administrator also may change the duration and timing of Enrollment Periods from time to time in order to
accommodate holidays and similar events or as otherwise deemed necessary or advisable.
“ESPP Share” shall mean a single, whole share of Common Stock purchased under the terms of and the
process defined by this Plan.
“Exercise Date” shall mean the last Trading Day of an Offering Period and refers to the date upon which the
Option(s) granted to a Participant shall be exercised at the Purchase Price calculated, resulting in the purchase by
the Participant of ESPP Shares. The Exercise Date also represents (i) the expiration date of the Option(s)
associated with that Offering Period and, as such, (ii) the end of that Offering Period.
“Fair Market Value” shall mean, unless otherwise determined or provided by the Administrator utilizing the
valuation methods permitted under U.S. Treasury Regulation Section 20.2031-2, the Market’s reported closing
price (in regular trading) for a share of Common Stock for the date in question or, if no sales of Common Stock
were reported by the Market on that date, the last price (in regular trading) for a share of Common Stock on the
Market for the immediately preceding day on which sales of Common Stock were reported by the Market.
“Grant Date” shall mean the first Trading Day of each Offering Period, as designated by the Administrator
and consistent with U.S. Treasury Regulation Section 1.423-2(h)(3).
“Market” shall mean the National Market System of the NASDAQ Stock Market, or such other securities
exchange on which the shares of Common Stock are listed for trading.
“Offering” shall mean an offer by the Corporation under the Plan of an Option that may be exercised during
the specifically-associated Offering Period.
“Offering Period” shall mean the period, established in advance by the Administrator, under no
circumstances exceeding twenty-seven (27) months, during which Contributions shall be collected to purchase
ESPP Shares pursuant to an Offering. Unless otherwise established by the Administrator prior to the start of an
Offering Period, each Offering Period shall be of approximately six (6) months duration, with the first such
Offering Period under the Plan intended to begin on or about September 1 and end on the last business day of the
immediately following January, and the second such Offering Period intended to begin on or about March 1 with
subsequent Offering Periods following the same six (6) month sequence.
“Option” shall mean the right granted to Participants to purchase ESPP Shares pursuant to an Offering. Such
rights will be “book-entry” only, in that the specific terms and information associated with the grant of the
Option will be recorded in the internal books and records of the Corporation, and the contractual existence of the
Option will be evidenced by the Enrollment Agreement documents executed between the Participant and the
Corporation.
“Outstanding Election” shall mean (i) a Participant’s then-current election to purchase ESPP Shares at the
conclusion of an Offering Period, or (ii) that part of such an election not cancelled (including voluntary
cancellation under Section 7 and deemed cancellation under Sections 8 and 13) prior to the close of business on
the last Trading Day of the Offering Period or such other date as determined by the Administrator.
“Participant” shall mean an Eligible Employee who has elected voluntarily to participate in an Offering
pursuant to Section 5.
“Plan” shall mean this Vicor Corporation 2017 Employee Stock Purchase Plan, as it may be amended from
time to time.
3
“Plan Account” shall mean a bookkeeping account established, maintained, and controlled by the
Corporation, on its internal books and records, to record the amount of funds accumulated pursuant to the Plan
and, for a brief period between the Exercise Date and the Settlement Date, to record the number of ESPP Shares
purchased by each Participant.
“Purchase Price” shall mean the price per ESPP Share purchased for an Offering Period, determined by the
Administrator at the close of business on the Exercise Date; such Purchase Price shall not be less than the lower
of (i) eighty-five percent (85%) of the Fair Market Value on the Grant Date or (ii) eighty-five percent (85%) of
the Fair Market Value on the Exercise Date.
“Settlement Date” shall mean that date upon which purchase by the Participant of ESPP Shares is
completed, in that the ESPP Shares have been recorded in a Participant’s ESPP Share Account, are owned by the
Participant, and are available for sale.
“Subsidiary” shall mean any corporation (other than the Corporation) in an unbroken chain of corporations
beginning with the Corporation if each of the corporations other than the last corporation in the unbroken chain
owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of capital
stock in one of the other corporations in such chain. A corporation attaining the status of a Subsidiary on a date
after the Adoption Date shall be considered a Subsidiary commencing as of such date.
“Termination of Service” shall mean, with respect to the Plan, a cessation of the employee-employer
relationship between the Eligible Employee and the Corporation or a Designated Subsidiary for any reason,
(i) including but not by way of limitation, (A) a termination by resignation, discharge, disability, retirement, or
death, (B) the disaffiliation of a Subsidiary (i.e., a transaction by which the employer of the Eligible Employee is
no longer a Subsidiary), (C) unless otherwise determined or provided by the Administrator, a transfer of
employment to a Subsidiary not identified as a Designated Subsidiary as of the first day immediately following
the three (3) month period following such transfer, but (ii) excluding (D) such termination when there is a
simultaneous reemployment of the Eligible Employee by the Corporation or a Designated Subsidiary, and (E) a
leave of absence, such as family leave, medical leave, personal leave, and military leave, if the leave has been
approved by the Corporation or the Designated Subsidiary (provided, however, if the period of approved leave
exceeds three (3) months, and the Eligible Employee’s right to reemployment is not guaranteed either by statute
or by contract, the employee-employer relationship will be deemed to have terminated on the first day
immediately following such three (3) month approved leave).
“Trading Day” shall mean a day on which the Market is open for trading or, if the Common Stock is not
listed on an established exchange, a business day, as determined by the Administrator in good faith.
SECTION 3. Administration of the Plan.
The Administrator shall have the authority and responsibility for the operation and administration of the
Plan. Subject to the provisions set forth herein, the Administrator shall have full authority, in its sole discretion,
to take any actions it deems necessary or advisable for the administration of the Plan, including, but not limited
to:
A.
Interpreting the Plan and defining, adopting, and rescinding policies, rules and procedures it deems
appropriate to implement the Plan, including modifying any outstanding Option, as it may deem
advisable or necessary to comply with Applicable Laws, and making all other decisions relating to the
operation of the Plan;
B. Scheduling Grant Dates, Exercise Dates, and Offering Periods;
C. Establishing minimum and maximum Contribution rates;
4
D. Establishing new or modifying existing limits on the number of ESPP Shares an Eligible Employee
may elect to purchase with respect to any Offering Period, provided such limits are announced prior to
the associated Offering Period and applicable to all Eligible Employees;
E. Entering into contracts with the Designated Transfer Agent, Designated Broker and any other third-
party service providers in support of the Plan’s functions, including administration of Participant’s
ESPP Share Accounts;
F. Adopting such policies, rules, sub-plans and procedures, as may be deemed necessary or appropriate to
comply with the laws of other countries, while maintaining the qualified status of the Plan under
Section 423 of the Code; and
G. Establishing the exchange ratio applicable to amounts associated with Contributions made by Eligible
Employees, if any, if such Contributions are made in a currency other than U.S. dollars.
The determinations of the Administrator under the Plan shall be final, conclusive, and binding on all
persons. Neither the Administrator, the Board, the Compensation Committee of the Board, any other committee
appointed by the Board, nor any of their agents or designees shall be liable for any act, failure to act, or
determination made in good faith with respect to the Plan.
SECTION 4. Shares of Common Stock Issuable and Reserved.
A. Subject to the adjustments addressed in Section 13, the maximum aggregate number of ESPP Shares
that may be issued under this Plan shall be 2,000,000 shares of Common Stock, as such shares are
defined, on a fully converted basis, in Section 2. As of the date on which the Board approved the Plan,
April 26, 2017, the number of shares of Common Stock outstanding, on a fully converted basis, was
39,115,110.
1.
2.
In the event the Administrator determines the number of shares of Common Stock then available
for issuance under the Plan may be insufficient to meet the ESPP Share issuance requirements of
an Offering Period the Administrator, without Participant consent, shall make a pro-rata allocation
of the aggregate number of ESPP Shares to be purchased by Participants pursuant to the Plan for
that Offering Period in as uniform and equitable manner as is reasonably practicable. In such
circumstance, the Administrator shall provide written notice to each Participant of the reduction of
the number of ESPP Shares to be purchased on the Exercise Day for that Offering Period and
refund in cash each Participants’ Plan Account balances associated with such pro-rata allocation
as soon as practicable. Such balances shall not be applied toward the following Offering Period.
If, during an Offering Period, the Administrator determines some or all of the ESPP Shares to be
purchased by Participants on the last day of an Offering Period (i) would not be issued pursuant to
an effective Form S-8 registration statement, and/or (ii) would not be issued in accordance with
Applicable Laws (or would require approval by any regulatory body prior to issuance), the
Administrator, without Participant consent, may terminate any outstanding Offering Period (and
the Options granted pursuant thereto). In such circumstance, the Administrator shall provide
written notice to each Participant of the termination and refund in cash each Participants’ Plan
Account balances associated with such Offering Period(s) as soon as practicable. Such balances
shall not be applied toward the following Offering Period.
B. The shares of Common Stock reserved for issuance pursuant to this Plan shall be authorized but
unissued shares (i.e., newly issued shares) or shares held by the Corporation (i.e., treasury shares), and
shall be registered under the terms of the Securities Act of 1933 via the filing by the Corporation of a
Form S-8 as soon as practicable on or after the Adoption Date.
C.
If any Option granted under the Plan is terminated, for any reason, without having been exercised, the
shares of Common Stock not issued as ESPP Shares under such Option shall again become available
for issuance under the Plan).
5
SECTION 5. Participation in the Plan.
A. Enrollment.
An Eligible Employee may become a Participant for an Offering Period by completing and signing the
Enrollment Agreements and timely submitting such documents to the Corporation (or the
Corporation’s designee), in the format and pursuant to the process as set forth by the Administrator,
during the Enrollment Period prior to the commencement of the Offering Period to which it relates
(i.e., the period beginning thirty (30) calendar days before and concluding ten (10) calendar days prior
to a Grant Date associated with the next Offering Period, unless otherwise determined by the
Administrator).
Such Enrollment Agreements shall contain the authorization of payroll deductions described in
Section 7. The initial payroll deduction authorization will be effective for the first Offering Period
following the submission of the Enrollment Agreements and all subsequent Offering Periods as
provided by Section 7, until such payroll deduction:
1.
2.
3.
4.
Is modified through execution and submission of a Deduction Change Election;
Is terminated through execution and submission of a Withdrawal Election;
Is terminated due to the Participant’s Termination of Service, as described in Section 8; or
Is terminated because the Participant is otherwise ineligible to participate in the Plan.
B. Automatic Re-Enrollment of Participant.
Following the conclusion of each successive Offering Period, each Participant shall be automatically
re-enrolled in the following Offering Period at the applicable rate of payroll deductions in effect on the
last Trading Day of the concluding Offering Period or otherwise as provided under Section 7, unless:
1.
2.
3.
4.
5.
The Participant has elected to withdraw from the Plan in accordance with Section 7;
Termination of Service of the Participant, as described in Section 8, during the then-current
Offering Period;
The Administrator, in accordance with Section 4, determines the number of shares of Common
Stock available for issuance under the Plan is insufficient to meet the requirements of the
anticipated exercise of Options on the Exercise Date associated with the current Offering Period;
The Plan will terminate at the conclusion of the concluding Offering Period; or
The Participant is otherwise ineligible to participate in the following Offering Period.
Notwithstanding the foregoing, the Administrator may require current Participants to complete and
submit new Enrollment Agreements at any time it deems necessary or desirable to facilitate the
administration of the Plan.
C. Designation of Beneficiary.
1. By the end of the initial Enrollment Period, a Participant must file with the Corporation (or its
duly authorized delegate) a written designation (i.e., a Designation of Beneficiary) of a beneficiary
who shall receive, in the event of the Participant’s death, any cash from the Participant’s Plan
Account and/or any ESPP Shares purchased and held in the Participant’s ESPP Share Account.
2.
3.
The Designation of Beneficiary may be changed by the Participant at any time by delivering
written notice to the Corporation, or its duly authorized delegate (i.e., a revised Designation of
Beneficiary).
In the event of the death of a Participant, and in the absence of a beneficiary validly designated
under the Plan who is living at the time of the Participant’s death, the Administrator shall deliver
any cash from the Participant’s Plan Account and/or any ESPP Shares purchased and held in the
Participant’s ESPP Share Account to the surviving legal spouse (if any) of the Participant, or if
there is no surviving legal spouse, to the executor(s) of the Participant’s estate.
6
SECTION 6. Limitations on Participation.
A. Limit on Number of ESPP Shares Purchased.
Any provisions of the Plan to the contrary notwithstanding, in no event may a Participant purchase
more than 2,500 ESPP Shares in any one Offering Period, irrespective of the value of the Participant’s
Plan Account associated with the Offering Period or the Purchase Price of the ESPP Shares on the last
day of the Offering Period, unless otherwise expressly provided by the Administrator in advance of that
Offering Period.
B. Limit on Aggregate Annual Value Under All Qualified Plans.
Any provisions of the Plan to the contrary notwithstanding, no Participant shall be granted an Option
under this Plan causing the Participant’s cumulative rights to purchase shares of Common Stock
associated with all statutory options awarded under the terms of all employee stock purchase plans
maintained by the Corporation and its Subsidiaries (as defined within U.S. Treasury Regulations
Section 1.421-1(b)) to exceed a total Fair Market Value of twenty-five thousand dollars ($25,000) of
such shares of Common Stock (determined at the time such statutory options are granted) for each
calendar year.
C. Limit on Aggregate Voting Power.
Any provisions of the Plan to the contrary notwithstanding, no Eligible Employee shall be granted an Option
under the Plan to the extent, immediately after such grant, the Eligible Employee (or any other person whose
ownership would be attributed to such Eligible Employee pursuant to Treasury Regulations Section
1.423-2(d)) would own capital stock of the Corporation or of any Subsidiary (and/or hold outstanding
options to purchase shares of such capital stock) possessing five percent (5.0%) or more of the total
combined voting power or value of all classes of the capital stock of the Corporation or any Subsidiary.
SECTION 7. Participant’s Payroll Deductions; Changes; Withdrawal.
A. Range of Deductions.
Each Participant’s Enrollment Agreements shall contain a payroll deduction authorization pursuant to which
he or she shall elect to have a designated whole percentage of Eligible Compensation between one percent
(1.0%) and fifteen percent (15.0%) deducted on each payday during the Offering Period from his or her
Eligible Compensation and credited to the Participant’s Plan Account for the purchase of ESPP Shares or
such other designation as permitted by the Administrator. For avoidance of doubt, the dollar value of the
deduction each payroll period from the Participant’s net pay (i.e., the amount paid to the Participant after
withholding for income taxes, FICA, and FUTA) will be based on the product of the percentage designated
by the Participant and his or her Eligible Compensation (i.e., his or her gross pay for the period before
withholding of any amounts due for income taxes, FICA, and FUTA).
B. Timing of Deductions.
Payroll deductions shall begin on the date of the first scheduled payday after the Grant Date of the first
Offering Period to which the Enrollment Agreements relate (or as soon as administratively practicable
thereafter) and shall continue each scheduled payday through the payday ending coincident with or
immediately prior to the applicable Exercise Date for the applicable Offering Period. The amounts so
deducted may be commingled with the general assets of the Corporation and used for general corporate
purposes and shall not be required to be held in a trust fund or in any segregated account, unless
otherwise required under Applicable Law.
C. No Separate Plan Account Contributions.
Participants shall not be permitted to make any separate cash payments (i.e., payments outside of the
payroll deduction process) into their Plan Account for the purchase of ESPP Shares. Notwithstanding
the foregoing, if Applicable Laws in a particular jurisdiction prohibit payroll deductions or otherwise
restrict participation as defined by the Plan, a Participant may elect to participate in an Offering Period
7
through Contributions to his or her Plan Account in a format and pursuant to a process acceptable to
the Administrator. In order to maintain Plan qualification under Section 423 of the Code, any such
Participant shall be deemed to participate in a separate offering under the Plan, unless the
Administrator otherwise expressly provides.
D.
Insufficient Amounts for Deductions.
If, in any payroll period, a Participant has insufficient funds (after other authorized deductions) to
permit deduction of the full amount of the Participant’s Outstanding Election, then (i) the payroll
deduction election for such payroll period shall be reduced, without Participant consent, to the amount
of pay remaining, if any, after all other authorized deductions, and (ii) the percentage or dollar amount
of Eligible Compensation shall be deemed to have been reduced by the amount of the reduction in the
payroll deduction election for such payroll period. Deductions of the full amount originally elected by
the Participant will recommence as soon as the Participant’s pay is sufficient to permit such payroll
deductions; provided, however, no additional amounts will be deducted to satisfy the Outstanding
Election.
E. Corporation Adjustments to Participant’s Rate of Deductions.
Notwithstanding the foregoing, the Corporation may adjust a Participant’s payroll deductions at any
time during an Offering Period to the extent necessary to maintain compliance with Section 423 of the
Code and the limitations of Section 6. Payroll deductions will recommence and be made in accordance
with the Outstanding Election in place prior to such adjustment, starting with the first Offering Period
beginning in the next calendar year (or such other time as is determined by the Administrator), unless
the Participant:
1. Withdraws in accordance with Paragraph I of this Section 7;
2.
Is withdrawn from the Plan in accordance with Section 8;
3. Modifies an Outstanding Election to bring such election into compliance with Section 423 of the
Code or the limitations of Section 6 through execution and submission of a Deduction Change
Election; or
4.
Is otherwise ineligible to participate in the Plan.
F. No Increase of Participant’s Deduction Rate During Offering Period.
A Participant may not increase the percentage rate at which his or her payroll deductions are made
during the current Offering Period. As provided by Paragraph H of this Section 7, a Participant may
submit to the Corporation (or its duly authorized delegate) a new Deduction Change Election to modify
the percentage rate of payroll deductions for a later Offering Period.
G. Decreasing Deduction Rate During Offering Period.
A Participant may elect to decrease the percentage rate of payroll deductions during an Offering Period
by submitting to the Corporation (or its duly authorized delegate) a new Deduction Change Election at
any time prior to the tenth (10th) calendar day prior to the associated Exercise Date. A Participant shall
be entitled to make such election only once during any Offering Period.
Any such payroll deduction change will be effective as soon as administratively practicable thereafter
and will remain in effect for successive Offering Periods as provided in Section 7, unless the
Participant:
1.
2.
3.
4.
Submits, as provided by Paragraph H of this Section 7, a new Deduction Change Election for a
later Offering Period requesting a change in percentage rate of payroll deduction;
Elects to withdraw from the Plan in accordance with Paragraph I of this Section 7;
Is withdrawn from the Plan in accordance with Section 8; or
Is otherwise ineligible to participate in the Plan.
8
H. Changes to Payroll Deduction Rates for Future Offering Periods.
A Participant may increase or decrease his or her rate of payroll deductions to be effective for an
upcoming Offering Period by completing and filing with the Corporation (or its duly authorized
delegate) a new Deduction Change Election authorizing the payroll deductions during the Enrollment
Period for such upcoming Offering Period.
I. Withdrawal from Current Offering Period (i.e., After Applicable Grant Date).
A Participant may withdraw from any Offering Period after the applicable Grant Date (i.e., the
beginning of the associated Offering Period), in whole, but not in part, at any time prior to the tenth
(10th) calendar day prior to the associated Exercise Date, by submitting the required Withdrawal
Election to the Corporation (or its duly authorized delegate), in the format and following the process
set forth by the Administrator.
If a Participant withdraws from an Offering Period, the Participant’s Option awarded on the associated
Grant Date for that Offering Period will automatically be terminated, and the Corporation will refund
in cash the Participant’s entire Plan Account balance, as soon as practicable thereafter.
A Participant’s withdrawal from a particular Offering Period shall be irrevocable. If a Participant
wishes to participate in a subsequent Offering Period, he or she must re-enroll in the Plan by submitting
new Enrollment Agreements in accordance with Section 5.
J.
Effect of Financial Hardship Distribution.
A Participant who receives a financial hardship distribution from a qualified cash or deferred
arrangement (as described in Section 401(k) of the Code) that is maintained by the Corporation or a
Designated Subsidiary may not contribute to the Plan for a period of six (6) months after receipt of the
financial hardship distribution. The Participant must submit new Enrollment Forms to recommence
Contributions to the Plan after receiving such a financial hardship distribution.
K. No Interest Paid on Accumulated Contributions.
No interest shall be paid on Contributions held in a designated Plan Account for the purchase of ESPP
Shares, unless otherwise determined necessary by the Administrator.
SECTION 8. Deemed Withdrawals.
A. Termination of Service.
In the event of a Participant’s Termination of Service:
1. Any outstanding Option held by the Participant shall immediately terminate;
2.
3.
The Participant shall be withdrawn from the Plan; and
The Participant shall receive a refund of the amount then credited to the Participant’s Plan
Account.
B. Death of a Participant.
If a Participant dies:
1. Any outstanding Option held by the Participant shall immediately terminate;
2.
The Participant shall be withdrawn from the Plan; and
3. As soon as administratively practicable after the Participant’s death, the amount then credited to
the Participant’s Plan Account shall be remitted to the executor, administrator, or other legal
representative of the Participant’s estate or, if the Administrator permits a beneficiary designation,
to the beneficiary or beneficiaries designated by the Participant, provided such designation of
beneficiary has been filed with the Corporation or the Corporation’s designee prior to the
Participant’s death.
9
If such executor, administrator, or other legal representative of the Participant’s estate has not been
appointed (to the knowledge of the Corporation), or if the beneficiary or beneficiaries are no longer
living at the time of the Participant’s death, the Corporation, in its discretion, may deliver the
outstanding Plan Account balance to the spouse or to any one or more dependents or relatives of the
Participant or to such other person as the Administrator may designate.
SECTION 9. Option Grant and Exercise.
A. Grant of Option.
On each Grant Date, each Participant shall automatically be granted by the Corporation an Option,
recorded on a book-entry basis, to purchase as many whole ESPP Shares as the Participant may be able
to purchase with the value of the accumulated Contributions credited to the Participant’s Plan Account
during the applicable Offering Period, subject to any applicable limitations provided herein. When the
Option grant is recorded by the Corporation, the Fair Market Value associated with the Grant Date also
is recorded.
The Option is granted by the Corporation to the Participant on the Grant Date for no consideration.
While such Option shall have a non-cash compensatory value, calculated and recognized by the
Corporation as an expense for financial reporting purposes, such value only is associated with the
exercise of the Option by the Participant to purchase ESPP Shares at the Purchase Price. Unless so
exercised, the Option has no other value to the Participant, as (i) the Participant may withdraw from an
Offering Period, thereby terminating the associated Option and receiving the full value of all
Contributions made during the Offering Period, (ii) the Option may not be transferred, and (iii) the
Option only may be exercised by the Participant on the Option’s Exercise Date. Accordingly, the
Corporation shall not record any value associated with the Option in the Participant’s Plan Account,
nor shall it otherwise accrue or recognize any value of the Option for the benefit of the Participant.
B. No Transfer of Option.
A Participant may not sell, pledge, assign, or transfer an Option in any manner. If a Participant
attempts to do so in violation of this Section 9, such Option shall immediately terminate, and the
Participant shall immediately receive a refund of the amount then credited to the Participant’s Plan
Account.
C. Exercise of Option.
Unless a Participant withdraws from the Plan no later than the tenth (10th) calendar day prior to the
Exercise Date, as provided in Section 7, the Participant’s Option shall be exercised automatically on
the Exercise Date by the Administrator, which shall record the Fair Market Value associated with such
exercise.
SECTION 10.
Issuance, Purchase, and Delivery of ESSP Shares.
A. Purchase Price Determination.
At the close of business on an Exercise Date, the Administrator shall have determined the Purchase
Price.
B.
Issuance Procedure.
As soon as practicable after determination of the Purchase Price:
1.
The Administrator shall calculate the whole number of ESPP Shares to be issued by the
Corporation to each Participant, based on the Participant’s accumulated Contributions in his or her
Plan Account, subject to the volume limitations of Section 6, in exchange for the accumulated
Contributions in his or her Plan Account. Each Participant’s purchase of that whole number of
ESPP Shares, as well as the Purchase Price calculated, shall be recorded in the Participant’s Plan
Account from the Exercise Date (or as soon as practicable after determination of the Purchase
Price) until the Settlement Date.
10
2. As soon as practicable after determination of the whole number of ESPP Shares issued to and
purchased by a Participant, the Administrator shall inform the Designated Transfer Agent and
Designated Broker of the necessary information describing each Participant’s purchase of ESPP
Shares and instruct the Designated Transfer Agent and the Designated Broker to execute certain
processes and transactions on behalf of the Corporation and each Participant to arrange for
delivery of the Participant’s purchased ESPP Shares into the ESPP Share Account established for
such Participant. Participants shall not have any voting, dividend or other rights of a shareholder
with respect to shares of Common Stock subject to an Option granted hereunder until such shares
have been delivered pursuant to this Section 10.
3. No fractional ESPP Shares will be issued or purchased. Any payroll deductions not applied to the
purchase of ESPP Shares on any Exercise Date shall be promptly refunded to the Participant
following the last day of the Offering Period; provided that any amount representing a fractional
ESPP Share shall be retained in the Participant’s Plan Account and applied to the Plan Account’s
value for the next Offering Period. No cash from a Participant’s Plan Account shall be transferred
to his or her ESPP Share Account.
SECTION 11. Responsibility for Withholding
At the time the Option is exercised, in whole or in part, or at the time some or all the ESPP Shares issued
under the Plan are sold or disposed of, the Participant must make adequate provision for the federal, state, or
other tax withholding and payment obligations, if any, that arise upon the exercise of the Option or the sale or
disposition of the ESPP Shares. At any time, the Corporation may, but shall not be obligated to, withhold from
the Participant’s pay the amount necessary for the Corporation to meet applicable withholding obligations,
including any withholding required to make available to the Corporation any tax deductions or benefits
attributable to the sale or disposition of the ESPP Shares by the Participant.
Each Participant shall give the Corporation prompt written notice if the Participant sells or otherwise
disposes of any ESPP Share within (ii) two years of the Grant Date of the Option exercised to acquire the ESPP
Share or (ii) within one year of the Exercise Date of the Option exercised to acquire the ESPP Share.
SECTION 12. Participant Rights.
A. No Rights to Employment.
Neither the action of the Corporation in establishing the Plan, nor any action taken under the Plan by
the Board or the Administrator, nor any provision of the Plan itself, shall be construed so as to grant
any person the right to remain in the employ of the Corporation or any Subsidiary for any period of
specific duration, and such person’s employment may be terminated at any time, with or without cause.
B. Rights as Unsecured Creditor.
Until ESPP Shares are issued by the Corporation and recorded in the Participant’s ESPP Share
Account, Participants will only have the rights of an unsecured creditor of the Corporation. All payroll
deductions received or held by the Corporation under the Plan on its internal books and records may be
used by the Corporation for any corporate purpose, and the Corporation is not obligated to segregate
funds associated with payroll deductions from the Corporation’s general funds.
C. Rights as Shareholder.
A Participant will not be a shareholder or have any rights as a shareholder with respect to the Options
granted under the Plan to the Participant until the associated ESPP Shares are purchased, pursuant to the
exercise of the Options, and such ESPP Shares are (i) recorded on the Corporation’s books and records in
the Participant’s name, and (ii) issued and transferred to the Participant’s ESPP Share Account.
11
D. Equal Rights and Privileges.
Notwithstanding any provision of the Plan to the contrary and in accordance with Section 423 of the
Code, all Eligible Employees who are granted Options under the Plan shall have the same rights and
privileges, except for differences that are required in order to comply with the Applicable Laws of a
foreign jurisdiction or are otherwise consistent with Code Section 423(b)(5).
SECTION 13. Subsequent Adjustments.
A. Changes in Capitalization.
Subject to Section 4, upon (or, as may be necessary to effect the adjustment, immediately prior to): (i)
any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend)
or reverse stock split, (ii) any merger, combination, consolidation, or other reorganization, (iii) any
spin-off, split-up, or similar extraordinary dividend distribution in respect of the Common Stock,
(iv) any exchange of Common Stock or other securities of the Corporation, or (v) any unusual or
extraordinary corporate transaction of a similar nature in respect of the Common Stock, in each case,
then the Administrator shall equitably and proportionately adjust (1) the number, amount, and type of
shares of Common Stock (or other securities) that thereafter may be made the subject of Options
(including the specific share limits, maximums, and numbers of shares set forth elsewhere in the Plan),
(2) the number, amount, and type of shares of Common Stock (or other securities or property) subject
to any outstanding Options, (3) the Purchase Price associated with any outstanding Options, and/or
(4) the securities, cash, or other property deliverable upon exercise or payment of any outstanding
Options, in each case to the extent necessary to preserve (but not increase) the level of incentives
intended by the Plan and the then-outstanding Options.
It is intended, if possible, any adjustments contemplated by the preceding paragraph be made in a
manner satisfying applicable legal, tax (including, without limitation and as applicable in the
circumstances, Section 424 of the Code and Section 409A of the Code), and accounting (i.e., financial
reporting) requirements.
Without limiting the generality of Section 4, any good faith determination by the Administrator as to
whether an adjustment is required in the circumstances pursuant to this Section 13, and the extent and
nature of any such adjustment, shall be final, conclusive, and binding on all persons.
B. Changes Required to Address Merger or Liquidation of Corporation.
In the event the Corporation or its shareholders enter into an agreement to dispose of all or
substantially all of the assets or outstanding capital stock of the Corporation by means of a sale,
merger, or reorganization in which the Corporation will not be the surviving corporation (other than a
reorganization effected primarily to change the jurisdiction in which the Corporation is incorporated, a
merger or consolidation with a wholly-owned Subsidiary, or any other transaction in which there is no
substantial change in the shareholders of the Corporation or their relative ownership, regardless of
whether the Corporation is the surviving corporation) or in the event the Corporation is liquidated, then
all outstanding Options under the Plan shall automatically be exercised immediately prior to the
consummation of such sale, merger, reorganization, or liquidation (deemed the end of the Offering
Period in such case) by causing all amounts credited to each Participant’s Plan Account to be applied to
purchase as many ESPP Shares pursuant to the Participant’s Option as possible at the Purchase Price,
subject to the limitations of Section 6.
C. Changes Required to Address Acquisitions, Sales, or Disposals.
The Administrator may, in accordance with provisions of Section 423 of the Code, create special
Offering Periods for individuals who become Eligible Employees solely in connection with the
acquisition of another Corporation or business by merger, reorganization, or purchase of assets, and
notwithstanding Section 7, may provide for special purchase dates for Participants who will cease to be
12
Eligible Employees solely in connection with the sale or other form of disposition of all or a portion of
any Designated Subsidiary or a portion of the Corporation, which Offering Periods and purchase rights
granted pursuant thereto shall, notwithstanding anything stated herein, be subject to such terms and
conditions as the Administrator considers appropriate.
SECTION 14. Plan Amendment, Suspension, and Termination.
The Plan shall terminate upon the earlier of (i) the date on which all shares available for issuance under the
Plan shall have been sold pursuant to purchase rights exercised under the Plan, or (ii) the date determined by the
Board, in its sole discretion. In addition, the Board may alter, amend, suspend, or terminate the Plan at any time
and in any manner it deems necessary or advisable; provided, however, no such action shall adversely affect any
then outstanding Options under the Plan unless such action is required to comply with Applicable Laws; and
provided, further, no such action of the Board shall be effective without the approval of the Corporation’s
shareholders if such approval is required by Applicable Laws. Upon the termination of the Plan, all outstanding
purchase rights shall terminate and any balance in a Participant’s Plan Account shall be refunded to him or her as
soon as practicable thereafter.
SECTION 15. Rules for Foreign Jurisdictions.
Notwithstanding any provision to the contrary in this Plan, the Administrator may adopt rules or procedures
relating to the operation and administration of the Plan to accommodate the specific requirements of local laws
and procedures for jurisdictions outside of the U.S. Without limiting the generality of the foregoing, the
Administrator specifically is authorized to adopt rules, procedures, and sub-plans regarding, without limitation,
eligibility to participate, the definition of Eligible Compensation, processing of payroll deductions, making of
Contributions (including, without limitation, in forms other than payroll deductions), establishment of bank or
trust accounts to hold payroll deductions, payment of interest on amounts held pending the purchase of ESPP
Shares, conversion of local currency, obligations to pay payroll tax, determination of beneficiary-designation
requirements, withholding procedures and handling of ESPP Share issuances, all of which may vary according to
local requirement. Notwithstanding the foregoing, to the extent such varying provisions are not in accordance
with Code Section 423(b), the individuals affected by such varying regulations shall be deemed not to be Eligible
Employees.
SECTION 16. Government Approvals or Consents.
This Plan and any offering and sales of ESPP Shares or delivery of ESPP Shares under this Plan to
Participants hereunder are subject to any governmental or regulatory approvals or consents that may be or
become applicable in connection therewith.
SECTION 17. Governing Law.
The Plan shall be governed by, and construed in accordance with, the laws of the Commonwealth of
Massachusetts and applicable U.S. Federal laws.
On April 26, 2017, the Board approved the adoption of the Vicor Corporation 2017 Employee Stock
Purchase Plan, which shall govern all grants of Options as to which ESPP Shares are to be delivered, on or after
the date of stockholder approval of adoption of the Plan. The full text of the Plan is presented above.
13
Exhibit A to Vicor Corporation 2017 Employee Stock Purchase Plan
Designated Subsidiaries
Designated Subsidiary
Picor Corporation
VI Chip Corporation
VLT, Inc.
Vicor Development Corporation
Freedom Power Systems, Inc.
Granite Power Technologies, Inc.
Northwest Power, Inc.
Incorporation
Delaware, USA
Delaware, USA
California, USA
Delaware, USA
Delaware, USA
Delaware, USA
Delaware, USA
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Í
‘
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 0-18277
VICOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
25 Frontage Road, Andover, Massachusetts
(Address of principal executive offices)
04-2742817
(IRS employer
identification no.)
01810
(Zip code)
Registrant’s telephone number, including area code:
(978) 470-2900
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.01 par value
(Title of Class)
The NASDAQ Stock Market LLC
(Name of Each Exchange on Which Registered)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ‘ No Í
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ‘ No Í
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes Í No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes Í No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. Í
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large Accelerated Filer ‘ Accelerated Filer Í
Smaller Reporting Company ‘
Non-accelerated Filer ‘
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No Í
The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates (for this purpose, persons
and entities other than executive officers and directors) of the registrant, as of the registrant’s most recently completed second fiscal
quarter (June 30, 2016) was approximately $163,529,000.
Title of Each Class
Class A Common Stock
Class B Common Stock
Number of Shares of Common Stock
Outstanding as of February 28, 2017
27,321,277
11,758,218
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s definitive proxy statement (the “Definitive Proxy Statement”) to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A and relating to the Company’s 2017 annual meeting of stockholders are incorporated
by reference into Part III.
PART I
In this Annual Report on Form 10-K, unless the context indicates otherwise, references to “Vicor®,” “the
Company,” “our company,” “we,” “us,” “our,” and similar references, refer to Vicor Corporation and
subsidiaries.
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). The words “believes,” “expects,” “anticipates,” “intend,” “estimate,” “plans,” “assumes,”
“may,” “will,” “would,” “should,” “continue,” “prospective,” “project,” and other similar expressions identify
forward-looking statements. Forward-looking statements also include statements regarding: the transition of our
business strategically and organizationally from serving a large number of relatively low volume customers
across diversified markets and geographies to serving a small number of relatively large volume customers,
typically concentrated in computing and communications; the level of customer orders overall and, in particular,
from large customers and the delivery lead times associated therewith; the financial and operational impact of
customer changes to shipping schedules; the derivation of a portion of our sales in each quarter from orders
booked in the same quarter; our ongoing development of power conversion architectures, switching topologies,
packaging technologies, and products; our plans to invest in expanded manufacturing capacity and the timing and
location thereof; our continued success depending in part on our ability to attract and retain qualified personnel;
our belief cash generated from operations and the total of our cash and cash equivalents will be sufficient to fund
operations for the foreseeable future; our belief that we have limited exposure to currency risks; our intentions
regarding the declaration and payment of cash dividends; our intentions regarding protecting our rights under our
patents; and our expectation that no current litigation or claims will have a material adverse impact on our
financial position or results of operations. These statements are based upon our current expectations and
estimates as to the prospective events and circumstances that may or may not be within our control and as to
which there can be no assurance. Actual results could differ materially from those implied by forward-looking
statements as a result of various factors, including our ability to: develop and market new products and
technologies cost effectively and on a timely basis; leverage our new technologies in standard products to
promote market acceptance of our approach to power system architecture; leverage design wins into increased
product sales; continue to meet requirements of key customers and prospects; enter into licensing agreements
increasing our market opportunity and accelerating market penetration; realize significant royalties under such
licensing agreements; achieve sustainable bookings rates for our products across served markets and
geographies; improve manufacturing and operating efficiencies; successfully enforce our intellectual property
rights; successfully defend outstanding litigation; hire and retain key personnel; and maintain an effective system
of internal controls over financial reporting. These and other factors that may influence actual results are
described in this Annual Report on Form 10-K, including but not limited to those described under Part I, Item I
— “Business,” under Part I, Item 1A — “Risk Factors,” under Part I, Item 3 — “Legal Proceedings,” and under
Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
The discussion of our business contained herein, including the identification and assessment of factors that may
influence actual results, may not be exhaustive. Therefore, the information presented should be read together
with other documents we file with the U.S. Securities and Exchange Commission (“SEC”) from time to time,
including Forms 10-Q and 8-K, which may supplement, modify, supersede, or update the factors discussed in this
Annual Report on Form 10-K. We do not undertake any obligation to update any forward-looking statements as a
result of future events or developments, except as required by law.
ITEM 1. BUSINESS
Overview
Vicor Corporation designs, develops, manufactures, and markets modular power components and power
systems for converting, regulating, and controlling electric current. We consider power components analogous to
building blocks, and our strategy is based largely on products, performing distinct functions, that can be flexibly
combined to enable a complete power system. We serve customers with applications for which the high
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conversion efficiency (i.e., the ratio of output power in watts to the power consumed by the device) and high
power density (i.e., the amount of power in watts divided by the volume of the device) of our products are well
suited. We also offer a range of higher value-added standard products (our “Configurable” product line) and
custom system design and manufacturing capabilities. Both our Configurable products and custom systems
leverage the superior performance of our modular power components.
In the market segments we serve, we position the Company as a vendor of power components that can be
utilized individually, given their market-leading performance, or combined, given their level of integration, to
create highly-differentiated power management solutions. We articulate this positioning through our “Power
Component Design Methodology”, which is our approach to providing our customers the modular products,
design tools, and support to enable the rapid design of comprehensive power conversion and management
systems.
Our website, www.vicorpower.com, sets forth detailed information describing our Power Component
Design Methodology, all of our products, the applications for which they may be used, and our suite of design
tools. The information contained on our website is not a part of, nor incorporated by reference into, this Annual
Report on Form 10-K and shall not be deemed “filed” under the Exchange Act.
We are headquartered in Andover, Massachusetts, where our manufacturing facility is located. We conduct
business primarily through the activities of our Brick Business Unit (“BBU”), established in 2005, and our two
operating subsidiaries, Picor Corporation, established in 2001, and VI Chip Corporation, established in 2007.
Picor Corporation relocated its headquarters from North Smithfield, Rhode Island, to Lincoln, Rhode Island in
January 2017. Picor Corporation also has personnel based in Andover, Massachusetts. VI Chip Corporation is
headquartered in Andover, Massachusetts, where its manufacturing facilities are co-located with those of the
BBU.
Our Vicor Custom PowerTM locations are geographically distributed across the United States and all are
incorporated in Delaware. In March 2016, we acquired 100% ownership of certain operating assets and cash of
our consolidated subsidiary, Converpower Corporation, in which we held a 49% ownership interest. In December
2015, we completed the statutory merger of one Vicor Custom Power subsidiary, Mission Power Solutions, Inc.,
with and into another subsidiary, Northwest Power, Inc., after which we closed the Mission Power Solutions
location. Also in December 2015, we sold our 49% ownership interest in Aegis Power Systems, Inc. to Aegis
Power Systems, thereby ending our formal relationship with the subsidiary. The consolidated financial
statements presented herein reflect these transactions.
Internationally, we conduct business through subsidiaries incorporated in or branch offices established in
individual countries. Vicor Japan Company, Ltd. (“VJCL”), our majority-owned Japanese subsidiary, which is
engaged in sales and customer support activities exclusively for the Japanese market, is headquartered in Tokyo,
Japan. Vicor B.V., a wholly-owned subsidiary incorporated in the Netherlands, serves as our European
distribution center. We have established individual subsidiaries or branch offices to conduct the activities of
Technical Support Centers (“TSCs”) located outside of the United States.
VLT, Inc., incorporated in California, is our wholly-owned licensing subsidiary. VICR Securities
Corporation, incorporated in Massachusetts, is a subsidiary established to hold certain investment securities.
Our subsidiaries and their legal domicile are set forth in Exhibit 21.1 to this Annual Report on Form 10-K.
The activities of all of the above named entities are consolidated in the financial statements presented herein.
We were incorporated in Delaware in 1981. Shares of our Common Stock were listed on the NASDAQ
National Market System in April 1990 under the ticker symbol VICR, and we completed an initial public
offering of our shares in May 1991.
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Market Background and Our Strategy
In electrically-powered devices utilizing alternating current (“AC”) voltage from a primary AC source (for
example, a wall outlet), a power system converts AC voltage into the stable direct current (“DC”) voltage
necessary to power subsystems and/or individual applications and devices (known as “loads”). In many
electronic devices, this DC voltage may be further converted to one or more higher or lower voltages required by
a range of loads. In equipment utilizing DC voltage from a primary DC source (for example, a battery), the initial
DC voltage similarly may require further conversion to one or more voltages. Because numerous applications
requiring different DC voltages and varied power ratings may exist within an electronic device, and system
power architectures themselves vary, we offer an extensive range of products and accessories in numerous
application-specific configurations. We believe our product offering is among the most comprehensive in the
market segments we serve.
Since the Company was founded, our product strategy has been driven by innovations in design, largely
enabled by our focus on the development of differentiated technologies, often implemented in proprietary
semiconductor circuitry. Many of our products incorporate patented or proprietary implementations of high-
frequency switching topologies, which enable the design of converter modules much smaller and more efficient
than conventional alternatives. Emphasizing the superior power density and performance advantages of this
technology, our primary product strategy since our founding has been to offer a comprehensive range of
component-level building blocks to configure a power system specific to a customer’s needs.
Our strategy, competitive positioning, and product offerings, all based on highly differentiated product
performance, have anticipated the evolution of system power architectures. As system designs advanced along
with the demands of the loads powered, the inherent limitations of historically accepted system power
architectures have caused designers to seek out improved solutions.
In 1984, we introduced a significant enhancement of the standardized DC-DC converter: the fully-
encapsulated “brick” module. Our innovative, patented technology utilized our implementation of zero current
soft switching topology to deliver unprecedentedly high switching frequencies and, in turn, unprecedented power
density. Superior conversion efficiency, overall performance improvements, and full encapsulation (which
provided shielding from environmental influences) contributed to significant enhancement of thermal
performance characteristics, an important competitive advantage. Such thermal performance enhancement has
been critical to the differentiation of our power converters, as the by-product of voltage conversion is heat, which
must be dissipated in order to assure the performance of the converter itself and the overall system to which it is
delivering power.
The brick module integrated transformation, regulation, isolation, filtering, and/or input protection into a
single device, thereby driving the adoption of the Distributed Power Architecture (“DPA”). The dominant system
power architecture up until that time, the Centralized Power Architecture (“CPA”), generates all system voltages
centrally and distributes these voltages to loads using individual distribution buses (i.e., a conductive circuit,
generally made of copper). CPA became expensive and impractical for electronic systems increasingly
characterized by widely distributed loads requiring lower voltages, higher currents, and higher speeds. DPA,
enabled by the brick concept, allows the distribution of one DC voltage system-wide and downstream conversion
of that voltage, with a brick, at a specific load. This approach allows electricity to be distributed through a
complex system in the most efficient manner, at a uniform higher voltage (typically 48 volts), thereby
dramatically reducing distribution and conversion losses, lowering copper consumption, and significantly
increasing design flexibility. With patented advances in switching topology and converter design, Vicor became
a leading vendor of brick DC-DC converters in the 1980s and 1990s, particularly within the telecommunications
infrastructure segment of the market.
With the advent of enterprise computing in the 1990s, the limitations of DPA became apparent, as the
number of different loads on a system board increased beyond the level for which DPA and bricks were well-
suited. The Intermediate Bus Architecture (“IBA”), a multi-stage extension of DPA, addressed the space
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constraints, performance requirements, and cost challenges of highly complex system boards by further
separating the functions of DC conversion carried out by the brick, which in IBA is replaced by an isolated bus
converter delivering a stepped-down (i.e., reduced), unregulated voltage to a non-isolated point-of-load regulator.
For computing and, later, networking applications, IBA was more scalable and cost-efficient, as numerous brick
DC-DC converters on a system board were replaced by one brick DC-DC converter, providing one system-wide
distributed voltage, accompanied by numerous, lower-cost bus converters providing an intermediate bus voltage,
typically from 5 to 14 volts, to point-of-load regulators.
Two significant industry changes coincided with the broad adoption of IBA in the late 1990s and the early
2000s. The first change was the significant decline of the telecommunications infrastructure segment that
represented our primary focus, while the second change was a pronounced shift toward product commoditization,
primarily driven by globalization. These two changes had an interrelated impact on our strategy, as the primary
driver of IBA adoption was initial cost reduction, not system conversion efficiency. As such, IBA was broadly
implemented using 12 volt distribution, not the more efficient 48 volt distribution, our core competency.
Unwilling to pursue rapidly commoditized market opportunities, notably in IBA, and unwilling to relocate
our manufacturing to lower-cost countries, we shifted our strategy and operations in the 2000s to emphasize
“mass customization”, using highly automated, efficient, domestic manufacturing to serve customers with
product design and performance requirements, across a wide range of worldwide market segments, that could not
be met by high-volume oriented competitors. We focused on applications, largely implementations of DPA, for
which our brick DC-DC converters were well-suited, in market segments such as aerospace and defense
electronics, industrial automation and equipment, instrumentation and test equipment, and transportation (e.g.,
rail). This strategy has been the basis upon which the BBU has competed since this strategic and operational
shift. The customers served range from independent manufacturers of highly specialized electronic devices to
larger original equipment manufacturers (“OEMs”) and their contract manufacturers.
During the 2000s, we embarked on a long-term strategy based on our belief that our competitors’ products
and existing system power architectures, notably IBA, would not meet evolving market requirements, notably
system conversion efficiency. Over the last decade, we have invested significantly in the development of new
power component technologies and product concepts addressing two meaningful market trends, the first toward
higher required conversion efficiencies, and the second toward higher currents, more and diverse on-board
voltages, and the higher performance demands of numerous complex loads. Reflecting the versatile, building
block approach of our Power Component Design Methodology, in 2003 we introduced our Factorized Power
ArchitectureTM (“FPA”), an innovative, component-based approach to flexible, rapid system design, based on
separate components optimized to perform a specific function. We continue to believe FPA represents a
compelling architectural alternative to other architectural implementations, as it offers superior conversion
efficiency, higher power density, improved system responsiveness, and an attractive total cost of ownership,
while offering design flexibility. FPA increases total system conversion efficiency by separating power
conversion stages, reducing the number of stages required (i.e., duplicated functions requiring separate
components), reducing system distribution losses, and reducing power dissipation at the point-of-load.
To support implementation of FPA, we introduced our initial range of VI Chip modules exploiting our
proprietary expertise in soft switching topologies and control, power semiconductors, materials, and packaging:
the PRM® (Pre-Regulator Module), a non-isolated buck-boost regulator; the BCM® (Bus Converter Module), an
isolated, fixed ratio intermediate bus voltage converter; and the VTM® (Voltage Transformation Module), an
isolated current multiplier (i.e., voltage converter). The VTM and BCM utilize on our Sine Amplitude
ConverterTM switching topology, a patented fixed-frequency implementation of zero current / zero voltage soft
switching, while the PRM is based on our proprietary implementation of zero voltage soft switching (“ZVS”),
which is optimized for buck-boost voltage regulation. All three products incorporate technologies for which we
have been issued patents or have patent applications pending.
Beginning in 2011, we began to shift our strategic focus toward higher-volume opportunities with global
OEMs and their contract manufacturers, as FPA and VI Chip modules offered superior power density, conversion
4
efficiency, and thermal management characteristics for board-based, rack-mounted point-of-load applications,
notably for microprocessors requiring tightly regulated high currents. FPA and our first-generation VI Chip
modules were adopted by customers for use in demanding applications, most notably supercomputing,
sophisticated test instrumentation, and defense electronics. However, broader adoption was inhibited by cost
considerations and, to a lesser extent, a narrow product range.
In response, we undertook development of a substantially improved product platform, which we introduced
in 2013. Our “ChiP” platform (ChiP is an acronym for “Converter housed in PackageTM”) specifically was
designed to be a scalable, leveragable module format with lower manufacturing costs. ChiPs are offered in the
same functional families as the earlier VI Chip modules, using the same advanced switching topologies, but,
because of the format’s design flexibility and improved manufacturability, we are able to offer much broader
ranges of performance specifications within existing and new functional families. Because ChiPs were designed
to be manufactured with lower costs, we are able to profitably sell ChiPs and ChiP-based solutions at competitive
prices, on a cents-per-watt basis, comparable to prices of alternative commodity products. While our first-
generation VI Chip modules were designed to facilitate FPA implementations, ChiP modules support all known
power distribution architectures, including FPA, thereby expanding our addressable market opportunity (i.e., the
range of customer applications across which our products can be used).
At the same time, our Picor subsidiary undertook development of a high-performance family of
point-of-load regulators, in “SiP” (System in Package LGA package) format, to be integrated into our expanded
product portfolio, truly enabling comprehensive power management solutions to point(s)-of-load. These Cool-
Power® point-of-load regulators have been designed to meet the requirements of high-volume OEMs for cost-
effectiveness, design flexibility, and high performance.
In 2014, we introduced the “VIA” packaging concept (VIA is an acronym for “Vicor Integrated
AdaptorTM”), a rugged, double-sided package for ChiP modules integrating complementary components,
circuitry, and superior thermal management. In 2016, we completed the installation of our first dedicated
manufacturing line exclusively for the VIA packaging concept. The VIA package provides customers an
advanced, turn-key solution for their demanding power needs, cost-effectively accelerating design cycles and
time-to-market, while providing superior power density. The VIA package is particularly differentiated by the
flexibility it provides designers, as it offers substantial thermal advantages, and its form factor allows a broad
range of installation options. We consider the VIA package to be strategically important, as it has been designed
to be used in the widest range of power system architectures and applications, as well as serving as the packaging
platform for our line of ChiP-based AC-DC front end converters, a critical element of our comprehensive product
portfolio enabling highly-differentiated power management solutions from the AC or DC source to the
point(s)-of-load. The VIA package enables us to target applications ranging from those addressed by our legacy
brick products to the most challenging emerging applications.
With the introduction of innovative new products, we began executing a transitional go-to-market strategy
based on our Power Component Design Methodology, exploiting our historical strengths, while addressing both
the realities of today’s power conversion marketplace and our vision of its long-term direction. This strategy
involves maintaining a profitable legacy business in bricks and brick-based system solutions, while investing in
and transitioning to a new, advanced product portfolio based largely on the ChiP platform, targeting high growth
opportunities.
Today, we target well-defined applications for which the high conversion efficiency and high power density
of our products are well suited within the following industrial and military market segments: aerospace and
aviation; defense electronics; enterprise and high performance computing (including large scale datacenters and
supercomputers); industrial automation, instrumentation, and test equipment; medical diagnostics;
telecommunications and network equipment and infrastructure; and vehicles and transportation infrastructure.
With our new, advanced products, we also are pursuing opportunities in emerging market segments, including:
autonomous vehicles; hybrid and electric vehicles; commercial solid state lighting; and 380 volt DC-based
facility infrastructure (also referred to as “HVDC” (for high voltage DC distribution) or “micro-grids”).
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Our competitive positioning has been, and will continue to be, supported by our long-standing commitment
to research and development of power conversion technologies, advanced packaging and manufacturing, and
innovative approaches to solving customer problems. We incurred approximately $41,848,000, $41,472,000, and
$41,479,000 in research and development expenses in 2016, 2015, and 2014, respectively, representing
approximately 20.9%, 18.8%, and 18.4% of revenues in 2016, 2015, and 2014, respectively.
As stated, our strategy involves maintaining high levels of customer engagement and support, which has
resulted in significant expansion of our sales and application engineering infrastructure over historical levels,
notably in high growth regions of the world such as China, Korea, and India. We incurred approximately
$37,967,000, $37,336,000, and $38,056,000 in marketing and sales expenses in 2016, 2015, and 2014,
respectively, representing approximately 19.0%, 17.0%, and 16.9% of revenues in 2016, 2015, and 2014,
respectively.
We intend to maintain spending in support of research and development and marketing and sales at levels,
on an absolute basis, consistent with prior periods. If we successfully execute our strategy, we believe our
revenue should increase and, if so, the percentages of revenue represented by spending on research and
development and marketing and sales should decline.
Competition
Despite significant consolidation of our competitors, the growth of large-scale, low-cost competitors, and
increased application overlap with vendors of solutions based on semiconductors and discrete components, the
global merchant market for AC-DC and DC-DC power conversion solutions remains fragmented, with over
1,000 merchant vendors. The market is made up of many large, diversified manufacturers, as well as many
smaller manufacturers focused on specialized products or narrowly defined market segments or geographies. The
overall market, including those segments in which we compete, is characterized by rapid commoditization and
intense price competition.
Although numerous third party industry studies estimate the total global merchant market for AC-DC and
DC-DC switching power supplies to exceed $20 billion of annual revenue, representing approximately two-thirds
of the total annual consumption of switching power supplies (i.e., the sum of merchant and captive volumes
consumed), the Company competes in smaller, well-defined industrial and military market segments. We believe
AC-DC power supplies represent more than 85% of the total merchant market, reflecting a wide range of battery
charging applications, primarily in the consumer, mobile device, and office computing segments (commodity
segments in which we do not compete, together representing more than 50% of the total merchant market). Based
on our own assessment of the segments in which we do compete, we estimate our aggregate addressable market
opportunity within the AC-DC portion of the merchant market approaches $1 billion annually, while we estimate
our aggregate addressable market opportunity within the DC-DC portion of the merchant market exceeds
$3 billion annually.
Despite our relative position in the overall merchant market, our small historical presence in the AC-DC
portion of the merchant market, and the competitive presence of numerous, far larger vendors in the market
segments we serve, we believe we are consistently among the largest volume vendors of solutions for the
conversion, regulation, and control of DC-DC current, particularly in the market segments we serve. However,
numerous competitors in these market segments have significantly greater financial and marketing resources and
longer operating histories than we do.
The competitive characteristics of market segments we serve with our transitional go-to-market strategy
may vary. Generally, competition is based on product price, product performance, design flexibility (i.e., ease of
use), and product availability. We seek to position ourselves with customers across all market segments served in
a manner that reduces our vulnerability to commoditization. As we shift our strategy to focus more on higher
volume OEM opportunities, we are emphasizing what we believe are our sustainable competitive advantages: the
differentiation of our products’ superior performance and power densities; a compelling value proposition based
6
on lower total cost of ownership enabled by superior power conversion efficiencies; and the advantageous design
flexibility enabled by our products and tools. The BBU, given its history, continues to compete on the basis of
differentiated responsiveness to individual customer requirements enabled by our mass customization
capabilities, largely with brick DC-DC converters. However, the BBU is pursuing opportunities for which our
new products are appropriate, particularly with VIA packaged ChiPs.
Our VI Chip and Picor subsidiaries, given our focus on higher-volume OEM opportunities with our new,
innovative products, seek to build customer awareness and acceptance of our products and value propositions
through the high levels of customer engagement and support described above. VI Chip and Picor are pursuing
applications with these OEMs and their contract manufacturers in market segments for which the advantages of
our new products are most compelling. In particular, we are marketing FPA, enabled by our new products, as an
alternative to IBA and other distributed architectures, primarily in enterprise computing (notably for large-scale
datacenter and supercomputing applications). A complement to this customer-specific effort is the ongoing
development of collaborative relationships with influential suppliers to our OEM customers.
Our Products
Reflecting our Power Component Design Methodology, we offer a comprehensive range of individual,
highly integrated building blocks enabling design of a power system specific to a customer’s needs. Since
introducing and popularizing the encapsulated brick package format during the 1980s, our product focus has been
on high performance DC-DC switching converters providing the transformation, regulation, isolation, filtering,
and/or input protection necessary to power and protect sophisticated electronic loads. With the development of
FPA, VI Chip modules, Picor point-of-load regulators, and, most recently, ChiP modules and the VIA packaging
platform, we believe we offer the most advanced range of high-performance power components in the industry.
A secondary and highly complementary product strategy has been to vertically integrate our component-level
building blocks into complete power systems representing turnkey AC-DC and DC-DC solutions for our
customers’ power needs.
Reflecting our history and direction, we broadly categorize our products as either “legacy” or “advanced”,
generally based on design, performance, and form factor considerations, as well as the range of applications for
which the products are appropriate.
Legacy Products
The following product groups include those that historically generated the majority of our revenue. Some of
our brick product lines have been in production for over a decade, reflecting the long-established relationships
we have with many customers and the long-standing suitability of our products to their demanding applications.
Their generally long lifecycles and well-established share of targeted market segments provide the competitive
foundation and organizational resources for our transitional go-to-market strategy.
• Bricks (Modular DC-DC Converters and Complementary Components)
We offer brick modules as DC-DC converters, as well as complementary components providing AC
line rectification, input filtering, power factor correction, and transient protection. All of our brick
modules are encapsulated with a dielectric, thermally-conductive material, thereby providing electrical
insulation, thermal conductivity, and environmental protection of the electronic circuitry. These
products are well-established as important, reliable elements of conventional power systems
architectures.
The BBU currently offers seven families of high power density, component-level DC-DC converters,
representing what we believe to be the broadest selection of DC-DC converter modules in the industry:
the VI-200TM, VI-J00TM, MI-200TM, MI-J00TM, and the FasTrakTM module line, our highest volume
products, made up of the Maxi, Mini, and Micro product families. All of our DC-DC converters are
based on our proprietary approach to resonant soft switching, enabling high efficiencies and power
7
densities. Wide ranges of input voltage (from nine to 425 volts), output voltages (from two to 54 volts),
and output power (up to 600 watts) are offered, allowing end users to select components appropriate to
their individual applications. The products differ in temperature grades, maximum power ratings,
performance characteristics, pin configuration, and, in certain cases, characteristics specific to the
targeted market. Brick DC-DC converters are offered in sizes, depending on family, ranging from
116.9 x 61.0 x 12.7 mm (full brick), to 57.9 x 61.0 x 12.7 mm (half brick), to 57.9 x 36.8 x 12.7 mm
(quarter brick).
Products from our broad line of complementary components are used to condition and/or filter the
input and output voltages of the brick DC-DC converter. Generally, these components address
customer requirements at the AC current source, upstream from our DC-DC converters, providing
rectification of the AC current, input filtering, inrush limiting, and transient protection. An example of
such a complementary product is our HAMTM (Harmonic Attenuator Module), a front end providing
power factor correction. The HAM utilizes a proprietary zero current switching boost converter,
allowing it to provide output power of up to 675 watts and DC output voltage of 365 volts.
We also offer numerous accessories (for example, base plates and heat sinks) to meet customer
requirements.
These products are generally targeted at applications requiring high performance and reliability in the
following market segments: aerospace and aviation; defense electronics; industrial automation,
instrumentation, and test equipment; medical diagnostics; telecommunications infrastructure; and
vehicles and transportation infrastructure.
• Open-Frame Intermediate Bus Converters
We offer an extensive line of open-frame (i.e., not encapsulated) intermediate bus converters (“IBCs”)
for implementation of multi-stage power conversion. These devices utilize the same Sine Amplitude
Converter switching topology utilized in our VTM and BCM modules in the VI Chip and ChiP
formats. These low profile, isolated, fixed-ratio IBCs conform to industry standard quarter-brick and
eighth-brick sizes, but offer increased capabilities and exceptional performance.
These devices typically are used in telecommunications and networking equipment applications.
Because our IBCs represent pin compatible upgrades for existing designs, a customer, for example, can
replace a competitor’s quarter-brick unit with our eighth-brick converter, using half the available space,
while meaningfully improving system performance.
• Cool-Power High Density ZVS DC-DC Converters
We offer a family of isolated DC-DC converters delivering up to 60 watts in a very small (22 x 16.5 x
6.7 mm) surface-mount package. Because these small devices are packaged in the VI Chip over-
molded package, they are able to withstand harsh environments in applications for which space is
limited and light weight is advantageous (e.g., aerospace, aviation, and defense electronics). These high
density converter modules are offered in three input voltages: 48 volt nominal for communication
applications; 28 volt nominal for rugged high temperature or military applications; and 24 volt nominal
for industrial applications.
Cool-Power converters utilize our proprietary zero voltage soft switching topology (“ZVS”) to achieve
high-switching frequencies enabling best-in-class power density, while reducing input and output
filtering requirements.
• Configurable Products
Utilizing our modular brick components to drive system function, we offer numerous higher valued-
added standard products we configure to a customer’s specific needs, often with multiple voltage
outputs. These near-custom products exploit the benefits and flexibility of our modular approach to
offer higher performance, higher power densities, lower costs, and faster delivery than many
competitive offerings. These AC-DC and DC-DC configurable products are designed, developed, and
manufactured by the BBU.
8
Our highest volume configurable product, the FlatPACTM, is representative of our approach to
integrating our power components to create high-performance solutions. FlatPACs, available in
thousands of configurations in three package variants based on the number of DC output voltages, are
complete, conductively-cooled AC-DC conversion solutions comprised of our VI-200 DC-DC
converter modules and our complementary components, described above, providing rectification and
filtering of the AC input voltage.
Our configurable products typically are used in a range of CPA and distributed power architecture
implementations in defense electronics, industrial and transportation applications, as well as medical
instrumentation.
• Custom Power Systems
Certain customers rely on us to design, develop, and manufacture custom power systems to meet
performance and/or form factor requirements that cannot be met with off-the-shelf system solutions.
These low-volume, high value-add products frequently are designed to function reliably in the harsh
environments associated with aerospace, aviation, and defense applications, but also are used in
applications ranging from industrial equipment to medical instrumentation. By utilizing our modular
components to drive system function, we have been able to meet such customers’ needs with reliable,
high power density, turnkey solutions.
Advanced Products
The following product groups include those that reflect our vision of the direction of the market segments
we serve with our Power Component Design Methodology. Many of these products are targeted toward FPA
implementations, but our more recently introduced products are suitable for other distributed architectures.
• ChiPs (Modular Power Components)
In 2013, our VI Chip Corporation subsidiary introduced the ChiP platform, designed to be a scalable,
leveragable module format with lower manufacturing costs. We believe the ChiP platform establishes
best-in-class standards for a new generation of scalable power modules, while expanding our capability
range and, in turn, our addressable market opportunity. Combining advanced proprietary magnetic
structures, power semiconductors, and microcontrollers in a high density interconnect substrate, the
ChiP delivers superior thermal management characteristics, allowing customers to achieve low cost
power system solutions with previously unattainable system efficiency, size, and weight. ChiP modules
also have lower manufacturing costs than our original VI Chips, thereby allowing us to offer highly
differentiated products, not only with superior total cost of ownership over time, but at attractive initial
price points. Our goal is to offer ChiP modules and solutions on a cents per watt basis near or
equivalent to the prices of competitive product offerings, thereby presenting customers with a
compelling value proposition.
ChiPs are produced in the same functional families as our earlier VI Chip FPA modules (i.e., PRM,
BCM, and VTM), but today we offer five package sizes ranging from 6 by 23 mm to 61 by 23 mm. We
currently offer over 100 specific ChiP module variants, reflecting the multiple configurations, based on
dimensions, lead formats, and performance specifications, enabled by the flexible module format.
During 2016, we continued to introduce ChiP modules, adding 32 new products and 128 additional
variants within the product families. Based on our current design and development activities, we
anticipate, in 2017, further expansion of the range of package sizes, board or chassis mounting
alternatives, lead formats, and performance characteristics of our ChiP product offerings. We plan to
target a number of these new product families and variants at segments and applications that, if
successfully penetrated, should expand the size of our addressable markets.
ChiP modules are targeted at sophisticated applications, regardless of the power distribution
architecture, for which their high level of performance and form factor differentiation is appropriate.
Across distributed power system architectures, ChiPs are targeted at: aerospace and aviation (e.g., for
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use in unmanned aerial vehicles, due to their conversion efficiency, reliability, small form factor, and
light weight); computing (e.g., for source to point-of-load solutions in servers deployed in datacenters,
due to their conversion efficiency and flexibility of use, which contribute to lower total cost of
ownership); defense electronics (e.g., for use in airborne, seaborne, or field radar, due to their high
power capabilities, conversion efficiency, ruggedness, and reliability); industrial automation,
instrumentation, and test equipment (e.g., for use in semiconductor testing, due to their power density
and tight current regulation); telecommunications and networking infrastructure (e.g., for use in pole-
mounted small-cell base stations in urban environments, due to their form factor, reliability, and cost/
performance profile); and vehicles (e.g., in hybrid electric vehicles, due to their form factor, light
weight, differentiated performance, and cost/performance profile). As stated, we also are pursuing
applications with OEMs and their contract manufacturers in market segments for which the advantages
of ChiPs are most compelling.
• VIAs (Vicor Integrated Adapter Package)
The VIA platform is a rugged, double-sided, copper-alloy package for ChiP modules, integrating
complementary components, circuitry, and superior thermal management through conductive cooling.
In 2016, we completed installation of our first dedicated manufacturing line exclusively for the VIA
packaging concept.
We consider the VIA platform to be important to our transitional go-to-market strategy, as it has been
designed to enable the use of ChiP modules across the widest range of power system architectures,
power levels, and applications. It is an easy-to-use power management solution, providing customers
an advanced, turn-key solution for their demanding power needs, cost-effectively accelerating design
cycles and time-to-market, while providing superior power density. The VIA platform is particularly
differentiated by the flexibility it provides designers, as it offers substantial thermal advantages and its
form factor allows a broad range of installation options. In numerous applications, the package
simplifies thermal design considerations and, in some instances, eliminates the need for a fan for
convection cooling, improving overall system reliability and further minimizing the power system
footprint. Offered in board and chassis mount configurations, all VIA packages have a vertical
dimension of 9.3 mm and a width of 35.5 mm, and, depending on the packaged ChiP module and its
functionality, range in length from 72.0 to 141.4 mm.
The VIA platform facilitates our latest AC front-end solution, based on the ChiP PFM® (Power Factor
Module). The VIA PFM represents a significant improvement over our legacy front-end solutions,
thereby enhancing our positioning as a supplier of highly-differentiated power management solutions
from the AC source to the point(s) of load. The VIA PFM achieves a market-leading power density of
127 W/in³, supplying an isolated DC output of either 24 or 48 volts, at up to 400 watts, from a
universal AC input. It operates with active power factor correction at 93% peak conversion efficiency,
which is an unprecedented level for an AC-DC converter of this size and power density. Combining the
VIA PFM with our small AIMTM (“AC Input Module”), which provides AC rectification, filtering,
transient protection, and inrush limiting capabilities, creates a high-performance AC-DC front-end
solution with an unmatched size profile. This solution is especially well-suited for emerging
applications with size constraints, including small-cell base stations and commercial LED lighting.
The VIA platform also facilitates the VIA DCM, which is an important product for executing our
strategic transition. We currently offer seven variants of the VIA DCM. The product family integrates
filtering, output voltage regulation, circuitry protection, and a control interface, giving the VIA DCM
the function of a conventional brick DC-DC converter, while offering higher conversion efficiency,
superior power density, and the design flexibility described above. As such, we are positioning the VIA
DCM as a successor to our legacy brick DC-DC converters, notably in advanced, challenging
applications. However, the VIA DCM also is positioned as an innovative, high-performance element of
our Power Component Design Methodology, as it has been designed to be integrated with our other
products to facilitate design of comprehensive power system solutions.
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• Cool-Power® ZVS Modules (System-in-Package Point-of-Load Regulators)
Our Cool-Power brand of non-isolated, point-of-load regulators currently consists of an expanding
portfolio of buck (i.e., the device steps down voltage) and buck-boost (i.e., the device lowers or
increases voltage) regulators.
We believe Cool-Power buck regulators provide best in class conversion efficiency (up to 98%),
allowing customers to deploy more efficient designs, regardless of power system architecture, based on
the compatibility of these point-of-load regulators with higher, more efficient input voltages. Operating
from nominal input voltages of 12, 24, or 48 volts, these regulators are optimized for applications
requiring high conversion efficiency and power density, such as computer and graphic processors.
The high conversion efficiency of our Cool-Power regulators is enabled by our proprietary ZVS
topology, which minimizes switching losses, while maximizing dynamic response to line and load
transients. Along with ZVS control circuitry, the advanced design of Cool-Power regulators
incorporates proprietary power semiconductors, all within a high-density, surface-mount package.
Cool-Power regulators are competitively well-positioned to address market trends toward higher
required conversion efficiencies and higher currents at the point-of-load. The addition of buck-boost
variants expands our capabilities to include loads powered by batteries, which are subject to varying
voltage delivery over their discharge cycle. We believe these products will be an important contributor
to our long-term success, as they represent a meaningful element of our Power Component Design
Methodology, enabling comprehensive, highly integrated solutions for FPA and other distributed
architectural implementations, fulfilling our strategic commitment to offering integrated solutions all
the way from the source to the point-of-load. Our success to date with these products has frequently
been when they have been part of an integrated FPA solution, delivering a tightly regulated voltage to a
downstream VTM serving as a current multiplier, which in turn delivers low voltage, high amperage,
regulated current to the point-of-load, typically a microprocessor. Our 48 volt to point-of-load solutions
for datacenter servers is representative of such an integrated FPA solution.
• Power Path Management Components
Our Picor subsidiary offers a limited range of specialized components for circuit protection, all of
which are characterized by small size, ease-of-use, and differentiated performance. The highest volume
products are QuietPower® filters for input filtering of electro-magnetic interference and output noise
(i.e., ripple attenuation).
We consider these products to be a valuable complement to our Power Component Design
Methodology, despite their relatively small sales volumes, as they enable customers, assisted by our
application engineers, to source from Vicor their complete solution to power conversion and
management.
• VI Chips (Modular Power Components)
We continue to offer the first generation of VI Chip PRM, BCM, and VTM modules, in full (32.5 by
22.0 by 6.73 mm) and half (22.0 by 16.5 by 6.73 mm) sizes, targeting FPA implementations. These
products remain compelling solutions for certain applications, notably in defense electronics, medical
instrumentation, and test and measurement applications.
With the expansion of ChiP product families, we anticipate our sales of the first generation of VI Chips
will be limited to shipments to existing customers during the life cycles of the applications into which
these products have been designed. We expect the life cycles of many of these applications may
continue for several years.
Patents and Intellectual Property
An important element of our strategy is to protect our competitive leadership with domestic and foreign
patents and patent applications that cover our products and much of their enabling technologies. We believe our
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competitive leadership is further protected by proprietary trade secrets associated with our use of certain
components and materials of our own design, as well as our significant experience with manufacturing,
packaging, and testing these complex devices.
We believe our patents afford advantages by building fundamental and multilayered barriers to competitive
encroachment upon key features and performance benefits of our principal product families. Our patents cover
the fundamental switching topologies used to achieve the performance attributes of our converter product lines;
converter array architectures; product packaging design; product construction; high frequency magnetic
structures; as well as automated equipment and methods for circuit and product assembly.
In the United States, as of December 31, 2016, we have been issued 102 total patents, which expire between
2017 and 2035. We also have a number of patent applications pending in the United States and certain countries
of Europe and Asia. We have vigorously protected our rights under these patents and will continue to do so.
Although we believe patents are an effective way of protecting our technology, there can be no assurances our
patents will prove to be enforceable in any given jurisdiction.
In addition to generating revenue from product sales, we seek to license our intellectual property. In
granting licenses, we generally retain the right to use our patented technologies and manufacture and sell our
products in all licensed geographic areas and fields of use. Licenses are granted and administered through our
wholly-owned subsidiary, VLT, Inc., which is the assignee for our patents that may be subject to licensing.
Revenues from licensing arrangements have not exceeded 10% of our consolidated revenues in any of the last
three fiscal years.
Customers and Backlog
The applications in which our products are used are in the higher-performance, higher-power segments of the
market segments we serve. The BBU has customers concentrated in aerospace and aviation, defense electronics,
industrial automation and equipment, medical diagnostics, rail transportation, and test and measurement
instrumentation. VI Chip and Picor have customers concentrated in the datacenter and supercomputer segments of
the computing market, although they also target applications in aerospace and aviation, defense electronics,
networking equipment, solid state lighting, test and measurement instrumentation, and transportation (electric and
hybrid vehicles and autonomous vehicles). With our strategic emphasis on larger, high-volume customers, we
expect to experience a greater concentration of sales among relatively fewer customers.
For the year ended December 31, 2016, one customer, NuPower Electronic, Ltd., accounted for
approximately 16.4.% of net revenues, and our five largest customers represented approximately 26.5% of net
revenues. For the year ended December 31, 2015, one customer, NuPower Electronic, Ltd., accounted for
approximately 16.2% of net revenues, and our five largest customers represented approximately 33.4% of net
revenues. For the year ended December 31, 2014, one customer (NuPower Electronic, Ltd.) accounted for
approximately 14.7% of net revenues, and our five largest customers represented approximately 32.6% of net
revenues.
International revenues, as a percentage of total revenues, were approximately 59.4%, 59.6%, and 60.5% in
2016, 2015, and 2014, respectively. Net revenues from customers in China, our largest international market,
accounted for approximately 32.1% of total net revenues in 2016, approximately 34.2% in 2015, and
approximately 32.3% in 2014, respectively. International sales have increased from historical levels primarily
due to higher volumes of shipments to foreign contract manufacturers, many of which are located in China,
utilized by domestic and international OEMs. As we have substantially expanded our sales and customer support
activities and resources internationally, particularly in Asia, we expect international sales to continue to increase
as a percentage of total revenue.
As of December 31, 2016, we had a backlog of approximately $48,371,000, compared to $39,073,000 as of
December 31, 2015. Backlog, as presented here, consists of orders for products for which shipment is scheduled
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within the following 12 months, subject to normal customer cancellation policies. A portion of our revenue in
any quarter is, and will continue to be, derived from orders booked and shipped in the same quarter. Over the past
two years, the portion of sales booked and shipped in the same quarter has represented less than two-fifths of our
quarterly revenue, as we typically only build products to customer specifications upon receipt of a purchase order
(i.e., we typically do not maintain significant inventories of finished goods for the BBU and VI Chip). Products
sold by the BBU may have a lead time (i.e., the period between receipt of an order and shipment of the product)
of up to six weeks, although the average lead time for 2016 was less than four weeks. Products sold by VI Chip
typically have a lead time in excess of eight weeks. Lead times for the BBU and VI Chip may shorten (and have
shortened) during periods of sustained volume. Picor, given its fabless model, builds inventories based on
expected customer demand and orders from stocking distribution partners. As such, the portion of sales booked
and shipped in the same quarter can vary considerably depending on the relative volumes of BBU, VI Chip, and
Picor products booked within the quarter.
Sales and Marketing
We reach and serve customers through several channels: a direct sales force; a network of independent sales
representative organizations in North America and South America; independent, authorized non-stocking
distributors in Europe and Asia; and three authorized stocking distributors world-wide, Digi-Key Corporation,
Future Electronics Incorporated, and Mouser Electronics, Inc. These channels are supported by regional TSCs,
each offering application engineering and sales support for customers and our channel partners. Domestic TSCs
are located in: Andover, Massachusetts; Lombard, Illinois; and Santa Clara, California. International TSCs are
located in: Beijing, China; Hong Kong, China; Shanghai, China; Shenzhen, China; Munich, Germany;
Bangalore, India; Milan, Italy; Taipei, Taiwan (Republic of China); Seoul, South Korea; and Camberley, United
Kingdom. Customers do not place purchase orders with TSCs, but either directly with the Company or with our
distributors. In Japan, customers place purchase orders with VJCL or authorized distributors.
Because of the technically complex nature of our products and the applications they address, we maintain an
extensive staff of Field Applications Engineers to support our own sales and customer support activities, as well
as those of our channel partners. Field Application Engineers, based in our TSCs, provide direct technical support
worldwide by reviewing new applications and technical matters with existing and potential customers, as well as
our channel partners. Product Line Engineers, located in our Andover headquarters, support Field Application
Engineers assigned to all of our TSCs.
Vicor also reaches customers through the recently-expanded electronic commerce capabilities of our
website, www.vicorpower.com. Registered customers in the United States, Canada, and certain European
countries are able to purchase prototype quantities of selected products online. We intend to expand these
capabilities to allow for higher-volume purchases.
Our web-based resources are an important element of our efforts to interact and support customers. Within
our website, PowerBenchTM is a workspace of tools and references allowing engineers to select, architect, and
implement power systems using Vicor’s products. During 2016, we continued to enhance our highly
differentiated WhiteboardTM tool, which allows users to configure and analyze their own power system designs or
those from an extensive library of designs addressing a wide range of applications. Users can modify the
operating condition for each component of their design to match the intended application and perform efficiency
and loss analysis of individual components and the full power system. We are aggressively expanding the range
and capabilities of engineering tools we make available online to customers and prospective customers.
In 2016, we reorganized our approach to how we address new, low volume customers not already served by
our regional distributors in European Union member countries. We discontinued our distributor support
initiative, which had been an effort to address the needs of small-volume customers targeted for transition to
distributors as their purchase volumes increased. Previously, such customers had placed orders via telephone or
email, denominated in Euros or Pounds Sterling, with Vicor B.V., which served as importer of record for
shipments by Vicor from Andover, Massachusetts. European TSCs participating in the initiative did not record
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any revenue associated with shipments from Vicor to Vicor B.V. for subsequent delivery to customers. The
early-stage, low volume customers previously served by this initiative now are referred by us to either our
website or a distributor for order placement.
We generally sell our products on the basis of our standard terms and conditions, and we most commonly
warrant our products for a period of two years. Effective January 1, 2017, we extended the warranty period to
three years for a range of H Grade, M Grade and MI Family DC-DC converters, input filters, output filters, and
front ends sold after that date. In a limited number of circumstances, we have entered into supply contracts with
certain high-volume customers calling for extended warranty terms. With our distribution partners, we also enter
into contracts providing for our product warranties to transfer to the end customer upon final sale of our
product(s) by the stocking distributor.
Manufacturing, Quality Assurance, and Supply Chain Management
Our BBU and VI Chip manufacturing facilities are co-located in Andover, Massachusetts, where we are
headquartered. Picor, given its fabless model, outsources manufacturing, packaging, and testing of its products
under contract to partners in the United States and Asia.
Our primary manufacturing processes consist of assembly of electronic components onto printed circuit
boards; automatic testing of components; wave, reflow and infrared soldering of assembled components;
encapsulation or over-molding of converter subassemblies and assemblies; final environmental stress screening
of certain products; and product inspection and testing using automated equipment. These processes are largely
automated, but their labor components require relatively high levels of skill and training.
We pursue a manufacturing strategy based upon production flexibility and the continuous improvement of
product quality, volume throughput, and reduced manufacturing costs. Product quality and reliability are critical
to our success and, as such, we emphasize quality and reliability in our design and manufacturing activities. We
follow industry best practices in manufacturing and are compliant with ISO 9001 certification standards (as set
forth by the International Organization for Standardization). Our quality assurance practices include rigorous
testing and, as necessary, burn-in and temperature cycling (i.e., extended operation of a product to confirm
performance) of our products using automated equipment.
We continue to make investments in automated manufacturing equipment, particularly for our ChiP
modules and VIA packaging platforms. Based on current estimates of ChiP and VIA manufacturing volumes and
our capacity requirements, we do not expect to incur capital expenditures during 2017 significantly higher than
we incurred during recent years.
Components and materials used in our products are purchased from a variety of domestic and international
vendors. Most of the components are available from multiple sources, whether directly from suppliers or
indirectly through distributors. In instances of single source items, we maintain levels of inventories we consider
to be appropriate to enable meeting the delivery requirements of customers. Incoming components, assemblies,
and other parts are subjected to several levels of inspection procedures, and we maintain robust data on our
inventories in order to support our quality assurance procedures. Picor, given its fabless model, relies on a limited
number of wafer foundries and providers of packaging and test services. Our proprietary switching controllers
were designed by and are sourced through Picor, which relies on these wafer foundries and service providers for
supply continuity and sufficiency of these critical semiconductor devices.
See Note 17 — Segment Information to the Consolidated Financial Statements for certain financial
information associated with the operations and manufacturing activities of our business segments.
Employees
As of December 31, 2016, we had 959 full time employees and 12 part time employees. None of our
employees are subject to a collective bargaining agreement. We believe our continued success depends, in part,
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on our ability to attract and retain qualified personnel. Although there is strong demand for qualified personnel,
we have not to date experienced difficulty in attracting and retaining sufficient engineering and technical
personnel to meet our needs (see Part I, Item 1A — “Risk Factors”).
Available Information
We maintain a website with the address www.vicorpower.com and make available free of charge through
this website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as
soon as reasonably practicable after we electronically file such material with, or furnish such material to, the
SEC. We also make available on our website our Code of Business Conduct, as well as the charters for the Audit
and Compensation Committees of our Board of Directors.
While our website sets forth extensive information, including information regarding our products and the
applications in which they may be used, such information is not a part of, nor incorporated by reference into, this
Annual Report on Form 10-K and shall not be deemed “filed” under the Exchange Act.
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ITEM 1A. RISK FACTORS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Actual results could differ
materially from those projected in the forward-looking statements as a result of, among other factors, the risk
factors set forth below.
Our future operating results are difficult to predict and are subject to fluctuations.
Our operating results, including revenues, gross margins, operating expenses, and net income (loss), have
fluctuated on a quarterly and annual basis. Our focus on higher volume opportunities with OEMs and their
contract manufacturers has caused the impact of a relative few such customers to disproportionately influence
our operating results. Unanticipated delays in purchase orders from and shipments to these customers have
resulted in lower revenue, contributing to our recent operating losses. We cannot predict when, or if, we will
return to profitability. Our future operating results may be materially affected by a number of factors, many of
which are beyond our control, including:
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changes in demand for our products and for our customers’ end-products incorporating our products, as
well as our ability to respond efficiently to such changes in demand, including changes in order lead
times and the volume of product for which orders are received and the product shipped within an
individual quarter;
our ability to manage our supply chain, inventory levels, and our own manufacturing capacity or that of
third-party partners, particularly in the event of delays or cancellation of significant customer orders;
our ability to effectively coordinate changes in the mix of products we manufacture and sell, while
managing our ongoing transition in organizational focus from traditional brick power components to
our new products;
our ability to provide and maintain a high level of support to an increasing number of demanding, high
volume customers;
the ability of our third party suppliers, service subcontractors, and manufacturers to supply us with
sufficient quantities of high quality products, components, and/or services on a timely basis;
the effectiveness of our efforts to continuously reduce product costs and manage operating expenses;
our ability to utilize our manufacturing facilities and personnel at efficient levels, maintaining
production capacity and manufacturing yields;
the timing of our new product introductions and our ability to meet customer expectations for timely
delivery of fully qualified products;
the timing of new product introductions or other competitive actions (e.g., product price reductions) by
our competitors;
the ability to hire, retain, and motivate qualified employees to meet the demands of our customers;
intellectual property disputes;
potential significant litigation-related costs;
adverse economic conditions in the United States and those international markets in which we operate;
adverse budgetary conditions within the U.S. government, particularly the Department of Defense,
which continue to influence spending on current and anticipated programs into which we sell or
anticipate to sell our products;
costs related to compliance with increasing worldwide governance, quality, environmental, and other
regulations; and
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the effects of events outside of our control, including natural disasters, public health emergencies,
terrorist activities, political risks, international conflicts, information security breaches, communication
interruptions, and other force majeure.
As a result of these and other factors, we cannot assure you we will not experience significant fluctuations in
future operating results on a quarterly or annual basis. In addition, if our operating results do not meet the
expectations of investors, the market price of our Common Stock may decline.
Our stock price has been volatile and may fluctuate in the future.
Because of the factors set forth below, among others, the trading price of our Common Stock has fluctuated
and may continue to fluctuate significantly:
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volatility of the financial markets;
uncertainty regarding the prospects of domestic and foreign economies, including currency exchange
rates;
uncertainty regarding domestic and international political conditions, including tax and tariff policies;
actual or anticipated fluctuations in our operating performance or that of our competitors;
the performance and prospects of our major customers;
announcements by us or our competitors of significant new products, technical innovations, or
litigation;
investor perception of our company and the industry in which we operate;
the absence of earnings estimates and supporting research by investment analysts;
the liquidity of the market for our Common Stock;
the uncertainty of the declaration and payment of future cash dividends on our Common Stock; and
the concentration of ownership of our Common Stock by Dr. Vinciarelli, our Chairman of the Board,
Chief Executive Officer, and President.
We do not actively communicate with investment analysts and, as a consequence, we are not aware of
earnings estimates or supporting investment research coverage of Vicor and our Common Stock. While we seek
to be transparent in our financial reporting, public statements, and related disclosures, the absence of research
coverage may limit investor interest in our Common Stock. Because our operating results have fluctuated on a
quarterly and annual basis, investors may have difficulty in assessing our current and future performance.
In the past, we have declared and paid cash dividends on our Common Stock. The payment of dividends is
based on the periodic determination by our Board of Directors that we have adequate capital to fund anticipated
operating requirements and that excess cash is available for distribution to stockholders via a dividend. We have
no formal policy regarding dividends and, as such, investors cannot make assumptions regarding the possibility
of future dividend payments nor the amounts and timing thereof.
The ownership of our Common Stock is concentrated between Dr. Vinciarelli and a limited number of
institutional investors. As of December 31, 2016, Dr. Vinciarelli owned 9,828,272 shares of our Common Stock,
as well as 11,023,648 shares of our unregistered Class B Common Stock (convertible on a one-for-one basis into
registered shares of Common Stock), together representing 54.5% of total issued and outstanding shares.
Accordingly, the market float for our Common Stock and average daily trading volumes are relatively small,
which can negatively impact investors’ ability to buy or sell shares of our Common Stock in a timely manner.
Dr. Vinciarelli owns 93.8% of our issued and outstanding Class B shares, which possess 10 votes per share.
Dr. Estia J. Eichten, a member of our Board of Directors, owns the majority of the balance of Class B shares
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issued and outstanding. As such, Dr. Vinciarelli, controlling in aggregate 82.7% of our outstanding voting
securities, has effective control of our governance.
Global economic uncertainty could materially and adversely affect our business and consolidated operating
results.
Disruption and further deterioration of global economic conditions, including relative strength of the
U.S. Dollar, may reduce customer purchases of our products, thereby reducing our revenues and earnings. In
addition, such adverse conditions may, among other things, result in increased price competition for our
products, increased risk of excess and obsolete inventories, increased risk in the collectability of our accounts
receivable from our customers, increased risk in potential reserves for doubtful accounts and write-offs of
accounts receivable, and higher operating costs as a percentage of revenues.
We compete with many companies possessing far greater resources.
Some of our competitors have far greater financial, manufacturing, technical, sales and marketing resources
than we have. We compete with domestic and foreign manufacturers of integrated power supplies and power
conversion components. With the growth of our VI Chip and Picor product lines, we increasingly are competing
with global manufacturers of power management products with far larger organizations and broader
semiconductor-based product lines. Competition is generally based on design and quality of products, product
performance, features and functionality, and product pricing, availability and capacity, with the relative
importance of these factors varying among products, markets, and customers. Existing or new competitors may
develop products or technologies that more effectively address the demands of our customers and markets with
enhanced performance, features and functionality, or lower cost. If we fail to develop and commercialize leading-
edge technologies and products that are cost effective and maintain high standards of quality, and introduce them
to the market on a timely basis, our competitive position and results of operations could be materially adversely
affected.
Our future success depends upon our ability to develop and market differentiated, leading-edge power
conversion products for larger customers, potentially contributing to lengthy product development and sales
cycles that may result in significant expenditures before revenues are generated. Our future operating
results are dependent on the growth in such customers’ businesses and on our ability to profitably develop
and deliver products meeting customer requirements.
The power system industry and the industries in which many of our customers operate are characterized by
intense competition, rapid technological change, quickened product obsolescence, and price erosion for mature
products, each of which could have an adverse effect on our results of operations. We are following a strategy
based on the development of differentiated products addressing what we believe to be the long-term limitations
of traditional power architectures, while at the same time sustaining the performance of the BBU, which
manufactures and markets our lines of legacy brick products. The development of new products is often a
complex, time-consuming, and costly process involving significant investment in research and development, with
no assurance of return on investment. Although we have introduced many products over the past three years,
there can be no assurance we will be able to continue to develop and introduce new and improved products in a
timely or efficient manner. Similarly, there can be no assurance recently introduced or to be developed products
will achieve customer acceptance.
Our future success depends substantially upon customer acceptance of our innovative products. As we have
been in the early stages of market penetration for these products, we have experienced lengthy periods during
which we have focused our product development efforts on the specific requirements of a limited number of
large customers, followed by further periods of delay before meaningful purchase orders are received. These
lengthy development and sales cycle times increase the possibility a customer may decide to cancel or change
product plans, which could reduce or eliminate our sales to that customer. As a result, we may incur significant
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product development expenses, as well as significant sales and marketing expenses, before we generate the
related revenues for these products. Furthermore, we may never generate the anticipated revenues from a product
after incurring such expenses if our customer cancels or changes its product plans.
We are shifting our go-to-market strategy to focus on larger opportunities with global OEMs and their contract
manufacturers. Our growth is therefore dependent on: the pace at which these OEMs develop their own new products,
the acceptance of our products by these OEMs, and the success of the OEM products incorporating our new products.
If we fail to anticipate changes in our customers’ businesses and their changing product needs or do not successfully
identify and enter new markets, our results of operations and financial position could be negatively impacted. We
cannot assure you the markets we serve will grow in the future, our existing and new products will meet the
requirements of these markets, or we can maintain adequate gross margins or operating profits in these markets.
Our operating results recently have been influenced by a limited number of customers, and our future
results may be similarly influenced.
Since it was established in 2007, our VI Chip subsidiary has derived a substantial portion of its revenue in
any given year from one customer, whether through sales directly to the customer or indirectly to the customer’s
contract manufacturers. Similarly, our Picor subsidiary has derived a substantial portion of its third-party revenue
from a limited number of customers, including those customers served by VI Chip. This concentration of revenue
is a reflection of the relatively early stage of adoption of the technologies, architectures, and products offered by
these subsidiaries, and their targeting of market leading innovators as initial customers. Our current sales and
marketing efforts, in part, are focused on accelerating the adoption of VI Chip and Picor products by a diversified
customer base across a number of identified market segments. However, we cannot assure you our new strategy
will be successful and such diversification of customers will be achieved.
Further stagnation of spending by the U.S. Department of Defense or a pronounced shift in the nature of
such spending may negatively influence our operating results.
Customers in the defense electronics segment historically have contributed a meaningful portion of our
revenue, primarily in the BBU, which sells military-grade brick modules and, through our Vicor Custom Power
businesses, customer-specific systems incorporating our brick modules, primarily for C4I (Command, Control,
Communications, Computing, and Intelligence) applications. However, shifts in Department of Defense spending
priorities and ongoing budget constraints have contributed to a decline in such revenue as a percentage of our
consolidated revenue. Additional risks to our defense electronics volume has been associated with the
organizational structure, capacity, and ownership of our Vicor Custom Power businesses. In March 2016, we
acquired 100% ownership of certain operating assets and cash of our consolidated subsidiary, Converpower
Corporation, in which we held a 49% ownership interest, transferring operations to Granite Power Technologies,
Inc., a wholly-owned subsidiary we established to assume the operations of a previously unincorporated Vicor
Custom Power location (i.e., a division). Converpower ceased operations in December 2015. In December 2015,
we completed the statutory merger of one Vicor Custom Power subsidiary, Mission Power Solutions, Inc. with
and into another subsidiary, Northwest Power, Inc., after which we closed the Mission Power Solutions location.
Also in December 2015, we sold our 49% ownership interest in Aegis Power Systems, Inc. to Aegis Power
Systems, thereby ending our formal relationship with the subsidiary. We undertook these transactions in order to
consolidate our custom organization, reduce manufacturing capacity, and reduce our cost structure. If the
performance of the remaining three Vicor Custom Power subsidiaries does not improve as expected, we may
choose to further consolidate our locations or otherwise rationalize our associated cost structure, which may
impact our ability to compete cost effectively in this market segment.
We may not be able to procure necessary key components for our products, or we may purchase excess raw
material inventory or unusable inventory, possibly impacting our operating results.
The power systems industry, and the electronics industry as a whole, can be subject to pronounced business
cycles and otherwise subject to sudden and sharp changes in demand. Our success, in part, is dependent on our
19
ability to forecast and procure inventories of raw materials and components to match production schedules and
customer delivery requirements. Many of our products require raw materials supplied by a limited number of
vendors and, in some instances, a single vendor. During certain periods, key components or materials required to
build our products may become unavailable in the timeframe required for us to meet our customers’ needs. Our
inability to secure sufficient materials and components to build products for our customers has, in the past,
negatively impacted our sales and operating results and could do so again. We may choose, and have chosen, to
mitigate this risk by increasing the levels of inventory for certain materials and components. Such increased
inventory levels may increase the potential risk for excess or obsolete inventories, should our forecasts fail to
materialize or if there are negative factors impacting our customers’ end markets, leading to order cancellation. If
we identify excess inventory or determine certain inventory is obsolete (i.e., unusable), we may record additional
inventory reserves (i.e., expenses representing the write-off of the excess or obsolete inventory), which could
have an adverse effect on our gross margins and on our operating results.
We rely on third-party vendors and subcontractors for supply of components, assemblies, and services and,
therefore, cannot control the availability or quality of such components, assemblies, and services.
We depend on third-party vendors and subcontractors to supply components, assemblies, and services used
in our products, some of which are supplied by a single vendor, and have experienced shortages of certain
semiconductor components, incurred additional and unexpected costs to address the shortages, and experienced
delays in production and shipping. If suppliers or subcontractors cannot provide their products or services on
time or to our specifications, we may not be able to meet the demand for our products and our delivery times may
be negatively affected. In addition, we cannot directly control the quality of the products and services provided
by third parties. In order to grow revenue, we likely will need to identify and qualify new suppliers and
subcontractors to supplant or replace existing suppliers and subcontractors which is a time-consuming and
expensive process. In addition, any qualification of new suppliers may require customers of our products
utilizing products and services from new suppliers and service providers to undergo a re-qualification process.
Such circumstances likely would lead to disruptions in our production, increased production costs, delays in
shipping to our customers, and/or increases in prices paid to third parties for products and services.
We are exposed to foreign economic, political, and other external risks.
For the years ended December 31, 2016, 2015, and 2014, our revenues from sales outside the United States
were 59.4%, 59.6%, and 60.5%, respectively, of the Company’s total revenues. Net revenues from customers in
China, our largest international market, accounted for approximately 32.1% of total net revenues in 2016,
approximately 34.2% in 2015, and approximately 32.3% in 2014, respectively. We expect international sales will
continue to be a significant component of total sales, since many of the global manufacturers we target as
customers increasingly utilize offshore contract manufacturers and rely upon those contract manufacturers to
place orders directly with us. We also expect international revenue from our distributors to increase.
While our currency risks are limited, as our sales are denominated in U.S. Dollars worldwide, with the
exception of sales by VJCL and Vicor B.V., our international activities expose us to special risks including, but
not limited to, regulatory requirements, economic and political instability, transportation delays, foreign currency
controls and market fluctuations, trade barriers and tariffs, and unfavorable shifts in foreign exchange rates. In
addition, our international customers’ business may be negatively affected by economic sanctions, as were
imposed in 2014 by the U.S. Department of the Treasury against certain Russian entities to which we had sold
products in the past. Sudden or unexpected changes in the foregoing could have a material adverse effect on our
operating results.
We may be unable to adequately protect our proprietary rights, which may limit our ability to compete
effectively.
We operate in an industry in which the ability to compete depends on the development or acquisition of
proprietary technologies that must be protected to preserve the exclusive use of such technologies. We devote
20
substantial resources to establish and protect our patents and proprietary rights, and we rely on patent and
intellectual property law to protect such rights. This protection, however, may not prevent competitors from
independently developing products similar or superior to our products. We may be unable to protect or enforce
current patents, may rely on unpatented technology that competitors could restrict or replicate, or may be unable
to acquire patents in the future, all of which may have a material adverse effect on our competitive position. In
addition, the intellectual property laws of foreign countries may not protect our rights to the same extent as those
of the United States. We have been and may need to continue to defend or challenge patents. We have incurred
and expect to incur significant financial costs in the defense of our patented technologies and have devoted and
expect to devote significant resources to these efforts which, if unsuccessful, may have a material adverse effect
on our operating results and financial position.
We face intellectual property infringement claims that could be disruptive to operations and costly to resolve
and may encounter similar infringement claims in the future.
The power supply industry is characterized by vigorous protection and pursuit of intellectual property rights.
We have in the past and may in the future receive communications from third parties asserting that our products
or manufacturing processes infringe on a third party’s patent or other intellectual property rights. Such assertions,
if publicly disclosed, have in the past and may in the future inhibit the willingness of potential customers to
purchase certain of our products. In the event a third party makes a valid intellectual property claim against us
and a license is not available to us on commercially reasonable terms, or at all, we could be forced to either
redesign or stop production of products incorporating that technology, and our operating results could be
materially and adversely affected. In addition, litigation may be necessary to defend us against claims of
infringement, and this litigation could be costly, extend over a lengthy period of time, and divert the attention of
key personnel. An adverse outcome in these types of matters could have a material adverse impact on our
operating results and financial condition.
Please see Part I, Item 3 — “Legal Proceedings” for information regarding current litigation related to our
intellectual property.
Any expenses or liability resulting from the outcome of litigation could adversely affect our operating
results and financial condition.
From time to time, we may be subject to claims or litigation, including intellectual property litigation as
described elsewhere in this Annual Report on Form 10-K. Any such claims or litigation may be time-consuming
and costly, divert management resources, require us to change our products, or have other adverse effects on our
business. Any of the foregoing could have a material adverse effect on our operating results and could require us
to pay significant monetary damages.
The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. An
estimated loss from a loss contingency such as a legal proceeding or claim is accrued by a charge to income if it
is considered probable an asset has been impaired or a liability has been incurred and the amount of the loss can
be reasonably estimated. Disclosure of a contingency is required if there is at least a reasonable possibility that a
loss has been incurred. In determining whether a loss should be accrued, we evaluate, among other factors, the
degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of
loss. Changes in these factors could materially impact our financial statements. As of December 31, 2016, our
evaluation led us to conclude no accrual of a loss contingency was warranted.
We may face legal claims and litigation from product warranty or other claims that could be costly to
resolve.
We have in the past and may in the future encounter legal action from customers, vendors, or others
concerning product warranty or other claims. We generally offer a two-year warranty from the date title passes
21
from us for all of our standard products. Effective January 1, 2017, we extended the warranty period to three
years for a range of H Grade, M Grade and MI Family DC-DC converters, input filters, output filters, and front
ends sold after that date. In a limited number of circumstances, we have entered into supply contracts with certain
high-volume customers calling for extended warranty terms. With our distribution partners, we also enter into
contracts providing for our product warranties to transfer to the end customer upon final sale of our product(s) by
the stocking distributor.
We invest significant resources in the testing of our products; however, if any of our products contain
defects, we may be required to incur additional development and remediation costs, pursuant to our warranty
policies. These issues may divert our technical and other resources from other product development efforts and
could result in claims against us by our customers or others, including liability for costs associated with product
returns, which may adversely impact our operating results. If any of our products contain defects, or have
reliability, quality or compatibility problems, our reputation may be damaged, which could make it more difficult
for us to sell our products to existing and prospective customers and could adversely affect our operating results.
We are currently party to a limited number of supply agreements with certain customers contractually
committing us to warranty and indemnification requirements exceeding those to which we have been exposed in
the past. While we maintain insurance coverage for such exposure, we could incur significant financial cost
beyond the limits of such coverage, as well as operational disruption and damage to our competitive position and
image if faced with a significant product warranty or other claim.
Our ability to successfully implement our business strategy may be limited if we do not retain our key
personnel and attract and retain skilled and experienced personnel.
Our success depends on our ability to retain the services of our executive officers. The loss of one or more
members of senior management could materially adversely affect our business and financial results. In particular,
we are dependent on the services of Dr. Vinciarelli, our founder, Chairman of the Board, Chief Executive
Officer, and President. The loss of the services of Dr. Vinciarelli could have a material adverse effect on our
development of new products and on our results of operations. In addition, we depend on highly skilled engineers
and other personnel with technical skills that are in high demand and are difficult to replace. Our continued
operations and growth depend on our ability to attract and retain skilled and experienced personnel in a very
competitive employment market. If we are unable to attract and retain these employees, our ability to
successfully implement our business strategy may be harmed.
Extended interruption of production at our manufacturing facility in Andover, Massachusetts, could
materially reduce our revenue and increase costs.
All modular power components, whether for direct sale to customers or for sale to our subsidiaries for
incorporation into their respective products, as well as all configurable products, are manufactured at our
Andover, Massachusetts, production facility. Substantial damage to this facility due to fire, natural disaster,
power loss or other events could interrupt manufacturing. While we have never experienced any meaningful
interruption of manufacturing in our history, any prolonged inability to utilize all or a significant portion of our
Andover facility could have a material adverse effect on our results of operations.
Disruption of our information technology infrastructure could adversely affect our business.
We depend heavily on our computing and communications infrastructure to achieve our business objectives,
particularly for email communications, financial and operational record keeping, and our computer-integrated
manufacturing processes that control all aspects of our operations in our manufacturing facility in Andover,
Massachusetts. If a problem occurs impairing this infrastructure, the resulting disruption could impede our ability
to record or process orders, manufacture and ship in a timely manner, or otherwise carry on business in the
normal course. Since 2012, we have experienced no interruption of our computing and communications
capabilities. While we carry business interruption insurance that would mitigate financial losses from such an
22
interruption to an extent, such insurance may be insufficient to compensate us for the potentially significant
amounts incurred. Any such events, if prolonged, could have a material and adverse effect on our operating
results and financial condition.
Our systems are designed to protect us from network security breaches and associated disruptions. However,
we remain vulnerable to computer viruses and related software-based challenges to the integrity of our systems,
unauthorized or illegal break-ins or malicious network hacking, equipment or software sabotage, acts of
vandalism to our systems by third parties, and, in the extreme, forms of cyber-terrorism. Our security measures
or those of our third-party service providers may not detect or prevent such network security breaches or
associated disruptions. Also, we provide confidential information to third-party business partners in certain
circumstances when doing so is necessary to conduct business. While we employ confidentiality agreements to
protect such information, our own security measures or those of our third-party service providers may not be
sufficient to protect such information in the event the computing infrastructure of these third-party business
partners is compromised. Security breaches of our computing and communications infrastructure or that of a
third-party business partner could result in the misappropriation or unauthorized release of confidential
information belonging to us or to our employees, partners, customers or suppliers, which could result in an
interruption to our operations, result in a violation of privacy or other laws, expose us to a risk of litigation, or
damage our reputation, any of which could have a material and adverse effect on our operating results and
financial condition.
If we fail to maintain an effective system of internal controls over financial reporting or discover material
weaknesses in our internal controls over financial reporting, we may not be able to report our financial
results accurately or timely or detect fraud, which could have a material adverse effect on our business.
An effective internal control environment is necessary for us to produce reliable financial reports and is an
important part of our effort to prevent financial fraud. Section 404 of the Sarbanes-Oxley Act of 2002 requires
our management to report on, and our independent registered public accounting firm to attest to, the effectiveness
of our internal control over financial reporting.
We have an ongoing program to perform the system and process evaluation and testing necessary to comply
with the requirements of the Sarbanes-Oxley Act and to continuously improve and, when necessary, remediate
internal controls over financial reporting.
While management evaluates the effectiveness of our internal controls on a regular basis, these controls may
not always be effective. There are inherent limitations on the effectiveness of internal controls, including
collusion, management override, and failure in human judgment. In addition, control procedures are designed to
reduce rather than eliminate business risks. In the event our Chief Executive Officer, Chief Financial Officer, or
independent registered public accounting firm determines our internal controls over financial reporting are not
effective as defined under Section 404, we may be unable to produce reliable financial reports or prevent fraud,
which could materially adversely affect our business. In addition, we may be subject to sanctions or investigation
by government authorities or self-regulatory organizations, such as the SEC or The NASDAQ Stock Market
LLC. Any such actions could affect investor perceptions of the Company and result in an adverse reaction in the
financial markets due to a loss of confidence in the reliability of our financial statements, which could cause the
market price of our Common Stock to decline or limit our access to capital.
New regulations related to conflict minerals could adversely impact our business.
The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve
transparency and accountability concerning the supply of certain minerals, known as conflict minerals (including
gold, tantalum, tin, and tungsten, and their related ores), originating from the Democratic Republic of Congo
(“DRC”) and adjoining countries. As a result, in August 2012 the SEC released final rules for annual disclosure
and reporting for those companies who use conflict minerals mined from the DRC and adjoining countries in
23
their products. We began to implement processes within our supply chain to comply these rules beginning in
2012 and filed our initial Form SD in May 2014. There have been and will continue to be costs associated with
complying with these disclosure requirements, including due diligence to determine the sources of conflict
minerals used in our products and other potential changes to products, processes, or sources of supply as a
consequence of such verification activities. The implementation of these rules could adversely affect the
sourcing, supply, and pricing of materials used in our products. As there may be only a limited number of
suppliers offering “conflict free” conflict minerals, we cannot be sure that we will be able to obtain necessary
conflict minerals from such suppliers in sufficient quantities or at competitive prices. Also, we may face
reputational challenges if we determine that certain of our products contain minerals not determined to be
conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products
through the procedures we may implement.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters building in Andover, Massachusetts, which we own, provides approximately
90,000 square feet of office space for our sales, marketing, engineering, and administrative personnel and is used
by and supports all business segments. We also own a building of approximately 230,000 square feet in Andover,
Massachusetts, which houses all Massachusetts manufacturing activities.
In December 2014, we completed the consolidation of manufacturing Westcor’s products, from a single-
story industrial building of approximately 31,000 square feet in Sunnyvale, California, to our manufacturing
facility in Andover, Massachusetts. The Sunnyvale building was purchased in 1994 and is carried on our
consolidated balance sheet at a net book value, as of December 31, 2016, of approximately $631,000. In
February 2016, we executed a long-term lease with a corporate tenant, who occupied the building beginning in
June 2016.
All other domestic and foreign facilities are leased from third-party lessors on arms’ length terms. We
believe our owned and leased facilities are adequate for our present needs and expect them to remain adequate
for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
On January 28, 2011, SynQor, Inc. (“SynQor”) filed a complaint for patent infringement against Ericsson,
Inc. (“Ericsson”), Cisco Systems, Inc. (“Cisco”) and Vicor in the U.S. District Court for the Eastern District of
Texas (the “Texas Action”). Ericsson and Cisco subsequently settled with SynQor and are no longer parties to
the Texas Action. With respect to Vicor, SynQor’s complaint in the Texas Action alleged that our products,
including but not limited to unregulated bus converters used in intermediate bus architecture power supply
systems, infringe SynQor’s U.S. patent numbers 7,072,190, 7,272,021, and 7,564,702 (“the ‘190 patent”, “the
‘021 patent” and “the ‘702 patent”, respectively). SynQor’s complaint sought an injunction against further
infringement and an award of unspecified compensatory and enhanced damages, interest, costs and attorney fees.
On September 20, 2011, SynQor filed an amended complaint in the Texas Action that further alleged that our
products, including, but not limited to, unregulated bus converters used in intermediate bus architecture power
supply systems, infringe SynQor’s U.S. patent number 8,023,290 (“the ‘290 patent”). We responded to SynQor’s
amended complaint in the Texas Action by denying our products infringe any of the SynQor patents, and
asserting that the SynQor patents are invalid. We further alleged that the SynQor ‘290 patent is unenforceable
due to inequitable conduct by SynQor or its agents during the examination of the ‘290 patent at the United States
Patent and Trademark Office (“USPTO”). We have also asserted counterclaims seeking damages against SynQor
for deceptive trade practices and tortious interference with prospective economic advantage arising from
SynQor’s attempted enforcement of its patents against us.
24
We have initiated administrative review proceedings at the USPTO challenging the validity of certain
claims of the SynQor patents asserted in the Texas Action, including all claims that were asserted against us by
SynQor. Regarding the ‘190 patent, the Patent Trial and Appeal Board (“PTAB”) of the USPTO issued a
decision upholding the validity of the ‘190 patent claims. That decision was appealed by us to the United States
Court of Appeals for the Federal Circuit (“the Federal Circuit”), which issued a decision on March 13, 2015
reversing the PTAB, determining that certain claims were invalid, and remanding the matter to the PTAB for
further proceedings. On May 2, 2016, the PTAB issued a decision determining that all but one of the remaining
claims of the ‘190 patent were invalid and remanding the remaining claim to a patent examiner for further
examination, where it remains under review. In addition, on that date, the PTAB issued decisions finding all
challenged claims of SynQor’s ‘021 patent invalid and upholding the validity of all challenged claims of
SynQor’s ‘702 and ‘290 patents. We have filed an appeal with the Federal Circuit from the PTAB’s decision
upholding the validity of the challenged claims of the ‘702 and ‘290 patents. SynQor has filed an appeal with the
Federal Circuit from the PTAB’s decision that the challenged claims of the ‘021 patent are invalid. Decisions in
these appeals are expected later in 2017. On May 23, 2016, the Texas Court issued an order staying the Texas
Action until the completion of all of the administrative review proceedings concerning the asserted SynQor
patents, including any appeals from such proceedings to the Federal Circuit.
We continue to believe none of our products, including our unregulated bus converters, infringe any valid
claim of the asserted SynQor patents, either alone or when used in an intermediate bus architecture
implementation, including such use by Cisco. We believe SynQor’s claims lack merit and, therefore, continue to
vigorously defend ourselves against SynQor’s patent infringement allegations. We do not believe a loss is
probable for this matter. If a loss were to be incurred, however, we cannot estimate the amount of possible loss or
range of possible loss at this time.
In addition to the SynQor matter, we are involved in certain other litigation and claims incidental to the
conduct of our business. While the outcome of lawsuits and claims against us cannot be predicted with certainty,
we do not expect any current litigation or claims will have a material adverse impact on our financial position or
results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
25
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Common Stock is listed on The NASDAQ Stock Market LLC, under the trading symbol “VICR.”
Shares of our Class B Common Stock are not registered with the Securities and Exchange Commission, are not
listed on any exchange nor traded on any market, and are subject to transfer restrictions under our Restated
Certificate of Incorporation, as amended.
The following table sets forth the quarterly high and low sales prices for the Common Stock as reported by
The NASDAQ Stock Market for the periods indicated:
2016
High
Low
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10.60
11.06
12.16
16.05
$ 7.19
8.94
9.74
11.50
2015
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High
Low
$15.79
17.21
11.89
10.66
$10.77
11.73
8.93
8.96
As of February 28, 2017, there were 153 holders of record of our Common Stock and 13 holders of record
of our Class B Common Stock. These numbers do not reflect persons or entities that hold their shares in nominee
or “street name” through various brokerage firms.
Dividend Policy
We do not have a policy mandating the declaration of cash dividends at any particular time or on a regular
basis. We did not pay cash dividends on our Common Stock for the years ended December 31, 2016 or 2015.
Dividends are declared periodically, only at the discretion of our Board of Directors, and any such
declaration depends on actual cash from operations, our financial condition and capital requirements, the
recommendation of our management, and any other factors the Board of Directors may consider relevant at the
time.
From time to time, excess cash held at the subsidiary level is transferred to the Company via cash dividends
declared by the subsidiary. Because we have owned less than 100% of the common stock of certain subsidiaries,
such subsidiary dividends can result in payments to outside shareholders of those subsidiaries. During the years
ended December 31, 2016 and 2015, one of our subsidiaries paid a total of $750,000 and $250,000 in cash
dividends, respectively, all of which was paid to us. Dividends paid to outside shareholders of our subsidiaries
are accounted for as a reduction in noncontrolling interest.
26
Issuer Purchases of Equity Securities
Period
Total
Number of
Shares
Purchased
Average Price Paid
per Share
Total Number of
Shares
Purchased as Part
of Publicly
Announced Plans
or Programs
October 1 — 31, 2016 . . . . . . . . . . . . . . . . .
November 1 — 30, 2016 . . . . . . . . . . . . . . .
December 1 — 31, 2016 . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
$—
$—
$—
$—
—
—
—
—
Maximum
Number (of
Approximate
Dollar Value) of
Shares
that May Yet Be
Purchased Under
the Plans or
Programs
$8,541,000
$8,541,000
$8,541,000
$8,541,000
In November 2000, our Board of Directors authorized the repurchase of up to $30,000,000 of our Common
Stock (the “November 2000 Plan”). The November 2000 Plan authorizes us to make such repurchases from time
to time in the open market or through privately negotiated transactions. The timing and amounts of Common
Stock repurchases are at the discretion of management based on its view of economic and financial market
conditions.
27
Stockholder Return Performance Graph
The graph set forth below presents the cumulative, five-year stockholder return for each of the Company’s
Common Stock, the Standard & Poor’s 500 Index (“S&P 500 Index”), a value-weighted index made up of 500 of
the largest, by market capitalization, listed companies, and the Standard & Poor’s SmallCap 600 Index (“S&P
SmallCap 600 Index”), a value-weighted index of 600 listed companies with market capitalizations between
$200,000,000 and $1,000,000,000.
The graph assumes an investment of $100 on December 31, 2011, in each of our Common Stock, the S&P
500 Index, and the S&P SmallCap 600 Index, and assumes reinvestment of all dividends. The historical
information set forth below is not necessarily indicative of future performance.
Comparison of Five Year Cumulative Return
Among Vicor Corporation, S&P 500 Index
and S&P SmallCap 600 Index
S
R
A
L
L
O
D
250
200
150
100
50
0
2011
2012
2013
2014
2015
2016
Vicor Corporation
S&P 500 Index - Total Returns
S&P Smallcap 600 Index
Vicor Corporation
S&P 500 Index
2011
2012
2013
2014
2015
2016
$100.00
$ 68.09
$168.59
$152.01
$114.57
$189.70
$100.00
$116.00
$153.57
$174.60
$177.01
$198.18
S&P SmallCap 600 Index
$100.00
$116.33
$164.38
$173.84
$170.41
$215.67
Our equity plan information required by this item is incorporated by reference to the information in Part III,
Item 12 of this Annual Report on Form 10-K.
28
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data with respect to our statements of operations for the years
ended December 31, 2016, 2015, and 2014, and with respect to our balance sheet as of December 31, 2016 and
2015, are derived from our audited Consolidated Financial Statements, which appear elsewhere in this Annual
Report on Form 10-K. The following selected consolidated financial data with respect to our statements of
operations for the years ended December 31, 2013 and 2012, and with respect to our balance sheets as of
December 31, 2014, 2013, and 2012, are derived from our Consolidated Financial Statements, which are not
included herein. The data should be read in conjunction with the Consolidated Financial Statements, related notes
and other financial information included herein.
Statement of Operations Data
2016
2015
2014
2013
2012
Year Ended December 31,
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated net income (loss)
. . . . . . . . . . . . . . . . . .
Net income (loss) attributable to noncontrolling
interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Vicor Corporation . .
Net income (loss) per share — basic and diluted
attributable to Vicor Corporation . . . . . . . . . . . . . . .
Weighted average shares — basic . . . . . . . . . . . . . . . .
Weighted average shares — diluted . . . . . . . . . . . . . . .
$200,280
(6,314)
(6,261)
(In thousands, except per share data)
$199,160
$225,731
$220,194
(20,467)
(14,763)
(267)
(23,504)
(14,070)
5,159
$218,507
(2,785)
(3,798)
(14)
(6,247)
(0.16)
38,842
38,842
232
4,927
(183)
(13,887)
136
(23,640)
279
(4,077)
0.13
38,754
39,146
(0.36)
38,569
38,569
(0.60)
39,195
39,195
(0.10)
41,811
41,811
As of December 31,
Balance Sheet Data
2016
2015
2014
2013
2012
Working capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 89,545
154,067
23,050
131,017
$ 94,905
157,545
21,460
136,085
(In thousands)
$ 90,321
155,542
24,990
130,552
$ 97,869
165,640
23,303
142,337
$128,498
202,581
20,608
181,973
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
We design, develop, manufacture, and market modular power components and power systems for
converting, regulating, and controlling electric current. We also license certain rights to our technology in return
for recurring royalties. The principal customers for our power converters and systems are large original
equipment manufacturers (“OEMs”) and their contract manufacturers, and smaller, lower volume users. We
serve a broad range of market segments and geographies worldwide.
We have organized our business segments according to our key product lines. Reflecting our history and
direction, we broadly categorize our products as either “legacy” or “advanced”, generally based on design,
performance, and form factor considerations, as well as the range of applications for which the products are
appropriate.
The BBU segment designs, develops, manufactures and markets our legacy lines of DC-DC converters and
configurable products, as well as complementary components providing AC line rectification, input filtering,
power factor correction, and transient protection. The BBU segment also includes the BBU business conducted
through VJCL and our Vicor Custom Power subsidiaries. The BBU has customers concentrated in aerospace and
aviation, defense electronics, industrial automation and equipment, medical diagnostics, rail transportation, and
test and measurement instrumentation.
29
As previously disclosed, on March 30, 2016, we acquired 100% ownership of certain operating assets and
cash of Converpower Corporation (“Converpower”). We also entered into a license with Converpower allowing
us to continue manufacturing certain products and supporting existing customers. With the closing of the
Converpower transaction, we completed the consolidation of our Vicor Custom Power operations into three
wholly-owned subsidiaries.
The VI Chip segment consists of our subsidiary, VI Chip Corporation, which designs, develops,
manufactures, and markets many of our advanced power component products. The VI Chip segment also
includes VI Chip business conducted in Japan through VJCL. VI Chip generally targets large, high-volume
customers concentrated in the datacenter and supercomputer segments of the computing market, although we
also target applications in aerospace and aviation, defense electronics, electric and hybrid vehicles,
instrumentation and test equipment, and networking equipment.
The Picor segment consists of our subsidiary, Picor Corporation, which designs, develops, and markets
integrated circuits and related solid-state products for use in a variety of power management and power system
applications. Picor is a “fabless manufacturer,” as its products are manufactured, assembled, packaged, and tested
by third parties. Picor develops products for use in our BBU and VI Chip modules, to be sold as complements to
our BBU and VI Chip products, or for sale to third parties for separate (i.e., stand-alone) applications, often
integrated with VI Chip products to represent a customer solution, particularly in the datacenter and
supercomputer segments of the computing market.
Our consolidated results for 2016, particularly our decreased revenue and profitability, continue to be
impacted by the general weakness of demand for our legacy products due to global macroeconomic uncertainty.
Customer interest in our expanding portfolio of advanced products continues to increase, but we are encountering
longer sales cycles than originally anticipated, attributable, in part, to the same macroeconomic trends and
industry-specific conditions influencing bookings and sales of our legacy product lines. In addition, for the latter
half of 2015 and throughout 2016, demand for our 48 volt to point-of-load solutions for datacenter servers was
influenced by customer supply chain matters, notably scheduling delays associated with the release of next
generation computer processors. However, since the first quarter of 2016, these solutions received significant,
high profile recognition from customers, user groups, and trade publications, leading to increased design
activities and design wins with an expanded range of customers. We believe this heightened visibility, along with
the implied endorsements of our solutions, has contributed to shortened sales cycles for our advanced products.
We believe the following factors influenced our results for the year ended December 31, 2016, and may
continue to influence our results for the foreseeable future:
• Global demand for our legacy brick converters, configurable products, and associated components
remains unpredictable and at volumes lower than historical trend, given the macroeconomic variables
underlying customer confidence across the industries and geographies we serve. Our legacy products
are commonly used in high-value capital goods and sizeable infrastructure projects, the end demand for
which has lagged, reflecting low-growth economies and budgetary uncertainty. Although we have
completed initiatives to reduce our exposure to certain problematic market segments, notably the
custom portion of defense electronics, we expect to experience relatively flat aggregate demand for the
BBU until customer outlooks improve.
• Our profitability is closely aligned with production volumes. We manufacture our products in Andover,
Massachusetts, in a state-of-the-art, highly automated factory. While direct labor and associated costs
are scaled with volume, extended periods of low activity and/or small production runs contribute to
lower profitability, largely due to lower absorption of overhead expenses, which are less flexible and
less scalable, given the sophistication and complexity of our manufacturing processes. An additional
influence on product-level profitability has been the availability and delivery timing of certain
materials and components we use in our products. Due to the same economic uncertainty we and our
customers are experiencing, our suppliers are facing production and scheduling challenges. While we
30
closely monitor our supply chain and our raw materials requirements, we are susceptible to production
delays and added costs associated with unforeseen supply chain disruption.
• We have focused our organization on the promising opportunities for our advanced products, in which
we have invested a substantial amount of research and development effort and dollars. Many of these
opportunities are in the early phases of market exposure, and we are committed to expanding our
product lines and our ability to serve and support customers in pursuit of these opportunities. As such,
our operating costs have been high, relative to revenue levels, and likely will remain relatively high
until revenue from our legacy products recovers and revenue from our newer advanced products
increases on a sustained basis.
• Customer adoption of certain new products has been delayed by unanticipated market influences
beyond our control. For example, our leadership position in the transition of datacenter computing to
48 volt to point-of-load solutions using our Factorized Power Architecture was the basis for our
expectation of an earlier, higher-volume uptake of such solutions and our decisions to focus our
resources on such opportunities. However, delays in the transition of processor generations and
associated supply chain disruption caused repeated delays in customer purchase orders. We continue to
believe our new products, notably our 48 volt to point-of-load solutions for datacenters, will be adopted
in volume by multiple, leading customers, particularly in light of various announcements during the
first and second quarters of 2016 from two industry trade organizations regarding adoption and support
of 48 Volt bus architectures. However, we cannot control the actions by, nor the timing, of our
customers, their contract manufacturers, or the significant vendors also participating in the market.
• Recent consolidated financial results have been influenced by operational changes and restructuring
initiatives. During the first quarter of 2016, we completed the consolidation of our Vicor Custom
Power operations, reducing our six domestic locations to three. While this consolidation disrupted the
sales, bookings, and manufacturing patterns of the custom operations for the fourth quarter of 2015 and
the first quarter of 2016, we believe we currently are achieving our competitive and performance goals.
• During the third quarter of 2016, we reversed approximately $768,000 of stock-based compensation
expense related to certain VI Chip performance-based stock options. This resulted in decreases to cost
of revenues of $86,000, selling, general, and administrative expense of $516,000, and research and
development expense of $166,000 in the third quarter of 2016. (See Note 3 to the Consolidated
Financial Statements).
Financial Highlights:
• Net revenues decreased 9.0% to $200,280,000 for 2016, from $220,194,000 for 2015, primarily due to
an 8.7% decrease in overall BBU bookings for 2016 compared to 2015. While VI Chip and Picor
bookings increased year over year, a large portion of their respective bookings in the third and fourth
quarter of 2016 was scheduled for shipment in 2017, mitigating the impact of the increased bookings
on 2016 revenue.
• Export sales, as a percentage of total revenues, represented approximately 59.4% in 2016 and 59.6% in
2015.
• Gross margin decreased to $91,209,000 for 2016, from $99,518,000 for 2015, due primarily to lower
production volumes associated with the decrease in net revenues.
• Gross margin, as a percentage of net revenues, increased to 45.5% for 2016 from 45.2% for 2015. The
gross margin percentage improved, despite lower net revenues, due to a more favorable product mix
and lower charges for warranty reserves.
• Backlog, representing the total of orders for products received for which shipment is scheduled within
the next 12 months, was approximately $48,371,000 at the end of 2016, as compared to $39,073,000 at
the end of 2015. The increase in backlog was due to increased VI Chip and Picor bookings in the
second half of 2016, compared to the second half of 2015, partially offset by lower BBU bookings.
31
• Operating expenses for 2016 decreased $2,262,000, or 2.3%, to $97,523,000 from $99,785,000 for
2015, due to a decrease in selling, general, and administrative expenses of $2,638,000, partially offset
by an increase in research and development expense of $376,000.
• The primary components of the decrease in selling, general and administrative expenses were declines
in compensation expenses of $1,077,000, commission expenses of $748,000, and legal fees of
$734,000.
• Lower compensation expenses were due to a reversal of stock-based compensation expense related to
certain VI Chip performance-based stock options in the third quarter of 2016, as noted above, the
impact of the consolidation of our Vicor Custom Power operations, and the final shutdown of Westcor
operations.
• The primary elements of the increase in research and development expenses were project and
pre-production materials of $1,214,000, and compensation expenses of $502,000, partially offset by
decreases in deferred costs of $774,000, depreciation and amortization of $357,000, and facilities
expenses of $221,000.
• We recorded a gain from equity method investment of $4,999,719 in the third quarter of 2015 when
Intersil Corporation (“Intersil”) acquired Great Wall Semiconductor Corporation (“GWS”). See Note 8
to the Consolidated Financial Statements for additional details.
• We reported a net loss for 2016 of $(6,247,000), as compared to net income of $4,927,000 for 2015,
and a net loss per share of $(0.16) for 2016, as compared to net income per diluted share of $0.13 for
2015.
•
•
In 2016, depreciation and amortization totaled $8,438,000, and capital additions were $8,428,000,
compared to $9,142,000 and $9,090,000, respectively, for 2015.
Inventories increased by approximately $3,694,000, or 15.8%, to $27,136,000 at the end of 2016, as
compared to $23,442,000 at the end of 2015. This increase was primarily associated with increases in
VI Chip and Picor inventories of $2,959,000 and $1,799,000, respectively, to meet increased bookings
for the two segments, partially offset by a decrease in BBU inventories of $1,064,000.
The following table sets forth certain items of selected consolidated financial information as a percentage of
net revenues for the years shown, ended December 31. This table and the subsequent discussion should be read in
conjunction with the selected financial data and the Consolidated Financial Statements and related footnotes
contained elsewhere in this report.
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0% 100.0% 100.0%
45.5% 45.2% 43.0%
27.8% 26.5% 30.2%
20.9% 18.8% 18.4%
(3.0)% (0.1)% (6.4)%
Year Ended December 31,
2016
2015
2014
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our
Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related
disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and assumptions,
and our associated judgments, including those related to inventories, income taxes, contingencies, and litigation.
32
We base our estimates, assumptions, and judgments on historical experience, knowledge of current conditions,
and on various other factors we believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different assumptions or conditions. We also
have other policies we consider key accounting policies, such as our policy for revenue recognition, including the
deferral of revenue on sales to distributors until the products are sold to the end user. However, the application of
these other policies does not require us to make significant estimates and assumptions difficult to support
quantitatively.
Inventories
We employ a variety of methodologies to estimate allowances for our inventory for estimated obsolescence
or unmarketable inventory, based upon our existing backlog, historical consumption, and assumptions about
future demand and market conditions. For BBU products produced at our Andover facility, our principal
manufacturing location, the methodology used compares on-hand quantities to projected demand and historical
consumption, such that amounts of inventory on hand in excess of a three-year projected consumption or three-
year historical consumption, whichever is higher, are fully reserved. VI Chip and Picor use two-year projected
and historical consumption assumptions. While we have used our best efforts and believe we have used the best
available information to estimate future demand, due to uncertainty in the economy and our business and the
inherent difficulty in predicting future demand, it is possible actual demand for our products will differ from our
estimates. If actual future demand or market conditions are less favorable than those projected by management,
additional inventory reserves for existing inventories may need to be recorded in future periods.
Income Taxes
We make certain estimates, assumptions, and judgments in determining income tax expense for financial
statement reporting purposes. These estimates, assumptions, and judgments occur in the calculation of tax
credits, benefits, and deductions, and in the calculation of certain assets and liabilities that arise from differences
in the timing and of the recognition of revenue and expense for tax and financial statement purposes, as well as
the interest and penalties relating to uncertain tax positions. Significant changes to these estimates, assumptions,
and judgments may result in an increase or decrease to our tax provision in a subsequent period.
Significant management judgment also is required in determining whether deferred tax assets will be
realized in full or in part. We assess the need for a valuation allowance on a quarterly basis. We record a
valuation allowance to reduce our deferred tax assets to the amount we believe is more likely than not to be
realized. In assessing the need for a valuation allowance, we consider all positive and negative evidence,
including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies,
and past financial performance. Currently, we maintain a valuation allowance against all domestic net deferred
tax assets and the majority of foreign net deferred tax assets. The valuation allowances against these deferred tax
assets may require adjustment in the future based on changes in the mix of temporary differences, changes in tax
laws, and operating performance. If and when we determine the valuation allowance should be released (i.e.,
reduced), the adjustment would result in a tax benefit reported in that period’s Consolidated Statements of
Operations, the effect of which would be an increase in reported net income. A portion of such an adjustment
may be accounted for through an increase to “Additional paid-in capital”, a component of Stockholders’ Equity.
The amount of any such tax benefit associated with release of our valuation allowance in a particular quarter may
be material.
We follow a two-step process to determine the amount of tax benefit to recognize in our financial statements
for tax positions taken on tax returns. The first step is to evaluate the tax position to determine the likelihood it
would be sustained upon examination by a tax authority. If the tax position is deemed “more-likely-than-not” to
be sustained, the second step is to assess the tax position to determine the amount of tax benefit to recognize in
the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater
33
than 50 percent likelihood of being realized upon ultimate settlement. If the tax position does not meet the
“more-likely-than-not” threshold then it is not recognized in the financial statements. We accrue interest and
penalties, if any, related to unrecognized tax benefits as a component of income tax expense. If the estimates,
assumptions, and judgments made by us change, the unrecognized tax benefits may have to be adjusted, and such
adjustments may be material.
Contingencies
From time to time, we receive notices of product failure claims, notices of infringement of patent or other
intellectual property rights of others, or notices associated with other claims. In January 2011, we were named in
a lawsuit for patent infringement (See Part I, Item 3 — “Legal Proceedings”) that is ongoing. We assess each
notice and associated matter to determine if a contingent liability should be recorded. In making this assessment,
we may consult, depending on the nature of the matter, with external legal counsel and technical experts. Based
on the information we obtain, combined with our judgment regarding all the facts and circumstances of each
matter, we determine whether it is probable a contingent loss may be incurred and whether the amount of such
loss can be reasonably estimated. Should a loss be probable and reasonably estimable, we record such a loss (i.e.,
we establish a loss contingency). In determining the amount of the loss to be recorded, we consider advice
received from experts in the specific matter, current status of legal proceedings (if any), prior case history,
comparable precedent litigation, and other factors. Should the estimates, assumptions, and judgments made by us
change, we may need to record additional losses (i.e., add to our loss contingency) that may be material.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards
Board (“FASB”) that we adopt as of the specified effective date. Unless otherwise discussed, we believe the
impact of recently issued accounting standards will not have a material impact on our future financial condition
and results of operations. See Note 2 — Impact of recently issued accounting standards, to the Consolidated
Financial Statements for a description of recently issued and adopted accounting pronouncements, including the
dates of adoption and expected impact on our financial position and results of operations.
Revenue Recognition
In May 2014, the FASB issued new guidance for revenue recognition, which will require an entity to
recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services
to customers. The new guidance, which includes several amendments, will replace most existing revenue
recognition guidance in U.S. Generally Accepted Accounting Principles when it becomes effective which will be,
for us, on January 1, 2018. The new standard permits the use of either the retrospective or cumulative effect
transition method. As described in Note 2 — Significant Accounting Policies, Revenue Recognition, of the Notes
to the Consolidated Financial Statements, we defer revenue and the related cost of sales on shipments to stocking
distributors until the distributors resell the products to their customers. Upon adoption of the new guidance, we
will no longer be permitted to defer revenue until sale by the stocking distributor to the end customer, but rather,
will be required to estimate the effects of returns and allowances provided to stocking distributors and record
revenue at the time of sale to the stocking distributor. We currently plan to utilize the cumulative effect transition
method for adoption of the standard. Upon adoption, we will recognize the cumulative effect of adopting this
guidance as an adjustment to the balance of retained earnings as of January 1, 2018. We are continuing to
evaluate the future impact and method of adoption the new guidance will have on our consolidated financial
statements and related disclosures.
Year ended December 31, 2016 compared to Year ended December 31, 2015
Net revenues for 2016 were $200,280,000, a decrease of $19,914,000 or 9.0%, as compared to $220,194,000
for 2015.
34
The components of revenue for the years ended December 31 were as follows (dollars in thousands):
BBU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI Chip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Picor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$151,429
38,369
10,482
$173,108
35,198
11,888
$(21,679)
3,171
(1,406)
(12.5)%
9.0%
(11.8)%
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$200,280
$220,194
$(19,914)
(9.0)%
2016
2015
$
%
Increase (decrease)
The overall year to year decrease in consolidated net revenues was primarily due to an 8.7% decrease in
overall BBU bookings for 2016 compared to 2015. While VI Chip and Picor bookings increased year over year, a
large portion of their respective bookings in the third and fourth quarter of 2016 was scheduled for shipment in
2017, mitigating the impact of the increased bookings on 2016 revenue. Customer bookings patterns continue to
be unpredictable, particularly with the VI Chip and Picor segments. The decrease in BBU revenues was primarily
attributable to a decrease in BBU module and configurable product revenues of approximately $18,225,000 and a
decrease in Vicor Custom Power revenues of $5,440,000, due to the consolidation of operations noted above.
Gross margin for 2016 decreased $8,309,000, or 8.3%, to $91,209,000 from $99,518,000 in 2015. Gross
margin as a percentage of net revenues increased to 45.5% in 2016 from 45.2% in 2015. The lower gross margin
dollars is primarily due to the lower net revenues, while the higher gross margin percentage was primarily due to
a more favorable product mix and lower charges for warranty reserves in 2016 compared to 2015.
Income (loss) from operations by segment for the years ended December 31 were as follows (dollars in
thousands):
2016
2015
$
%
Increase (decrease)
BBU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI Chip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Picor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 11,750
(16,494)
(637)
(933)
$ 21,743
(21,040)
(290)
(680)
$(9,993)
4,546
(347)
(253)
(46.0)%
21.6%
(119.7)%
(37.2)%
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (6,314)
$
(267)
$(6,047)
(2,264.8)%
The decrease in BBU operating profit in 2016 compared to 2015 was primarily due to a decrease in
revenues and related decrease in gross margin, partially offset by decreases in operating expenses. The primary
decreases in operating expenses were compensation expenses, commissions expense, and legal fees.
Compensation and other operating expenses have decreased in part due to the Westcor consolidation and the
consolidation of our Vicor Custom Power operations discussed above. The decrease in commissions expense is
primarily attributable to the decrease in net revenues subject to commissions. Legal fees, which are charged to
the BBU segment, are associated with the ongoing patent infringement litigation. The decrease in VI Chip
operating loss in 2016 compared to 2015 was due to the increase in revenues and the related increase in gross
margin, along with the reversal of approximately $768,000 of stock-based compensation expense related to
certain VI Chip performance-based stock options in the third quarter of 2016. The VI Chip segment continues to
incur significant operating losses as revenue volume and related gross margins are not sufficient to cover fixed
manufacturing costs and operating expenses, particularly research and development expenses. The cash needs for
each segment are primarily for working capital and capital expenditures. Positive cash flow from BBU
historically has funded, and is expected to continue to fund, VI Chip and Picor operations, as well as the capital
expenditures for all segments for the foreseeable future.
Selling, general, and administrative expenses were $55,675,000 for 2016, a decrease of $2,638,000, or
4.5%, as compared to $58,313,000 for 2015. As a percentage of net revenues, selling, general, and administrative
expenses increased to 27.8% in 2016 from 26.5% in 2015, primarily due to the decrease in net revenues.
35
The components of the $2,638,000 decrease in selling, general, and administrative expenses were as follows
(dollars in thousands):
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commissions expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Project expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employment recruiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Travel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net
Increase (decrease)
$(1,077)
(748)
(734)
(148)
(138)
(132)
(52)
(40)
300
362
(231)
(3.1)%(1)
(17.4)%(2)
(31.9)%(3)
(5.2)%(4)
(25.3)%(5)
(73.5)%(6)
(5.2)%
(15.3)%
11.3%(7)
22.1%(8)
(3.0)%
$(2,638)
(4.5)%
(1) Decrease primarily attributable to the reversal of VI Chip performance-based stock compensation expense
(see Note 3 to the Consolidated Financial Statements), the consolidation of Westcor operations, and the
consolidation of our Vicor Custom Power operations, partially offset by annual compensation adjustments
in May 2016.
(2) Decrease primarily attributable to the decrease in net revenues subject to commissions.
(3) Decrease attributable to reduced activity associated with the patent infringement claims filed against us
during the first quarter of 2011 by SynQor. See Note 16 to the Consolidated Financial Statements.
(4) Decrease attributable to certain Corporate segment fixed assets becoming fully depreciated during 2016.
(5) Decrease primarily attributable to a decrease in spending by the VI Chip segment.
(6) Decrease primarily attributable to a decrease in spending by the BBU segment.
(7)
Increase primarily attributable to increased travel by our sales and marketing personnel.
(8)
Increase primarily attributable to an increase in the use of outside consultants at certain international
locations.
Research and development expenses increased $376,000, or 0.9%, to $41,848,000 in 2016 from
$41,472,000 in 2015. As a percentage of net revenues, research and development increased to 20.9% in 2016
from 18.8% in 2015, primarily due to the decrease in net revenues.
The components of the $376,000 increase in research and development expenses were as follows (in
thousands):
Project and pre-production materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facilities expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease)
$1,214
502
91
(86)
(221)
(357)
(774)
7
$ 376
26.5%(1)
1.8%(2)
22.7%
(9.7)%
(10.2)%(3)
(14.8)%(4)
(474.7)%(5)
0.3%
0.9%
36
(1)
Increase primarily attributable to increases in spending by the BBU and VI Chip segments.
(2)
Increase primarily attributable to annual compensation adjustments in May 2016.
(3) Decrease primarily attributable to a decrease in utilities and building maintenance expenses.
(4) Decrease attributable to certain BBU segment fixed assets becoming fully depreciated during 2016.
(5) Decrease primarily attributable to an increase in deferred costs capitalized for certain non-recurring
engineering projects for which the related revenues have been deferred.
The significant changes in the components of “Other income (expense), net” for the years ended
December 31 were as follows (in thousands):
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit gains on available for sale securities . . . . . . . . . . . . . . . . . . . . . . .
(Loss) gain on disposal of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2015
Increase
(decrease)
$ 462
(268)
68
13
(4)
13
$ —
(161)
47
12
60
67
$ 284
$ 25
$ 462
(107)
21
1
(64)
(54)
$ 259
During the second quarter of 2016, we began recognizing rental income under a new leasing agreement with
a third party for the former Westcor facility. Our exposure to market risk for fluctuations in foreign currency
exchange rates relates primarily to the operations of VJCL, for which the functional currency is the Japanese
Yen. The functional currency of the subsidiaries in Europe and other subsidiaries in Asia is the U.S. Dollar.
While our Vicor B.V. operation also potentially exposes us to exchange rate risk, as that subsidiary’s sales are
denominated in Euros and Pounds Sterling, any periodic gains or losses associated with exchange rate
fluctuations are small, given the small U.S. Dollar value of shipments we make to Vicor B.V.
Loss before income taxes was $(6,030,000) in 2016, as compared to $(242,000) in 2015.
The provision (benefit) for income taxes and the effective income tax rate for the years ended December 31
were as follows (dollars in thousands):
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$231
$ (401)
3.8% (165.7)%
2016
2015
For the years ended December 31, 2016 and 2015, no tax benefit could be recognized for the majority of our
losses due to a full valuation allowance against all domestic deferred tax assets. The tax provision for both years
includes estimated federal, state and foreign income taxes and, in 2015, estimated federal and state income taxes
for one noncontrolling interest subsidiary. In 2016, in connection with the acquisition of 100% ownership of
certain operating assets and cash of Converpower Corporation, the related deferred tax liability for unremitted
earnings of $55,000 was reversed and recorded as a discrete benefit in the first quarter of 2016 (see Note 9 to the
Consolidated Financial Statements). In 2015, we recognized a tax benefit of approximately $555,000 as a
discrete item in the fourth quarter of 2015 for the release of certain tax reserves, due to entering into voluntary
disclosure agreements with several states. In addition, in connection with the sale of our 49% interest in a
noncontrolling interest subsidiary, Aegis Power Systems, Inc., the related deferred tax liability for unremitted
earnings of $274,000 was reversed and recorded as a deferred tax benefit in the fourth quarter of 2015 (see Note
9 to the Consolidated Financial Statements). We continue to maintain a full valuation allowance against all
37
domestic net deferred tax assets and the majority of foreign net deferred tax assets. The effective tax rate was
lower in 2016 than 2015 as the loss before income taxes and before the gain from sale of equity method
investments was significantly higher in 2016 than in 2015.
In September 2015, Intersil acquired GWS. At that time, our gross investment in non-voting convertible
preferred stock of GWS totaled $4,999,719, giving us an approximately 27% ownership interest in GWS. We
received cash consideration of $4,999,719 for our investment from Intersil, representing full preference value of
our shares of non-voting convertible preferred stock of GWS. Since the investment in GWS had previously been
written down to zero, the full amount of the consideration was recorded as a gain from sale of equity method
investment in the third quarter of 2015. (See Note 8 to the Consolidated Financial Statements for additional
information.)
Net loss per share attributable to Vicor Corporation was $(0.16) for the year ended December 31, 2016,
compared to net income per diluted share of $0.13 for the year ended December 31, 2015.
Year ended December 31, 2015 compared to Year ended December 31, 2014
Net revenues for 2015 were $220,194,000, a decrease of $5,537,000 or 2.5%, as compared to $225,731,000
for 2014.
The components of revenue for the years ended December 31 were as follows (dollars in thousands):
2015
2014
$
%
Increase (decrease)
BBU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI Chip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Picor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$173,108
35,198
11,888
$184,224
32,929
8,578
$(11,116)
2,269
3,310
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$220,194
$225,731
$ (5,537)
(6.0)%
6.9%
38.6%
(2.5)%
The overall year to year decrease in BBU net revenues was primarily due to a 8.2% decrease in bookings in
2015 compared to 2014. The decrease in BBU revenues was primarily attributable to decreases in BBU revenues
of approximately $4,481,000, Vicor Custom Power revenues of approximately $3,507,000, and VJCL revenues
of approximately $3,100,000. While bookings declined across all three segments on a year over year basis, VI
Chip and Picor revenues increased due to strong bookings in the latter half of 2014, particularly from the two
segments’ major datacenter customer.
Gross margin for 2015 increased $2,398,000, or 2.5%, to $99,518,000 from $97,120,000 in 2014. Gross
margin as a percentage of net revenues increased to 45.2% in 2015 from 43.0% in 2014. The increases in gross
margin and gross margin percentage were primarily due to the increase in VI Chip and Picor net revenues,
particularly due to a larger proportion of higher margin Picor products. In addition, the gross margin for BBU
products remained relatively flat, despite their decrease in net revenues, due to average selling price
improvements across several BBU programs, along with realizing the full benefit of the Westcor consolidation
into Andover manufacturing.
38
Income (loss) from operations by segment for the years ended December 31 were as follows (dollars in
thousands):
2015
2014
$
%
Increase
BBU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI Chip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Picor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 21,743
(21,040)
(290)
(680)
$ 15,499
(29,015)
(407)
(840)
$ 6,244
7,975
117
160
40.3%
27.5%
28.7%
19.0%
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(267)
$(14,763)
$14,496
98.2%
The increase in BBU operating profit in 2015 compared to 2014 was due to decreases in operating expenses,
partially offset by decreases in revenues and the related gross margin. The primary decreases in operating
expenses were legal fees and compensation expenses. Legal fees, which are charged to the BBU segment, are
associated with the ongoing patent infringement litigation. The decrease in legal fees continued the trend begun
in the fourth quarter of 2014 associated with continued delays in the expected trial date related to the SynQor
litigation. Compensation and other operating expenses have decreased in part due to the Westcor consolidation
discussed above.
Selling, general, and administrative expenses were $58,313,000 for 2015, a decrease of $9,884,000, or
(14.5)%, as compared to $68,197,000 for 2014. As a percentage of net revenues, selling, general, and
administrative expenses decreased to 26.5% in 2015 from 30.2% in 2014.
The components of the $9,884,000 decrease in selling, general, and administrative expenses were as follows
(dollars in thousands):
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commissions expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Travel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business taxes and fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit, tax, and accounting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facilities expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net
Increase (decrease)
$(8,621)
(1,064)
(310)
(280)
(234)
83
130
145
145
122
(78.9)%(1)
(3.0)%(2)
(6.7)%(3)
(9.5)%(4)
(9.6)%(5)
16.0%
8.1%
8.1%
10.0%
2.0%
$(9,884)
(14.5)%
(1) Decrease attributable to reduced activity associated with the patent infringement claims filed against us
during the first quarter of 2011 by SynQor. See Note 16 to the Consolidated Financial Statements.
(2) Decrease primarily attributable to the decrease in bonuses and the consolidation of Westcor operations.
(3) Decrease primarily attributable to the decrease in net revenues subject to commissions.
(4) Decrease primarily attributable to decreased travel by our sales and marketing personnel.
(5) Decrease primarily attributed to decreases in sales support expenses, direct mailings, and advertising in
trade publications.
Research and development expenses decreased $7,000, or 0.0%, to $41,472,000 in 2015 from $41,479,000
in 2014. As a percentage of net revenues, research and development increased to 18.8% in 2015 from 18.4% in
2014, primarily due to the decrease in net revenues.
39
The significant changes in the components of “Other income, net” for the years ended December 31 were as
follows (in thousands):
Foreign currency losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on disposal of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit gains on available for sale securities . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
2014
Increase (decrease)
$(161)
60
47
12
67
$(196)
22
80
311
51
$ 25
$ 268
$ 35
38
(33)
(299)
16
$(243)
We assess the value of our investment portfolio of auction rate securities each quarter, and record any credit
gains or losses calculated as a component of “Other income (expense), net”. Our exposure to market risk
fluctuations in foreign currency exchange rates relate primarily to the operations of VJCL, for which the
functional currency is the Japanese Yen. The functional currency of all other subsidiaries in Europe and Asia is
the U.S. Dollar. While our Vicor B.V. operation also potentially exposes us to exchange rate risk, as that
subsidiary’s sales are denominated in Euros and Pounds Sterling, any periodic gains or losses associated with
exchange rate fluctuations are small, given the small U.S. Dollar value of shipments we make to Vicor B.V. The
decrease in interest income for the period was due to lower average balances on our long-term investments, as
well as a general decrease in interest rates earned on these investments.
Loss before income taxes was $(242,000) in 2015, as compared to $(14,495,000) in 2014.
The benefit for income taxes and the effective income tax rate for the years ended December 31 were as
follows (dollars in thousands):
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (401)
(165.7)% (2.9)%
$(425)
2015
2014
For the years ended December 31, 2015 and 2014, no tax benefit could be recognized for the majority of our
losses due to a full valuation allowance against all domestic deferred tax assets. In 2015, we recognized a tax
benefit of approximately $555,000 as a discrete item in the fourth quarter of 2015 for the release of certain tax
reserves, due to entering into voluntary disclosure agreements with several states. In addition, in connection with
the sale of our 49% interest in a noncontrolling interest subsidiary, Aegis Power Systems, Inc., the related
deferred tax liability for unremitted earnings of $274,000 was reversed and recorded as a deferred tax benefit in
the fourth quarter of 2015 (see Note 9 to the Consolidated Financial Statements). In 2014, we recognized a tax
benefit of approximately $552,000 as a discrete item in the third quarter of 2014 for the release of certain income
tax reserves, due to the completion of an Internal Revenue Service examination of its 2010 and 2011 federal
corporate income tax returns during the quarter. The tax benefits in both years were partially offset by estimated
federal and state taxes for one noncontrolling interest subsidiary as well as estimated state and foreign taxes in
jurisdictions in which we do not have net operating loss carryforwards. We continue to maintain a full valuation
allowance against all domestic net deferred tax assets and, in 2015, established a valuation allowance against the
majority of foreign net deferred tax assets. The effective tax rate was higher in 2015 than 2014 as the loss before
income taxes and before the gain from sale of equity method investments was significantly lower in 2015 than in
2014.
In September 2015, Intersil acquired GWS. At that time, our gross investment in non-voting convertible
preferred stock of GWS totaled $4,999,719, representing an approximately 27% ownership preference in GWS.
We received cash consideration from Intersil of $4,999,719, representing full preference value of the shares of
40
non-voting convertible preferred stock of GWS we owned. Since the investment in GWS had previously been
reduced to zero, the full amount of the consideration was recorded as a gain from sale of equity method
investment in the third quarter of 2015. See Note 8 to the Consolidated Financial Statements for additional
information.
Net income (loss) of noncontrolling interest increased by $415,000 for 2015 to $232,000, as compared to
$(183,000) for 2014. This increase was due to the increase in net income during 2015 recorded by entities in
which others held an equity interest (i.e., three Vicor Custom Power subsidiaries and VJCL).
Net income per diluted share attributable to Vicor Corporation was $0.13 for the year ended December 31,
2015, compared to net loss per share of $(0.36) for the year ended December 31, 2014. The increase in net
income per diluted share was due in part to the acquisition of GWS by Intersil and the resulting gain from sale of
equity method investment recorded by us, as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2016, we had $56,170,000 in cash and cash equivalents. The ratio of current assets to
current liabilities was 5.0:1 at December 31, 2016, as compared to 5.6:1 at December 31, 2015. Working capital
decreased $5,360,000 to $89,545,000 at December 31, 2016 from $94,905,000 at December 31, 2015.
The primary working capital changes were due to the following (in thousands):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued severance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease)
$(6,810)
(766)
3,694
148
(118)
(616)
389
195
(61)
(1,415)
$(5,360)
The primary sources of cash for the year ended December 31, 2016, were $544,000 from operating activities
and $1,584,000 of proceeds from the issuance of Common Stock associated with the exercise of options for the
purchase of shares of our Common Stock. The primary use of cash for the year ended December 31, 2016, was
the purchase of equipment of $8,428,000.
In November 2000, our Board of Directors authorized the repurchase of up to $30,000,000 of Common
Stock (the “November 2000 Plan”). The November 2000 Plan authorizes us to make such repurchases from time
to time in the open market or through privately negotiated transactions. The timing of such repurchases and the
number of shares purchased in each transaction are at the discretion of management based on its view of
economic and financial market conditions. We did not repurchase shares of Common Stock under the November
2000 Plan during the year ended December 31, 2016. As of December 31, 2016, we had approximately
$8,541,000 remaining for share purchases under the November 2000 Plan.
During the years ended December 31, 2016 and 2015, one of our subsidiaries paid a total of $750,000 and
$250,000 in cash dividends, respectively, all of which were paid to us.
As of December 31, 2016, we had no off-balance sheet arrangements.
41
The table below summarizes our contractual obligations as of December 31, 2016 (in thousands):
Contractual Obligations
Payments Due by Period
Total
Less than
1 Year
Years 2 & 3 Years 4 & 5
More Than
5 Years
Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . .
$4,771
$1,572
$1,569
$699
$931
Our primary liquidity needs are for making continuing investments in manufacturing equipment. We believe
cash generated from operations and the total of our cash and cash equivalents will be sufficient to fund planned
operations and capital equipment purchases for the foreseeable future. We have approximately $2,393,000 of
capital expenditure commitments, principally for manufacturing equipment, as of December 31, 2016.
We do not consider the impact of inflation and changing prices on our business activities or fluctuations in
the exchange rates for foreign currency transactions to have been significant during the last three fiscal years.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to a variety of market risks, including changes in interest rates affecting the return on our
cash and cash equivalents and fluctuations in foreign currency exchange rates. As our cash and cash equivalents
consist principally of cash accounts and money market securities, which are short-term in nature, we believe our
exposure to market risk on interest rate fluctuations for these investments is not significant. As of December 31,
2016, our long-term investment portfolio, recorded on our Consolidated Balance Sheet as “Long-term
investments, net”, consisted of a single auction rate security with a par value of $3,000,000, purchased through
and held in custody by a broker-dealer affiliate of Bank of America, N.A., that has experienced failed auctions
(the “Failed Auction Security”) since February 2008. While the Failed Auction Security is Aaa/AA+ rated by
major credit rating agencies, collateralized by student loans and guaranteed by the U.S. Department of Education
under the Federal Family Education Loan Program, continued failure to sell at its periodic auction dates (i.e.,
reset dates) could negatively impact the carrying value of the investment, in turn leading to impairment charges
in future periods. Periodic changes in the fair value of the Failed Auction Security attributable to credit loss (i.e.,
risk of the issuer’s default) are recorded through earnings as a component of “Other income (expense), net”, with
the remainder of any periodic change in fair value not related to credit loss (i.e., temporary “mark-to-market”
carrying value adjustments) recorded in “Accumulated other comprehensive (loss) income”, a component of
Stockholders’ Equity. Should we conclude a decline in the fair value of the Failed Auction Security is other than
temporary, such losses would be recorded through earnings as a component of “Other income (expense), net”.
We do not believe there was an “other-than-temporary” decline in value in this security as of December 31, 2016.
We estimate our annual interest income would change by approximately $30,000 in 2016 for each 100 basis
point increase or decrease in interest rates.
Our exposure to market risk for fluctuations in foreign currency exchange rates relates primarily to the
operations of VJCL, for which the functional currency is the Japanese Yen, and changes in the relative value of
the Yen to the U.S. Dollar. Relative to our Yen exposure as of December 31, 2016, we estimate a 10%
unfavorable movement in the value of the Yen relative to the U.S. Dollar would increase our foreign currency
loss by approximately $188,000. As the functional currency of all other subsidiaries in Europe and Asia is the
U.S. Dollar, we believe risk to fluctuations in foreign currency exchange rates is not significant, as these
operations do not incur material foreign exchange exposures.
42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2016 and December 31, 2015 . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations For The Years Ended December 31, 2016, 2015, and 2014 . . . . . . .
Consolidated Statements of Comprehensive Income (Loss) For The Years Ended December 31, 2016,
2015, and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows For The Years Ended December 31, 2016, 2015, and 2014 . . . . . .
Consolidated Statements of Equity For The Years Ended December 31, 2016, 2015, and 2014 . . . . . . . . . .
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule (Refer to Item 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
44
45
46
47
48
49
50
89
43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Vicor Corporation:
We have audited the accompanying consolidated balance sheets of Vicor Corporation and subsidiaries as of
December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income
(loss), cash flows, and equity for each of the years in the three-year period ended December 31, 2016. In
connection with our audits of the consolidated financial statements, we also have audited the financial statement
schedule listed in Item 15(a)(2). These consolidated financial statements and the financial statement schedule are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Vicor Corporation and subsidiaries as of December 31, 2016 and 2015, and the results of
their operations and their cash flows for each of the years in the three-year period ended December 31, 2016, in
conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Vicor Corporation’s internal control over financial reporting as of December 31, 2016, based on
criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated March 7, 2017 expressed an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
Boston, Massachusetts
March 7, 2017
44
VICOR CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 2016 and 2015
(In thousands, except per share data)
2016
2015
Current assets:
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less allowance of $153 in 2016 and $171 in 2015 . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 56,170
25,216
27,136
3,250
$ 62,980
25,982
23,442
3,102
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term investments, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
111,772
38
2,508
37,574
2,175
115,506
15
2,866
37,450
1,708
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 154,067
$ 157,545
Current liabilities:
LIABILITIES AND EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued severance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,588
8,965
2,179
—
92
3,403
22,227
374
253
196
—
23,050
$
7,470
8,349
2,568
195
31
1,988
20,601
468
144
192
55
21,460
Commitments and contingencies (Note 16)
Equity:
Vicor Corporation stockholders’ equity:
Preferred Stock, $.01 par value, 1,000,000 shares authorized; no shares issued
Class B Common Stock: 10 votes per share, $.01 par value, 14,000,000 shares
authorized, 11,758,218 shares issued and outstanding in 2016 and 2015 . . . . . . .
118
118
Common Stock: 1 vote per share, $.01 par value, 62,000,000 shares authorized
38,922,489 shares issued and 27,251,003 shares outstanding (38,705,564 shares
issued and 27,034,078 shares outstanding in 2015) . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock at cost: 11,671,486 shares in 2016 and 2015 . . . . . . . . . . . . . . . . . . .
Total Vicor Corporation stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
397
176,344
93,438
(561)
(138,927)
130,809
208
131,017
395
174,337
99,685
(577)
(138,927)
135,031
1,054
136,085
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 154,067
$ 157,545
See accompanying notes.
45
VICOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2016, 2015 and 2014
(In thousands, except per share amounts)
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$200,280
109,071
$220,194
120,676
$225,731
128,611
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
91,209
99,518
97,120
2016
2015
2014
Operating expenses:
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net:
Total unrealized (losses) gains on available-for-sale securities, net
Portion of gains (losses) recognized in other comprehensive income
. . . . . . .
(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net credit gains recognized in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income (expense), net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain from sale of equity method investment, net of tax . . . . . . . . . . . . . . . . . .
Consolidated net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income (loss) attributable to noncontrolling interest . . . . . . . . .
55,675
41,848
—
97,523
58,313
41,472
—
68,197
41,479
2,207
99,785
111,883
(6,314)
(267)
(14,763)
(18)
(49)
750
31
13
271
284
(6,030)
231
—
(6,261)
(14)
61
12
13
25
(439)
311
(43)
268
(242)
(401)
5,000
5,159
232
(14,495)
(425)
—
(14,070)
(183)
Net income (loss) attributable to Vicor Corporation . . . . . . . . . . . . . . . . . . . . .
$ (6,247) $
4,927
$ (13,887)
Net income (loss) per common share attributable to Vicor Corporation:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
(0.16) $
(0.16) $
0.13
0.13
$
$
(0.36)
(0.36)
Shares used to compute net income (loss) per common share attributable to
Vicor Corporation:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38,842
38,842
38,754
39,146
38,569
38,569
See accompanying notes.
46
VICOR CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years Ended December 31, 2016, 2015 and 2014
(In thousands)
Consolidated net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation gains (losses), net of tax benefit (1) . . . . . . . . . . . .
Unrealized (losses) gains on available-for-sale securities, net of tax (1) . . . . . . .
$(6,261) $5,159
(52)
(59)
52
(31)
$(14,070)
(410)
429
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
(111)
19
Consolidated comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Comprehensive income (loss) attributable to noncontrolling interest . . . . .
(6,240)
(9)
5,048
227
(14,051)
(219)
Comprehensive income (loss) attributable to Vicor Corporation . . . . . . . . . . . . . . .
$(6,231) $4,821
$(13,832)
2016
2015
2014
(1) The deferred tax assets associated with cumulative foreign currency translation gains (losses) and
cumulative unrealized losses on available for sale securities are completely offset by a tax valuation
allowance as of December 31, 2016, 2015, and 2014. Therefore, there is no income tax benefit (provision)
recognized for the three years ended December 31, 2016.
See accompanying notes.
47
VICOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2016, 2015 and 2014
(In thousands)
Operating activities:
Consolidated net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile consolidated net income (loss) to net cash provided
$ (6,261) $ 5,159
$(14,070)
2016
2015
2014
by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain from sale of equity method investment
. . . . . . . . . . . . . . . . . . . . . . . . .
Increase in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain from disposition of consolidated subsidiary . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in long-term income taxes payable . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in long-term deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on disposal of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Benefit) provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit gain on available for sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Change in current assets and liabilities, net
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . .
8,438
9,142
— (5,000)
—
(28)
1,782
(675)
(183)
(139)
(60)
(18)
(12)
1,499
11,467
(505)
—
506
4
(78)
(94)
4
(22)
(13)
(1,435)
544
Investing activities:
Additions to property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and maturities of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of equity method investment . . . . . . . . . . . . . . . . . . . . . . . .
Deconsolidation of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8,428)
—
—
—
—
2
(93)
(8,519)
(9,090)
360
—
5,000
(392)
60
(204)
(4,266)
9,805
—
—
—
1,634
(472)
18
(139)
(22)
66
(311)
5,682
2,191
(7,128)
3,460
(340)
—
—
22
(43)
(4,029)
Financing activities:
Proceeds from issuance of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of noncontrolling interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of contingent consideration obligations . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interest dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign exchange rates on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,584
(372)
(99)
—
1,113
52
(6,810)
62,980
$56,170
820
(216)
—
—
604
(12)
7,793
55,187
$62,980
788
—
—
(162)
626
60
(1,152)
56,339
$ 55,187
Change in assets and liabilities, excluding effects of disposition of consolidated
subsidiary:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued severance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
780
(3,677)
(158)
339
(195)
61
1,415
$ 2,201
1,880
(111)
(1,301)
(1,709)
(10)
549
$ (1,435) $ 1,499
$ (1,151)
3,202
1,029
300
1,855
26
421
$ 5,682
Supplemental disclosures:
Cash paid during the year for income taxes, net of refunds . . . . . . . . . . . . . . . .
$
230
$
675
$ (1,529)
See accompanying notes.
48
Balance on December 31, 2013 . . . . . . $118
Sales of Common Stock . . . . . . . . . . .
Noncontrolling interest dividends
$392
1
$(138,927) $139,176
788
$ 3,161
$142,337
788
VICOR CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
Years Ended December 31, 2016, 2015 and 2014
(In thousands)
Class B
Common
Stock
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total Vicor
Corporation
Stockholders’
Equity
Treasury
Stock
Noncontrolling
Interest
Total
Equity
$169,474 $108,645
$(526)
787
1,634
6
(13,887)
55
118
393
2
171,901
818
94,758
(471)
(138,927)
(144)
(5)
1,782
(22)
7
4,927
(106)
118
395
2
174,337
1,587
99,685
(577)
(138,927)
(81)
506
(5)
(6,247)
16
1,634
6
(13,887)
55
(13,832)
127,772
820
(144)
(5)
1,782
(22)
7
4,927
(106)
4,821
135,031
1,589
(81)
506
(5)
(6,247)
16
(6,231)
(162)
(183)
(36)
(219)
2,780
(162)
1,634
6
(14,070)
19
(14,051)
130,552
820
(216)
(360)
(1,737)
232
(5)
227
1,054
(837)
(1,742)
1,782
(22)
7
5,159
(111)
5,048
136,085
1,589
(918)
506
(5)
(14)
5
(9)
(6,261)
21
(6,240)
paid . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . .
Components of comprehensive
income, net of tax . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . .
Total comprehensive loss . . . . . . . .
Balance on December 31, 2014 . . . . . .
Sales of Common Stock . . . . . . . . . . .
Acquisition of noncontrolling
interest . . . . . . . . . . . . . . . . . . . . . . .
Disposition of consolidated
subsidiary . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . .
Net settlement stock option
exercises . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . .
Components of comprehensive
income, net of tax . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . .
Total comprehensive income . . . . . .
Balance on December 31, 2015 . . . . . .
Sales of Common Stock . . . . . . . . . . .
Acquisition of noncontrolling
interest . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . .
Net settlement stock option
exercises . . . . . . . . . . . . . . . . . . . . .
Components of comprehensive
income, net of tax . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . . .
Total comprehensive income . . . . . .
Balance on December 31, 2016 . . . . . . $118
$397
$176,344 $ 93,438
$(561)
$(138,927) $130,809
$
208
$131,017
See accompanying notes.
49
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Vicor Corporation (the “Company” or “Vicor”) designs, develops, manufactures, and markets modular
power components and power systems for converting, regulating and controlling electric current. The Company
also licenses certain rights to its technology in return for recurring royalties. The principal markets for the
Company’s power converters and systems are large original equipment manufacturers (“OEMs”) and their
contract manufacturers, and smaller, lower volume users, which are broadly distributed across several major
market areas.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All
intercompany transactions and balances have been eliminated upon consolidation. Two of the Company’s
subsidiaries were not majority owned by the Company prior to 2016, and a third was not majority owned prior to
March 31, 2016. Prior to the transactions described in Note 9, these entities were consolidated by the Company
as management believed that the Company had the ability to exercise control over their activities and operations.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingencies at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Such estimates and assumptions relate to the useful lives of
fixed assets and identified intangible assets, recoverability of long-lived assets, fair value of long-term
investments, allowances for doubtful accounts, the net realizable value of inventory, potential reserves relating to
litigation matters, accrued liabilities, accrued taxes, deferred tax valuation allowances, assumptions pertaining to
share-based payments, and other reserves. Actual results could differ from those based on these estimates and
assumptions, and such differences may be material to the financial statements.
Revenue recognition
Product revenue is recognized in the period when persuasive evidence of an arrangement with a customer
exists, the products are shipped and title has transferred to the customer, the price is fixed or determinable, and
collection is considered probable.
The Company defers revenue and the related cost of sales on shipments to stocking distributors until the
distributors resell the products to their customers. The agreements with these stocking distributors allow them to
receive price adjustment credits or to return qualifying products for credit, as determined by the Company, in
order to reduce the amounts of slow-moving, discontinued, or obsolete product from their inventory. These
stocking distributors are also granted price adjustment credits in the event of a price decrease subsequent to the
date the product was shipped and invoiced to the stocking distributor. Given the uncertainties associated with the
levels of price adjustment credits to be granted to stocking distributors, the sales price to the stocking distributor
is not fixed or determinable until the stocking distributor resells the products to its customers. Therefore, the
Company defers revenue and the related cost of sales on shipments to stocking distributors until the stocking
distributors resell the products to their customers. Accordingly, the Company’s revenue fully reflects
end-customer purchases and is not impacted by stocking distributor inventory levels. Agreements with stocking
distributors limit returns of qualifying product to the Company to a certain percentage of the value of the
50
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Company’s shipments to that stocking distributor during the prior quarter. In addition, stocking distributors are
allowed to return unsold products if the Company terminates the relationship with the stocking distributor. Title
to the inventory transferred to the stocking distributor at the time of shipment or delivery to the stocking
distributor, as well as payment from the stocking distributor, are due in accordance with the Company’s standard
payment terms. These payment terms are not contingent upon the stocking distributors’ sale of the products to
their end-customers. Upon title transfer to stocking distributors, the Company reduces inventory for the cost of
goods shipped, the margin (i.e., revenues less cost of revenues) is recorded as deferred revenue, and an account
receivable is recorded. As of December 31, 2016, the Company had gross deferred revenue of approximately
$3,337,000 and gross deferred cost of revenues of approximately $1,445,000 under agreements with stocking
distributors ($2,042,000 and $882,000, respectively, as of December 31, 2015).
The Company evaluates revenue arrangements with potential multi-element deliverables to determine if
there is more than one unit of accounting. A deliverable constitutes a separate unit of accounting when it has
standalone value and there are no customer-negotiated refund or return rights for the undelivered elements. The
Company enters into arrangements containing multiple elements that may include a combination of
non-recurring engineering services (“NRE”), prototype units, and production units. The Company has determined
NRE and prototype units represent one unit of accounting and production units represent a separate unit of
accounting, based on an assessment of the respective standalone value. The Company defers revenue recognition
for NRE and prototype units until completion of the final milestone under the NRE arrangement, which is
generally the delivery of the prototype. Recognition generally takes place within six to twelve months of the
initiation of the arrangement. Revenue for the production units is recognized upon shipment, consistent with
other product revenue summarized above. During 2016, 2015, and 2014, revenue recognized under multi-element
arrangements accounted for less than 3% of net revenues.
License fees are recognized as earned. The Company recognizes revenue on such arrangements only when
the contract is signed, the license term has begun, all obligations have been delivered to the customer, and
collection is probable.
Foreign currency translation
The financial statements of Vicor Japan Company, Ltd. (“VJCL”), a majority-owned subsidiary, for which
the functional currency is the Japanese Yen, have been translated into U.S. Dollars using the exchange rate in
effect at the balance sheet date for balance sheet amounts and the average exchange rates in effect during the year
for income statement amounts. The gains and losses resulting from the changes in exchange rates from year to
year have been reported in other comprehensive income.
Transaction gains and losses resulting from the remeasurement of foreign currency denominated assets and
liabilities of the Company’s foreign subsidiaries where the functional currency is the U.S. Dollar are included in
other income (expense), net. Foreign currency losses included in other income (expense), net, were
approximately $(268,000), $(161,000), and $(196,000) in 2016, 2015, and 2014, respectively.
Cash and cash equivalents
Cash and cash equivalents include funds held in disbursement (i.e., checking) and money market accounts,
certificates of deposit, and debt securities with maturities of less than three months at the time of purchase. Cash
and cash equivalents are valued at cost, approximating market value. The Company’s money market securities,
which are classified as cash equivalents on the balance sheet, are purchased and redeemed at par value. Their
estimated fair value is equal to their cost, and, due to the nature of the securities and their classification as cash
equivalents, there are no unrealized gains or losses recorded at the balance sheet dates.
51
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Long-term investments
The Company’s principal sources of liquidity are its existing balances of cash and cash equivalents, as well
as cash generated from operations. Consistent with the guidelines of the Company’s investment policy, the
Company can invest, and has historically invested, its cash balances in demand deposit accounts, money market
funds, brokered certificates of deposit and auction rate securities meeting certain quality criteria. All of the
Company’s investments are subject to credit, liquidity, market, and interest rate risk.
The Company’s long-term investments are classified as available-for-sale securities. Available-for-sale
securities are recorded at fair value, with unrealized gains and losses, net of tax, attributable to credit loss
recorded through the statement of operations and unrealized gains and losses, net of tax, attributable to other
non-credit factors recorded in “Accumulated other comprehensive loss,” a component of Total Equity. In
determining the amount of credit loss, the Company compares the present value of cash flows expected to be
collected to the amortized cost basis of the securities, considering credit default risk probabilities and changes in
credit ratings, among other factors.
The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to
maturity, the net amount of which, along with interest and realized gains and losses, is included in “Other income
(expense), net” in the Consolidated Statements of Operations. The Company periodically evaluates investments
to determine if impairment is required, whether an impairment is other than temporary, and the measurement of
an impairment loss. The Company considers a variety of impairment indicators such as, but not limited to, a
significant deterioration in the earnings performance, credit rating, or asset quality of the investment.
Fair value measurements
The Company accounts for certain financial assets at fair value, defined as the price that would be received
to sell an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for
the asset or liability in an orderly transaction between market participants on the measurement date. As such, fair
value is a market-based measurement that should be determined based on assumptions that market participants
would use in pricing an asset or liability. A three-level hierarchy is used to show the extent and level of judgment
used to estimate fair value measurements:
Level 1
Level 2
Inputs used to measure fair value are unadjusted quoted prices available in active markets for
the identical assets or liabilities as of the reporting date.
Inputs used to measure fair value, other than quoted prices included in Level 1, are either
directly or indirectly observable as of the reporting date through correlation with market data,
including quoted prices for similar assets and liabilities in active markets and quoted prices in
inactive markets. Level 2 also includes assets and liabilities valued using models or other
pricing methodologies that do not require significant judgment since the input assumptions used
in the models, such as interest rates and volatility factors, are corroborated by readily
observable data from actively quoted markets for substantially the full term of the financial
instrument.
Level 3
Inputs used to measure fair value are unobservable inputs supported by little or no market
activity and reflect the use of significant management judgment. These values are generally
determined using pricing models for which the assumptions utilize management’s estimates of
market participant assumptions.
The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate
fair value because of the short maturity of these financial instruments.
52
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Allowance for doubtful accounts
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability
of its customers to make required payments, based on assessments of customers’ credit-risk profiles and payment
histories. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required. The Company does not require collateral
from its customers, although there have been circumstances when the Company has required cash in advance
(i.e., a partial down-payment) to facilitate orders in excess of a customer’s established credit limit. To date, such
amounts have not been material.
Inventories
Inventories are valued at the lower of cost (determined using the first-in, first-out method) or net realizable
value. Fixed production overhead is allocated to the inventory cost per unit based on the normal capacity of the
production facilities. Abnormal production costs, including fixed cost variances from normal production
capacity, if any, are charged to cost of revenues in the period incurred. All shipping and handling costs incurred
in connection with the sale of products are included in cost of revenues.
The Company provides reserves for inventories estimated to be excess, obsolete, or unmarketable. The
Company’s estimation process for assessing net realizable value is based upon its known backlog, projected
future demand, historical consumption and expected market conditions. If the Company’s estimated demand and/
or market expectations were to change or if product sales were to decline, the Company’s estimation process may
cause larger inventory reserves to be recorded, resulting in larger charges to cost of revenues.
Concentrations of risk
Financial instruments potentially subjecting the Company to significant concentrations of credit risk consist
principally of cash and cash equivalents, of which a significant portion is held by one financial institution, long-
term investments, and trade accounts receivable. The Company maintains cash and cash equivalents and certain
other financial instruments with various large financial institutions. Generally, amounts invested with these
financial institutions are in excess of federal deposit insurance limits. The Company has not experienced any
losses in such accounts, and management believes the Company is not exposed to significant credit risk. The
Company’s long-term investments consist of highly rated (Aaa/AA+) municipal and corporate debt securities
which, as of December 31, 2016, consist of a single auction rate security with a par value of $3,000,000, which is
collateralized by student loans. Through December 31, 2016, auctions held for the Company’s auction rate
security have failed. The funds associated with an auction rate security that has failed auction may not be
accessible until a successful auction occurs, a buyer is found outside of the auction process, the security is called,
or the underlying securities have matured. If the credit rating of the issuer of the auction rate security held
deteriorates, the Company may be required to adjust the carrying value of the investment for an other-than-
temporary decline in value through an impairment charge. The Company’s investment policy, approved by the
Board of Directors, limits the amount the Company may invest in any issuer, thereby reducing credit risk
concentrations.
The Company’s products are sold worldwide to customers ranging from smaller, independent manufacturers
of highly specialized electronic devices, to larger OEMs and their contract manufacturers. The Company’s Brick
Business Unit (“BBU”) has customers concentrated in aerospace and aviation, defense electronics, industrial
automation and equipment, medical diagnostics, rail transportation, and test and measurement instrumentation.
The Company’s VI Chip and Picor subsidiaries have customers concentrated in the datacenter and supercomputer
segments of the computing market, although they also target applications in aerospace and aviation, defense
53
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
electronics, networking equipment, solid state lighting, test and measurement instrumentation, and transportation
(electric and hybrid vehicles and autonomous vehicles). While, overall, the Company has a broad customer base
and sells into a variety of industries, VI Chip and Picor have derived a substantial portion of their revenue from a
limited number of customers. This concentration of revenue is a reflection of the relatively early stage of
adoption of the technologies, architectures and products offered by these subsidiaries, and their targeting of
market leading innovators as initial customers. Concentrations of credit risk with respect to trade accounts
receivable are limited due to the number of entities comprising the Company’s customer base. As of
December 31, 2016 and 2015, one customer accounted for approximately 14.2% and 21.9%, respectively, of
trade account receivables.
During 2016, 2015, and 2014, one customer accounted for approximately 16.4%, 16.2%, and 14.7% of net
revenues, respectively. International sales, based on customer location, as a percentage of total net revenues,
were approximately 59.4% in 2016, 59.6% in 2015, and 60.5% in 2014. Net revenues from customers in China,
our largest international market, accounted for approximately 32.1% of total net revenues in 2016, approximately
34.2% in 2015, and approximately 32.3% in 2014, respectively.
Components and materials used in the Company’s products are purchased from a variety of vendors. While
most of the components are available from multiple sources, some key components for certain VI Chip and Picor
products, in particular, are supplied by single vendors. In instances of single source items, the Company
maintains levels of inventories management considers appropriate to enable meeting the delivery requirements of
customers. If suppliers or subcontractors cannot provide their products or services on time or to the required
specifications, the Company may not be able to meet the demand for its products and its delivery times may be
negatively affected.
Long-lived assets
The Company reviews property, plant and equipment and finite-lived intangible assets for impairment
whenever events or changes in circumstances indicate the carrying value of such assets may not be recoverable.
Management determines whether the carrying value of an asset or asset group is recoverable based on
comparison to the undiscounted expected future cash flows the assets are expected to generate over their
remaining economic lives. If an asset value is not recoverable, the impairment loss is equal to the amount by
which the carrying value of the asset exceeds its fair value, which is determined by either a quoted market price,
if any, or a value determined by utilizing a discounted cash flow technique. Evaluation of impairment of long-
lived assets requires estimates of future operating results that are used in the preparation of the expected future
undiscounted cash flows. Actual future operating results and the remaining economic lives of our long-lived
assets could differ from the estimates used in assessing the recoverability of these assets. These differences could
result in impairment charges, which could be material.
Intangible assets
Values assigned to patents are amortized using the straight-line method over periods ranging from three to
20 years. Patents and other intangible assets are included in “Other assets” in the accompanying Consolidated
Balance Sheets.
Advertising expense
The cost of advertising is expensed as incurred. The Company incurred $1,818,000, $1,762,000, and
$1,832,000 in advertising costs during 2016, 2015 and 2014, respectively.
54
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Product warranties
The Company generally offers a two-year warranty for all of its products, though it is party to a limited
number of supply agreements with certain customers contractually committing the Company to warranty and
indemnification requirements exceeding those to which the Company has been exposed in the past. Effective
January 1, 2017, the Company extended the warranty period to three years for certain military grade products
sold after that date. The Company provides for the estimated cost of product warranties at the time product
revenue is recognized. Factors influencing the Company’s warranty reserves include the number of units sold,
historical and anticipated rates of warranty returns, and the cost per return. The Company periodically assesses
the adequacy of warranty reserves and adjusts the amounts as necessary. Warranty obligations are included in
“Accrued expenses” in the accompanying Consolidated Balance Sheets.
Legal Costs
Legal costs in connection with litigation are expensed as incurred.
Net income (loss) per common share
The Company computes basic net income (loss) per share using the weighted average number of common
shares outstanding and diluted net income (loss) per share using the weighted average number of common shares
outstanding plus the effect of outstanding dilutive stock options, if any. The following table sets forth the
computation of basic and diluted net income (loss) per share for the years ended December 31 (in thousands,
except per share amounts):
2016
2015
2014
Numerator:
Net income (loss) attributable to Vicor Corporation . . . . . . . .
$ (6,247)
$ 4,927
$(13,887)
Denominator:
Denominator for basic net income (loss) per share-weighted
average shares (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38,842
38,754
38,569
Effect of dilutive securities:
Employee stock options (2)
. . . . . . . . . . . . . . . . . . . . . . .
—
392
—
Denominator for diluted net income (loss) per share-adjusted
weighted-average shares and assumed conversions (3) . . . .
38,842
39,146
38,569
Basic net income (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.16)
Diluted net income (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.16)
$
$
0.13
0.13
$
$
(0.36)
(0.36)
(1) Denominator represents weighted average number of Common Shares and Class B Common Shares
outstanding.
(2) Options to purchase 1,696,222, 238,792, and 1,895,675 shares of Common Stock in 2016, 2015, and 2014,
respectively, were not included in the calculation of net income (loss) per share as the effect would have
been antidilutive.
(3) Denominator represents weighted average number of Common Shares and Class B Common Shares
outstanding for the year, adjusted to include the dilutive effect, if any, of outstanding options.
55
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Income taxes
Deferred tax assets and liabilities are determined based on the differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted income tax rates and laws expected to be in
effect when the temporary differences are expected to reverse. Deferred tax assets are reduced by a valuation
allowance if management determines it is more likely than not that some portion or all of the deferred tax assets
will not be realized. All deferred tax assets and liabilities are classified as noncurrent.
The Company follows a two-step process to determine the amount of tax benefit to recognize. The first step
is to evaluate the tax position to determine the likelihood it would be sustained upon examination by a tax
authority. If the tax position is deemed “more-likely-than-not” to be sustained, the second step is to assess the tax
position to determine the amount of tax benefit to be recognized in the financial statements. The amount of the
benefit that may be recognized is the largest amount that possesses greater than 50 percent likelihood of being
realized upon ultimate settlement. If the tax position does not meet the “more-likely-than-not” threshold, then it
is not recognized in the financial statements. Additionally, the Company accrues interest and penalties, if any,
related to unrecognized tax benefits as a component of income tax expense. The unrecognized tax benefits,
including accrued interest and penalties, if any, are included in “Long-term income taxes payable” in the
accompanying Consolidated Balance Sheets.
Stock-based compensation
The Company uses the Black-Scholes option-pricing model to calculate the grant-date fair value of stock
option awards, whether they possess time-based vesting provisions or performance-based vesting provisions. For
stock options with time-based vesting provisions, the calculated compensation expense, net of expected
forfeitures, is recognized on a straight-line basis over the service period of the award, which is generally five
years for stock options. For stock options with performance-based vesting provisions, recognition of
compensation expense, net of expected forfeitures, commences if and when the achievement of the performance
criteria is deemed probable. For stock options with performance-based vesting provisions, compensation
expense, net of expected forfeitures, when recognized, is recognized over the relevant performance period.
Comprehensive income (loss)
The components of comprehensive income (loss) include, in addition to net income (loss), unrealized gains
and losses on investments, net of tax and foreign currency translation adjustments related to VJCL, net of tax.
Impact of recently issued accounting standards
In August 2016, the Financial Accounting Standards Board (“FASB”) issued guidance to clarify how certain
cash receipts and cash payments should be presented in the statement of cash flows. These include debt
prepayment, settlement of zero-coupon debt instruments, contingent consideration payments made after a
business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of
corporate-owned life insurance policies, distributions received from equity method investees and beneficial
interests in securitization transactions. The new guidance is effective for interim and annual reporting periods
beginning after December 15, 2017, with early adoption permitted. The Company has not yet determined the
impact this new guidance will have on its consolidated financial statements and related disclosures.
In June 2016, the FASB issued new guidance which will require measurement and recognition of expected
credit losses on certain types of financial instruments. It also modifies the impairment model for
available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets
56
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
with credit deterioration since their origination. The new guidance is effective for interim and annual reporting
periods beginning after December 15, 2019, with early adoption permitted. It is required to be applied on a
modified-retrospective approach with certain elements being adopted prospectively. The Company has not yet
determined the impact this new guidance will have on its consolidated financial statements
In March 2016, the FASB issued new guidance for employee share-based payment accounting, which makes
several modifications to existing guidance related to the accounting for forfeitures, employer tax withholding on
share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. This
new guidance also clarifies the statement of cash flows presentation for certain components of share-based
awards. In terms of the accounting for forfeitures, the new guidance allows an option for them to either be
estimated, as currently required, or recognized when they occur. The Company will continue to estimate
forfeitures. The standard is effective for interim and annual reporting periods beginning after December 15, 2016,
with early adoption permitted. The Company does not anticipate the new guidance will have a material impact on
its consolidated financial statements and related disclosures.
In February 2016, the FASB issued new guidance for lease accounting, which will require lessees to
recognize leases on the balance sheet and disclose key information about leasing arrangements. The new
guidance establishes a right-of-use model (“ROU”) that will require a lessee to recognize a ROU asset and a
lease liability on the balance sheet for all leases with a term longer than twelve months. Leases will be classified
as finance or operating, with classification affecting the pattern and classification of expense recognition in the
income statement. For lessors, the guidance modifies the classification criteria and accounting for sales-type and
direct financing leases. The new standard is effective for interim and annual periods beginning after
December 15, 2018, with early adoption permitted. The Company plans to adopt the new guidance effective
January 1, 2019. The new standard must be adopted using a modified retrospective transition which includes
certain practical expedients. The Company has not yet determined the impact this new guidance will have on its
consolidated financial statements and related disclosures.
In July 2015, the FASB issued new guidance for inventory accounting, which will require companies to
measure in scope inventory at the lower of cost or net realizable value. Current guidance requires an entity to
measure inventory at the lower of cost or market. The new guidance does not apply to inventory that is measured
using last-in, first-out (“LIFO”) or retail inventory methods. The guidance applies to all other inventory, which
includes inventory that is measured using first-in, first-out (“FIFO”), which the Company employs, or average
cost methods. The new guidance will be effective for the Company on January 1, 2017, and is to be applied
prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The
Company does not anticipate the new guidance will have a material impact on its consolidated financial
statements and related disclosures.
In May 2014, the FASB issued new guidance for revenue recognition, which will require an entity to
recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services
to customers. The new guidance, which includes several amendments, will replace most existing revenue
recognition guidance in U.S. Generally Accepted Accounting Principles when it becomes effective which will be,
for the Company, on January 1, 2018. The new standard permits the use of either the retrospective or cumulative
effect transition method. As described in Note 2 — Significant Accounting Policies, Revenue Recognition, of
these Notes to the Consolidated Financial Statements, the Company defers revenue and the related cost of sales
on shipments to stocking distributors until the distributors resell the products to their customers. Upon adoption
of the new guidance, the Company will no longer be permitted to defer revenue until sale by the stocking
distributor to the end customer, but rather, will be required to estimate the effects of returns and allowances
provided to stocking distributors and record revenue at the time of sale to the stocking distributor. The Company
currently plans to utilize the cumulative effect transition method for adoption of the standard. Upon adoption, the
Company will recognize the cumulative effect of adopting this guidance as an adjustment to the balance of
57
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
retained earnings as of January 1, 2018. The Company is continuing to evaluate the future impact and method of
adoption the new guidance will have on its consolidated financial statements and related disclosures.
Other new pronouncements issued but not effective until after December 31, 2016 are not expected to have
a material impact on the Company’s consolidated financial statements.
3. STOCK-BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS
Vicor currently grants options for the purchase of common stock (i.e., “stock options”) under the following
equity compensation plans that are stockholder-approved:
Amended and Restated 2000 Stock Option and Incentive Plan (the “2000 Plan”) — Under the 2000
Plan, the Board of Directors or the Compensation Committee of the Board of Directors may grant stock
incentive awards based on the Company’s Common Stock, including stock options, stock appreciation
rights, restricted stock, performance shares, unrestricted stock, deferred stock, 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 4,000,000 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.
Picor Corporation (“Picor”), a privately held, majority-owned subsidiary of Vicor, currently grants stock
options under the following equity compensation plan that has been approved by its Board of Directors:
2001 Stock Option and Incentive Plan, as amended (the “2001 Picor Plan”) — Under the 2001 Picor
Plan, the Board of Directors of Picor may grant equity-based awards associated with Picor Common Stock,
including stock options, restricted stock, or unrestricted stock. Awards may be granted to employees and
other key persons, including non-employee directors and full or part-time officers. No incentive stock
options have been granted since November 11, 2011, and no such options were outstanding as of
December 31, 2015. Non-qualifying stock options may be granted to employees at a price at least equal to
the fair market value per share of Picor Common Stock, based on judgments made by Picor’s Board of
Directors on the date of grant. All stock option awards must be approved by both the Picor Board of
Directors and the Compensation Committee of the Company’s Board of Directors. A total of
20,000,000 shares of Picor Common Stock have been reserved for issuance under the 2001 Picor Plan. The
period of time during which an option may be exercised and the vesting periods are determined by the Picor
Board of Directors. The term of each option may not exceed 10 years from the date of grant.
VI Chip Corporation (“VI Chip”), a privately held, majority-owned subsidiary of Vicor, currently grants
stock options under the following equity compensation plan that has been approved by its Board of Directors:
2007 Stock Option and Incentive Plan, as amended (the “2007 VI Chip Plan”) — Under the 2007 VI
Chip Plan, the Board of Directors of VI Chip may grant equity-based awards associated with VI Chip
Common Stock, including stock options, restricted stock, or unrestricted stock. Awards may be granted to
employees and other key persons, including non-employee directors and full or part-time officers. No
incentive stock options have been granted since November 11, 2011, and no such options were outstanding
as of December 31, 2016. Non-qualifying stock options may be granted to employees at a price at least
equal to the fair market value per share of the VI Chip Common Stock, based on judgments made by VI
Chip’s Board of Directors on the date of grant. A total of 12,000,000 shares of VI Chip Common Stock have
58
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
been reserved for issuance under the 2007 VI Chip Plan. The period of time during which an option may be
exercised and the vesting periods are determined by the VI Chip Board of Directors. The term of each
option may not exceed 10 years from the date of grant.
All time-based (i.e., non-performance-based) options for the purchase of Vicor common stock are granted at
an exercise price equal to or greater than the market price for Vicor common stock at the date of the grant. All
time-based (i.e., non-performance-based) options for the purchase of VI Chip or Picor common stock are granted
at an exercise price equal to or greater than the estimated fair market value of the respective share price, based on
a value calculated using a discounted cash flow model at the date of grant consistent with the requirements of
Section 409A of the Internal Revenue Code.
On December 31, 2010, the Company granted 2,984,250 non-qualified stock options under the 2007 VI
Chip Plan with performance-based vesting provisions tied to achievement of certain margin targets by VI Chip
Corporation. As of December 31, 2010, the Company determined it was probable the margin targets would be
achieved and, accordingly, began recording stock-based compensation expense relating to these options
beginning January 1, 2011. During the third quarter of 2016, the Company determined the margin targets would
not be met prior to the expiration date of the corresponding options, as VI Chip’s revenue growth has been below
levels necessary to achieve the targets. As a result, the Company reversed approximately $768,000 of previously
recorded stock-based compensation expense in the third quarter of 2016, representing all expense taken for these
performance-based options through June 30, 2016. This resulted in decreases in cost of revenues of
$86,000, selling, general and administrative expense of $516,000, and research and development expense of
$166,000 in the third quarter of 2016.
During the fourth quarter of 2014, the Company, in effect, cancelled certain stock options previously
awarded to three corporate officers in 2013 and awarded to those officers new stock options representing an
equivalent value, as calculated using the Black-Scholes option-pricing model. Subsequent to the 2013 awards, the
Company determined those grants exceeded the limit on the number of stock options that may be granted to an
individual in a year, according to the terms of the 2000 Plan. In connection with this action, recorded for
financial reporting purposes as a modification of existing options, a total of 129,028 stock options awarded in
2013 were cancelled and a total of 150,355 new stock options were awarded. The cancellation of the 2013 stock
options and the award of new stock options did not have a material impact on the Company’s results of
operations.
Stock-based compensation expense for the years ended December 31 was as follows (in thousands):
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development
$ 95
412
(1)
$ 230
1,246
306
$ 183
1,176
275
Total stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . .
$506
$1,782
$1,634
2016
2015
2014
The decrease in stock-based compensation expense in 2016 compared to 2015 was primarily due to the
reversal of previously recorded stock-based compensation for VI Chip performance-based options, described
above.
59
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fair value for options awarded 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:
Vicor:
Non Performance-
based Stock
Options
2016
2015
2014
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected lives (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.5% 2.0% 2.2%
—
45% 51% 52%
7.2
6.6
7.2
—
VI Chip:
2016
2015
2014
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected lives (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.7% 2.1% 2.3%
—
34% 37% 41%
6.5
6.5
6.5
—
Picor:
2016
2015
2014
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected lives (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.5% 1.9% 2.2%
—
42% 41% 42%
6.5
6.5
6.5
—
Risk-free interest rate:
Vicor — 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.
Picor and VI Chip — Picor and VI Chip use the yield to maturity of a seven-year U.S. Treasury bond, as it
most closely aligns to the expected exercise period.
Expected dividend yield:
Vicor — 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.
Picor and VI Chip — Picor and VI Chip have not and do not expect to declare and pay dividends in the
foreseeable future. Therefore, the expected dividend yield is not applicable.
Expected volatility:
Vicor — 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.
Picor — As Picor is a nonpublic entity, historical volatility information is not available. An industry sector
index of six publicly traded fabless semiconductor firms was developed for calculating historical volatility for
Picor. Historical prices for each of the companies in the index based on the market price of the shares on each
day of trading over the expected term were used to determine the historical volatility.
60
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VI Chip — As VI Chip is a nonpublic entity, historical volatility information is not available. An industry
sector index of 11 publicly traded fabless semiconductor firms was developed for calculating historical volatility
for VI Chip. Historical prices for each of the companies in the index based on the market price of the shares on
each day of trading over the expected term were used to determine the historical volatility.
Expected term:
Vicor — 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.
Picor and VI Chip — Due to the lack of historical information, the “simplified” method as prescribed by the
Securities and Exchange Commission is used to determine the expected term.
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.
Vicor — The Company currently expects, for Vicor options, based on an analysis of historical forfeitures,
approximately 86% of its options will actually vest. An annual forfeiture rate of 5.00% has been applied to all
unvested options as of December 31, 2016. For 2015 and 2014, the Company expected 88% and 78%,
respectively, of its options would actually vest and applied an annual forfeiture rate of 4.25% and 8.00%,
respectively.
Picor — The Company currently expects, for Picor options, based on an analysis of historical forfeitures,
approximately 92% of its options will actually vest. An annual forfeiture rate of 2.50% has been applied to all
unvested options as of December 31, 2016. For 2015 and 2014, the Company expected 93% and 92%,
respectively, of its options would actually vest and applied an annual forfeiture rate of 2.50% and 2.75%,
respectively.
VI Chip — The Company currently expects, for VI Chip options, based on an analysis of historical
forfeitures, approximately 76% of its options will actually vest. An annual forfeiture rate of 9.00% has been
applied to all unvested options as of December 31, 2016. For 2015 and 2014, the Company expected 78% and
77%, respectively, of its options would actually vest and applied an annual forfeiture rate of 8.50% and 7.75%,
respectively.
61
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Vicor Stock Options
A summary of the activity under Vicor’s stock option plans as of December 31, 2016 and changes during
the year then ended, is presented below (in thousands except for share and weighted-average data):
Outstanding on December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-
Average
Remaining
Contractual
Life in
Years
Aggregate
Intrinsic
Value
Options
Outstanding
1,848,067
83,817
(18,737)
(216,925)
Weighted-
Average
Exercise
Price
$ 8.57
$10.32
$ 9.21
$ 7.25
Outstanding on December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . .
1,696,222
$ 8.82
Exercisable on December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . .
730,388
$ 7.74
Vested or expected to vest as of December 31, 2016 (1) . . . . . . .
1,646,808
$ 8.76
6.83
6.51
6.82
$10,661
$ 5,375
$10,437
(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, 2015 and 2014 the Company had options exercisable for 565,861 and 306,173 shares
respectively, for which the weighted average exercise prices were $7.24 and $6.90, respectively.
During the years ended December 31, 2016, 2015, and 2014 under all plans, 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 $1,392,000, $928,000, and $751,000, respectively. The total amount of
cash received by the Company from options exercised in 2016, 2015, and 2014, was $1,572,000, $805,000, and
$788,000, respectively. The total grant-date fair value of stock options that vested during the years ended
December 31, 2016, 2015, and 2014 was approximately $365,000, $1,194,000, and $1,096,000, respectively.
As of December 31, 2016, there was $870,000 of total unrecognized compensation cost related to unvested
non-performance based awards for Vicor. That cost is expected to be recognized over a weighted-average period
of 1.5 years for those awards. The expense will be recognized as follows: $490,000 in 2017, $245,000 in 2018,
$103,000 in 2019, $28,000 in 2020, and $4,000 in 2021.
The weighted-average fair value of Vicor options granted was $4.94, $6.76, and $5.50, in 2016, 2015, and
2014, respectively.
62
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Picor Stock Options
A summary of the activity under the 2001 Picor Plan as of December 31, 2016 and changes during the year
then ended, is presented below (in thousands except for share and weighted-average data):
Outstanding on December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options
Outstanding
9,725,067
603,000
(113,560)
(683,520)
Outstanding on December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . .
9,530,987
Weighted-
Average
Exercise
Price
$0.62
$0.88
$0.65
$0.88
$0.62
Exercisable on December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . .
7,915,219
$0.62
Vested or expected to vest as of December 31, 2016 (1) . . . . . . .
9,470,822
$0.62
Weighted-
Average
Remaining
Contractual
Life in
Years
Aggregate
Intrinsic
Value
4.56
4.09
4.54
$1,262
$1,030
$1,256
(1)
In addition to the vested options, the Company expects a portion of the unvested options to vest at some
point in the future. Options expected to vest is calculated by applying an estimated forfeiture rate to the
unvested options.
As of December 31, 2015 and 2014, Picor had options exercisable for 8,053,490 and 6,643,377 shares,
respectively, for which the weighted average exercise prices were $0.64 and $0.67, respectively.
During the years ended December 31, 2016 and 2015, the total intrinsic value of Picor options exercised was
$24,000 and $72,000, respectively. The total amount of cash received by Picor from options exercised in 2016
and 2015 was $17,000 and $14,000, respectively. There were no Picor options exercised in 2014. The total grant-
date fair value of stock options that vested during the years ended December 31, 2016, 2015, and 2014 was
approximately $155,000, $39,000, and $0, respectively.
As of December 31, 2016, there was $285,000 of total unrecognized compensation cost related to unvested
share-based awards for Picor. That cost is expected to be recognized over a weighted-average period of 2.8 years
for all Picor awards. The expense will be recognized as follows: $116,000 in 2017, $78,000 in 2018, $45,000 in
2019, $29,000 in 2020, and $17,000 in 2021.
The weighted-average fair value of Picor options granted was $0.26 in 2016, $0.48 in 2015, and $0.19 in
2014.
63
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VI Chip Stock Options
A summary of the activity under the 2007 VI Chip Plan as of December 31, 2016 and changes during the
year then ended, is presented below (in thousands except for share and weighted-average data):
Weighted-
Average
Remaining
Contractual
Life in
Years
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value
Options
Outstanding
Outstanding on December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,097,500
5,000
(168,750)
$1.00
$1.00
$1.00
— $ —
Outstanding on December 31, 2016 (1) . . . . . . . . . . . . . . . . . . . .
9,933,750
$1.00
Exercisable on December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . .
7,074,650
$1.00
Vested or expected to vest as of December 31, 2016 (2) . . . . . . .
9,747,034
$1.00
1.88
0.88
1.83
$—
$—
$—
(1) Of the total VI Chip options outstanding on December 31, 2016, 5,500,000 options had been granted to
Dr. Vinciarelli, the Company’s Chief Executive Officer.
(2)
In addition to the vested options, the Company expects a portion of the unvested options to vest at some
point in the future. Options expected to vest is calculated by applying an estimated forfeiture rate to the
unvested options.
As of December 31, 2015 and 2014, VI Chip had options exercisable for 7,042,600 and 7,377,950 shares,
respectively, for which the weighted average exercise price was $1.00.
There were no VI Chip options exercised in 2016 and 2014. The total intrinsic value of VI Chip options
exercised in 2015 was zero. The total amount of cash received by VI Chip from options exercised in 2015 was
$1,000.
As of December 31, 2016, there was $51,000 of total unrecognized compensation cost related to unvested
share-based awards for VI Chip. That cost is expected to be recognized over a weighted-average period of
2.1 years for all VI Chip awards. The expense will be recognized as follows: $39,000 in 2017, and $12,000 in
2018.
The weighted-average fair value of VI Chip options granted was $0.01, $0.01, and $0.02 in 2016, 2015, and
2014, respectively.
401(k) Plan
The Company sponsors a savings plan available to all domestic employees, which qualifies under
Section 401(k) of the Internal Revenue 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 3% 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 $882,000, $854,000, and $877,000 in 2016, 2015, and 2014,
respectively.
64
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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, 2016, 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.
4. LONG-TERM INVESTMENTS
As of December 31, 2016 and 2015, the Company held one auction rate security that had experienced failed
auctions of $3,000,000 at par value, which was purchased through and is held by a broker-dealer affiliate of Bank
of America, N.A. (the “Failed Auction Security”). The Failed Auction Security held by the Company is Aaa/AA+
rated by the major credit rating agencies, is collateralized by student loans, and is guaranteed by the U.S.
Department of Education under the Federal Family Education Loan Program. Management is not aware of any
reason to believe the issuer of the Failed Auction Security is presently at risk of default. The interest rate for the
security is reset at regular intervals ranging from seven to 28 days. The auction rate security held by the
Company traded at par prior to February 2008 and is callable at par at the option of the issuer. Through
December 31, 2016, the Company has continued to receive interest payments on the Failed Auction Security in
accordance with the terms of its indenture. Management believes the Company ultimately should be able to
liquidate the Failed Auction Security without significant loss primarily due to the overall quality of the issue held
and the collateral securing the substantial majority of the underlying obligation. However, current conditions in
the auction rate securities market have led management to conclude the recovery period for the Failed Auction
Security exceeds 12 months. As a result, the Company continued to classify the Failed Auction Security as long-
term as of December 31, 2016.
The following is a summary of available-for-sale securities (in thousands):
December 31, 2016
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Cost
Estimated Fair
Value
Failed Auction Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,000
$—
$492
$2,508
December 31, 2015
Failed Auction Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brokered certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated Fair
Value
$—
—
$—
$474
—
$474
$2,526
340
$2,866
Cost
$3,000
340
$3,340
As of December 31, 2016 and 2015, the Failed Auction Security had been in an unrealized loss position for
greater than 12 months.
The amortized cost and estimated fair value of available-for-sale securities on December 31, 2016, by
contractual maturities, are shown below (in thousands):
Due in twenty to forty years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,000
$2,508
Based on the fair value measurements described in Note 5, the fair value of the Failed Auction Security on
December 31, 2016, with a par value of $3,000,000, was estimated by the Company to be approximately
$2,508,000. The gross unrealized loss of $492,000 on the Failed Auction Security consists of two types of
Cost
Estimated Fair
Value
65
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
estimated loss: an aggregate credit loss of $59,000 and an aggregate temporary impairment of $433,000. In
determining the amount of credit loss, the Company compared the present value of cash flows expected to be
collected to the amortized cost basis of the security, considering credit default risk probabilities and changes in
credit ratings as significant inputs, among other factors (see Note 5).
The following table represents a rollforward of the activity related to the credit loss recognized in earnings
on available-for-sale auction rate securities held by the Company for the years ended December 31 (in
thousands):
Balance at the beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions in the amount related to credit gain for which other-than-
2016
$ 72
2015
$ 84
2014
$ 395
temporary impairment was not previously recognized . . . . . . . . . . . . . . . . .
Reductions for securities sold during the period . . . . . . . . . . . . . . . . . . . . . . . .
(13)
—
(12)
—
(39)
(272)
Balance at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 59
$ 72
$ 84
At this time, the Company has no intent to sell the Failed Auction Security and does not believe it is more
likely than not the Company will be required to sell the security. If current market conditions deteriorate further,
the Company may be required to record additional unrealized losses. If the credit rating of the security
deteriorates, the Company may be required to adjust the carrying value of the investment through impairment
charges recorded in the Consolidated Statement of Operations, and any such impairment adjustments may be
material.
Based on the Company’s ability to access cash and cash equivalents and its expected operating cash flows,
management does not anticipate the current lack of liquidity associated with the Failed Auction Security held will
affect the Company’s ability to execute its current operating plan.
5. FAIR VALUE MEASUREMENTS
The Company accounts for certain financial assets at fair value, defined as the price that would be received
to sell an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for
the asset or liability in an orderly transaction between market participants on the measurement date. As such, fair
value is a market-based measurement that should be determined based on assumptions market participants would
use in pricing an asset or liability. A three-level hierarchy is used to show the extent and level of judgment used
to estimate fair value measurements.
Assets and liabilities measured at fair value on a recurring basis included the following as of December 31,
2016 (in thousands):
Using
Significant
Other
Observable
Inputs
(Level 2)
Quoted Prices
in Active
Markets
(Level 1)
Significant
Unobservable
Inputs
(Level 3)
Total Fair
Value as of
December 31,
2016
Cash equivalents:
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,114
$—
$ —
$10,114
Long-term investments:
Failed Auction Security . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities:
Contingent consideration obligations . . . . . . . . . . . . . . .
—
—
—
—
2,508
2,508
(253)
(253)
66
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Assets measured at fair value on a recurring basis included the following as of December 31, 2015 (in
thousands):
Using
Significant
Other
Observable
Inputs
(Level 2)
Quoted Prices
in Active
Markets
(Level 1)
Significant
Unobservable
Inputs
(Level 3)
Total Fair
Value as of
December 31,
2015
Cash equivalents:
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,412
$ —
$ —
$10,412
Long-term investments:
Failed Auction Security . . . . . . . . . . . . . . . . . . . . . . . . .
Brokered certificates of deposit . . . . . . . . . . . . . . . . . . .
Liabilities:
Contingent consideration obligation . . . . . . . . . . . . . . .
—
—
—
—
340
—
2,526
—
2,526
340
(144)
(144)
The Company has classified its contingent consideration obligations as Level 3 because the fair value for
this liability was determined using unobservable inputs. The liability was based on estimated sales of legacy
products over the period of royalty payments at the royalty rate (see Note 9), discounted using the Company’s
estimated cost of capital.
The Company has classified its brokered certificates of deposit as Level 2 because the fair value for these
investments was determined utilizing observable inputs from non-active markets. The fair values fluctuate with
changes in market interest rates obtained from information available in publicly quoted markets. Management
tested the reported fair values by comparing them to net present value calculations utilizing a discount rate based
on U.S. Treasury bill and bond yields for similar maturities.
As of December 31, 2016, there was insufficient observable auction rate security market information
available to determine the fair value of the Failed Auction Security using Level 1 or Level 2 inputs. As such, the
Company’s investment in the Failed Auction Security was deemed to require valuation using Level 3 inputs.
Management, after consulting with advisors, valued the Failed Auction Security using analyses and pricing
models similar to those used by market participants (i.e., buyers, sellers, and the broker-dealers responsible for
execution of the Dutch auction pricing mechanism by which each issue’s interest rate was set). Management
utilized a probability weighted discounted cash flow (“DCF”) model to determine the estimated fair value of this
security as of December 31, 2016. The major assumptions used in preparing the DCF model included: estimates
for the amount and timing of future interest and principal payments based on default probability assumptions
used to measure the credit loss of 2.0%; the rate of return required by investors to own this type of security in the
current environment, which we estimate to be 5.0% above the risk free rate of return; and an estimated timeframe
of three to five years for successful auctions for this type of security to occur. In making these assumptions,
management considered relevant factors including: the formula applicable to each security defining the interest
rate paid to investors in the event of a failed auction (the “Penalty Rate”); forward projections of the interest rate
benchmarks specified in such formulas; the likely timing of principal repayments; the probability of full
repayment considering the guarantees by the U.S. Department of Education of the underlying student loans,
guarantees by other third parties, and additional credit enhancements provided through other means; and publicly
available pricing data for recently issued student loan asset-backed securities not subject to auctions. In
developing its estimate of the rate of return required by investors to own these securities, management compared
the Penalty Rate of the Failed Auction Security with yields of actively traded long-term bonds with similar
characteristics and, reflecting the limited liquidity for auction rate securities and the discounts to par value seen
in recent tender offers by issuers and arm’s length market transactions between informed buyers and sellers,
67
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
estimated the implied yield (i.e., the discount to par value) necessary to complete a sale of the Failed Auction
Security. Management has calculated an increase or decrease in the liquidity risk premium of 5.0% referenced
above of 1.0% (i.e., 100 basis points) as used in the model, would decrease or increase, respectively, the fair
value of the Failed Auction Security by approximately $100,000.
For purposes of the valuation process for the Failed Auction Security, “management” consists of senior
members of the Company’s finance department. The fair value measurements for the Failed Auction Security are
reviewed and updated on a quarterly basis. The calculations are prepared by the Company’s Corporate
Controller, in conjunction with information provided by its valuation advisors, and include the development and
substantiation of the unobservable inputs. The methodology, assumptions, and calculations are reviewed and
approved by the Company’s Chief Financial Officer and Chief Accounting Officer.
The significant unobservable inputs used in the fair value measurement of the Company’s Failed Auction
Security are the cumulative probability of earning the maximum rate until maturity, the cumulative probability of
principal return prior to maturity, the cumulative probability of default, the liquidity risk premium, and the
recovery rate in default. Significant increases (decreases) in any of those inputs in isolation would result in
changes in fair value measurement. Significant increases (decreases) in the cumulative probability of earning the
maximum rate until maturity, the cumulative probability of principal return prior to maturity, and the recovery
rate in default would result in a higher (lower) fair value measurement, while increases (decreases) in the
cumulative probability of default and the liquidity risk premium would result in a (lower) higher fair value
measurement.
Generally, the interrelationships are such that a change in the assumption used for the cumulative
probability of principal return prior to maturity is accompanied by a directionally similar change in the
assumption used for the cumulative probability of earning the maximum rate until maturity and a directionally
opposite change in the assumptions used for the cumulative probability of default and the liquidity risk premium.
The recovery rate in default is somewhat independent and based upon the securities’ specific underlying assets
and published recovery rate indices.
Quantitative information about Level 3 fair value measurements as of December 31, 2016 are as follows
(dollars in thousands):
Fair
Value
Valuation
Technique
Unobservable Input
Failed Auction Security . . . . . . . . . . . . . .
$2,508 Discounted
cash flow
Cumulative probability of earning
the maximum rate until maturity
Cumulative probability of principal
return prior to maturity
Cumulative probability of default
Liquidity risk premium
Recovery rate in default
Weighted
Average
0.04%
93.72%
6.24%
5.00%
40.00%
The change in the estimated fair value calculated for the investment valued on a recurring basis utilizing
Level 3 inputs (i.e., the Failed Auction Security) for the year ended December 31, 2016 was as follows (in
thousands):
Balance at the beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit gain on available- for- sale security included in Other income (expense), net . . . . . . . .
Loss included in Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,526
13
(31)
Balance at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,508
68
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The change in the estimated fair value calculated for the liabilities valued on a recurring basis utilizing
Level 3 inputs (i.e., the Contingent consideration obligations) for the year ended December 31, 2016 was as
follows (in thousands):
Balance at the beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligation incurred upon acquisition of noncontrolling interest (see Note 9) . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$144
208
(99)
Balance at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$253
There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the year ended
December 31, 2016.
6. INVENTORIES
Inventories as of December 31 were as follows (in thousands):
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,648
3,361
5,127
$16,257
2,879
4,306
Net balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$27,136
$23,442
2016
2015
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are depreciated and amortized over a period of three to
39 years generally under the straight-line method for financial reporting purposes and accelerated methods for
income tax purposes.
Property, plant and equipment as of December 31 were as follows (in thousands):
2016
2015
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in-progress and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,089
43,950
237,434
5,656
2,471
$
2,089
44,647
231,305
5,652
3,839
Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . .
291,600
(254,026)
287,532
(250,082)
Net balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 37,574
$ 37,450
Depreciation expense for the years ended December 31, 2016, 2015 and 2014 was approximately
$8,304,000, $9,028,000, and $9,833,000 respectively. As of December 31, 2016, the Company had
approximately $2,393,000 of capital expenditure commitments.
8. OTHER INVESTMENTS
In September 2015, Intersil Corporation (“Intersil”) acquired, through a statutory merger, Great Wall
Semiconductor Corporation (“GWS”), in which the Company held non-voting convertible preferred stock. GWS
69
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and its subsidiary designed and sold semiconductors, conducted research and development activities, and
developed and licensed patents. A director of the Company was the founder, Chairman of the Board, President
and Chief Executive Officer (“CEO”), as well as the majority voting shareholder, of GWS. The Company
accounted for its investment in GWS under the equity method. The Company determined, while GWS was a
variable interest entity, the Company was not the primary beneficiary. The key factors in the Company’s
assessment were that the CEO of GWS had: (i) the power to direct the activities of GWS that most significantly
impact its economic performance, and (ii) an obligation to absorb losses or the right to receive benefits from
GWS, respectively, that could potentially be significant to GWS.
At the time of the merger transaction, the Company’s gross investment totaled $4,999,719. However, during
the fourth quarter of 2008, the Company determined a decline in value judged to be other-than-temporary had
occurred and, as such, the investment’s recorded value on the Consolidated Balance Sheet, as of December 31,
2008, was reduced to zero. Management’s decision to reduce the remaining investment balance to zero at that
time was based on GWS’ continued operating losses, the impact of the global economic crisis on the current and
short-term outlook for its operations, a negative working capital position as of December 31, 2008, and a
valuation based on discounted cash flows.
Under the terms of the merger agreement between GWS and Intersil, and in accordance with the terms of
the shareholder agreement under which the Company made its investments, all preferred stock was redeemed at
full preference value (i.e., purchased for cash equal to the original investment amount). This redemption was
effected through the exchange of a share of preferred stock for (a) the right to receive the preference value in
cash upon surrender of the preferred shares and (b) the non-transferable right to receive certain cash payments as
additional consideration, after a period of 16 months, associated with (i) the release by Intersil of some or all of
the $2,625,000 portion of total consideration held in escrow by Intersil for potential funding of indemnification
and related obligations made by GWS and its selling shareholders and (ii) additional consideration of up to
$4,000,000, payable in the event Intersil achieved certain revenue goals related to GWS products. Immediately
after the closing of the merger transaction, the Company received the full preference value, equal to its gross
investment in GWS. Because the net investment on the Company’s Consolidated Balance Sheet had a value of
zero, the full preference value was recorded as a gain from sale of equity method investment in the third quarter
of 2015. Just prior to the merger, the Company also received, as a dividend from GWS, shares of an entity in
which GWS held an investment. Such shares were deemed by the Company to have a value of zero on the date of
receipt.
While the Company’s shares of preferred stock were never converted into shares of non-voting common
stock, as provided for in the terms of the shareholder agreement under which the Company made its investment,
the proportionate share of the contingent amounts described above was calculated assuming such a conversion,
resulting in a pro forma proportionate share for the Company of any amounts paid of 27.0%. The Company will
record its proportionate share of any additional consideration when it is determined to be realizable. As a former
stockholder of GWS, the Company is subject to the indemnification provisions in the merger agreement, as noted
above. In certain cases, the Company’s indemnification obligation can extend to the full amount of the merger
consideration received by the Company, however, the Company believes the likelihood of any such
indemnification obligation occurring is remote.
The Company and GWS were parties to an intellectual property cross-licensing agreement, a license
agreement, and two supply agreements, under which the Company purchased certain components from GWS.
Intersil, through the merger transaction, has assumed all of GWS’ rights and obligations under these agreements.
Company purchases from GWS totaled approximately $1,662,000 for the nine months ended September 30,
2015, the approximate time of the sale, and $2,146,000 in 2014.
70
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. NONCONTROLLING INTEREST TRANSACTIONS
On March 30, 2016, the Company acquired 100% ownership of certain operating assets and cash of its
consolidated subsidiary, Converpower Corporation (“Converpower”), in which it held a 49% ownership interest.
The operating assets and cash were acquired in exchange for the Company’s common shares representing that
49% interest and the aggregate dollar amount of royalty payments to be made by the Company to Converpower.
The transaction was executed through a newly-formed, wholly-owned subsidiary, Granite Power Technologies,
Inc. (“GPT”), the business operations of which had formerly existed as a division of Vicor Corporation. The
shares of Converpower common stock held by the Company were contributed to GPT prior to the transaction. At
the same time that it entered into the Asset Purchase Agreement associated with this transaction, the Company
and Converpower entered into a license agreement providing the Company the right to continue manufacturing
certain Converpower products in exchange for payment of royalties, quarterly through June 30, 2021, equal to a
percentage of the revenue generated by the manufacture and sale of these products by GPT. The estimated
present value of total future royalties, included in “Contingent consideration obligations” in the accompanying
Consolidated Balance Sheet as of December 31, 2016, is $167,000 (initially $208,000, as of March 31, 2016).
Although the Company exchanged its shares representing its 49% equity interest in Converpower, it acquired
100% control of the business operations. Accordingly, this transaction was accounted for as an acquisition of a
noncontrolling interest (i.e., an equity transaction). As such, the noncontrolling interest balance in equity
associated with Converpower was reduced to zero, and the additional paid-in capital account was reduced by
$208,000, the estimated present value of total future royalties as of March 31, 2016. As a result of the
transactions associated with the consolidation of the Converpower operation into GPT, the Company’s aggregate
balance of cash, short-term interest receivable, and long-term investments on its Consolidated Balance Sheet as
of March 31, 2016, declined by approximately $718,000. No amounts were recorded in the Consolidated
Statement of Operations related to these transactions.
On December 28, 2015, the Company sold its 49% ownership interest in Aegis Power Systems, Inc.
(“APS”) to the 51% noncontrolling interest holder for approximately $1,698,000. The amount of the proceeds
approximated the Company’s share of the net equity of APS, resulting in a gain of approximately $28,000, which
was recorded in Other income (expense), net in the accompanying Consolidated Statements of Operations. As a
result of the transaction, cash of approximately $2,090,000 and other net assets of approximately $1,317,000 of
APS were fully deconsolidated from the Company’s consolidated balance sheet as of December 31, 2015. After
the sale, APS operates independently from the Company, and may purchase the Company’s products going
forward, on an arms-length basis.
Also on December 28, 2015, the Company acquired the noncontrolling interest holder’s 18% ownership
interest in Mission Power Solutions, Inc. (“MPS”) for approximately $216,000, which equaled the noncontrolling
interest holder’s share of the net equity of MPS. This transaction was achieved through a statutory merger of
MPS with and into an existing Vicor Custom Power wholly-owned subsidiary, Northwest Power, Inc. (“NPI”). In
addition to the payment noted above, the selling principal will be eligible to receive quarterly royalty payments
through June 30, 2021 equal to a percentage of the revenue generated by the sale of certain MPS legacy products
to be manufactured by NPI going forward. The estimated obligation for total future royalties, recorded as
Contingent consideration obligation in the accompanying Consolidated Balance Sheets, was approximately
$144,000 as of December 31, 2015. Royalty payments of approximately $58,000 were made during 2016. The
acquisition of the noncontrolling interest holder’s 18% ownership interest was accounted for as an equity
transaction, and therefore, the noncontrolling interest balance in equity for this subsidiary was reduced to zero.
The excess of the acquisition amount, which is inclusive of the cash paid and the value of the contingent
consideration obligation, over the noncontrolling interest balance in equity, was recorded as a charge to
additional paid-in capital.
71
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The respective noncontrolling interest holders of APS, Converpower, and MPS served as key employees of
each company prior to the transactions described above.
10. INTANGIBLE ASSETS
Patent costs, which are included in other assets in the accompanying balance sheets, as of December 31
were as follows (in thousands):
Patent costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,427
(1,598)
$ 2,525
(1,583)
2016
2015
$
829
$
942
Definite lived intangible assets, such as patent rights, are amortized and tested for impairment if a triggering
event occurs.
Amortization expense was approximately $134,000, $145,000 and $170,000 in 2016, 2015 and 2014,
respectively. The estimated future amortization expense from patent assets held as of December 31, 2016, is
projected to be $129,000, $113,000, $106,000, $102,000 and $92,000, in fiscal years 2017, 2018, 2019, 2020,
and 2021, respectively.
11. SEVERANCE AND OTHER CHARGES
In July 2014, the Company’s management authorized the consolidation of the manufacturing of its Westcor
division products, of the BBU segment, announcing its intent to transfer those operations from Westcor’s
Sunnyvale, California facility to the Company’s primary manufacturing facility in Andover, Massachusetts, by
the end of 2014. As a result, the Company recorded a pre-tax charge of $2,207,000 in the second half of 2014,
primarily for the cost of severance and other employee-related costs involving cash payments based on each
employee’s respective length of service. The Company also incurred other costs related to the relocation of the
manufacturing operations, primarily freight costs for the transfer of inventories and equipment, and employee
travel expenses, of which approximately $303,000 was expensed in the second half of 2014. The related liability
is presented as “Accrued severance charges” in the Consolidated Balance Sheets.
A summary of the activity related to the accrued severance charges, is as follows (in thousands):
Balance as of December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,904
(1,709)
Balance as of December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
195
(195)
Balance as of December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
72
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. PRODUCT WARRANTIES
Product warranty activity for the years ended December 31 was as follows (in thousands):
Balance at the beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals for warranties for products sold in the period . . . . . . . . . . . . . . . .
Fulfillment of warranty obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revisions of estimated obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 585
358
(527)
(202)
$ 204
715
(334)
—
$ 283
281
(350)
(10)
Balance at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 214
$ 585
$ 204
2016
2015
2014
13. STOCKHOLDERS’ EQUITY
Each share of Common Stock entitles the holder thereof to one vote on all matters submitted to the
stockholders.
Each share of Class B Common Stock entitles the holder thereof to ten votes on all such matters.
Shares of Class B Common Stock are not transferable by a stockholder except to or among the stockholder’s
spouse, certain of the stockholder’s relatives, and certain other defined transferees. Class B Common Stock is not
listed or traded on any exchange or in any market. Class B Common Stock is convertible at the option of the
holder thereof at any time and without cost to the stockholder into shares of Common Stock on a one-for-one
basis.
In November 2000, the Board of Directors of the Company authorized the repurchase of up to $30,000,000
of the Company’s Common Stock (the “November 2000 Plan”). The plan authorizes the Company to make
repurchases from time to time in the open market or through privately negotiated transactions. The timing of this
program and the amount of the stock that may be repurchased is at the discretion of management based on its
view of economic and financial market conditions. There were no repurchases under the November 2000 Plan in
2016, 2015, and 2014. On December 31, 2016 the Company had approximately $8,541,000 available for share
repurchases under the November 2000 Plan.
Dividends are declared at the discretion of the Company’s Board of Directors and depend on actual cash
from operations, the Company’s financial condition and capital requirements and any other factors the
Company’s Board of Directors may consider relevant at the time. Common Stock and Class B Common Stock
participate in dividends and earnings equally.
During the years ended December 31, 2016 and 2015, one subsidiary paid a total of $750,000 and $250,000,
in cash dividends, respectively, all of which were paid to the Company. During the year ended December 31,
2014, two subsidiaries paid a total of $3,900,000 in cash dividends, of which $3,738,000 was paid to the
Company and $162,000 was paid to outside shareholders. Dividends paid to outside shareholders of our
subsidiaries are accounted for as a reduction in noncontrolling interest.
On December 31, 2016, 2015, and 2014 there were 14,377,880, 14,594,805, and 14,719,889, respectively,
shares of Vicor Common Stock reserved for issuance for Vicor stock options and upon conversion of Class B
Common Stock.
73
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. OTHER INCOME (EXPENSE), NET
The major changes in the components of Other income (expense), net for the years ended December 31
were as follows (in thousands):
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency losses, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit gains on available for sale securities . . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) gain on disposal of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2015
2014
$ 462
(268)
68
13
(4)
13
$ — $ —
(196)
(161)
80
47
311
12
22
60
51
67
$ 284
$ 25
$ 268
During the second quarter of 2016, the Company began recognizing rental income under a new leasing
agreement with a third party for the former Westcor facility.
15. INCOME TAXES
The tax provision is based on the annual effective tax rate for the year, which includes estimated federal,
state and foreign income taxes on the Company’s pre-tax income and, in 2015 and 2014, estimated federal and
state income taxes for certain noncontrolling interest subsidiaries that were not part of the Company’s
consolidated income tax returns. The tax provisions also may include discrete items, principally related to tax
credits, increases or decreases in tax reserves, tax provision vs. tax return differences and accrued interest for
potential liabilities.
The reconciliation of the federal statutory rate on the loss before income taxes and before the gain from sale
of equity method investment to the effective income tax rate for the years ended December 31 is as follows:
2016
2015
2014
Statutory federal tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of federal income tax benefit . . . . . . . . . . . . . . . .
(Decrease) increase in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital gain on sale to noncontrolling interest . . . . . . . . . . . . . . . . . . . . . .
Permanent items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in unremitted Vicor Custom Power earnings . . . . . . . . . . . . . . .
Foreign rate differential and deferred items . . . . . . . . . . . . . . . . . . . . . . . .
Book income attributable to noncontrolling interest . . . . . . . . . . . . . . . . .
Decrease in tax reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(34.0)% (34.0)% (34.0)%
46.4
(138.4)
29.9
237.8
21.2
(108.7)
(18.2)
47.0
(248.6)
(0.1)
0.8
46.9
(12.4)
—
0.4
—
(0.3)
(0.6)
(3.7)
—
1.9
46.5
(13.6)
3.9
0.9
(0.9)
(0.8)
0.1
—
(0.2)
3.8% (165.7)% (2.9)%
In 2016, 2015, and 2014, the Company could not recognize a tax benefit for the majority of its losses due to
a full valuation allowance against all domestic deferred tax assets, as described below.
In 2016, in connection with the Company’s acquisition of 100% ownership of certain operating assets and
cash of Converpower, the related deferred tax liability for unremitted earnings of $55,000 was reversed and
recorded as a discrete benefit in the first quarter of 2016 (see Note 9).
74
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In 2015, the Company entered into voluntary disclosure agreements with several states. As a result, the
Company recognized a tax benefit of approximately $555,000 as a discrete item in the fourth quarter of 2015 for
the release of tax reserves. In addition, in connection with the Company’s sale of its 49% interest in APS,
recognized as a capital gain, the related deferred tax liability for unremitted earnings of $274,000 was reversed
and recorded as a deferred tax benefit in the fourth quarter of 2015 (see Note 9).
During the third quarter of 2014, the Company recognized a tax benefit of approximately $552,000 as a
discrete item for the release of certain income tax reserves, due to the completion of an Internal Revenue Service
examination of its 2010 and 2011 federal corporate income tax returns during the quarter.
For financial reporting purposes, income (loss) before income taxes and before the gain from sale of equity
method investment for the years ended December 31 include the following components (in thousands):
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(6,034)
4
$ 1,373
(1,615)
$(14,223)
(272)
2016
2015
2014
$(6,030)
$ (242)
$(14,495)
Significant components of the provision (benefit) for income taxes for the years ended December 31 are as
follows (in thousands):
Current:
2016
2015
2014
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ — $ 144
(473)
111
172
137
$(690)
147
124
Deferred:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
309
(218)
(419)
(55)
(23)
(78)
(274)
91
(183)
(6)
—
(6)
$231
$(401)
$(425)
As discussed in Note 8, the Company recorded a gain from equity method investment in the third quarter of
2015 for cash consideration received equal to its gross investment in GWS of $4,999,719 for the full preference
value of its non-voting convertible preferred stock upon GWS’ acquisition by Intersil, as the value of the
investment for financial reporting purposes was zero. For income tax purposes, though, the tax basis of the
investment was $4,999,719 at the time of the redemption as it was not previously deducted for tax purposes and,
therefore, there was no gain or loss on the transaction for income tax purposes.
The Company intends to continue to reinvest certain of its foreign earnings indefinitely. Accordingly, no
U.S. income taxes have been provided for approximately $909,000 of unremitted earnings of international
subsidiaries. As of December 31, 2016, the amount of unrecognized deferred tax liability on these earnings was
$80,000.
75
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Significant components of the Company’s deferred tax assets and liabilities as of December 31 were as
follows (in thousands):
Deferred tax assets:
Research and development tax credit carryforwards . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vacation accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alternative minimum tax credit carryforward . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bad debt reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2015
$ 13,967
4,902
4,066
3,143
1,928
1,576
340
154
136
73
52
331
$ 12,503
3,393
3,993
2,979
1,768
1,399
340
192
149
202
58
735
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Valuation allowance for deferred tax assets . . . . . . . . . . . . . . . . . . .
30,668
(29,274)
27,711
(25,862)
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,394
1,849
Deferred tax liabilities:
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patent amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unremitted Vicor Custom Power earnings . . . . . . . . . . . . . . . . . . . . . . . . . . .
(654)
(406)
(296)
—
(713)
(787)
(334)
(55)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,356)
(1,889)
Net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
38
$
(40)
As of December 31, 2016, the Company has a valuation allowance of approximately $29,274,000 primarily
against all domestic net deferred tax assets and the majority of foreign net deferred tax assets, for which
realization cannot be considered more likely than not at this time. Management assesses the need for the
valuation allowance on a quarterly basis. In assessing the need for a valuation allowance, the Company considers
all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future
taxable income, tax planning strategies, and past financial performance. The Company remains in a significant
cumulative loss position as of December 31, 2016 and, as a result, management believes a full valuation
allowance against all domestic net deferred tax assets is warranted as of December 31, 2016. The valuation
allowance against these deferred tax assets may require adjustment in the future based on changes in the mix of
temporary differences, changes in tax laws, and operating performance. If and when the Company determines the
valuation allowance should be released (i.e., reduced), the adjustment would result in a tax benefit reported in
that period’s Consolidated Statements of Operations, the effect of which would be an increase in reported net
income. A portion of such an adjustment may be accounted for through an increase to “Additional paid-in
capital”, a component of Stockholders’ Equity. The amount of any such tax benefit associated with release of our
valuation allowance in a particular quarter may be material.
As a result of certain realization requirements under the stock-based compensation guidance, the table of
deferred tax assets and liabilities shown above does not include certain deferred tax assets as of December 31,
2016, that arose directly from tax deductions related to stock-based compensation greater than stock-based
76
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
compensation recognized for financial reporting. Equity will be increased, net of any valuation allowance, by
$3,485,000 if and when such deferred tax assets are ultimately realized. Beginning in 2017, upon the adoption of
new guidance for employee share-based accounting described in Note 2 — Significant Accounting Policies —
Impact of recently issued accounting standards, this amount will be allocated and added to the deferred tax assets
for research and development tax credit carryforwards and net operating loss carryforwards, but will be fully
offset by the valuation allowance for deferred tax assets. The Company uses ASC 740 ordering when
determining when excess tax benefits have been realized.
The research and development tax credit carryforwards expire beginning in 2017 for state purposes and in
2022 for federal purposes. The Company has federal net operating loss carryforwards which expire beginning in
2033, as well as net operating loss carryforwards in certain states, which expire beginning in 2017 through 2036.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in
thousands):
Balance on January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax provisions related to the current year
. . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapse of statute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2015
2014
$830
125
—
—
(9)
$1,254
120
—
(480)
(64)
$2,072
161
(967)
—
(12)
Balance on December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$946
$ 830
$1,254
The Company has reviewed the tax positions taken, or to be taken, in its tax returns for all tax years
currently open to examination by a taxing authority. The total amount of unrecognized tax benefits, that is the
aggregate tax effect of differences between tax return positions and the benefits recognized in the Company’s
financial statements, as of December 31, 2016, 2015, and 2014 of $946,000, $830,000, and $1,254,000,
respectively, if recognized, may decrease the Company’s income tax provision and effective tax rate. None of the
unrecognized tax benefits as of December 31, 2016, are expected to significantly change during the next twelve
months.
The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits as a
component of income tax expense. During the years ended December 31, 2016, 2015, and 2014, the Company
recognized approximately $6,000, $21,000, and $32,000, respectively, in net interest expense. As of
December 31, 2016 and 2015, the Company had accrued approximately $25,000 and $24,000, respectively, for
the potential payment of interest.
The Company files income tax returns in the United States and various foreign tax jurisdictions. These tax
returns are generally open to examination by the relevant tax authorities from three to seven years from the date
they are filed. The tax filings relating to the Company’s federal and state taxes are currently open to examination
for tax years 2013 and 2015 and 2007 through 2015, respectively. In addition, the 2003, 2004, and 2007 tax years
resulted in losses. These years may also be subject to examination since the losses were carried forward and
utilized in future years.
The Company’s subsidiary in Italy, Vicor Italy S.r.l. (“Vicor Italy”), underwent during 2014 a tax inspection
for tax years 2009 through 2013, covering corporation, regional and value added taxes. Vicor Italy received a
preliminary tax audit report dated June 30, 2014. The Company filed a response to the preliminary tax audit
report in the third quarter of 2014. The statute of limitations for the tax authorities in Italy to file an assessment,
if any, expired on December 31, 2015 for tax year 2009 and on December 31, 2016 for tax year 2010. While
management believes it is too early to determine the likelihood or amount of potential liability at this time, it
does not believe the ultimate impact of this matter will be material to the Company’s financial statements.
77
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other than the Vicor Italy matter discussed above there are no other income tax examinations or audits
currently in process.
16. COMMITMENTS AND CONTINGENCIES
The Company leases certain of its office and manufacturing space. The future minimum rental commitments
under non-cancelable operating leases with remaining terms in excess of one year are as follows (in thousands):
Year
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,572
1,013
556
411
1,219
Rent expense was approximately $1,866,000, $1,902,000 and $1,824,000 in 2016, 2015 and 2014,
respectively. The Company also pays tenant-related executory costs such as taxes, maintenance, and insurance.
On January 28, 2011, SynQor, Inc. (“SynQor”) filed a complaint for patent infringement against Ericsson,
Inc. (“Ericsson”), Cisco Systems, Inc. (“Cisco”) and the Company in the U.S. District Court for the Eastern
District of Texas (the “Texas Action”). Ericsson and Cisco subsequently settled with SynQor and are no longer
parties to the Texas Action. With respect to the Company, SynQor’s complaint in the Texas Action alleged that
the Company’s products, including but not limited to unregulated bus converters used in intermediate bus
architecture power supply systems, infringe SynQor’s U.S. patent numbers 7,072,190, 7,272,021, and 7,564,702
(“the ‘190 patent”, “the ‘021 patent” and “the ‘702 patent”, respectively). SynQor’s complaint sought an
injunction against further infringement and an award of unspecified compensatory and enhanced damages,
interest, costs and attorney fees. On September 20, 2011, SynQor filed an amended complaint in the Texas
Action that further alleged that the Company’s products, including, but not limited to, unregulated bus converters
used in intermediate bus architecture power supply systems, infringe SynQor’s U.S. patent number 8,023,290
(“the ‘290 patent”). The Company responded to SynQor’s amended complaint in the Texas Action by denying its
products infringe any of the SynQor patents, and asserting that the SynQor patents are invalid. The Company has
further alleged that the SynQor ‘290 patent is unenforceable due to inequitable conduct by SynQor or its agents
during the examination of the ‘290 patent at the United States Patent and Trademark Office (“USPTO”). The
Company has also asserted counterclaims seeking damages against SynQor for deceptive trade practices and
tortious interference with prospective economic advantage arising from SynQor’s attempted enforcement of its
patents against the Company.
The Company has initiated administrative review proceedings at the USPTO challenging the validity of
certain claims of the SynQor patents asserted in the Texas Action, including all claims that were asserted against
the Company by SynQor. Regarding the ‘190 patent, the Patent Trial and Appeal Board (“PTAB”) of the USPTO
issued a decision upholding the validity of the ‘190 patent claims. That decision was appealed by the Company to
the United States Court of Appeals for the Federal Circuit (“the Federal Circuit”), which issued a decision on
March 13, 2015 reversing the PTAB, determining that certain claims were invalid, and remanding the matter to
the PTAB for further proceedings. On May 2, 2016, the PTAB issued a decision determining that all but one of
the remaining claims of the ‘190 patent were invalid and remanding the remaining claim to a patent examiner for
further examination, where it remains under review. In addition, on that date, the PTAB issued decisions finding
all challenged claims of SynQor’s ‘021 patent invalid and upholding the validity of all challenged claims of
SynQor’s ‘702 and ‘290 patents. The Company has filed an appeal with the Federal Circuit from the PTAB’s
78
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
decision upholding the validity of the challenged claims of the ‘702 and ‘290 patents. SynQor has filed an appeal
with the Federal Circuit from the PTAB’s decision that the challenged claims of the ‘021 patent are invalid.
Decisions in these appeals are expected later in 2017. On May 23, 2016, the Texas Court issued an order staying
the Texas Action until the completion of all of the administrative review proceedings concerning the asserted
SynQor patents, including any appeals from such proceedings to the Federal Circuit.
The Company continues to believe none of its products, including its unregulated bus converters, infringe
any valid claim of the asserted SynQor patents, either alone or when used in an intermediate bus architecture
implementation, including such use by Cisco. The Company believes SynQor’s claims lack merit and, therefore,
continues to vigorously defend itself against SynQor’s patent infringement allegations. The Company does not
believe a loss is probable for this matter. If a loss were to be incurred, however, the Company cannot estimate the
amount of possible loss or range of possible loss at this time.
In addition to the SynQor matter, the Company is involved in certain other litigation and claims incidental to
the conduct of its business. While the outcome of lawsuits and claims against the Company cannot be predicted
with certainty, management does not expect any current litigation or claims will have a material adverse impact
on the Company’s financial position or results of operations.
17. SEGMENT INFORMATION
The Company has organized its business segments according to its key product lines. The BBU segment
designs, develops, manufactures, and markets the Company’s modular DC-DC converters and configurable
products, and also includes the entities comprising Vicor Custom Power, the BBU operations of VJCL, and the
operations of the Company’s Westcor division through its closure in December 2014. The VI Chip segment
includes VI Chip Corporation, which designs, develops, manufactures, and markets many of the Company’s
advanced power component products. The VI Chip segment also includes the VI Chip business conducted
through VJCL. The Picor segment consists of Picor Corporation, which designs, develops, manufactures, and
markets integrated circuits and related products for use in a variety of power management and power system
applications. The Picor segment develops these products for use in the Company’s BBU and VI Chip modules, to
be sold as complements to the Company’s BBU and VI Chip products, or for sale to third parties for separate
(i.e., stand-alone) applications.
The Company’s Chief Executive Officer (i.e., the chief operating decision maker) evaluates performance
and allocates resources based on segment revenues and segment operating income (loss). The operating income
(loss) for each segment includes selling, general, and administrative and research and development expenses
directly attributable to the segment. Certain of the Company’s indirect overhead costs, which include corporate
selling, general, and administrative expenses, are allocated among the segments based upon an estimate of costs
associated with each segment. Assets allocated to each segment are based upon specific identification of such
assets, which include accounts receivable, inventories, fixed assets and certain other assets. The Corporate
segment consists of those operations and assets shared by all segments. The costs of certain centralized executive
and administrative functions are recorded in this segment, as are certain shared assets, most notably cash and
cash equivalents, deferred tax assets, long-term investments, the Company’s facilities in Massachusetts, real
estate, and other assets. The Company’s accounting policies and method of presentation for segments are
consistent with that used throughout the Consolidated Financial Statements.
79
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table provides significant segment financial data as of and for the years ended December 31
(in thousands):
BBU
VI Chip
Picor
Corporate Eliminations
Total
(1)
2016:
Net revenues . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from operations . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . .
2015:
Net revenues . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from operations . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . .
2014:
Net revenues . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from operations . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . .
$151,428
11,750
196,987
4,258
$ 39,947
(16,494)
21,389
2,235
$16,684
(637)
8,583
545
$173,064
21,743
170,939
4,538
$ 36,688
(21,040)
15,577
2,740
$17,304
(290)
5,369
442
$ — $
(933)
73,253
1,400
(7,779) $200,280
(6,314)
154,067
8,438
—
(146,145)
—
$ — $
(680)
81,824
1,422
(6,862) $220,194
(267)
157,545
9,142
—
(116,164)
—
$184,224
15,499
151,923
4,711
$ 34,701
(29,015)
17,677
3,265
$15,570
(407)
5,691
410
$ — $
(840)
75,758
1,419
(8,764) $225,731
— (14,763)
155,542
9,805
(95,507)
—
(1) The elimination for net revenues is principally related to inter-segment revenues of Picor to BBU and VI
Chip and for inter-segment revenues of VI Chip to BBU. The elimination for total assets is principally
related to inter-segment accounts receivable due to BBU for the funding of VI Chip and Picor operations.
18. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
The following table sets forth certain unaudited quarterly financial data for the years ended December 31 (in
thousands, except per share amounts):
2016:
Net revenues . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Consolidated net income (loss)
Net income (loss) attributable to
First
Second
Third
Fourth
Total
$46,027
19,316
(5,376)
$52,941
24,471
(550)
$53,227
25,923
2,351
$48,085
21,499
(2,686)
$200,280
91,209
(6,261)
noncontrolling interest . . . . . . . . . . . . . .
(25)
(6)
15
2
(14)
Net income (loss) attributable to Vicor
Corporation . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) per share attributable to
Vicor Corporation:
Basic and diluted . . . . . . . . . . . . . . . . . .
(5,351)
(544)
2,336
(2,688)
(6,247)
(0.14)
(0.01)
0.06
(0.07)
(0.16)
80
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2015:
Net revenues . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Consolidated net income (loss)
Net income (loss) attributable to
First
Second
Third
Fourth
Total
$64,017
28,891
3,442
$56,119
26,510
771
$48,664
21,286
2,609
$51,394
22,831
(1,663)
$220,194
99,518
5,159
noncontrolling interest . . . . . . . . . . . . . .
71
(34)
106
89
232
Net income (loss) attributable to Vicor
Corporation . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) per share attributable to
Vicor Corporation:
Basic and diluted . . . . . . . . . . . . . . . . . .
3,371
805
2,503
(1,752)
4,927
0.09
0.02
0.06
(0.05)
0.13
81
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Attached as exhibits to this Annual Report on Form 10-K are certifications of our CEO and Chief Financial
Officer (“CFO”), which are required in accordance with Rule 13a-14 of the Exchange Act. This “Controls and
Procedures” section includes information concerning the controls and controls evaluation referred to in the
certifications.
(a) Evaluation of disclosure controls and procedures
As required by Rule 13a-15 under the Exchange Act, management, with the participation of our CEO and
CFO, conducted an evaluation regarding the effectiveness of our disclosure controls and procedures, as of the
end of the last fiscal year. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to
ensure that information required to be disclosed by a company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by a company in
the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s
management, including its principal executive and principal financial officers, as appropriate to allow timely
decisions regarding required disclosure. We recognize any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving their objectives and we necessarily apply our
judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation
of the Company’s disclosure controls and procedures as of December 31, 2016, the Chief Executive Officer and
Chief Financial Officer concluded, as of such date, the Company’s disclosure controls and procedures were
effective at the reasonable assurance level.
(b) Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting includes those policies and procedures; (a) pertaining to the maintenance
of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
(b) providing reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures are
being made only in accordance with authorizations of our management and Board of Directors; and (c) providing
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
our assets that could have a material effect on our financial statements.
Management assessed our internal control over financial reporting as of December 31, 2016, the end of our
fiscal year. Management based its assessment on criteria established in Internal Control — Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). Management’s assessment included evaluation of such elements as the design and operating
effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall
control environment.
Based on our assessment, management has concluded that our internal control over financial reporting was
effective as of December 31, 2016.
82
The effectiveness of our internal control over financial reporting as of December 31, 2016 has been audited
by KPMG LLP, our independent registered public accounting firm, as stated in their report which is included
immediately below.
83
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Vicor Corporation:
We have audited Vicor Corporation’s internal control over financial reporting as of December 31, 2016, based on
criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Vicor Corporation’s management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, Vicor Corporation maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2016, based on criteria established in Internal Control — Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Vicor Corporation and subsidiaries as of December 31, 2016
and 2015, and the related consolidated statements of operations, comprehensive income (loss), cash flows, and
equity for each of the years in the three-year period ended December 31, 2016, and our report dated March 7,
2017 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
Boston, Massachusetts
March 7, 2017
84
(c) Inherent Limitations on Effectiveness of Controls
The Company’s management, including the CEO and CFO, does not expect that our disclosure controls or
our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no
matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control
system’s objectives will be met. The design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements
due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company
have been detected. These inherent limitations include the realities that judgments in decision-making can be
faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by
the individual acts of some persons, by collusion of two or more people, or by management override of the
controls. The design of any system of controls is based in part on certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to
risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree
of compliance with policies or procedures.
(d) Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter
ended December 31, 2016, that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.
85
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated by reference from the Company’s Definitive Proxy Statement for its 2017 annual meeting of
stockholders.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the Company’s Definitive Proxy Statement for its 2017 annual meeting of
stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Incorporated by reference from the Company’s Definitive Proxy Statement for its 2017 annual meeting of
stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Incorporated by reference from the Company’s Definitive Proxy Statement for its 2017 annual meeting of
stockholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Incorporated by reference from the Company’s Definitive Proxy Statement for its 2017 annual meeting of
stockholders.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a) (1) Financial Statements
See index in Item 8.
(a) (2) Schedules
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulation of the Securities and
Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been
omitted.
86
(b) Exhibits
Exhibits
3.1
3.2
3.3
3.4
3.5
4.1
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
21.1
23.1
31.1
31.2
32.1
32.2
101
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Description of Document
Restated Certificate of Incorporation, dated February 28, 1990 (1)
Certificate of Ownership and Merger Merging Westcor Corporation, a Delaware
Corporation, into Vicor Corporation, a Delaware Corporation, dated December 3, 1990 (1)
Certificate of Amendment of Restated Certificate of Incorporation, dated May 10, 1991 (1)
Certificate of Amendment of Restated Certificate of Incorporation, dated June 23, 1992 (1)
Bylaws, as amended (9)
Specimen Common Stock Certificate (2)
1984 Stock Option Plan of the Company, as amended (2)
1993 Stock Option Plan (3)
1998 Stock Option and Incentive Plan (4)
Amended and Restated 2000 Stock Option and Incentive Plan (5)
Form of Non-Qualified Stock Option under the Vicor Corporation Amended and Restated
2000 Stock Option and Incentive Plan (6)
Sales Incentive Plan (7)
Picor Corporation 2001 Stock Option and Incentive Plan (8)
Form of Non-Qualified Stock Option under the Picor Corporation 2001 Stock Option and
Incentive Plan (8)
VI Chip Corporation Amended 2007 Stock Option and Incentive Plan (11)
Form of Non-Qualified Stock Option Agreement under the VI Chip Corporation Amended
2007 Stock Option and Incentive Plan (10)
Form of Incentive Stock Option Agreement under the VI Chip Corporation Amended 2007
Stock Option and Incentive Plan (11)
Form of Stock Restriction Agreement under the VI Chip Corporation Amended 2007 Stock
Option and Incentive Plan (11)
Subsidiaries of the Company (12)
Consent of KPMG LLP (12)
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange
Act (12)
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange
Act (12)
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (12)
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (12)
The following material from the Company’s Annual Report on Form 10-K, for the year
ended December 31, 2016, formatted in XBRL (Extensible Business Reporting Language):
(i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the
Consolidated Statements of Comprehensive Income (Loss); (iv) the Consolidated
Statements of Cash Flows; (v) the Consolidated Statements of Equity; and (vi) the Notes to
Consolidated Financial Statements.
*
Indicates a management contract or compensatory plan or arrangement required to be filled pursuant to
Item 15(b) of Form 10-K.
(1) Filed as an exhibit to the Company’s Annual Report on Form 10-K filed on March 29, 2001 and
incorporated herein by reference.
(2) Filed as an exhibit to the Company’s Registration Statement on Form 10, as amended, under the Securities
Exchange Act of 1934 (File No. 0-18277), and incorporated herein by reference.
(3) Filed as an exhibit to the Company’s Registration Statement on Form S-8, as amended, under the
Securities Act of 1933 (No. 33-65154), and incorporated herein by reference.
87
(4) Filed as an exhibit to the Company’s Registration Statement on Form S-8, as amended, under the
Securities Act of 1933 (No. 333-61177), and incorporated herein by reference.
(5) Filed as an exhibit to the Company’s Proxy Statement for use in connection with its 2002 Annual Meeting
of Stockholders, which was filed on April 29, 2002 (File No. 0-18277), and incorporated herein by
reference.
(6) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on November 4, 2004 (File
No. 0-18277) and incorporated herein by reference.
(7) Filed as an exhibit to the Company’s Annual Report on Form 10-K filed on March 16, 2005 (File
No. 0-18277) and incorporated herein by reference.
(8) Filed as an exhibit to the Company’s Annual Report on Form 10-K filed on March 14, 2006 (File
No. 0-18277) and incorporated herein by reference.
(9) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on November 8, 2006 (File
No. 0-18277) and incorporated herein by reference.
(10) Filed as an exhibit to the Company’s Current Report on Form 8-K, dated June 6, 2007 (File No. 0-18277)
and incorporated herein by reference.
(11) Filed as an exhibit to the Company’s Current Report and Form 8-K, dated March 6, 2008 (File
No. 0-18277) incorporated herein by reference.
(12) Filed herewith.
ITEM 16. Form 10-K Summary
None.
88
VICOR CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 2016, 2015 and 2014
Description
Allowance for doubtful accounts:
Year ended:
Balance at
Beginning of Period
Charge (Recovery)
to Costs and
Expenses
Other Charges,
Deductions (1)
Balance at
End of Period
December 31, 2016 . . . . . . . . . . . . . . . .
December 31, 2015 . . . . . . . . . . . . . . . .
December 31, 2014 . . . . . . . . . . . . . . . .
$171,000
183,000
198,000
$(22,000)
18,000
66,000
$ 4,000
(30,000)
(81,000)
$153,000
171,000
183,000
(1) Reflects uncollectible accounts written off, net of recoveries.
89
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Vicor Corporation
By: /s/
James A. Simms
James A. Simms
Vice President, Chief Financial Officer
Date: March 7, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Patrizio Vinciarelli
Patrizio Vinciarelli
/s/
James A. Simms
James A. Simms
/s/ Estia J. Eichten
Estia J. Eichten
/s/ David T. Riddiford
David T. Riddiford
/s/ Barry Kelleher
Barry Kelleher
/s/ Samuel J. Anderson
Samuel J. Anderson
/s/ Claudio Tuozzolo
Claudio Tuozzolo
/s/
Jason L. Carlson
Jason L. Carlson
/s/ Liam K. Griffin
Liam K. Griffin
/s/ H. Allen Henderson
H. Allen Henderson
March 7, 2017
March 7, 2017
March 7, 2017
March 7, 2017
March 7, 2017
March 7, 2017
March 7, 2017
March 7, 2017
March 7, 2017
March 7, 2017
President, Chief Executive Officer
and
Chairman of the Board (Principal
Executive Officer)
Chief Financial Officer and Vice President
(Principal Financial Officer and Principal
Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
90
EXHIBIT 21.1
Name
SUBSIDIARIES OF THE COMPANY
State or Jurisdiction
of Incorporation
Picor Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware, USA
VI Chip Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware, USA
VLT, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California, USA
Vicor GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
VICR Securities Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Massachusetts, USA
Vicor France SARL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
Vicor Italy SRL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vicor Hong Kong Ltd.
Vicor U.K. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom
Vicor B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
Vicor Japan Company, Ltd.
Japan
Vicor Trading (Shanghai) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
Vicor Development Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware, USA
Freedom Power Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware, USA
Granite Power Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware, USA
Northwest Power, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware, USA
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hong Kong
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Italy
Exhibit 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Patrizio Vinciarelli, certify that:
1.
I have reviewed this report on Form 10-K of Vicor Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Dated: March 7, 2017
/s/ Patrizio Vinciarelli
Patrizio Vinciarelli
Chief Executive Officer
Exhibit 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I, James A. Simms, certify that:
1.
I have reviewed this report on Form 10-K of Vicor Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Dated: March 7, 2017
/s/
James A. Simms
James A. Simms
Vice President, Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Vicor Corporation (the “Company”) on Form 10-K for the period
ending December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Patrizio Vinciarelli, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
/s/ Patrizio Vinciarelli
Patrizio Vinciarelli
President, Chairman of the Board and
Chief Executive Officer
March 7, 2017
A signed original of this written statement required by Section 906 has been provided to the Company and
will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon
request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Vicor Corporation (the “Company”) on Form 10-K for the period
ending December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, James A. Simms, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
/s/
James A. Simms
James A. Simms
Vice President, Chief Financial Officer
March 7, 2017
A signed original of this written statement required by Section 906 has been provided to the Company and
will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon
request.
Financial Highlights 2012 - 2016 (In thousands, except per share amounts)
2012
2013
2014
2015
2016
Net Revenues
$218,507
$199,160
$225,731
$220,194
$220,280
Loss from Operations
(2,785)
(20,467)
(14,763)
(267)
(6,314)
Net Income (Loss)
Attributable to Vicor Corporation
Net Income (Loss) Per Share
Attributable to Vicor Corporation
Weighted Average Shares
Working Capital
Total Assets
Total Liabilities
Total Equity
(4,077)
(23,640)
(13,887)
4,927
(6,247)
$(0.10)
$(0.60)
$(0.36)
$0.13
$(0.16)
41,811
$128,498
202,581
20,608
39,195
$97,869
165,640
23,303
38,569
$90,321
155,542
24,990
39,146
$94,905
157,545
21,460
38,842
$89,545
154,067
23,050
$181,973
$142,337
$130,552
$136,085
$131,017
Return on Average Equity
(2.2%)
(14.6%)
(10.2%)
3.7%
(4.7%)
Vicor’s Value Proposition =
Customers’ Competitive Advantage
At Vicor, we enable customers to effi ciently
convert and manage power from the wall
plug to point-of-load. We master the entire
power chain with a comprehensive portfolio
of high-effi ciency, high-density, power
distribution architectures addressing a broad
range of performance-critical applications.
Vicor’s approach gives power system architects
the fl exibility to choose from modular,
plug-and-play components ranging from bricks
to semiconductor-centric solutions.
By integrating our world-class manufacturing
and applications development, we can quickly
customize our power components to meet a
customer’s unique power system needs.
Vicor Corporation designs, manufactures
and markets innovative, high performance
modular power components, from bricks
to semiconductor-centric solutions, to enable
customers to effi ciently convert and manage
power from the wall plug to the point-of-load.
Complementing an extensive portfolio of
patented innovations in power conversion
and power distribution with signifi cant
application development expertise, Vicor off ers
comprehensive product lines addressing a broad
range of power conversion and management
requirements across all power distribution
architectures, including Centralized Power
Architectures, Distributed Power Architectures,
Intermediate Bus Architectures, Factorized Power
Architectures and Controlled Bus Architectures.
Vicor focuses on solutions for performance-
critical applications in the following markets:
aerospace and defense electronics, enterprise
and high performance computing, industrial
equipment and automation, telecommunications
and network infrastructure, and vehicles and
transportation.
This report contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). The words “believes,” “expects,” “antic-
ipates,” “intend,” “estimate,” “plans,” “assumes,” “may,” “will,” “would,” “should,” “con-
tinue,” “prospective,” “project,” and other similar expressions identify forward-look-
ing statements. Forward-looking statements also include statements regarding: the
transition of our business strategically and organizationally from serving a large
number of relatively low volume customers across diversifi ed markets and geog-
raphies to serving a small number of relatively large volume customers, typically
concentrated in computing and communications; the level of customer orders over-
all and, in particular, from large customers and the delivery lead times associated
therewith; the fi nancial and operational impact of customer changes to shipping
schedules; the derivation of a portion of our sales in each quarter from orders booked
in the same quarter; our ongoing development of power conversion architectures,
switching topologies, packaging technologies, and products; our plans to invest in
expanded manufacturing capacity and the timing and location thereof; our con-
tinued success depending in part on our ability to attract and retain qualifi ed per-
sonnel; our belief cash generated from operations and the total of our cash and cash
equivalents will be suffi cient to fund operations for the foreseeable future; our belief
that we have limited exposure to currency risks; our intentions regarding the decla-
ration and payment of cash dividends; our intentions regarding protecting our rights
under our patents; and our expectation that no current litigation or claims will have
a material adverse impact on our fi nancial position or results of operations. These
statements are based upon our current expectations and estimates as to the prospec-
tive events and circumstances that may or may not be within our control and as to
which there can be no assurance. Actual results could diff er materially from those
implied by forward-looking statements as a result of various factors, including our
ability to: develop and market new products and technologies cost eff ectively and
on a timely basis; leverage our new technologies in standard products to promote
market acceptance of our approach to power system architecture; leverage design
wins into increased product sales; continue to meet requirements of key customers
and prospects; enter into licensing agreements increasing our market opportunity
and accelerating market penetration; realize signifi cant royalties under such licens-
ing agreements; achieve sustainable bookings rates for our products across served
markets and geographies; improve manufacturing and operating effi ciencies; suc-
cessfully enforce our intellectual property rights; successfully defend outstanding
litigation; hire and retain key personnel; and maintain an eff ective system of internal
controls over fi nancial reporting, as well as those matters described in the Compa-
ny’s Annual Report on Form 10-K. You should read the risk factors that are set forth
in the Company’s most recent Form 10-K, presented herein. However, the risk factors
set forth may not be exhaustive. Therefore, the information in the Form 10-K should
be read together with other reports and documents that the Company fi les with the
Securities and Exchange Commission (the “SEC”) from time to time, including the
Company’s Forms 10-Q and 8-K and Proxy Statements, which may supplement,
modify, supersede or update those risk factors. Copies of the Company’s recent SEC
fi lings may be obtained without charge by contacting Investor Relations or through
the Investor Relations section of the Company’s website at vicorpower.com under
the section titled “SEC Filings”. The Company does not undertake any obligation to
update any forward-looking statements as a result of future events or developments,
except as required by law.
Corporate Officers
Sean Crilly
Corporate Vice President, Engineering, Power Systems
Philip D. Davies
Corporate Vice President, Global Sales and Marketing
Nancy L. Grava
Corporate Vice President, Human Resources
Alex Gusinov
Corporate Vice President, Engineering, Power Components
Joseph A. Jeff ery, Jr.
Corporate Vice President, Chief Information Offi cer
Michael S. McNamara
Corporate Vice President, General Manager, Operations
Richard J. Nagel, Jr.
Corporate Vice President, Chief Accounting Offi cer
James A. Simms
Corporate Vice President, Chief Financial Offi cer,
Treasurer, & Secretary
Claudio Tuozzolo
Corporate Vice President & President, Picor Corporation
Patrizio Vinciarelli, Ph.D.
Chairman of the Board, President & Chief Executive Offi cer
Board of Directors
Samuel J. Anderson
Chairman of the Board, President & Chief Executive Offi cer
IceMOS Technology Corporation
Jason L. Carlson
Chief Executive Offi cer
congatec, AG
Estia J. Eichten, Ph.D.
Senior Scientist
Fermi National Accelerator Laboratory
Liam K. Griffi n
President & Chief Executive Offi cer
Skyworks Solutions, Inc.
Common Stock
Vicor shares are traded on the NASDAQ Stock Market®
under the symbol “VICR”.
Transfer Agent
Computershare Trust Company NA
College Station, Texas, 1.877.282.1169
Counsel
Foley & Lardner LLP
Boston, Massachusetts
Auditors
KPMG LLP
Boston, Massachusetts
H. Allen Henderson
Retired and Former Corporate Vice President & President, VLT, Inc.
Barry Kelleher
Retired and Former Corporate Vice President & President,
Brick Business Unit
David T. Riddiford
Private Investor
James A. Simms
Corporate Vice President, Chief Financial Offi cer,
Treasurer, & Secretary
Claudio Tuozzolo
Corporate Vice President & President, Picor Corporation
Patrizio Vinciarelli, Ph.D.
Chairman of the Board, President & Chief Executive Offi cer
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2016 Annual Report & Proxy Statement
Vicor Corporation
25 Frontage Road
Andover, MA 01810 USA
978.470.2900
vicorpower.com
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