UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Amendment No.     )

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:
	Preliminary Proxy Statement
	Confidential, for Use of the Commission Only (as permitted by Rule 14A-6(E)(2))
	Definitive Proxy Statement
	Definitive Additional Materials
	Soliciting Material under §240.14a-12

VERICEL CORPORATION

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):
	No fee required.
	Fee paid previously with preliminary materials.
	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

2

Notice of Virtual Annual Meeting of Shareholders

Dear Shareholder of Vericel Corporation:

 

You are cordially invited to attend the Virtual Annual Meeting of Shareholders of Vericel Corporation (the “Annual Meeting”), a Michigan corporation. The Annual Meeting will be held on Wednesday, May 1, 2024, at 9:00 a.m. Eastern Time, via a live audio webcast at www.virtualshareholdermeeting.com/VCEL2024. A list of shareholders entitled to vote at the Annual Meeting will be available for inspection by any shareholder at our offices in Cambridge, Massachusetts during ordinary business hours for a period of 10 days prior to the meeting. This list will also be available for shareholders to view online at the time of the meeting.

 

Voting Items

 

Proposal		Board Voting Recommendation	For Further Details
1	To elect eight (8) directors, each to serve a term of one year expiring at the 2025 annual meeting	FOR each director nominee	Page 19
2	To approve, on an advisory basis, the compensation of our named executive officers	FOR	Page 42
3	To cast an advisory vote on the frequency of future non-binding, advisory votes to approve the compensation of our named executive officers	Every 1 YEAR	Page 63
4	To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2024	FOR	Page 64

 

Shareholders will also consider such other business as may properly come before the Annual Meeting and any adjournment thereof.

 

By Order of the Board of Directors,

 

 

 

Sean Flynn
Senior Vice President, General Counsel and Secretary
Cambridge, Massachusetts
March 21, 2024

BACKGROUND
	Date and Time   May 1, 2024, at 9:00 a.m. Eastern Time
	Location   Via a live audio webcast at www.virtualshareholder meeting.com/VCEL2024
	Who Can Vote   You may vote at the Annual Meeting if you were a shareholder of record at the close of business on March 8, 2024
VOTING METHODS
	Internet or Telephone   Follow the instructions on your proxy card and at www.proxyvote.com
	Mail   Vote, sign and return the proxy card to Broadridge Financial Solutions, 51 Mercedes Way, Edgewood, New York 11717
	Online at the Annual Meeting   www.virtualshareholdermeeting. com/VCEL2024

 

If you attend the Annual Meeting, you may vote during the meeting even if you have previously voted via the Internet, by telephone, or by returning your proxy card.

Message from Our President and Chief Executive Officer		1
Notice of Virtual Annual Meeting of Shareholders		3
Proxy Overview		5
Corporate Governance		19
	Proposal 1: Election of Directors	19
Board’s Skills and Experience		22
Board’s Role and Responsibilities		29
Board Structure		34
Board Practices, Policies and Processes		37
Compensation of Directors		39
Executive Compensation		42
	Proposal 2: Advisory Vote to Approve the Compensation of Our Named Executive Officers	42
Vericel’s Executive Officers		43
Compensation Discussion and Analysis		44
Compensation Committee Report		53
Executive Compensation Tables		54
CEO Pay Ratio		60
Pay versus Performance		60
	Proposal 3: Advisory Vote on the Frequency of Future Advisory Votes to Approve the Compensation of our Named Executive Officers	63
Overview		63
Audit Matters		64
	Proposal 4: Ratification of Appointment of Independent Registered Public Accounting Firm	64
Fees of Independent Registered Public Accounting Firm		65
Pre-Approval Policy		65
Report of the Audit Committee of the Board of Directors		65
Information About Stock Ownership		66
Stock Ownership of Certain Beneficial Owners and Management		66
Additional Information		68

4

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Vericel Corporation (the “Board of Directors” or the “Board”), a Michigan corporation, for use at the Annual Meeting of Shareholders to be held on Wednesday, May 1, 2024, at 9:00 a.m. Eastern Time, via a live audio webcast at www.virtualshareholdermeeting.com/VCEL2024 or at any adjournments or postponements thereof. An Annual Report to Shareholders, containing financial statements for the year ended December 31, 2023, and this Proxy Statement are being made available to all shareholders entitled to vote at the Annual Meeting. This Proxy Statement and the form of proxy were first made available to shareholders on or about March 21, 2024. Unless the context requires otherwise, references to “we,” “us,” “our,” and “Vericel” refer to Vericel Corporation.

This overview highlights certain information contained elsewhere in this Proxy Statement and does not contain all of the information that you should consider. You should read the entire Proxy Statement carefully before voting. For more information about our business and 2023 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (“SEC”) on February 29, 2024.

About Vericel

Vericel is a leading provider of advanced therapies for the sports medicine and severe burn care markets. Whether we are treating damaged cartilage or severe burns, we provide advanced therapies to repair serious injuries and restore lives. Our highly differentiated portfolio of cell therapy and specialty biologic products combines innovations in biology with medical technologies. We were among the first companies to achieve commercial success in the complex field of cell therapies with treatments that use tissue engineering to regenerate skin and healthy knee cartilage.

Today, we are known for putting a patient’s own cells to work — and working for each of our patients. We deliver our therapies with personalized care and attention. This approach has created many promising possibilities for expanding our portfolio. As we grow, our purpose remains the same: to produce therapies as individual as the people who need them.

We currently market three products in the United States. MACI^® (autologous cultured chondrocytes on porcine collagen membrane) is an autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults. Epicel^® (cultured epidermal autografts) is a permanent skin replacement for the treatment of patients with deep dermal or full thickness burns greater than or equal to 30% of total body surface area. We also hold an exclusive license for North American rights to NexoBrid^® (anacaulase-bcdb), a botanical drug product containing proteolytic enzymes, which is indicated for the removal of eschar in adults with deep partial-thickness and/or full-thickness burns.

Our portfolio is unique in that there are significant barriers to entry for competitive products. For MACI and Epicel, which are regulated as combination biologic/device products by the FDA, there are no established generic biosimilar or 510(k) pathways to enter the market, so future entrants will almost certainly be required to follow a standard clinical trial pathway, which is challenging and the results of which are often uncertain. We believe there are no similarly situated competitors in either of these markets in the near-term.

We believe that our product portfolio provides an exceptionally solid foundation to deliver sustained strong revenue and profitability growth in the years ahead. We expect to further enhance our profile by reinforcing our position as a premier high-growth sports medicine business as we expand our leadership position in the knee cartilage repair market by maximizing certain MACI growth drivers within the product’s current indication, expanding MACI’s indication to encompass new delivery techniques and treatment targets, and creating a second high-growth franchise in burn care with the launch of NexoBrid and continued growth in the utilization of Epicel.

Our Products: Advanced Therapies for the Sports Medicine and Severe Burn Care Markets

	Our lead product is MACI, an advanced cell therapy product that uses a patient’s own cells to repair damaged cartilage tissue and improve function in the knee. We launched MACI in 2017 for the treatment of cartilage defects in the knee, and MACI is now the leading restorative cartilage repair product in the sports medicine market, and the only FDA-approved product in its class. MACI is produced from a patient’s own cells, which are obtained from a biopsy of healthy cartilage, expanded and placed onto a resorbable porcine collagen membrane that is implanted into the area of the cartilage defect through a minimally-invasive outpatient surgical procedure.   There are more than 750,000 knee cartilage repair surgical procedures performed each year in the U.S. Of these, approximately 315,000 patients have cartilage defects that are covered by the current MACI label. Based on defect characteristics, surgeons that have implanted MACI consider approximately 125,000 of these patients clinically appropriate for MACI. Approximately 60,000 of the eligible patients have larger lesions that we believe are likely to secure insurance authorization for MACI. Given the number of cartilage injuries, the knee cartilage repair market represents a significant commercial opportunity for MACI, and we estimate that our current overall MACI target addressable market exceeds $3 billion.
	MACI represented a major technological advancement that resulted in a less invasive, simpler and faster way for orthopedic surgeons to treat patients suffering from knee cartilage damage. We are now focused on the potential arthroscopic delivery of MACI, which would represent the next major procedural advancement in our strategy of continuing to make MACI an even simpler and less invasive procedure for surgeons and patients. We believe the potential approval of MACI ArthroTM will drive continued strong growth for the product. Surgeons have indicated that an arthroscopic delivery method would not only allow the treatment of MACI patients in a less-invasive manner, but would also more easily permit the treatment of cartilage defects in the knee’s femoral condyle and increase the penetration into MACI’s largest market opportunity. The FDA has accepted our submission seeking to expand the MACI label to include arthroscopic delivery of MACI for the treatment of cartilage defects in the knee and we expect to commercially launch MACI Arthro during the third quarter of 2024.   In addition to further procedural advancements, we are also making progress on our strategy to expand MACI’s use to other joints. Specifically, our MACI clinical development program is focused on studying MACI’s use to treat cartilage injuries in the ankle, which represents the largest cartilage repair opportunity outside of the knee, and an additional addressable market of approximately $1 billion. We are on track to initiate a MACI Ankle clinical study beginning in 2025 and, if approved, we believe MACI’s expansion into the ankle will be another longer-term growth driver for the product.
	Epicel is the only cultured epidermal autograft product approved by the FDA for the treatment of adult and pediatric patients with deep dermal or full-thickness burns greater than or equal to 30% of their total body surface area. Epicel is a permanent skin replacement produced from a patient’s own skin cells, which are obtained from two postage stamp-sized biopsies of healthy skin, expanded to form skin grafts, and placed onto the burn wound site.   Epicel is an important and potentially life-saving treatment option for patients with severe burns who may not be candidates for autografts due to the severity and extent of their burns. We estimate that there are approximately 600 surviving patients in the U.S. each year with full-thickness burns greater than 40% of total body surface area that are candidates for treatment with Epicel, representing a potential market opportunity of $300 million per year.
	In 2023, we commercially launched NexoBrid in the United States, which is an innovative treatment for burn patients and which significantly expands our addressable burn care market. NexoBrid is a botanical drug product containing proteolytic enzymes that is indicated for the removal of eschar in adults with deep partial and/or full-thickness thermal burns. NexoBrid satisfies an unmet need in burn treatment by selectively degrading eschar over the course of four hours while preserving viable tissue. The advantages of removing tissue damaged from burns while preserving viable skin are important and NexoBrid’s clinical results, which underpin its BLA approval from the FDA, are compelling in terms of long-term healing outcomes.   NexoBrid’s launch activities are well underway with our first patients treated in the U.S. soon after the product entered the market during the fourth quarter of 2023. We estimate that there are approximately 40,000 hospitalized burn patients in the U.S. each year, the majority of whom will require eschar removal and are candidates for treatment with NexoBrid, representing a potential market opportunity of $300 million per year. NexoBrid is also highly synergistic with our existing Burn Care franchise and the use of Epicel. We believe the addition of NexoBrid meaningfully expands our burn care total addressable market to $600 million and we will be targeting a significantly larger segment of hospitalized burn patients with NexoBrid than with Epicel alone. We believe that the indication for NexoBrid in this larger share of the burn care market will both drive NexoBrid uptake and increase Epicel penetration, thus enabling us to build a second high-growth franchise in the burn care market.

6

Business Highlights

Growth Strategy Leverages Near-Term & Long-Term Opportunities

Strong Financial	High-Growth Sports	Advancing	Second High-Growth
Profile	Medicine Franchise	Pipeline	Franchise in Burn Care
•  Total net revenue growth of 20% to $197.5 million in 2023 •  Gross margin expansion in 2023 to 69% •  Full-year non-GAAP adjusted EBITDA* growth of 40% to $33.9 million, or 17% of total net revenue •  $152.6 million in cash, restricted cash and investments and no debt as of December 31, 2023	•  Market leader in knee cartilage repair •  25% MACI revenue growth in 2023 to $164.8 million •  Continued strong growth in MACI surgeons and MACI biopsies	•  MACI Arthro human factors study submission accepted for review by the FDA •  Commercial launch of MACI Arthro expected during Q3 2024 •  MACI Ankle program advancing •  NexoBrid’s BLA for pediatric indication accepted for review by the FDA	•  NexoBrid launched commercially in Q4 2023 •  High surgeon interest in NexoBrid

Financial Highlights

Continued Strong Revenue and Profit Growth Across the Organization

Top-Tier Total Net Revenue Growth		Year-over-Year Total Net Revenue Growth Adjusted EBITDA*
•  Durable growth platform equating to multiple years of top-tier revenue growth •  Significantly underpenetrated markets diversified across two franchises •  Strong reimbursement profiles		•  Converting strong revenue growth into cash flow generation •  Adjusted-EBITDA* growth of 40% during 2023 •  $152.6 million in cash, restricted cash and investments and no debt as of December 31, 2023 •  14 consecutive quarters with positive adjusted EBITDA* and Operating Cash Flow through Q4 2023

Track Record of Creating Significant Shareholder Value

Trailing Stock Performance
(through March 8, 2024)

We are pleased that our performance and continued execution on our strategic and operational goals have translated into significant value for our shareholders. Between December 30, 2022 and March 8, 2024, the value of Vericel’s publicly-traded stock has increased approximately 72%, outperforming the Nasdaq Biotechnology Index, the Russell 2000 Index and the average of our Proxy Statement Peer Group during that period. For more information concerning our Peer Group companies, see page 48 of this Proxy Statement.

ESG Highlights

We recognize the importance of incorporating Environmental, Social, and Governance (“ESG”) principles into the core of our operations, for our organization and employees, and for the larger communities in which we operate. During 2022, Vericel published its inaugural ESG Report, which highlights for investors our Company’s steadfast commitment to incorporating ESG principles into our everyday business activities. Below is a summary of some of our recent ESG-related activities and achievements.

Governance

The Vericel Board of Directors provides oversight of, and strategic guidance to, our executive leadership team on ESG topics. Our Board is comprised of industry leaders with extensive and diverse experiences, which span the business, healthcare, and scientific arenas. The Board continued its focus on developing and implementing the Company’s ESG strategy throughout 2023. The Board has continued to conduct educational programs with outside experts on ESG topics and was involved in the oversight of Vericel’s company-level Diversity and Inclusion Advisory Committee, which is a central component of Vericel’s steadfast commitment to integrating core diversity and inclusion concepts into corporate policies, initiatives, and programs across the organization. See “Oversight of Environmental, Social and Governance Matters” on page 32 of this Proxy Statement for more information on how the Board and its committees exercise ESG oversight.

Environmental

We are committed to minimizing the environmental impact of the Company’s operations and as part of that commitment we have implemented several process improvements and adopted operational efficiencies to reduce our environmental footprint. We have adopted environmentally sustainable practices into our facilities and manufacturing operations and have established procedures and policies to manage our electricity and water usage, as well as the handling of medical and hazardous waste.

The Company is currently constructing a new state-of-the-art advanced cell therapy manufacturing and corporate headquarters facility in the greater Boston area. The 125,000 ft² facility will significantly increase our cell therapy manufacturing capacity to support the long-term growth of our commercial products. Our manufacturing expansion will enable us to sustain our long-term revenue growth while helping us promote environmentally responsible operations and workforce well-being. We expect to begin occupying our new facility at the end of 2024.

Importantly, Vericel’s new facility will be located within a campus that is designed and operated in accordance with existing LEED Gold and Fitwel Level 2 certifications. We will continue to evaluate opportunities to manage the Company’s environmental impact as we prepare to transition operations to our new facility.

8

Social

We are passionate, not only about serving the patients and healthcare professionals who use our products, but also about our continuing commitment to our employees.

Corporate Governance

10

PROPOSAL 1:
Election of Directors			The Board recommends a vote FOR each director nominee.
To elect eight (8) directors, each to serve a term of one year expiring at the 2025 annual meeting of shareholders.			See page 19

Board Snapshot		Skills and Experience

 

Shareholder Engagement
	Vericel greatly values the perspectives that we gain through direct engagement with our shareholders.		In 2023, our shareholder engagement included participation in multiple investor conferences and numerous individual investor meetings and calls on a variety of topics, such as business and financial performance, Company strategy, executive compensation and product development and commercialization.

12

PROPOSAL 2:
Advisory Vote to Approve the Compensation of our Named Executive Officers			The Board recommends a vote FOR this proposal.
To vote on an advisory resolution to approve the compensation of Vericel’s named executive officers.			See page 42

2023 Financial and Business Performance
$197.5 million Record full-year total net revenue, representing 20% year-over-year growth		40%* Adjusted EBITDA year-over-year growth rate		$164.8 million MACI net revenue, representing 25% year-over-year growth
$33.9 million* Non-GAAP adjusted EBITDA (Net Loss of $3.2 million)		$32.7 million Burn Care net revenue; commercial launch of NexoBrid in Q4 2023		$152.6 million Cash, restricted cash and investments as of December 31, 2023, and no debt

Elements of Compensation

The primary components of our executive officer compensation program are: (i) annual base salary; (ii) annual non-equity incentive compensation, which is based on the achievement of specified Company goals; and (iii) long-term equity incentive compensation in the form of periodic stock options and restricted stock unit (“RSU”) grants, with the objective of aligning the executive officers’ long-term interests with those of our shareholders.

		Element		Target Mix		Strategy and Performance Alignment
		Base Salary				Base salaries are established, in-part, based on the individual experience, skills and expected contributions of our executives, their performance during the prior year, and a comparison against peer group benchmarks.
		Annual Non-Equity Incentive Compensation				The determination of annual incentives for our executives is tied to achieving our financial targets, advancing our commercial and development-stage products and accomplishing operational goals.   •  Commercial and Financial Performance Goals: 40% •  Product Goals: 50% •  Operational Goals: 10% Additional Upside Value Goal Opportunity (up to 15%)
		Long-Term Equity Incentive Compensation				Long-term incentive compensation aligns employees with shareholders and further incentivizes our executive officers to drive stock price growth and allows them to share in any appreciation in the value of our common stock.

14

Performance Against Our 2023 Metrics

Our Goals				Our Metrics		Our Performance
		Commercial and Financial Performance Goals		Generate total net product revenues of at least $194.3 million		•  Exceeded total net product revenue goal during 2023 as Company total revenue reached $197.5 million, based largely on MACI’s 25% year-over-year revenue growth
				Achieve budget expense target of $162.8 million		•  Budget expense target was fractionally below goal in 2023, although the Company’s continued fiscal discipline resulted in the generation of $35.3 million in Operating Cash Flow
		Product Goals		Achieve budgeted MACI surgeon engagement goals of increasing number of biopsy surgeons and MACI biopsy conversion rate; achieve unique Epicel biopsy center target; and secure Pharmacy and Therapeutics (“P&T”) committee approval to purchase NexoBrid at target burn centers		•  MACI biopsy surgeon engagement goal reached at target, while MACI biopsy conversion rate for the year was slightly below the target level; Epicel biopsy centers were achieved at target for the year; and NexoBrid P&T committee approvals were below target as a result of the delay in the commercial launch of the product due to a now-corrected deviation in MediWound’s manufacturing process
				Complete MACI, Epicel and NexoBrid long-term brand development initiatives		•  Achieved brand development initiative goals at target, including the continued development of the MACI Ankle program
				Complete MACI Arthro human factors study and submit label update to the FDA by December 1, 2023		•  Exceeded target with respect to the MACI Arthro program as the Company conducted and completed a human factors study during the third quarter of 2023 and submitted a prior approval supplement to the FDA shortly thereafter seeking to add instructions for arthroscopic delivery of MACI to the product’s approved labeling
		Operational Goals		Complete manufacturing facility and key manufacturing/IT efficiency improvement initiatives		•  Exceeded target with respect to manufacturing facility and key manufacturing/IT efficiency improvement goals
		Upside Value Goals		Execute high-quality business development transaction		•  Company strategically chose not to execute any business development transactions during 2023

Governance Features of Our Executive Compensation Program

		What We Do				What We Don’t Do
		Design executive compensation to align pay with performance   Balance short-and long-term incentive compensation to incentivize achievement of short-and long-term goals   Retain an independent compensation consultant reporting directly to the Compensation Committee   Provide shareholders with an annual say-on-pay vote   Prohibit short-sales, hedging, pledging or other inherently speculative transactions by our directors and employees (including our executives) (for more information, please see our Special Trading Procedures for Insiders, available at www.vcel.com)   Conduct competitive benchmarking of our executive compensation program against the market   Maintain robust Stock Ownership Guidelines that apply to our directors and named executive officers   Maintain a compensation Clawback Policy in accordance with applicable law and Nasdaq listing rules, which covers both cash and equity incentive compensation and requires recoupment of the incentive compensation of our executive officers in situations involving certain accounting restatements of financial results				No excessive perquisites   No tax gross-ups on executive perquisites or on executive severance or change-in-control benefits   No single-trigger change-in-control benefits   Do not provide supplemental company-paid retirement benefits   Our equity plan does not permit “evergreen” replenishment of shares   Do not provide dividends or dividend equivalents on unearned equity awards   Do not reprice stock options without prior shareholder approval

16

PROPOSAL 3:
Advisory Vote on the Frequency of Future Advisory Votes to Approve the Compensation of our Named Executive Officers			The Board recommends a vote that future non-binding, advisory votes to approve the compensation of our named executive officers be held every 1 YEAR
To cast an advisory vote on the frequency of future non-binding, advisory votes to approve the compensation of our named executive officers.			See page 63

PROPOSAL 4:
Ratification of Appointment of Independent Registered Public Accounting Firm			The Board recommends a vote FOR this proposal.
To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2024.			See page 64

The Audit Committee has selected PricewaterhouseCoopers LLP (“PwC”) as Vericel’s independent registered public accounting firm to audit the consolidated financial statements of Vericel for the fiscal year ending December 31, 2024. PwC has acted in such capacity since its appointment in fiscal year 1996.

As part of its duties, the Audit Committee considered the provision of services, other than audit services, during the fiscal year ended December 31, 2023 by PwC, our independent registered public accounting firm for that period, to ensure the firm maintains its independence. The following table sets forth the aggregate fees accrued by Vericel for the fiscal years ended December 31, 2022 and 2023, respectively, for PwC:

18

PROPOSAL 1:
Election of Directors			The Board recommends a vote FOR the election of each nominee.

Overview

The Vericel Board of Directors provides oversight of, and strategic guidance to, our Company’s senior management. The core responsibility of a director is to fulfill his or her duties of care and loyalty and otherwise exercise his or her business judgment in the best interests of the Company and its shareholders. The Board is responsible for overseeing the Company’s officers, including the President and Chief Executive Officer, and for ensuring that management advances the interests of the shareholders through the operation of the Company’s business. The Board recognizes that it is management’s responsibility to carry out the policies and strategies approved by the Board and to manage and carry out the operation of the Company’s business. Our Board is committed to legal and ethical conduct in fulfilling its responsibilities and it expects all directors, as well as officers and employees of the Company, to adhere to Vericel’s Code of Business Conduct and Ethics, a copy of which is available on the Company’s website.

Our Board is committed to the continuous improvement of our corporate governance structure, the principles of enterprise-wide diversity and inclusion, the oversight of our corporate ESG initiatives and enhancing the composition and effectiveness of the Board itself.

	Recent Governance Enhancements •   Board adoption of enhanced Compensation Clawback Policy, as discussed further on page 52 (2023) •   Oversight of an in-depth initiative to evaluate and enhance the Company’s cybersecurity incident response framework and readiness (2022-2023) •   Termination of shareholder rights plan or “poison” pill (2021) •   Implementation of comprehensive Corporate Governance Guidelines (2021) •   Adoption of formal Stock Ownership Guidelines, with which all directors and officers were in compliance as of December 31, 2023
	Board Composition and Effectiveness •   Added new director with expertise in healthcare operations and payer matters (2021) •   Robust Board self-assessment process in place to continuously evaluate the relevant skills and attributes of the Board’s individual members as well as the effectiveness of the Board as a whole
	Diversity & Inclusion •   Increased gender and racial diversity of Board (2021) •   Continued oversight of Vericel Diversity and Inclusion Advisory Committee, which is committed to furthering and strengthening our workforce diversity across all levels of the organization
	ESG Oversight •   Oversaw the creation and publication of Vericel’s inaugural ESG report highlighting our Company’s commitment to incorporating ESG principles into our everyday business activities (2022) •   Designated the Governance and Nominating Committee to oversee management of ESG-related matters (2022)

Our Company’s Amended and Restated Bylaws (“Bylaws”) provide that the Board of Directors will consist of not less than five nor more than nine members, as fixed from time-to-time by a resolution of the Board, and that all directors will be elected annually. The Board currently consists of eight (8) directors. The persons named below as nominees for director will, if elected, each serve a term of one year expiring at the 2025 annual meeting of shareholders or until their successors are elected and qualified.

Vote Required

The affirmative vote of a plurality of the total shares of common stock entitled to vote and be represented in person or by proxy is required for the election of each of the nominees. It is the intention of the persons named as proxies to vote such proxy FOR the election of all nominees, unless otherwise directed by the shareholder. The Board of Directors knows of no reason why any of the nominees would be unable or unwilling to serve, but if any nominee should for any reason be unable or unwilling to serve, the proxies will be voted for the election of such other person for the office of director as the Board may recommend in place of such nominee.

Shares present or represented and not so marked as to withhold authority to vote for a particular nominee will be voted in favor of a particular nominee and will be counted toward such nominee’s achievement of a plurality. Shares present at the meeting or represented by proxy where the shareholder properly withholds authority to vote for such nominee in accordance with the proxy instructions and “broker non-votes” will not be counted toward such nominee’s achievement of a plurality.

Board Refreshment and Succession Planning

The Company regularly examines the experience and expertise of our Board as a whole to ensure alignment between the Board’s abilities and our strategic priorities and long-range plan. We seek directors who will bring to the Board a deep and wide range of experiences in the business world and diverse problem-solving talents. The Company believes that the Board should represent an appropriate and relevant mix of skills, industry experience, backgrounds, ages and diversity (inclusive of race, gender and ethnicity). Typically, directors will be individuals who have demonstrated high achievement in business or another field, enabling them to provide strategic support and guidance to the Company. Particular areas of expertise include corporate strategy and development, commercial sales and marketing, commercial operations and execution, research and development, technical operations, familiarity with manufacturing biotechnology and medical device products, knowledge of the legal and compliance issues facing the life science industry, experience concerning the policies and procedures of public and private payers in the medical technology and biopharmaceutical space, corporate finance, financial and/or accounting expertise, organizational leadership, development and management, public company management and disclosure, and corporate risk assessment and prior experience in the medical technology, biopharmaceutical and complex biologics industries.

Identifying and Evaluating Candidates for Director

The Governance and Nominating Committee evaluates and recommends to the Board of Directors the nominees for each election of directors. Both the Governance and Nominating Committee and the Board use a variety of methods for identifying and evaluating such nominees, and the Governance and Nominating Committee, in consultation with the Chairman and other Board members, regularly assesses the composition of the Board and each committee to evaluate their effectiveness and whether or not changes should be considered. The full Board annually determines the diversity of specific skills and characteristics that could improve the overall quality and ability of the Board to carry out its oversight of the Company and other functions.

The Governance and Nominating Committee’s goal is to assemble a Board of Directors that brings to Vericel a variety of perspectives and skills derived from high quality business and professional experience, while considering the appropriate size of both the Board and its committees. In doing so, the Governance and Nominating Committee also considers candidates with appropriate non-business backgrounds. In general, the Governance and Nominating Committee seeks director nominees with the talents and backgrounds that provide the Board with an appropriate mix of knowledge, skills and experience for the needs of Vericel’s business.

20

   Current members of the Governance and Nominating Committee and the Board are polled for suggestions as to individuals meeting the criteria of the Governance and Nominating Committee.

   Research may also be performed to identify qualified individuals.

   If the Governance and Nominating Committee believes that the Board requires additional candidates for nomination, the Governance and Nominating Committee may explore alternative sources for identifying additional candidates. This may include engaging, as appropriate, a third-party search firm to assist in identifying qualified candidates.

The Governance and Nominating Committee recognizes that under applicable regulatory requirements at least one member of the Board of Directors must, and believes that it is preferable that more than one member of the Board of Directors should, meet the criteria for an “audit committee financial expert” as defined by SEC rules, and that at least a majority of the members of the Board must meet the definition of “independent director” under the Nasdaq listing standards or the listing standards of any other applicable self-regulatory organization that Vericel is subject to or governed by. The Governance and Nominating Committee also believes that it is appropriate for at least one member of Vericel’s management to participate as a member of the Board.

There are no stated minimum criteria for director nominees, and the Governance and Nominating Committee may consider such other factors as it deems are in the best interests of Vericel and its shareholders. In general, and given Vericel’s position as a leader in the biotechnology and medical technology space, the Board believes it should be comprised of persons with skills and experience in areas such as:

Following the identification of one or more potential candidates to serve on The Board, members of the Governance and Nominating Committee will generally be provided with a copy of each candidate’s resume and any additional information concerning the candidate’s skills and qualifications. One or more members of the Governance and Nominating Committee will then conduct an interview of each candidate. The Company’s CEO may also participate in such interview, if desired.

Once the Governance and Nominating Committee identifies an individual to serve as a new director, the Committee will generally commission an independent background check of that individual to confirm the candidate’s suitability to serve on Vericel’s Board. Upon obtaining the results of the background check, the Governance and Nominating Committee will again discuss the candidate’s suitability for membership on the Board and will normally share its findings and recommendation with all members of the Board.

Once the Governance and Nominating Committee has reached a decision to invite a new member to the Board it will make a formal recommendation to the Board for the candidate’s election. Following approval of Board resolutions to elect the new member, an invitation to join the Board will be extended to the candidate, normally by the Chairman of the Board.

Commitment to Diversity

The Governance and Nominating Committee also actively seeks out highly-qualified diverse candidates. In February 2020, the Board formalized its longstanding practice of considering women and minority candidates for open director positions by amending the Charter of the Governance and Nominating Committee and its Director Nominations Policy to clearly state that in filling each open director position the Governance and Nominating Committee will endeavor to actively seek out highly-qualified diverse candidates (including diversity on the basis of gender, race and ethnicity) to include in the pool from which director nominees are chosen. Additionally, in situations where the Governance and Nominating Committee engages a third-party search firm to assist in a Board member search, the policy requires that the search firm actively seek out highly qualified female and racially/ethnically diverse candidates, as well as individuals with diverse backgrounds, skills and experiences, to include in the candidate pool. The Board most recently added a member in 2021, when it conducted a nationwide search for a new director that resulted in the appointment of Lisa Wright on June 1, 2021.

Board’s Skills and Experience

All of our director nominees exhibit high integrity, sound business judgment, innovative thinking, collegiality and a knowledge of corporate governance requirements and practices. As a group, our director nominees bring a balance of relevant skills and experience to our boardroom, including those listed below:

	Robert Zerbe, M.D.	Dominick Colangelo	Heidi Hagen	Alan Rubino	Kevin McLaughlin	Steven Gilman, Ph.D.	Paul Wotton, Ph.D.	Lisa Wright
Prior BOD Experience
Industry Experience
Medical Technologies
BioPharma
Complex Biologics
Payer
Healthcare Operations
Functional Expertise
CEO/GM
Finance
Chief Operating Officer
Marketing/Sales
Research and Development
Technical Operations
Business Development
Geography
North America
Asia/Middle East
Europe
Demographics
Age	73	60	55	69	67	71	63	49
Tenure	2006	2013	2013	2005	2015	2015	2015	2021
Male/Female	M	M	F	M	M	M	M	F
Race/Ethnicity
African American or Black
Alaskan Native or Native American
Asian
Hispanic or Latinx
Native Hawaiian or Pacific Islander
White
LGBTQ+

Directors who are Military Veterans: 0

Directors with Disabilities: 0

Directors who Identify as Middle Eastern: 0

22

Director Nominees for Election at the 2024 Annual Meeting of Shareholders

The biographical description below for each director nominee includes the specific experiences, qualifications, attributes and skills that led to the conclusion by the Board of Directors that such person should serve as a director of Vericel.

24

26

28

Shareholder Recommendations

The Governance and Nominating Committee will evaluate any recommendation for director nominees proposed by a shareholder who: (i) has continuously held at least 1% of the outstanding shares of our common stock entitled to vote at the annual meeting for at least one year by the date the shareholder makes the recommendation; and (ii) undertakes to continue to hold the common stock through the date of the meeting. In order to be evaluated in connection with Vericel’s established procedures for evaluating potential director nominees, any recommendation for a director nominee submitted by a qualifying shareholder must be received by Vericel no later than 120 days prior to the anniversary of the date proxy statements were made available to shareholders in connection with the prior year’s annual meeting. Any shareholder recommendation for a director nominee must be submitted to the General Counsel and Secretary, in writing, at 64 Sidney St., Cambridge, Massachusetts 02139, and must contain the following information:

The Governance and Nominating Committee will evaluate recommendations for director nominees submitted by directors, management or qualifying shareholders in the same manner, using the criteria stated above.

All directors and director nominees will submit a completed director and officer questionnaire as part of the nominating process. The process may also include interviews and additional background and reference checks for non-incumbent nominees, at the discretion of the Governance and Nominating Committee.

Board’s Role and Responsibilities

Overall Role of the Board of Directors

The Board is elected by the shareholders to oversee their interests in the long-term success of the Company. The Board serves as the ultimate decision-making body of the Company, except for those matters reserved to, or shared with, the shareholders. The core responsibility of a director is to fulfill his or her duties of care and loyalty and to otherwise exercise sound business judgment in the best interests of Vericel and its shareholders. The Board oversees the proper safeguarding of the Company’s assets, the maintenance of appropriate financial and other internal controls and the Company’s compliance with applicable laws and regulations and proper governance. The Board selects the Chief Executive Officer (“Chief Executive Officer” or “CEO”) and oversees the members of senior management, who are charged by the Board with conducting the business of the Company.

Key Responsibilities of the Board

Oversight of Corporate Strategy		Oversight of Risk Management		Oversight of ESG and Human Capital Management
•  The Board oversees and monitors strategic and long-range planning •  The Board and its committees routinely engage with senior management on critical business matters that are tied to the Company’s long-term strategy •  Senior management is tasked with executing business strategy and providing regular updates to the Board		•  The Board oversees risk management •  The Board’s individual committees play key roles in monitoring and managing risk areas particular to Vericel’s core business •  Senior management is charged with managing risk, through the development and implementation of robust internal processes and effective internal controls		•  The Board, through the Governance and Nominating Committee, oversees management of the Company’s strategy, initiatives, opportunities and reporting on material ESG matters, including DE&I •  The Board oversees the creation and retention of a talented employee base •  The Board maintains responsibility for succession planning for the CEO and other key members of the senior management team

Oversight of Corporate Strategy

Our Board actively oversees management’s establishment and execution of corporate strategy, including major business and organizational initiatives, annual budget and long-term strategic plans, capital allocation priorities and corporate development opportunities. Our Board also reviews and approves strategic transactions, including significant investments, acquisitions and collaborations. At the Board and committee meetings and throughout the year, our Board regularly receives information and formal updates from our management and actively engages with the executive leadership team with respect to our corporate strategy. The Board’s independent directors also hold regularly scheduled executive sessions at which strategic matters are discussed.

Board’s Role in the Oversight of Risk Management

Vericel management is responsible for assessing and managing risk to the Company, subject to the oversight of the Board. The Board exercises its oversight responsibility directly and through its committees. The Board considers specific risk topics directly, such as risks associated with the Company’s overall strategy, including clinical, product development, and financing strategies, business continuity, crisis preparedness and corporate reputational risks. The Board is kept informed of the committees’ risk oversight activities through periodic reports to the Board. The Board and its committees meet regularly with members of management responsible for managing risk.

30

The committees of the Board of Directors execute their oversight responsibility for risk management as follows:

	Audit Committee		Compensation Committee
The Audit Committee has primary responsibility for overseeing risk associated with: •  the Company’s financial and accounting systems, as well as the work performed by Vericel’s independent registered public accounting firm and internal audit team; •  accounting policies; •  investment strategies; •  finance-related reporting; •  regulatory compliance, and risks associated with the manufacturing and production of the Company’s approved products; and •  the Company’s data security and information systems and technology, including cybersecurity. The Audit Committee also reviews transactions between Vericel and its officers, directors, affiliates of officers and directors or other related parties for conflicts of interest. The Audit Committee also receives regular reports and feedback from Vericel’s Chief Compliance Officer concerning the health of the Company’s Compliance Program as well as management’s Enterprise Risk assessment of the organization.		The Compensation Committee is responsible for overseeing risks related to Vericel’s cash and equity-based compensation programs and practices and ensuring that executive and employee compensation plans are appropriately structured so that they do not incentivize excessive risk-taking and are not reasonably likely to have a material adverse effect on Vericel.
			Governance and Nominating Committee
		The Governance and Nominating Committee is responsible for overseeing risks related to the composition and structure of the Board of Directors and its committees, as well as our corporate governance. The Governance and Nominating Committee works to ensure that our corporate governance does not encourage or promote excessive risk-taking on the part of the Board of Directors or by Vericel employees.

Cybersecurity Risk Management

Cybersecurity is a risk management focus area for the Company, with both the full Board and the Audit Committee providing oversight.   Role of Management:   •  We have developed processes for assessing, identifying and managing material risks from cybersecurity threats. Our enterprise risk management system incorporates risks from cybersecurity threats alongside other risks to the Company. As part of this risk management system, our information technology team oversees and implements security controls designed to minimize the risk or impact of any breach or unauthorized disclosure of our confidential and sensitive data. These controls include security management, intrusion detection and monitoring applications, and multifactor authentication, among other mitigation efforts. •  Our Executive Director, Corporate Information Systems, along with our General Counsel, Information Technology management team, and Chief Operating Officer, oversees our approach to cybersecurity and is responsible for assessing and managing our material risks from cybersecurity threats. In this role, our Executive Director, Corporate Information Systems has access to an external information security firm and an industry-leading intelligence platform and, leveraging these tools, monitors the prevention, detection, mitigation and remediation of cybersecurity incidents across the organization. •  Throughout 2022 and 2023, management worked extensively with external consultants to evaluate the Company’s cybersecurity incident response planning framework and to develop an enhanced enterprise-wide incident response plan to be deployed in the event of, and to help mitigate the impact of, a cybersecurity incident. The Board was actively engaged in this endeavor and received periodic updates and reports concerning the Company’s progress.

Oversight of Environmental, Social and Governance Matters

Board of Directors		Governance and Nominating Committee		Management
•  Provides oversight of, and strategic guidance to, our executive leadership team on ESG topics •  Is comprised of industry leaders with extensive and diverse experiences, which span various business, healthcare, and scientific areas		•  Periodically reviews and oversees management of Vericel’s strategy, initiatives, risks, opportunities and related reporting with respect to significant ESG matters •  Oversees corporate ESG matters as they pertain to the Company’s business and long-term strategy and identifies emerging trends and issues that may affect our operations, performance and external stakeholder relationships •  Periodically receives updates on the Company’s ongoing and future ESG programs, products and disclosures, and the Company’s corporate social responsibility and diversity and inclusion programs and activities		•  Management is tasked with executing on the Company’s ESG strategy and initiatives set by the Board. •  Vericel’s commitment to ESG permeates all levels of the organization, whether it be our Company-level Diversity and Inclusion Advisory Committee, which is designed to further cultivate the diverse culture we have created at Vericel, or whether it be our operations team, which is tirelessly working to complete our new state-of-the-art manufacturing facility and corporate headquarters in Burlington, Massachusetts.

32

Human Capital Management and Management Succession Planning

The Board is actively engaged in overseeing the Company’s people and culture strategy. Our Board believes that human capital management and succession planning, including DE&I initiatives, are vital to Vericel’s continued success. During 2023, our Board remained keenly engaged with, and received periodic updates concerning the progress of, the Company’s Diversity and Inclusion Advisory Committee, which is tasked with enhancing diversity across the organization and cultivating a culture and environment that respects, supports and promotes people of all races, ethnicities, religions, nationalities, genders, sexual orientations, and all other qualities that make each of us unique. Additionally, our Board’s involvement in leadership development and succession planning is ongoing, and the Board provides input on important decisions in each of these areas.

Board Oversight		Board Committees’ Responsibilities
		Our committees assist the Board with succession planning as follows:
•  Our Board, with leadership from our Chairman, maintains primary responsibility for succession planning for the Chief Executive Officer and talent retention and development programs for members of senior management •  In 2023, the Board, in conjunction with the Governance and Nominating Committee, reviewed a comprehensive plan that included the Company’s strategy to meet ongoing goals in the event of both planned and unforeseen vacancies at the director level and above, as well as the potential of such individuals to assume increased leadership in the organization		Governance and Nominating Committee •  At least annually, meets with our CEO to discuss succession planning for members of the executive management team •  Considers the procedure for timely and efficient transfer of CEO responsibilities in the event of an emergency or the sudden incapacity, death, resignation or retirement of Mr. Colangelo, or the occurrence of any other event that would have a material impact on Mr. Colangelo’s ability to fulfill his job duties •  In connection with its oversight of Emergency Succession planning, receives an assessment of the performance of members of senior management and their potential to assume the position of CEO and other key positions within the Company		Compensation Committee •  Performs an annual formal evaluation of the CEO in consultation with the Governance and Nominating Committee

Code of Ethics

In 2023, the Board of Directors oversaw a comprehensive review and revision of the Company’s Code of Business Conduct and Ethics, which applies to all of our employees, officers and directors, and which sets the bedrock principles of our Patients First mission, including expectations for integrity, compliance and ethical conduct in everything we do as a business. The Company also maintains a separate Code of Ethics for Senior Financial Officers. These documents are available on the Investor Relations page of our website, www.vcel.com. We will also make information related to any amendments to, or waivers from, these Codes of Ethics available on the website as required by law.

Board Structure

Board Leadership Structure

The Board of Directors does not have a formal policy on whether the positions of CEO and Chairperson of the Board should be separate or united, but rather will make that determination from time to time in its judgment. The Chairperson of the Board is currently an independent director, but if the Chairperson of the Board is not independent, the Board will appoint an independent lead director. The Chairperson of the Board shall preside at all meetings of the Board and the shareholders, and shall perform such other duties, and exercise such powers, as prescribed by the Bylaws or by the Board, from time to time. If the Chairperson of the Board is not independent and a lead director has been appointed, he or she shall preside at executive sessions of the independent directors and will bear such further responsibilities as the Board may designate from time to time. Currently, Dr. Zerbe serves as the Board’s independent Chairman.

The independent members of the Board of Directors have periodically reviewed this leadership structure and believe it is appropriate for Vericel at the current time. The CEO is responsible for setting the strategic direction for Vericel, as well as the day-to-day leadership and performance of the Company, while the Chairman of the Board of Directors provides guidance to the CEO and sets the agenda for, and presides over, meetings of the full Board of Directors. The CEO and Chairman of the Board of Directors provide leadership to the Board and work with it to define its structure and activities in the fulfillment of its responsibilities. The Chairman of the Board of Directors presides over executive sessions, ensures that no conflict of interest arises between management and the functions of the Board of Directors, and facilitates communication among the directors. The Chairman of the Board and the CEO work together to provide appropriate information to the Board, and the Chairman works with other Board members to provide strong, independent oversight of Vericel’s management and affairs. Thus, the Board of Directors believes that the current structure balances the needs for the CEO to run Vericel on a day-to-day basis with the benefit provided to Vericel by significant involvement and leadership of an independent Chairman of the Board of Directors.

Board Independence

The Board of Directors has affirmatively determined that all of the members of the Board and each director nominee, other than Mr. Colangelo, are independent within the meaning of the director independence standards of Nasdaq and the SEC. Mr. Colangelo is not considered independent because of his current employment as the President and CEO of Vericel. There are no family relationships between any of our directors, persons nominated or chosen to be a director or an officer and any of our executive officers.

Executive Sessions

Applicable Nasdaq listing standards require that the independent directors meet from time-to-time in executive sessions. In fiscal year 2023, our independent directors met in regularly scheduled executive sessions with only independent directors present at each Board and committee meeting.

34

Committees of the Board

Audit Committee

Kevin McLaughlin Chairperson   Members:   Alan Rubino   Robert Zerbe, M.D.		RESPONSIBILITIES Under the terms of its current charter, the Audit Committee’s responsibilities include, in part: •   Reviewing with Vericel’s independent accountants and management the annual financial statements and independent accountants’ opinion; •   Reviewing the scope and results of the examination of Vericel’s financial statements by the independent accountants; •   Reviewing all professional services performed by, and related fees of, the independent accountants; •   Approving the retention of the independent accountants; and •   Periodically reviewing Vericel’s accounting policies and internal accounting and financial controls. The Audit Committee may delegate duties or responsibilities to subcommittees or to one member of the Audit Committee. During the fiscal year ended December 31, 2023, the Audit Committee held four (4) meetings. All members of our Audit Committee are independent (as independence is defined in Rule 5605(a)(2) and as required under Rule 5605(c)(2) of the Nasdaq listing standards). Since March 2015, Mr. McLaughlin, an independent director, has been designated as an audit committee financial expert as defined by the rules of the SEC. The Audit Committee acts pursuant to a written charter, a current copy of which is available on the Investor Relations page of our website, www.vcel.com. For additional information concerning the Audit Committee, see “Report of the Audit Committee of the Board of Directors.”   PAST-YEAR HIGHLIGHTS In addition to its important oversight of Vericel’s financial statements and of our independent registered public accounting firm, during 2023, the Audit Committee received regular reports and provided key oversight of treasury, compliance and risk management activities at the organization level, to include management’s continued enhancements to the Company’s cybersecurity readiness. The Committee also oversaw the Company’s update and modernization of its Code of Business Conduct and Ethics.

Compensation Committee

Alan Rubino   Chairperson   Members:   Heidi Hagen Steven Gilman, Ph.D.		RESPONSIBILITIES Under the terms of its current charter, the Compensation Committee’s responsibilities include, in part: •   Determining and approving salary and bonus levels and equity award grants with respect to executive officers, and making recommendations to the Board of Directors regarding Mr. Colangelo’s compensation; •   Determining and approving equity award grants with respect to all employees; •   Reviewing and proposing to the Board of Directors changes in director compensation; and •   Retaining and approving the compensation of any compensation advisers and evaluating the independence of any such compensation advisers. In carrying out these responsibilities, the Compensation Committee reviews all components of executive officer compensation for consistency with the Committee’s compensation philosophy and strategy as well as relevant compensation guidelines. The Compensation Committee may delegate duties or responsibilities to subcommittees or to one member of the Committee. During the fiscal year ended December 31, 2023, the Compensation Committee held four (4) meetings. All members of our Compensation Committee are independent (as independence is defined in Rule 5605(a)(2) of the Nasdaq listing standards). The Compensation Committee acts pursuant to a written Charter, a current copy of which is available on the Investor Relations page of our website, www.vcel.com.   PAST-YEAR HIGHLIGHTS During 2023, the Compensation Committee approved of certain amendments to its Charter to reflect its administration and oversight of the Company’s Deferred Compensation Plan, which was adopted in May of 2023. The Deferred Compensation Plan, which is discussed in more detail on page 57 is limited to non-employee directors and a select group of management or highly compensated employees at the Company.

36

Governance and Nominating Committee

Heidi Hagen   Chairperson   Members:   Lisa Wright Paul Wotton, Ph.D.		RESPONSIBILITIES Under the terms of its current charter, the Governance and Nominating Committee’s responsibilities include, in part: •   Assisting Vericel’s Board of Directors in fulfilling its responsibilities by reviewing and reporting to the Board of Directors on (i) corporate governance compliance mechanisms, (ii) corporate governance roles amongst management and directors, and (iii) establishing a process for identifying and evaluating nominees for the Board of Directors; and •   Considering qualified candidates for appointment and nomination for election to the Board of Directors and making recommendations concerning such candidates. Consistent with this function, the Governance and Nominating Committee encourages continuous improvement of, and fosters adherence to, our corporate governance policies, procedures and practices at all levels. The Governance and Nominating Committee may delegate duties or responsibilities to subcommittees or to one member of the Governance and Nominating Committee. During the fiscal year ended December 31, 2023, the Governance and Nominating Committee held four (4) meetings. All members of the Governance and Nominating Committee are independent (as independence is defined in Rule 5605(a)(2) of the Nasdaq listing standards). The Governance and Nominating Committee acts pursuant to a written charter, a current copy of which is available on the Investor Relations page of our website, www.vcel.com.   PAST-YEAR HIGHLIGHTS As part of the Board’s regular governance enhancement process, in 2023, the Governance and Nominating Committee spearheaded a comprehensive review of the Company’s strategy to meet ongoing business goals in the event of both planned and unforeseen vacancies among key employees at various levels of the organization, as well as the potential of such individuals to assume increased leadership within the organization. The Committee also continued its important mission of arranging for robust continuing education for the Board and secured outside experts to teach on cybersecurity and SEC compliance, among other topics.

Board Practices, Policies and Processes

History of Commitment to Good Governance Practices

Board Practices   •   Non-employee members meet in executive session without management at each regularly scheduled Board and committee meeting •   7 of 8 director nominees are independent •   Director education programs

Board Enhancement   •   Board performance evaluations and assessment of needed skills •   Commitment to diversity and Board refreshment

Shareholder Rights   •   No active Shareholder Rights Plan •   Robust stock ownership guidelines that apply to our directors and named executive officers and with which each of our directors and officers were in compliance as of December 31, 2023

Board Meetings and Committees

During the fiscal year ended December 31, 2023, the Board of Directors held seven (7) meetings. Each director serving on the Board of Directors during 2023 attended at least 85% of the meetings of the full Board, and all but one director attended 100% of such meetings. Each member of the Board of Directors attended 100% of the meetings of the committees on which he or she served.

Director Attendance at Annual Meetings

The Board of Directors has adopted a Board Member Attendance at Annual Meetings Policy. This policy is available on the Investor Relations page of our website, www.vcel.com. All of the directors attended our 2023 annual meeting of shareholders, which was held in May 2023 and conducted in a virtual, audio webcast format.

Shareholder Communications with Directors

Our relationship with our shareholders is an important part of our corporate governance program. Engaging with shareholders helps us to understand how they view the Company, set goals and expectations for our performance and identify emerging issues that may affect our strategies, corporate governance, compensation practices or other aspects of our operations. The Board of Directors has adopted a Shareholder Communications with Directors Policy to inform shareholders how they may pose questions or communicate their views to our Board of Directors. The Shareholder Communications with Directors Policy is available on the Investor Relations page of our website, www.vcel.com.

Director Continuing Education

The Board of Directors recognizes the importance of ensuring that its members are continuously updated on matters of importance to its oversight of the Company from both an internal and external perspective. The Governance and Nominating Committee maintains responsibility for determining issues and subject matter areas that require further education for Board members, whether because of external developments or changes in Company direction. During 2023, the Board of Directors received education from Vericel’s General Counsel and outside advisors in the areas of cybersecurity and SEC compliance.

Certain Relationships and Related-Party Transactions

The Board of Directors is committed to upholding the highest legal and ethical standards in fulfilling its responsibilities and recognizes that related-party transactions can present a heightened risk of potential or actual conflicts of interest. Accordingly, and as a general matter, it is Vericel’s preference to avoid related-party transactions.

Our Audit Committee has primary responsibility for reviewing and approving in advance, or ratifying, all related-party transactions. In conformance with SEC regulations, we define related persons to include our executive officers, our directors and nominees to become directors of our Company, any person who is known to us to be a beneficial owner of more than 5% of any class of our voting securities, any immediate family member of any of the foregoing persons, and any firm, corporation or other entity in which any of the foregoing persons is employed, is a general partner or in which such a person has a 5% or greater beneficial ownership interest.

We have several processes that we use to ensure that we identify and review all related-party transactions. First, each executive officer is required to notify either our General Counsel or Chief Financial Officer of any potential transaction that could create a conflict of interest, and the General Counsel or Chief Financial Officer is required to notify the Audit Committee of the potential conflict. The directors, President and Chief Executive Officer, Chief Financial Officer and General Counsel are required to notify the Audit Committee of any potential transaction that could create a conflict of interest. Second, each year, we require our directors and executive officers to complete directors’ and officers’ questionnaires identifying any transactions with us in which the executive officer or director or their family members have an interest.

The Audit Committee reviews related-party transactions due to the potential for such transactions to create a conflict of interest. A conflict of interest occurs when an individual’s private interest interferes, or appears to interfere, with our interests. Our Board and its committees only approve a related-party transaction if it is determined that a transaction is in the best interests of shareholders or is at least not inconsistent with those interests. This includes situations where the Company may obtain products or services of a nature, quantity or quality, or on other terms, that are not readily available from alternative sources or when the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated party. There were no such reportable relationships or related party transactions during the fiscal year ended December 31, 2023.

38

Compensation of Directors

Our directors play a critical role in guiding our strategic direction and overseeing the management of Vericel. The many responsibilities and risks and the substantial time commitment of being a director require that we provide adequate compensation commensurate with our directors’ workload and opportunity costs. Our philosophy is to provide competitive compensation necessary to attract and retain high-quality non-employee directors and appropriately compensate them for the time, expertise and effort required to serve as a director of a commercial stage, publicly-traded company that operates in a dynamic and highly-regulated industry. Non-employee directors receive a combination of annual cash retainers and stock option and RSU grants in amounts that correlate to their responsibilities and levels of Board participation, including service on Board committees. At least every three (3) years, the Compensation Committee engages an independent consultant to perform an analysis of the non-employee director compensation program. In 2023, the Compensation Committee engaged Frederic W. Cook & Co., Inc. (“FW Cook”) to perform an independent review of the compensation program for non-employee directors.

How Our Director Compensation Program Aligns with Long-Term Shareholder Interests

The director compensation table reflects all compensation awarded to, earned by or paid to our non-employee directors for the fiscal year ended December 31, 2023.

Fees Earned or Paid in Cash. The Chairman of the Board of Directors receives an annual fee of $90,000 paid in equal quarterly increments and does not receive additional fees for service as a member of the Board of Directors or as an individual committee member. Each other non-employee director receives an annual fee of $50,000 paid in equal quarterly increments. The chairperson of each standing committee receives an additional annual fee of $20,000 for the Audit Committee, $17,500 for the Compensation Committee and $10,000 for the Governance and Nominating Committee. The non-chair members of the Audit Committee each receive an additional $10,000 annual fee, each non-chair committee member of the Compensation Committee receives an additional $7,500 annual fee and each non-chair committee member of the Governance and Nominating Committee receives an additional annual fee of $5,000, in each case payable quarterly.

Equity Awards. Under Vericel’s 2022 Omnibus Incentive Plan (the “2022 Plan”) and Vericel’s Amended and Restated Non-Employee Director Compensation Guidelines, each non-employee director who continues to serve beyond an annual meeting receives a stock option to purchase 8,000 shares granted on the date of each annual meeting, with an exercise price equal to the fair market value of our common stock on the date of grant, and a grant of 3,200 RSUs. Each non-employee director received a stock option to purchase 8,000 shares and a grant of 3,200 RSUs at the 2023 annual meeting. Such stock options vest in equal monthly increments over a period of one year, subject to continued service through the applicable vesting dates. The RSUs vest on the earlier of the first anniversary date of the RSU grant or the date of the first annual meeting following the grant, subject to continued service through the vesting date. Newly-elected directors joining the Board of Directors during the period between annual meetings receive a grant representing a pro-rata amount of the shares subject to the option (reflecting the period of time until the next annual meeting) and a pro-rata amount of the annual RSUs awarded (reflecting the period of time until the next annual meeting). Unless the non-employee director elects deferred settlement, the RSU grant will settle on vesting.

40

In addition, each future non-employee director who joins the Board of Directors will also receive a one-time initial stock option to purchase 4,000 shares on the date of such director’s appointment, which will vest in equal monthly installments over three years, subject to continued service through the applicable vesting dates and a one-time initial grant of 1,600 RSUs, which will vest in 1/3 annual increments over the course of three years, subject to continued service through the applicable vesting dates. Stock options issued to directors shall terminate and may no longer be exercised after the first to occur of (a) the expiration date of the option, (b) 24 months after the date on which the director’s service with Vericel is terminated, or (c) a change-in-control to the extent provided in the stock option agreement. Under the terms of the Company’s Deferred Compensation Plan, which was adopted May 3, 2023, non-employee directors have the ability to defer payment of all or a portion of their annual fees and/or defer settlement of all or a portion of their grant of RSUs. RSUs with a deferred settlement are subject to vesting, but the shares are not issued until the deferred settlement date. A non-employee director must make an election to defer his or her annual fees and/or RSU grant by December 31 of the year prior to the year such amounts will be earned, or such grants made. In addition, a deferral election for the RSU grant must be made during an open-trading window. Newly elected non-employee directors must make an election within thirty days of joining the Board. A non-employee director may elect to defer payment of the annual fees and/or grant of RSUs until a date specified in the non-employee director’s election. The deferred annual fees and/or grant of RSUs will be paid or settled on the earlier of (i) the date specified in the non-employee director’s election, (ii) the termination of the non-employee director’s service to Vericel (including due to death), (iii) the non-employee director becoming disabled, or (iv) a change-in-control, as defined in the 2022 Plan. Further, under the Deferred Compensation Plan, upon the occurrence of such event, the amounts credited in the non-employee director’s account shall be paid in cash and/or shares of stock, as applicable, as soon as practicable, but in no event after the last day of the calendar year in which the distribution event occurs.

Stock Ownership Guidelines for Directors

In April 2021, the Board adopted Stock Ownership Guidelines applicable to non-employee directors. Pursuant to these guidelines, non-employee directors are expected to meet share ownership targets that are determined based on their annual retainer within five years of the adoption of the guidelines. In addition, non-employee directors who join the Board after the establishment of the guidelines have five years from such date to reach their target. The share ownership target for non-employee directors is three times (3x) their annual retainer, and as of December 31, 2023, all non-employee directors are in compliance with their respective stock ownership targets.

PROPOSAL 2:
Advisory Vote to Approve the Compensation of Our Named Executive Officers			The Board of Directors unanimously recommends a vote FOR the approval of this resolution.

Overview

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), this proposal gives our shareholders the opportunity to vote to approve or not approve, on an advisory basis, the compensation of our named executive officers. This is commonly known, and referred to herein, as a “say-on-pay” proposal or resolution. Under Section 14A(a)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), generally, each public company must submit a say-on-pay proposal to its shareholders not less frequently than once every three years. We intend to hold an advisory vote to approve the compensation of our named executive officers annually, and as outlined in Proposal 3 of this Proxy Statement, the Board of Directors unanimously recommends that shareholders approve of holding future advisory votes to approve executive compensation on an annual basis. Following this year’s vote, the next advisory vote on the frequency of such advisory say-on-pay votes will occur no later than our 2030 annual meeting.

As discussed under the Compensation Discussion and Analysis (“CD&A”) below, we believe that our executive compensation programs emphasize sustainable growth through a pay-for-performance orientation and a commitment to both operational and organizational execution. We believe that the compensation program for our named executive officers was instrumental in helping us achieve strong strategic and financial performance in 2023.

We are asking our shareholders to vote “FOR” the following resolution at our Annual Meeting:

“RESOLVED, that the compensation paid to Vericel’s named executive officers, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the compensation tables and narrative discussion, is hereby APPROVED.”

We are asking shareholders to indicate their support for our named executive officers’ compensation as described in this Proxy Statement. This vote is not limited to any specific item of compensation, but rather addresses the overall compensation of our named executive officers and our philosophy, policies and practices relating to their compensation as described in this Proxy Statement pursuant to Item 402 of Regulation S-K.

Vote Required

The say-on-pay resolution is advisory, and therefore will not have any binding legal effect on Vericel, the Board of Directors or the Compensation Committee. However, the Board of Directors and the Compensation Committee value the opinions of our shareholders and intend to take the results of the vote on this proposal into account in its future decisions regarding the compensation of our named executive officers. Abstentions and broker non-votes will have no effect on this Proposal 2. If you sign and submit your proxy card without marking your voting instructions, your shares will be voted “FOR” Proposal 2.

We believe that our compensation program for our named executive officers is in the best interests of Vericel and the Company’s shareholders.

42

Vericel’s Executive Officers

		Dominick Colangelo   President and Chief Executive Officer   Dominick Colangelo, age 60, joined Vericel in 2013 with more than 20 years of executive management and corporate development experience in the biopharmaceutical industry, including nearly a decade with Eli Lilly and Company. During his career, he has held a variety of executive positions of increasing responsibility in product development, pharmaceutical operations, sales and marketing, and corporate development. He has extensive experience in the acquisition, development, and commercialization of products across a variety of therapeutic areas. During his tenure at Eli Lilly and Company, Mr. Colangelo held positions as Director of Strategy and Business Development for Lilly’s Diabetes Product Group and also served as a founding Managing Director of Lilly Ventures. Mr. Colangelo received his B.S.B.A. in Accounting, Magna Cum Laude, from the State University of New York at Buffalo and a J.D. degree, with Honors, from the Duke University School of Law.
		Joe Mara   Chief Financial Officer   Joe Mara, age 49, joined Vericel in January 2021 with more than 20 years of financial, strategic and operational experience, including more than 14 years of experience in the biotech industry. Prior to joining Vericel, Mr. Mara served as Vice President, Finance and Head of Investor Relations at Biogen Inc. While at Biogen, Mr. Mara held several finance leadership roles, including Vice President, Global Financial Planning and Analysis and Strategic Corporate Finance and Vice President, U.S. Finance and Operations. Mr. Mara worked across the entire Biogen organization in roles of increasing responsibility within Finance, including R&D, Corporate Finance, Corporate Strategy and Commercial operations, supporting company strategy, business development and several commercial launches. Prior to joining Biogen, Mr. Mara held finance and strategy roles in the financial services and technology industries, including at Thomson Reuters Corporation and Fidelity Investments. Mr. Mara earned a B.A. degree in Economics and International Studies from Northwestern University and an M.B.A. from the Sloan School of Management at M.I.T.
		Michael Halpin   Chief Operating Officer   Michael Halpin, age 62, joined Vericel in April of 2017 with more than 28 years of regulatory, quality assurance, and clinical research experience with a variety of medical device, combination product, small molecule, biologic, and advanced therapy technologies. Prior to joining Vericel, Mr. Halpin was with Sanofi and Genzyme Corporation, most recently as Vice President, North American region regulatory head with responsibility for Sanofi Genzyme’s rare disease, immuno-inflammatory, multiple sclerosis and other business unit products. Mr. Halpin has also served as Vice President, Regulatory Affairs for Genzyme’s biosurgery division, with regulatory oversight of all biosurgery and cell and gene therapy products, including Epicel, and MACI. Prior to Genzyme, Mr. Halpin held a number of regulatory, quality, and clinical affairs positions at several medical device companies, including Abbott/MediSense, C.R. Bard, and Abiomed, Inc. Mr. Halpin received his master’s degree in biomedical engineering and bachelor’s degree in biochemistry from the University of Virginia.

		Sean Flynn   Senior Vice President, General Counsel and Secretary   Sean Flynn, age 50, joined Vericel in 2019, having served as corporate and litigation counsel for nearly 20 years in both the public and private sectors. Prior to joining Vericel, Mr. Flynn held the position of Vice President and General Counsel of Verastem, Inc. where he was responsible for all legal matters across the organization. Mr. Flynn also served as Associate General Counsel and Chief Compliance Officer for Abiomed, Inc. during a period of rapid revenue and market growth. In that capacity, Mr. Flynn handled a wide variety of business and legal matters for the organization, while maintaining responsibility for the compliance readiness of the company on a global scale. Prior to joining Abiomed, Mr. Flynn served for seven years as a federal prosecutor with the Offices of the United States Attorney for the Eastern District of California and the Eastern District of New York. Mr. Flynn began his legal career as a litigator with Bingham McCutchen LLP, after clerking for the Honorable Ruggero J. Aldisert, Senior Circuit Judge, United States Court of Appeals for the Third Circuit, and after receiving his Juris Doctor, cum laude, from Vermont Law School. Prior to beginning his legal career, Mr. Flynn served as an Air Defense Artillery Officer in the United States Army, having graduated from the United States Military Academy at West Point in 1995.
		Dr. Jonathan Hopper   Chief Medical Officer   Jonathan Hopper, age 61, is a seasoned industry executive with previous experience as a surgeon and government regulator. He qualified in medicine in the United Kingdom in 1987 and trained as an orthopedic and trauma surgeon, gaining additional clinical experience in Accident and Emergency, Sports Medicine and Trauma Intensive Care. Dr. Hopper became a Fellow of the Royal College of Surgeons of Edinburgh in 1992. In 1997, he joined the UK’s Senior Civil Service as a senior medical officer at the UK’s Department of Health, regulating medical device manufacturers and advising senior government officials and Ministers of State. Dr. Hopper attained the degree M.B.A. (Health Executive) from the University of Keele in 2003. In 2006, Dr. Hopper joined the medical device industry and moved to the United States in 2009. He has held various Global Medical Affairs and Clinical Development Executive roles for ConvaTec, Stryker, Osiris Therapeutics and Ferring Pharmaceuticals. Dr. Hopper joined Vericel in August 2018 and leads the Clinical Development, Pharmacovigilance and Medical Affairs functions.

Compensation Discussion and Analysis

The Compensation Committee of our Board of Directors, which is comprised solely of independent directors as defined by Nasdaq and non-employee directors as defined by Rule 16b-3 of the Exchange Act, has been delegated the authority and responsibility to review and determine (and in the case of our Chief Executive Officer, Mr. Colangelo, recommend for approval by the Board of Directors) the compensation packages of our executive officers. Other information concerning the structure, roles and responsibilities of our Compensation Committee is set forth in the “Committees of the Board—Compensation Committee” section of this Proxy Statement.

A discussion of the policies and decisions that shape our executive compensation program, including the specific objectives and elements, is set forth below.

This CD&A focuses on the compensation for our CEO, our Principal Financial Officer, and our three other most highly compensated executive officers. Collectively, these officers are referred to as the named executive officers or NEOs. Our NEOs for 2023 are:

44

Executive Summary

Executive Compensation Objectives and Philosophy

The objectives of our executive compensation program are to attract, retain and motivate talented executives who are critical for the continued growth and success of Vericel and to align the interests of these executives with those of our shareholders. As such, our executive compensation program seeks to focus our leadership team on those key metrics that are critical drivers for executing on the Company’s strategy and achieving long-term sustainable growth. We foster a pay-for-performance culture by setting metrics in our incentive compensation plans that reflect our business plan, the operating framework for achieving it and the goals we communicate to investors. We set target performance levels that are challenging but achievable and are aligned with our strategy and our longer-term financial outlook. To this end, our compensation programs for executive officers are designed to achieve the following objectives:

		Attract talented and experienced executives to join Vericel				Motivate, reward and retain executives whose knowledge, skills and performance are critical to our success				Focus executive behavior on the achievement of our corporate mission and short-term and long-term corporate objectives and strategy
		Maintain a culture of “pay-for-performance”				Ensure fairness among the executive management team by recognizing the contributions each executive makes to our success				Align the interests of management and shareholders by providing management with longer-term incentives through equity ownership

Elements of Compensation

We strive to provide an effective mix of compensation elements, including providing an appropriate balance between current and long-term compensation and between cash and equity incentive compensation. Cash payments are primarily aligned with and reward short-term performance, while equity awards encourage our named executive officers to deliver sustained strong results over multi-year performance periods, thereby encouraging strong performance, ensuring fairness among the executive management team by recognizing the contributions each executive makes to our success, supporting our talent attraction and retention objectives, and fostering alignment with investors.

Target Total Direct Compensation

CEO		Other NEOs

Highlights of 2023 Performance and Impact on Executive Pay

Led by its executive management team, Vericel delivered strong results during 2023, as the Company achieved record full-year commercial revenues of $197.5 million, representing revenue growth of 20% for the year. Vericel’s MACI commercial team performed exceptionally well, securing record full-year MACI revenues of $164.8 million, representing 25% growth for the year. MACI’s continued upward trajectory was driven by strong business fundamentals. During the fourth quarter of 2023, the Company experienced the highest number of MACI implants, implanting surgeons, surgeons taking MACI biopsies and biopsies as in any quarter since the launch of the product. The commercial team’s execution during 2023 helped increase surgeon adoption of MACI and expand our surgeon customer base as the Company drove double-digit growth in surgeons taking biopsies in 2023. Epicel revenues were $31.6 million for the year, and we were pleased to see the continued strong utilization of this lifesaving product, which continues to be an important component of a burn surgeon’s armamentarium for treatment of the most severely burned patients in the United States.

Importantly, in 2023 we were successful in expanding our Burn Care franchise with the commercial launch of NexoBrid during the fourth quarter. NexoBrid is an innovative treatment for burn patients, and significantly expands our addressable burn care market as we move into 2024. NexoBrid is highly synergistic with Epicel and NexoBrid’s addition to our commercial portfolio significantly expands the segment of hospitalized burn patients in the U.S. that we will be targeting moving forward. We believe that this larger share of voice in the burn care market will drive both NexoBrid uptake and increased Epicel utilization.

Ultimately, the ability of our commercial teams to execute across our product portfolio, along with continued expense management, allowed Vericel to generate approximately $34 million of adjusted EBITDA*, representing full-year adjusted EBITDA growth of 40%. We continued to grow our cash, restricted cash and investments balance in 2023, notwithstanding capital expenditure investments associated with our new facility, which is under construction. We ended the year with $152.6 million in cash, restricted cash, and investments and no debt.

In addition to generating strong financial results, Vericel also made significant progress advancing our pipeline during 2023, highlighted by our completion of a human factors study of an arthroscopic method for the delivery of MACI in the knee, and the FDA’s subsequent acceptance of a prior approval supplement, which seeks to add instructions for arthroscopic delivery of MACI to the product’s approved labeling. We believe that MACI Arthro will be an attractive alternative for both patients and surgeons and help drive MACI’s growth, while at the same time allowing more patients to benefit from receiving MACI. We anticipate the potential launch of MACI Arthro in Q3 of 2024. Additionally, our clinical and regulatory teams made additional progress advancing our MACI Ankle program and helped secure the FDA’s acceptance of a supplemental BLA for a new pediatric indication for NexoBrid in the United States.

46

Consideration of Say-On-Pay Vote

There was strong support at the 2023 and 2022 annual meetings for the compensation program provided to Vericel’s named executive officers, with more than 92% and 86% of votes cast in favor, respectively. In light of the recent strong support for our executive compensation program reflected by the results of these “say-on-pay” proposals, the Compensation Committee maintained the same general structure and approach to Vericel’s executive compensation program for 2023. Although the results of the say-on-pay proposal are not binding, our Board and Compensation Committee value the input of our shareholders and intend to continue to consider the outcome of say-on-pay votes, as well as feedback received throughout the year, when making compensation decisions for our named executive officers in the future.

Executive Compensation Best Practices

		What We Do
		Design executive compensation to align pay with performance     Balance short and long-term incentive compensation to incentivize achievement of short-and long-term goals     Retain an independent compensation consultant reporting directly to the Compensation Committee     Provide shareholders with an annual say-on-pay vote     Prohibit short sales, hedging, pledging or other inherently speculative transactions by our executives, non-employee directors and other Company employees (for more information, please see our Special Trading Procedures for Insiders, available at www.vcel.com)     Conduct competitive benchmarking to align executive compensation with the market     Maintain robust stock ownership guidelines that apply to our directors and named executive officers     Maintain a compensation Clawback Policy in accordance with applicable law and Nasdaq listing rules, which covers both cash and equity incentive compensation and requires recoupment of the incentive compensation of our executive officers in situations involving certain accounting restatements of financial results

		What We Don’t Do
		No excessive perquisites     No tax gross-ups on executive perquisites or on executive severance or change-in-control benefits     No single-trigger change-in-control benefits     Do not provide supplemental company-paid retirement benefits     Our equity plan does not permit “evergreen” replenishment of shares     Do not provide dividends or dividend equivalents on unearned equity awards   Do not reprice stock options without prior shareholder approval

Procedures for Determining Compensation

Roles of Compensation Committee, Management and Compensation Consultant

The Compensation Committee performs a review of compensation for our executive officers annually. As part of this review, the Compensation Committee takes into consideration its understanding of external market data, which is primarily based on compensation practices of comparable companies (based on size and stage of development). Periodically, the Compensation Committee engages FW Cook, an independent consultant, to perform an analysis of the current compensation program. In late 2022, the Compensation Committee engaged FW Cook to perform an independent review of the compensation program for our executive officers to assist with setting 2023 compensation. FW Cook reports directly to the Compensation Committee. Other than the work it performs for the Compensation Committee, FW Cook does not provide any consulting services to Vericel or its executive officers. Our Compensation Committee performs an annual assessment of the independence of its compensation advisers. Our Compensation Committee has determined that FW Cook is independent and that their work has not raised any conflict of interests.

Generally, our Compensation Committee reviews and approves compensation arrangements for executive officers in the first quarter of each year and in connection with the hiring of new executives. Other than with respect to the compensation of our Chief Executive Officer, our Compensation Committee also takes into consideration the recommendations for executive compensation made by our Chief Executive Officer, which recommendations are generally presented at the time of our Compensation Committee’s review of executive compensation arrangements.

The compensation decisions made at the beginning of 2023 occurred in the context of sustained strong long-term performance, evidenced by our 20% three-year compound annual total shareholder return through January 13, 2023, which was in the top quartile of our peer group.

Peer Group

As part of its engagement, FW Cook analyzed compensation data relating to our peer group companies as approved by the Compensation Committee with input and guidance from FW Cook. The compensation analysis was performed in late 2022 and early 2023 and informed the 2023 compensation program. The peer group companies were reviewed in fall 2022 and consisted of 16 publicly-traded companies in the biotechnology/pharmaceutical, health care equipment & supplies, and life sciences tools & services industries, which had a median market capitalization of $1.57 billion on September 30, 2022 (comparable to our $1.1 billion market capitalization at that time), and the majority of which either have commercial operations or an FDA-approved product. All peers had September 30, 2022 market capitalization in a range of 0.3 to 3.1 times our market capitalization at that time. The peer group companies that informed 2023 executive officer compensation decisions were: Agenus, Inc., Agios Pharmaceuticals, Inc., Amicus Therapeutics, Inc., Anika Therapeutics, Inc., Artivion, Inc., AtriCure, Inc., AxoGen, Inc., Cardiovascular Systems, Inc., Corcept Therapeutics, Inc., Cryoport, Inc., Glaukos Corporation, Ironwood Pharmaceuticals, Inc., PTC Therapeutics, Inc., STAAR Surgical Company, Supernus Pharmaceuticals, Inc., and Vanda Pharmaceuticals, Inc. The only change compared to the previous year peer group was the removal of Flexion Therapeutics, Inc., due to its acquisition.

Components of 2023 Compensation

The primary components of our executive officer compensation program are: (i) annual base salary; (ii) annual incentive compensation, which is based on the achievement of specified Company goals; and (iii) long-term equity incentive compensation in the form of periodic stock option and RSU grants, with the objective of aligning the executive officers’ long-term interests with those of our shareholders.

In establishing overall executive compensation levels and making specific compensation decisions for the executives in 2023, the Compensation Committee considered a number of criteria, including each executive’s position, prior compensation levels, scope of responsibilities, prior and current period performance, attainment of individual and overall Company performance objectives, and external market data. In addition, the Compensation Committee considered the results of the advisory vote by shareholders on the “say-on-pay” proposal presented to shareholders at Vericel’s 2022 annual meeting, which had an 86% support rate.

The Compensation Committee also reviews the allocation of compensation components regularly to help ensure alignment with strategic and operating goals, competitive market practices and legislative changes. The Compensation Committee does not apply a specific formula to determine the allocation between cash and non-cash forms of compensation.

Base Salary

We believe that a competitive base salary is a necessary element of any compensation program that is designed to attract and retain talented and experienced executives. Base salaries are established, in part, based on the individual experience, skills and expected contributions of our executives and our executives’ performance during the prior year, with market data considered as context. The Compensation Committee reviews base salaries for our executive officers annually. We may also change the base salary of an executive officer at other times due to market conditions or if a change in the scope of the officer’s responsibilities justifies such adjustment.

In February 2023, our Compensation Committee approved base salary increases for each of our named executive officers serving at that time, based upon various factors, including a review of individual performance during 2022 and a comparison of cash compensation versus peer group data. Salary adjustments were focused on providing cash compensation in a competitive range relative to market benchmarks, also taking into account each executive’s tenure and performance. The table below sets forth the adjustments to base salaries for each of our named executive officers:

48

Annual Non-Equity Incentive Compensation

We maintain an annual incentive program (or “AIP”) that is designed to drive annual performance against important strategic, operational and financial aspects of our organization. We believe the AIP focuses management on advancing our overall corporate strategy and furthering both the short-and long-term growth of the Company. Each executive officer has a target cash incentive amount that is set as a percentage of base salary, based upon consideration of potential contribution, level and market data.

2023 Performance Metrics

The determination of annual incentives for our executives in 2023 was tied to achieving our financial targets, advancing our commercial and development stage products and accomplishing operational goals. In addition, a portion of annual incentive compensation was tied to a stretch upside value goal. These metrics were established by the Compensation Committee and approved by the full Board at the beginning of 2023.

		Weighting		Our Goals	Our Metrics			Achievement
Commercial and Financial Performance Goals				Total net revenue     Budget expense		•   Generate total net product revenues of at least $194.3 million   •   Achieve budget expense of $162.8 million (excluding depreciation, amortization and stock-based compensation, and unusual one-time expenses or changes in accounting methodology)
Product Goals				Commercial Product Goals               Long-Term Brand Development Goals       Product Development Goals		•   Achieve budgeted MACI surgeon engagement goals of increasing number of biopsy surgeons and MACI biopsy conversion rate; achieve unique Epicel biopsy center target; and secure P&T committee approval to use NexoBrid at target number of burn centers   •   Complete MACI, Epicel and NexoBrid long-term brand development initiatives   •   Complete MACI Arthro human factors study and submit label update to the FDA by December 1, 2023
Operational Goals				Manufacturing Capacity and Operational Improvement Initiatives		•   Complete manufacturing facility and key manufacturing/IT efficiency improvement initiatives
Upside Value Goals				Business Development		•   Execute high-quality business development transaction

No more than 200% of target may be earned under the AIP. The Compensation Committee reviewed the Company’s performance in 2023 against the corporate goals and made a determination of a 110% achievement of our corporate goals for 2023, based on the following:

The Compensation Committee made no adjustments to the goals or the manner in which they were scored to account for external events.

The table below shows the target award under the 2023 AIP as a percentage of each named executive officer’s annual base salary in 2023, the target cash award opportunity in dollars for 2023, and the actual cash bonus payments and percent of award opportunity paid to our named executive officers for 2023 performance.

Equity Incentive Compensation

Equity incentive compensation aligns executives with shareholders and allows them to share in any appreciation in the value of our common stock. In 2023, the Compensation Committee awarded stock options and RSUs to our named executive officers to aid in their retention, to motivate them to achieve both near-term and long-term corporate objectives and increase share price. In determining the form and value of a grant, the Compensation Committee considers the contributions and responsibilities of each named executive officer, appropriate incentives for the achievement of our long-term growth, the size and value of grants made to other executives at peer companies holding comparable positions, individual achievement of designated performance goals, Vericel’s overall performance relative to corporate objectives, and our overall equity compensation burn rate.

Stock options and RSU awards vest over time, generally four years, subject to continued employment with Vericel over the vesting period, which promotes executive retention. All stock options have a ten-year term and an exercise price equal to the fair market value of our common stock on the date of grant, which is equal to our closing market price on such date.

Awards are made at levels calculated to be competitive within our peer group. In determining the amount of each grant, the Compensation Committee also reviews the number of shares held by the executive prior to the grant. In late 2022, the Compensation Committee engaged FW Cook to independently review the equity incentive grant practices of Vericel as compared to our peer group, and this market data was used to support compensation decisions for 2023. The Compensation Committee considered our significant 20% three-year compound annual shareholder return through January 13, 2023, which was in the top quartile of our peer group, and well above the peer group median of -4% compound annual shareholder return over this period.

The executive equity award strategy for 2023 focused on providing a competitive number of stock options and RSUs with the majority of equity awards provided in stock options to ensure that our executives are aligned with shareholder value creation and to ensure the program pays for performance. The Compensation Committee reviewed the Company’s projected 2023 equity compensation burn rate and determined that the number of shares granted to executives would maintain the burn rate below the median of our peer group.

50

On February 17, 2023, the Board of Directors granted our CEO, and the Compensation Committee granted our other named executive officers, the following stock options and RSUs at a $29.82 price. The grant date fair value of these awards is also reported in the 2023 Summary Compensation Table below.

2024 Base Salary

Each of our named executive officer’s base salary is reviewed annually by the Compensation Committee. The named executive officers are also eligible to receive cash incentive compensation and equity awards from time to time at the discretion of the Compensation Committee. The current base salary as of March 4, 2024, and target annual incentive compensation (as a percentage of the base salary) for each of our currently serving named executive officers is as follows:

Other Compensation

Generally, benefits available to executive officers are available to all employees on similar terms and include health and welfare benefits, paid time-off, life and disability insurance and a 401(k) plan.

We provide the benefits above to attract and retain our executive officers and other employees by offering compensation that is competitive with other companies that are similar in size and stage of development. These benefits represent a relatively small portion of the total compensation of our named executive officers.

Other Items

Compensation Risk Analysis/Risk Assessment

We believe that risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on the Company. In addition, the Compensation Committee believes that the mix and design of the elements of executive compensation do not encourage management to assume excessive risks.

The Compensation Committee, with the assistance of FW Cook, extensively reviewed the elements of executive compensation to determine whether any portion of executive compensation encouraged excessive risk-taking and concluded:

Executive Stock Ownership Guidelines

In April 2021, the Board adopted Stock Ownership Guidelines applicable to the Company’s named executive officers. Pursuant to these guidelines, named executive officers are expected to meet share ownership targets that are determined based on their annual salary, within five years of the adoption of the guidelines. In addition, named executive officers who join the Company after the establishment of the guidelines have five years from such date to reach their target. The share ownership target for the Company’s CEO is five times (5x) his or her base salary, while other named executive officers have a target of two times (2x) base salary. For purposes of determining stock ownership levels, the following forms of equity interests in the Company are included: (i) shares owned directly (shares obtained through open market purchases or acquired and held upon vesting of Company equity awards); (ii) shares owned indirectly (shares owned jointly or separately by the individual’s spouse and shares held in trust for the benefit of the named executive officer, the named executive officer’s spouse and/or children); (iii) shares or units represented by amounts invested in a Company sponsored employee stock purchase plan, 401(k) plan or deferred compensation plan; and (iv) unvested awards of time-based RSUs. Unexercised stock options are not included when determining compliance with the required stock ownership levels. As of December 31, 2023, all of our named executive officers were in compliance with their respective stock ownership targets.

Clawback Policy

We maintain a robust Policy for Recoupment of Erroneously Awarded Incentive Compensation or “Clawback” Policy covering each of our executive officers (including our named executive officers). In June 2023, the SEC approved the Nasdaq’s proposed listing rules implementing the incentive-based compensation recovery provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and Rule 10D-1 of the Exchange Act, which require listed companies to develop and implement a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers and to satisfy related disclosure obligations. Effective October 2, 2023, we amended and restated our previous clawback policy to reflect these new requirements. The Clawback Policy requires the prompt recovery of certain excess incentive-based compensation received during an applicable three-year recovery period by current or former executive officers in the event we are required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws. Incentive-based compensation potentially subject to recovery under the Clawback Policy is, in general, limited to any compensation granted, earned, or vested based wholly or in part on the attainment of one or more financial reporting measures (whether cash or equity-based).

Tax Considerations

For taxable years after 2017, Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), generally disallows the deduction to a public corporation of any compensation paid to a “covered employee” in excess of $1,000,000, unless paid pursuant to a grandfathered arrangement within the meaning of Section 162(m) of the Code. The Compensation Committee believes that shareholder interests are best served if the Compensation Committee retains maximum flexibility to design executive compensation programs that meet stated business objectives. For these reasons, the Compensation Committee, while considering tax deductibility as a factor in determining executive compensation, will not limit such compensation to those levels that will be deductible under Section 162(m) of the Code.

52

Compensation Committee Report

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

COMPENSATION COMMITTEE MEMBERS:
Alan Rubino, Chairman
Heidi Hagen
Steven Gilman, Ph.D.

This report shall not constitute “soliciting material,” shall not be deemed “filed” with the Securities and Exchange Commission and is not to be incorporated by reference into any of our other filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this report by reference therein.

Compensation Committee Interlocks and Insider Participation

During the fiscal year ended December 31, 2023, Mr. Rubino, Ms. Hagen and Dr. Gilman served as the members of our Compensation Committee. None of the members of our Compensation Committee is, or has been, an officer or employee of ours or any of our subsidiaries. During the last year, none of our executive officers served as: (1) a member of the compensation committee (or other committee of the board of directors performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on the compensation committee; (2) a director of another entity, one of whose executive officers served on the compensation committee; or (3) a member of the compensation committee (or other committee of the board of directors performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as a director on our Board of Directors.

Executive Compensation Tables

Summary Compensation Table

The following table summarizes all compensation earned by or paid to Dominick Colangelo, our President and Chief Executive Officer, effective March 1, 2013; Joe Mara, our Chief Financial Officer, effective January 25, 2021; Michael Halpin, our Chief Operating Officer, effective June 15, 2019; Sean Flynn, our Senior Vice President, General Counsel and Secretary, effective November 4, 2019; and Jonathan Hopper, our Chief Medical Officer, effective August 20, 2018 (the “named executive officers”) during the fiscal years indicated.

54

Grants of Plan-Based Awards

The following table presents information on all grants of plan-based awards made in the fiscal year ended December 31, 2023 to our named executive officers: