UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) ofthe Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant  ☑

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

Proto Labs, Inc.

(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 the appropriate box):

Proto Labs, Inc.

5540 Pioneer Creek Drive

Maple Plain, Minnesota 55359

(763) 479-3680

Fax: (763) 479-2679

April 10, 20147, 2015

Dear Fellow Shareholder:

The Board of Directors of Proto Labs, Inc. joins me in extending a cordial invitation to attend our 20142015 Annual Meeting of Shareholders (the “Annual Meeting”), which will be held at the offices of Faegre Baker Daniels LLP, 2200 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN 55402, on Tuesday,Wednesday, May 20, 20142015 at 9:00 a.m. local time.

We will be using the “Notice and Access” method of furnishing proxy materials overvia the Internet to our shareholders that hold our common stock on account at a brokerage firm, bank or similar organization.shareholders. We believe that this process will provide you with a convenient and quick way to access your proxy materials and vote your shares, while allowing us to reduce the environmental impact of our Annual Meeting and the costs of printing and distributing the proxy materials. On or about April 10, 2014, the organization holding your account7, 2015, we will mail to youour shareholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our Proxy Statement and Annual Report on Form 10-K and vote electronically overvia the Internet. The Notice also contains instructions on how to receive a paper copy of your proxy materials.

If you are a shareholder whose shares are registered directly in your name with our transfer agent, Wells Fargo Shareowner Services, you will receive a printed copy of the Proxy Statement and our Annual Report on Form 10-K by mail.

It is important that your shares be represented at the Annual Meeting whether or not you plan to attend in person. Please vote electronically overvia the Internet or, if you receive a paper copy of the proxy card by mail, you may vote by Internet or telephone or by returning your signed proxy card in the envelope provided. If you do attend the Annual Meeting and desire to vote in person, you may do so by following the procedures described in the Proxy Statement even if you have previously sent a proxy.

We hope that you will be able to attend the Annual Meeting and we look forward to seeing you.

Very truly yours,

Lawrence J. Lukis

Chairman of the Board

PROTO LABS, INC.

5540 Pioneer Creek Drive

Maple Plain, Minnesota 55359

________________

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 20, 20142015

________________

Proto Labs, Inc. will hold its 20142015 Annual Meeting of Shareholders at the offices of Faegre Baker Daniels LLP located at 2200 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN 55402, on Tuesday,Wednesday, May 20, 2014.2015. The Annual Meeting will begin at 9:00 a.m. local time. The proxy materials were either made available to you overvia the Internet or mailed to you beginning on or about April 10, 2014.7, 2015. At the Annual Meeting, our shareholders will:

The board of directors recommends that shareholders voteFOReach of the following:

The board of directors recommends that shareholders voteONE yearon the say-when-on-pay vote.

4.

The approval of the amendment to our Third Amended and Restated Articles of Incorporation.

Only shareholders of record at the close of business on March 25, 20142015 may vote at the Annual Meeting or any adjournment or postponement thereof.

By Order of the Board of Directors

William R. Langton

Secretary

YOUR VOTE IS IMPORTANT

Whether or not you plan to attend the Annual Meeting, we urge you to vote as soon as possible. If you received the Notice of Internet Availability of Proxy Materials (the “Notice”), you may vote via the Internet as described in the Notice. If you received a copy of the proxy card by mail, you may vote by Internet or telephone as instructed on the proxy card, or you may sign, date and mail the proxy card in the envelope provided.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 20142015 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 20, 20142015.

Our Proxy Statement for the 20142015 Annual Meeting of Shareholders and our Annual Report on Form 10-K for the fiscal year ended December 31, 20132014 are availableat www.proxyvote.com.

TABLETABLE OF CONTENTS

PROTO LABS, INC.

5540 Pioneer Creek Drive

Maple Plain, Minnesota 55359

________________

PROXY STATEMENT

________________

The board of directors of Proto Labs, Inc. (the “Company”) is soliciting proxies for use at the Annual Meeting to be held on May 20, 2014,2015, and at any adjournment or postponement of the meeting.

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of March 25, 20142015 regarding the beneficial ownership of our common stock by:

The percentage of beneficial ownership is based on              25,606,040 shares of common stock outstanding as of March 25, 2014.2015. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each shareholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the shareholder. Unless otherwise indicated in the table or footnotes below, the address for each beneficial owner is c/o Proto Labs, Inc., 5540 Pioneer Creek Drive, Maple Plain, Minnesota 55359.

CORPORATE GOVERNANCE

Board Leadership Structure

Larry Lukis is our founder and former Chief Technology Officer, or CTO, and leads our board of directors in his role as Chairman. Mr. Lukis ceased serving as our CTO in July 2013. Our board has designated Sven Wehrwein as the lead independent director to complement the Chairman’s role and to serve as the principal liaison between the independent directors and the Chairman.

Our board of directors believes that its current structure is the appropriate one for Proto Labs at this time. Specifically, our board believes that its current leadership structure provides independent board leadership and engagement while deriving the benefit of having our founder and former CTO also serve as Chairman of the board. As an individual with in-depth knowledge and understanding of Proto Labs, Mr. Lukis is best positioned to chair regular board meetings as the directors discuss key business and strategic issues. Coupled with a lead independent director, this combined structure provides independent oversight while allowing the person most familiar with our historical operations and strategy to lead the board.

As lead independent director, Mr. Wehrwein:

Risk Oversight

Our management is responsible for defining the various risks facing the Company,our company, formulating risk management policies and procedures, and managing the Company’sour risk exposures on a day-to-day basis. The board’s responsibility is to monitor the Company’sour risk management processes by using board meetings, management presentations and other opportunities to educate itself concerning the Company’sour material risks and evaluating whether management has reasonable controls in place to address the material risks; the board is not responsible, however, for defining or managing the Company’sour various risks. The full board is responsible for monitoring management’s responsibility in the area of risk oversight. In addition, the audit committee and compensation committee have risk oversight responsibilities in their respective areas of focus, on which they report on to the full board. Management reports from time to time to the full board, audit committee and compensation committee on risk management. The board focuses on the material risks facing the Company,our company, including operational, credit, liquidity, and legal risks, to assess whether management has reasonable controls in place to address these risks.

Nominating Process and Board Diversity

In consultation with other members of the board of directors, the nominating and governance committee is responsible for identifying individuals who it considers qualified to become board members. The nominating and governance committee will screen potential director candidates, including those recommended by shareholders, and recommend to the board of directors suitable nominees for the election to the board of directors. The nominating and governance committee uses a variety of methods for identifying and evaluating nominees for directors. The nominating and governance committee regularly assesses the appropriate size and composition of the board of directors, the needs of the board of directors and the respective committees of the board of directors, and the qualifications of candidates in light of these needs. Candidates may come to the attention of the nominating and governance committee through shareholders, management, current members of the board of directors, or search firms. The evaluation of these candidates may be based solely upon information provided to the committee or may also include discussions with persons familiar with the candidate, an interview of the candidate or other actions the committee deems appropriate, including the use of third parties to review candidates.

In considering whether to recommend an individual for election to the board, the nominating and governance committee considers, as required by the corporate governance guidelines and its charter, the board’s overall balance of diversity of perspectives, backgrounds and experiences, although it does not have a formal policy regarding the consideration of diversity of board members. The nominating and governance committee views diversity expansively and considers among other things, breadth and depth of relevant business and board skills and experiences, educational background, employment experience and leadership performance as well as those intangible factors that it deems appropriate to develop a heterogeneous and cohesive board such as integrity, achievements, judgment, intelligence, personal character, the interplay of the candidate’s relevant experience with the experience of other board members, the willingness of the candidate to devote sufficient time to board duties, and likelihood that he or she will be willing and able to serve on the board for an extended period of time.

The nominating and governance committee will consider a recommendation by a shareholder of a candidate for election as a Proto Labs director. Shareholders who wish to recommend individuals for consideration by the nominating and governance committee to become nominees for election to the board may do so by submitting a written recommendation to the Secretary of the Company.our Secretary. Recommendations must be received by the Secretary within the timelines specified in our by-laws to be considered by the nominating and governance committee for possible nomination at the Company’sour Annual Meeting of Shareholders the following year. Our by-laws provide that such notice should be received no less than 90 days prior to the first anniversary of the preceding year’s Annual Meeting, except in certain circumstances. All recommendations must contain the information required in our by-laws and corporate governance guidelines, including, among other things, the identification of the nominee, a written consent by the recommended individual to agree to be named in our proxy statement and to serve as director if elected, and the name and address of the shareholder submitting the nomination. Recommendations must be received by the Secretary of the Company within the timeframes noted under “Proposals Not Included in the Proxy Statement.”

Director Independence

Our board of directors has reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly. Based on this review, our board has determined that, with the exception of Victoria M. Holt, our current Chief Executive Officer, Bradley A. Cleveland, our former Chief Executive Officer who retired in February 2014, and Mr. Lukis, our founder and former CTO, all of the directors are “independent directors” as defined by Section 303A.02 of the New York Stock Exchange Listed Company Manual.

Code of Business Conduct and Ethics

We have adopted a code of ethics and business conduct relating to the conduct of our business by our employees, officers and directors, which is posted on our website atwww.protolabs.com under the investor relations section. We plan to post to our website at the address described above any future amendments or waivers to our code of ethics and business conduct.

Communications with the Board and Corporate Governance Guidelines

Under our Corporate Governance Guidelines, a process has been established by which shareholders and other interested parties may communicate with members of the board of directors. Any shareholder or other interested party who desires to communicate with the board, individually or as a group, may do so by writing to the intended member or members of the board, c/o Secretary, Proto Labs, Inc., 5540 Pioneer Creek Drive, Maple Plain, Minnesota 55359. A copy of our Corporate Governance Guidelines is available atwww.protolabs.com under the investor relations section.

All communications received in accordance with these procedures will initially be received and processed by the office of our Secretary to determine that the communication is a message to one or more of our directors and will be relayed to the appropriate director or directors. The director or directors who receive any such communication will have discretion to determine whether the subject matter of the communication should be brought to the attention of the full board or one or more of its committees and whether any response to the person sending the communication is appropriate.

Board Meetings

During 2013,2014, the full board of directors met fourseven times in person and held two meetingsone meeting via teleconference. EachFive of the seven in-person meetings waswere preceded and/or followed by an executive session of the independent directors, chaired by Mr. Wehrwein. Each of our incumbent directors attended at least 75% percent of the meetings of the board and any committee on which they served in 2013.2014. We do not maintain a formal policy regarding the board’s attendance at annual shareholder meetings; however, board members are expected to regularly attend all board meetings and meetings of the committees on which they serve and are encouraged to make every effort to attend the Annual Meeting of Shareholders. Eight of our nineten directors at the time of the 20132014 Annual Meeting of Shareholders attended the meeting.

Committees of the Board

Our board of directors has established an audit committee, a compensation committee and a nominating and governance committee. The charters of these committees are posted on our website atwww.protolabs.com under the investor relations section.

The current composition and responsibilities of each committee, as well as the number of times it met during 2013,2014, are described below.

Audit Committee

Among other matters, our audit committee:

Each of the members of our audit committee meets the requirements for independence and financial literacy under the applicable rules and regulations of the SEC and the NYSE. Our board of directors has determined that Sven A. Wehrwein is an audit committee financial expert, as defined under the applicable rules of the SEC. The audit committee met ten times in 2013.2014.

Nominating and Governance Committee

Among other matters, our nominating and governance committee:

Each member of our nominating and governance committee satisfies the NYSE independence standards. The nominating and governance committee met fourfive times in 2013.2014.

Compensation Committee

Among other matters, our compensation committee:

In addition, the compensation committee has the authority to select, retain and compensate compensation consulting firms and other experts as it deems necessary to carry out its responsibilities.

Each member of our compensation committee satisfies current NYSE independence standards, is a “non-employee director” as that term is defined in Rule 16b-3 under the Securities Exchange Act of 1934, and is an “outside director” as that term is used in Section 162(m) of the Internal Revenue Code. The compensation committee met foureight times in 2013.2014.

Certain Relationships and Related Party Transactions

Since the beginning of 2013,2014, we have engaged in the following transactions with certain of our executive officers, directors, holders of more than 5% of our voting securities and their affiliates and immediate family members:

Certain Agreements

Since the beginning of 2013, the following agreements were in place and certain of our directors, officers, and holders of more than 5% of our voting securities were parties to such agreements.

Investors’ Rights Agreement

We are party to an investors’ rights agreement with North Bridge Growth Equity I, L.P. (“North Bridge”), Protomold Investment Company, LLC (“PIC”), Lawrence J. Lukis, Bradley A. Cleveland, the KEC 2011 Irrevocable Gift Trust, the JMC 2011 Irrevocable Gift Trust, Donald Krantz, and Mark Kubicek, pursuant to which we granted certain registration rights to our shareholders who are party to this agreement.

We are obligated to effect up to three registrations on Form S-1, and up to two registrations on Form S-3 in any 12-month period, as requested by the holders of our common stock having registration rights. A request for registration on Form S-1 for which the aggregate offering price, net of selling expenses, is reasonably expected to be at least $5,000,000 may be made by any holder of registrable securities.

After we become eligible to file a registration statement on Form S-3, one or more holders of then outstanding registrable securities may request that we effect a registration on Form S-3 of a number of registrable securities for which the aggregate offering price, net of selling expenses, is reasonably expected to be at least $3,000,000. We may delay the filing of a registration statement in connection with a demand registration for a period of up to 105 calendar days if our board of directors determines in its good faith judgment that the filing of such registration would be materially detrimental to the company. If the managing underwriter advises us that the number of shares to be included in a demand registration should be limited due to market conditions or otherwise, all shares other than registrable securities will initially be excluded from the registration, and if additional shares must be excluded from the registration, holders of registrable securities will share pro rata in the number of shares to be excluded from the registration based on the respective numbers of registrable securities owned by such holders.

In the event that we propose to register any of our securities under the Securities Act, but excluding the registration of securities (i) to be offered pursuant to a stock option or other employee benefit plan or a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the registrable securities, (ii) relating to an SEC Rule 145 transaction, or (iii) for which the only common stock being registered is common stock issuable upon conversion of debt securities that are also being registered, we are required to include in these registrations all securities with respect to which we have received written requests for inclusion under our amended and restated investors’ rights agreement, subject to certain limitations. If the managing underwriter advises us that the number of shares to be included in such a registration should be limited due to market conditions or otherwise, and we initiated the registration, all shares other than registrable securities, excluding shares to be issued by us, will initially be excluded from the registration, and if additional shares must be excluded from the registration, holders of registrable securities will share pro rata in the number of shares to be excluded from the registration based on the respective numbers of registrable securities owned by such holders, and if further additional shares must be excluded from the registration, shares to be issued by us will be excluded.

We are obligated to pay up to $50,000 of registration expenses of the holders of the shares registered pursuant to the demand and piggyback registrations described above.

Karbon Kinetics Limited

During the year ended December 31, 2013, the Company2014, we made sales to itsour customer Karbon Kinetics Limited (“KKL”) on terms consistent with the terms we provide to our other customers. Mr. Lukis is a director, our former Chief Technology Officer and a 64% shareholder of KKL. The Company’sOur revenues from sales to KKL did not exceed $120,000 during the year ended December 31, 2013.2014.

Employment of Related Person

Brian Lukis, the son of Mr. Lukis, is employed by us as a Senior Software Developer. He is entitled to receive a base salary, incentive compensation and other employee benefits that are offered to similarly situated employees of our Company.company. Brian Lukis’ compensation during the year ended December 31, 20132014 did not exceed $120,000.

Indemnification of Directors and Officers

We are subject to Minnesota Statutes Chapter 302A, the Minnesota Business Corporation Act, or the Corporation Act. Section 302A.521 of the Corporation Act provides in substance that, unless prohibited by its articles of incorporation or by-laws, a corporation must indemnify an officer or director who is made or threatened to be made a party to a proceeding by reason of the former or present official capacity of the person against judgments, penalties, fines, including, without limitation, excise taxes assessed against the person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorneys’ fees and disbursements, incurred by such person in connection with the proceeding, if certain criteria are met. These criteria, all of which must be met by the person seeking indemnification, are (a) that such person has not been indemnified by another organization or employee benefit plan for the same judgments, penalties, fines, including, without limitation, excise taxes assessed against the person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorneys’ fees and disbursements, incurred by the person in connection with the proceeding with respect to the same acts or omissions; (b) that such person must have acted in good faith; (c) that no improper personal benefit was obtained by such person and such person satisfied certain statutory conflicts of interest provisions, if applicable; (d) that in the case of a criminal proceeding, such person had no reasonable cause to believe that the conduct was unlawful; and (e) that, in the case of acts or omissions occurring in such person’s performance in an official capacity, such person must have acted in a manner such person reasonably believed was in the best interests of the corporation or, in certain limited circumstances, not opposed to the best interests of the corporation. In addition, Section 302A.521, subd. 3, requires payment by us, upon written request, of reasonable expenses in advance of final disposition in certain instances. A decision as to required indemnification is made by a majority of the disinterested board of directors present at a meeting at which a disinterested quorum is present, or by a designated committee of disinterested directors, by special legal counsel, by the disinterested shareholders, or by a court.

We also maintain a director and officer insurance policy to cover our Company, our directors and our officers against certain liabilities.

Severance Agreements

During 2013, we entered into severance agreements with our executive officers at the time, except we did not enter into a severance agreement with Bradley A. Cleveland, our Chief Executive Officer at the time, John R. Judd, our Chief Financial Officer, or Lawrence J. Lukis, our Chairman and Chief Technology Officer at the time. Our CFO has a separate severance arrangement with us as part of his employment agreement, which is described below in “Compensation Discussion and Analysis – Employment Agreements, Severance and Change in Control Benefits.” If such executive officer’s employment is terminated by us without Cause or if the executive voluntary resigns for Good Reason (both as defined in the severance agreement), such executive officer will be entitled to the following severance pay and benefits: (i) a cash payment equal to one times the executive officer’s annualized base salary generally payable in substantially equal installments in accordance with our regular payroll practices over a 12-month period; (ii) a pro rata cash incentive bonus amount calculated in accordance with the severance agreement payable in a lump sum at the same time as other eligible employees under our annual cash incentive bonus plan for such calendar year are paid their bonuses under such bonus plan, but in any event no later than March 15 of the calendar year immediately following the calendar year in which the executive officer’s termination date occurs and (iii) continuation of certain benefits pursuant to COBRA for 12 months. In addition, notwithstanding any language in any stock option agreement under our 2012 Long-Term Incentive Plan or in the 2012 Long-Term Incentive Plan to the contrary, a pro rata portion, as calculated in the severance agreement, of the unvested options to purchase shares of our stock held by such executive officer that are scheduled to vest on the next anniversary date will vest. An executive officer’s receipt of these severance pay and benefits will be conditioned on such executive’s execution of a release of claims against the Company.

Related Person Transaction Approval Policy

Our board of directors has adopted a written statement of policy regarding transactions with related persons, which we refer to as our related person policy. Subject to the exceptions described below, our related person policy requires our audit committee to review and approve any proposed related person transaction and all material facts with respect thereto. In reviewing a transaction, our audit committee will consider all relevant facts and circumstances, including (1) whether the terms are fair to the Company,us, (2) whether the transaction is material to the Company,us, (3) the role the related person played in arranging the transaction, (4) the structure of the transaction, (5) the interests of all related persons in the transaction, and (6) whether the transaction has the potential to influence the exercise of business judgment by the related person or others. Our audit committee will not approve or ratify a related person transaction unless it determines that, upon consideration of all relevant information, the transaction is beneficial to us and our Company and shareholders and the terms of the transaction are fair to our Company.us. No related person transaction will be consummated without the approval or ratification of our audit committee. Under our related person policy, a related person includes any of our directors, director nominees, executive officers, any beneficial owner of more than 5% of our common stock and any immediate family member of any of the foregoing. Related party transactions exempt from our policy include payment of compensation by the Companyus to a related person for the related person’s service to the Companyus as an employee, director or executive officer, transactions available to all of our employees and shareholders on the same terms and transactions between us and the related person that, when aggregated with the amount of all other transactions between us and the related person or its affiliates, involve $120,000 or less in a year. Other than the items discussed under “Karbon Kinetics,” “Employment of Related Person,” and “Severance Agreements” we did not have a formal review and approval policy for related party transactions at the time of any other transaction described in this “Certain Relationships and Related Party Transactions” section.

Compensation Committee Interlocks and Insider Participation

During 2013,2014, Matthew C. Blodgett, who decided not to seek reelection at our 2014 Annual Meeting of Shareholders and ceased serving as a director upon conclusion of such annual meeting, Dr. Gawlick, Douglas Kingsley, who resigned from our board of directors in February 2013, Mr. Blodgett,Kohrs, and Mr. KohrsSmith served as the members of our compensation committee. No current member of our compensation committee has ever been an officer or employee of our Companycompany or any of our subsidiaries and affiliates or has had any relationship with our Companycompany requiring disclosure in our proxy statement other than service as a director. None of our executive officers has served on the board of directors or on the compensation committee of any other entity, any officer of which served either on our board of directors or on our compensation committee.

Section 16(a) Beneficial Ownership Reporting Compliance

The rules of the SEC require us to disclose the identity of directors, executive officers and beneficial owners of more than 10% of our common stock who did not file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934. Based solely on a review of copies of such reports and written representations from reporting persons, we believe that all directors and executive officers complied with all filing requirements applicable to them during fiscal 2013.2014 except John B. Goodman filed one late report with respect to one transaction, which took place on January 6, 2014, Robert Bodor filed one late report with respect to one transaction, which took place on July 28, 2014, and Brian K. Smith filed one late report with respect to one transaction, which took place on May 20, 2014.

PROPOSAL 1

ELECTION OF DIRECTORS

General Information

EightSeven directors will be elected at the Annual Meeting. Upon the recommendation of the nominating and governance committee, the board of directors has nominated for election the eightseven persons named below. Each has consented to being named a nominee and will, if elected, serve until the next Annual Meeting of Shareholders or until a successor is duly elected. There are no family relationships between any director and anany executive officer. Each nominee listed below is currently a director of Proto Labs, and other than Ms. Holt, each has been duly elected by the shareholders. Ms. Holt was elected to the board of directors in February 2014 in connection her hiring as our President and Chief Executive Officer. Matthew C. Blodgett and Margaret A. Loftus, who currently serve as directors, both have decided not to seek reelection at the Annual Meeting and will cease serving as directors upon conclusion of the Annual Meeting.

Nominees

The names of the nominees and other information are set forth below:

Mr. Smith has knowledge of financial matters, merger and acquisition activities and capital markets and experience in leadership positions with companies at a variety of stages. Mr. Smith’s experiences enable him to provide oversight concerning general business matters and risk management and counsel on financial matters in his role on our audit committee.

Voting Agreement

Prior to our initial public offering in February 2012, we entered into a voting agreement with North Bridge PIC,Growth Equity I, L.P., Protomold Investment Company, LLC, Lawrence J. Lukis and Yuri Dreizin. The voting agreement terminated upon the completion our initial public offering. All of our current directors, other than Ms. Holt, Mr. Blodgett, Mr. Gawlick, and Mr. Kohrs, were first elected to serve as directors pursuant to the voting agreement. Pursuant to the agreement, the parties agreed to vote their shares of our capital stock in favor of maintaining a board of eight members, of whom two were designated by North Bridge, one was designated by PICProtomold Investment Company (initially Brian Smith), one was designated by a majority of the shares held by PIC,Protomold Investment Company, Lawrence Lukis, Yuri Dreizin and Gustavus Adolphus College (initially Lawrence J. Lukis), one was theour Chief Executive Officer, (initially Bradley A. Cleveland), and three were unaffiliated with the company and mutually acceptable to the other members of the board (initially John Goodman, Margaret Loftus, and Sven Wehrwein).

Voting Information and Board Voting Recommendation

In accordance with Minnesota law, directors are elected by a plurality of votes present and entitled to vote. The eightseven nominees receiving the highest number of votes will be elected. The proxies cannot be voted for a greater number of persons than eight.seven.

The Board unanimously Recommends That Shareholders Vote “For” Each Nominee ListedTHE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” EACH NOMINEE LISTED.

COMPENSATION DISCUSSION AND ANALYSIS

OverviewNamed Executive Officers

The compensation provided to our named executive officers for 20132014 is set forth in detail in the 2013 Summary Compensation Table and the other tables, accompanying footnotes and narrative that follow this section. This sectionCompensation Discussion and Analysis explains our executive compensation philosophy, objectives and design, our compensation-setting process, our executive compensation program components and the decisions made in 20132014 affecting the compensation of our named executive officers.

Throughout this section, we refer to the following individuals as our “named executive officers:”officers”:

As previously announced,Executive Transitions and Leadership Reorganization

During 2014, Mr. Cleveland retiredand Mr. Judd retired. Mr. Cleveland served as our CEO from 2001 until his position as President and CEOretirement in February 2014, and Victoria M.Mr. Judd served as our CFO from June 2011 until transitioning out of that role in December 2014 and retiring in January 2015. Both were important contributors to our successful initial public offering in 2012 and our subsequent growth as a public company. In connection with their retirements, we conducted extensive searches for outside candidates who we believed have the abilities to continue the growth of our company. As a result of these searches, we negotiated arms’-length compensation arrangements with Ms. Holt servesand Mr. Way that we believe are competitive when compared to the compensation offered by similar growth companies in our President, CEOindustry and a memberthat were necessary to induce them to join our company in light of the board of directors. A summary ofother employment opportunities available to them.

In connection with hiring Ms. Holt’s compensation arrangements pursuantHolt, we entered into an employment agreement with her. Pursuant to the employment agreement, Ms. Holt’s employment with us is “at will” and her employment may be unilaterally terminated by her or us at any time for any reason, subject to the terms of the agreement. Ms. Holt is our only executive who has an employment agreement. Our other executives have severance agreements with us as described in “Potential Payments Upon Termination or Change in Control” below.

In January 2015, we entered intoreorganized our leadership team to better align it with her in connection with her hiring is included below under the heading “—New CEO Employment Agreement.”needs of our business. As part of this reorganization, Dr. Krantz, who previously held the role of chief operating officer, began serving as our executive vice president and technology officer; Dr. Robert Bodor, who previously held the role of chief technology officer, assumed the role of vice president/general manager – Americas; Mr. Tumelty, who previously held the role of managing director of our European subsidiary, assumed the role of vice president/general manager and managing director – Europe, Middle East and Africa; and Ms. Schneider’s title changed from vice president of sales and customer service to vice president of global sales.

Executive Compensation Philosophy and Objectives

We believe our success depends in large measure on our ability to attract, retain and motivate a talented senior management team to effectively lead our Companycompany in a dynamic and changing business environment, and that a competitive executive compensation program is critical to that effort. We believe that our executive compensation program should support our short- and long-term strategic and operational objectives, and reward corporate and individual performance that contributes to creating value for our shareholders.

Consistent with this philosophy, our executive compensation program incorporates the following key principles and objectives:

Compensation Decisions and Processes

The compensation committee of our board of directors, which consists solely of non-employeeindependent directors, generally has generally been responsible for overseeing our executive compensation program, including annually reviewing the ongoing compensation arrangements for each of our executive officers, including our President and CEO. CEO, and reporting those arrangements to our board.

Our compensation committee approves all awards under our 2012 Long-Term Incentive Plan, with awards then ratified by our board of directors.

Our compensation committee has regularly receivedreceives and consideredconsiders input from our CEO regarding the compensation and performance of the other executive officers, including recommendations as to compensation levels that the CEO believes are commensurate with an individual’s job performance, skills, experience, qualifications, criticality to the Companyour company and development/career opportunities, as well as with our compensation philosophy, external market data and considerations of internal equity. In developing these recommendations, our CEO has consulted with Lawrence J. Lukis, our founder and former CTO. With the assistance of our CFO, and following review by and input from Mr. Lukis, our CEO also has provided recommendations to the compensation committee regarding the establishment of performance goals for the annual cash bonusincentive plan based on the operating budget approved by our board of directors. The compensation committee meets with Mr. Lukis to consider and approve compensation actions for our CEO. Our CEO regularly attends meetings of our compensation committee, except where histhe CEO’s own compensation is being considered.considered or times when the committee meets in executive session. Our CEO makes no recommendations to the compensation committee regarding his or her own compensation. The compensation committee communicates its views and decisions regarding compensation arrangements for our executive officers to our CEO, who generally has been generally responsible for implementing the arrangements.

In determining executive compensation, our compensation committee reviews and considers a number of factors, including individual and corporate performance, input from Mr. Cleveland and Mr. Lukis,our CEO, compensation market data from third party compensation surveys, our compensation philosophy and key principles, the pay practices of a set of comparable companies, and the committee’s collective experience and knowledge. We have used market data primarily as a reference point to assess whether our compensation practices are reasonable, competitive and likely to achieve our objectives, and actually deliver compensation in amounts that are consistent with the compensation committee’s assessment of our Company’scompany’s relative performance. As part of these assessments, we assumed that base salary and target total cash compensation levels were likely to be reasonable and competitive if together they approximated the market median we calculated from the surveys and other compensation data we utilized, which for us generally meant a range between 80% and 120% of the market median. The utilization of a range is largely in recognition of the limitations of the survey data that include companies with varyinglimited degrees of comparability to our Companycompany and position titles that may encompass positions with responsibilities that differ to varying degrees from the responsibilities of a similarly titled position within our Company.company. As a result, we did not establish specific compensation amounts or parameters for any executive officer position based on market data in 2013,2014, recognizing that factors unique to each individual will ultimately determine that individual’s compensation, which may not necessarily be within the median range.

Our compensation committee also approves all awards to our executive officers under our 2012 Long-Term Incentive Plan, or the LTIP, with awards then ratified by our board of directors. Our compensation committee has delegated authority to our CEO under the LTIP to award stock options to employees (other than our executive officers) in her discretion, subject to individual and aggregate maximum amounts in each year and approval by the chair of the compensation committee. The CEO typically exercises her discretion to grant these awards in connection with new hires and promotions and in recognition of extraordinary individual achievements. All awards granted pursuant to this delegated authority must have an exercise price at least equal to the closing price of our common stock on the New York Stock Exchange on the date of grant, must have a vesting period of 20% of the shares subject to the option vesting annual over a five-year period and must be made in accordance with our equity grant timing policy described below in “Other Compensation and Equity-Related Policies—Equity Award Approval Policy.”

Peer Group

DuringAt the end of 2013, the compensation committee engagedrequested that its independent compensation consultant, Pearl Meyer & Partners, and requested Pearl Meyer to review our peer group used for executive compensation. Pearl Meyer used a two-step process to construct a new peer group for 2013 that better reflectswe believe fits our current market position and profile. The compensation committee and our board of directors reviewed information relating to this peer group when establishing base salaries, annual equity awards and target annual incentive compensation for 2014.

First,When constructing the peer group, Pearl Meyer first identified U.S.-based, publicly traded technology and capital goods companies of a comparable size and with business profiles similar to ours. For assessing comparability of size, Pearl Meyer looked at companies with annual revenues between $50 million and $450 million, and market capitalizations between $500 million and $4.5 billion. For assessing comparability of business profiles, Pearl Meyer looked at high-growth companies, as indicated by a market capitalization-to-revenue ratio of greater than three times, and with positive EBITDA margins. To narrow the peer group from the list of companies that met these criteria, Pearl Meyer then selected companies engaged in manufacturing or rapid manufacturing or that Pearl Meyer believed offer disruptive technologies.

To supplement the peer group assembled from the first step described above, Pearl Meyer examined software and service companies with size and business profiles based on revenue, market capitalization, ratio of revenue-to-market capitalization and EBITDA margin metrics, to add companies and create a sufficiently large peer group to provide the compensation committee with a meaningful basis for comparison.

Pearl Meyer’s review resulted in a peer group of 17 companies, with annual revenue ranging from $167.8 million at the 25th percentile to $310.6 million at the 75th percentile, and market capitalization ranging from $1.1 billion at the 25th percentile to $2.9 billion at the 75th percentile. The 2013 peer group is comprised of the following 17 companies:

Below is selected information about the companies in the peer group that Pearl Meyer used when constructing the group:

The compensation committee uses data about executive compensation at peer group companies as a tool to assess the reasonableness of the total compensation paid to our executive officers. WeAs discussed above, we do not establish a percentile at which any part of our executive’s compensation or any executive’s overall compensation must meet or exceed.

Other Compensation and Equity-Related Policies

Clawback Policy

During 2014, we adopted an Executive Officer Incentive Compensation Recovery Policy, or the Clawback Policy, for recovery of incentive compensation from our executive officers under certain circumstances. The Clawback Policy provides that we will, in all appropriate circumstances as determined by the compensation committee, and to the extent permitted by applicable law, require reimbursement or forfeiture of all or a portion of any incentive compensation awarded to our executive officers after November 12, 2014, which is the date our board adopted the Clawback Policy, where the compensation committee has determined that all of the following factors are present:

In those circumstances, we will, to the extent deemed appropriate by the compensation committee, seek to recover or cancel the amount(s) by which an executive officer’s incentive compensation that was awarded, vested or paid during the three-year period referenced above exceeded the amount(s) that would have been awarded, vested or paid based on the restated financial results, net of taxes paid or payable by the executive officer with respect to the recoverable compensation.

Executive Stock Ownership Guidelines

During 2014, we adopted stock ownership guidelines applicable to our executive officers. The guidelines are applicable to each of our executive officers and provide that each executive officer is expected to own shares of our common stock with a value at least equal to the amount shown below:

Each executive officer has five years from the date he or she becomes subject to the guidelines to achieve compliance with the guidelines.

Equity Award Approval Policy

Our equity award approval policy permits us to make equity-based awards at any time other than during “blackout periods” provided for in our insider trading policy, which generally run from the tenth of the month in which each fiscal quarter closes through the end of the second trading day following the public release of our financial results for that quarter. The policy does, however, permit us to approve an award during a blackout period, provided the effective date of the grant and the concurrent pricing of the grant occur on the first trading day after the blackout period ends.

Other Equity-Related Policies

We prohibit our executive officers from engaging in certain types of transactions in our stock, including short sales, pledges of our stock and other hedging transactions with respect to our stock. This policy is intended to prevent our executive officers from reducing the effect that decreases in the value of our stock have on their financial position. The LTIP requires that all stock options granted under the plan have an exercise price that is not less than the fair market value of a share of our common stock on the date the grant is made. The LTIP also prohibits re-pricing or exchanging underwater stock options under the LTIP without shareholder approval.

Elements of Executive Compensation

Our executive compensation program historically has historically been comprised of three elements—base salary, annual bonuscash and equity-based long-term incentives. The primary elements of our compensation program for 2014 were consistent with our 2013 compensation program. Our shareholders voted for the first time on a say-on-pay proposal at our 2014 annual meeting. The say-on-pay proposal received the approval of more than 99% of the shares voted on the proposal. Our compensation committee considered this result to be an endorsement by our shareholders of our compensation program and maintained the fundamental features of our 2013 program for 2014. Our next say-on-pay proposal will be voted on at our 2016 Annual Meeting of Shareholders scheduled to be held in May 2016.

While all elements of our executive compensation program are intended to collectively achieve our overriding purpose of attracting, retaining and motivating talented executives, the table below identifies the form and additional specific purposes of each element.

Our compensation committee has not adopted a formal or informal policy for allocating compensation among the various elements, or between cash and non-cash elements or between long-andlong- and short-term compensation. As noted earlier, however, we do place greater emphasis on incentive and variable forms of compensation for executives with more significant responsibilities, reflecting their greater capacity to affect our performance and results.

Base Salaries

At the time an executive officer is first hired, his or her base salary generally is generally established through individual negotiations between us and the executive officer, taking into account judgments as to the executive officer’s qualifications, experience, responsibilities, prior salary, and internal pay equity considerations.considerations and market factors. In connection with hiring Ms. Holt and Mr. Way during 2014, we negotiated initial annual base salaries with these executives of $500,000 and $290,000, respectively.

The compensation committee annually reviews the base salaries of our executive officers near the end of each year and bases any adjustments for the following year on merit and market considerations. Merit-based adjustments primarily reflect a subjective assessment of an individual’s performance. Any market-based adjustments reflect an assessment of the competitive positioning of an individual’s salary with comparable positions in the market based on market data provided to the compensation committee by the compensation consultant and other market surveys the compensation committee might use.

In December 2012, the compensation committee approved annual base salaries for 2013 in the amounts shown in the following table for the named executive officers.

The compensation committee’s actions reflectedDr. Krantz’s annual base salary for 2014 increased to $278,000 from $265,000 for 2013 as a decisionresult of a merit-based increase based on the parthis contributions to our company and our company’s overall success in 2013 and expected success in 2014. Ms. Schneider’s annual base salary for 2014 increased to $255,000 from $222,000 for 2013 as a result of the compensation committee thata merit-based increase as well as a market-based increase intended to have her base salaries should generallysalary approximate the 25th percentilemedian of our peer group. Although Mr. Cleveland’sTumelty’s annual base salary for 2014 increased to £133,000 from £121,000 in 2013 as a result of a merit-based increase based on our strong performance in the European Union, or E.U., the region for which he is below the 25^th percentile, theprimarily responsible, during 2013, as well as a market-based increase intended to ensure we provide Mr. Tumelty competitive compensation committee chosein a region that we believe is important to increase his target bonus payout from 90% to 150% of his base salary to place increased emphasis on variable elements of compensation, as discussed in more detail below.our success and where competition for talent is intense.

Annual Incentive Program

2014 Annual BonusesIncentive Program

All of our employees, other than commissioned salespeople, participate in our annual incentive bonus program. Consistent with 2012, our 2013Our 2014 annual incentive bonus program providesprovided that bonus payouts willwould be a function of revenue growth, or the revenue factor, and adjusted operating income margin (“AOI”), or the AOI factor, each calculated without regard to foreign currency exchange rates, for 2013. A new component for the 2013 program is that a multiplier in the range of 0.9 to 1.1 was applied to increase or decrease the bonus payouts for our U.S.-based named executive officers based on the success of our achieving our strategic objectives for 2013. We refer to this element of the annual incentive bonus programs as the strategic objective factor.two metrics:

For purposes of calculating annual bonuses,incentives, AOI is defined as operating income before stock basedstock-based compensation expense as a percentage of revenue. Revenue growth and AOI were selected as the primary financial objectives that would determine the size of 20132014 annual incentive bonus payouts because our primary objective iscontinues to be to grow our Company.company.

In structuring the 20132014 annual incentive bonus program, the compensation committee approved 20132014 revenue and AOI for our Companycompany as a whole and for each of our major geographic business units (the United States, the European Union and Japan). Including business unit performance objectives enables us to tailor annual bonusincentive opportunities so as to reward each executive officer for the performance of those portion(s) of our Companycompany for which the officer had the most direct responsibility. All of our named executive officers other than Mr. Tumelty had revenue goals based on our consolidated results. Mr. Tumelty’s annual incentive compensation for 20132014 was based on our operating results in the European Union, or E.U., the region for which he is primarily responsible. Mr. Tumelty’s

Unlike 2013, our annual incentive payout wasprogram for 2014 did not influenced by the strategic objective factor because theinclude a strategic objectives primarily related to our U.S.-based operations and were influenced by our U.S.-based management team rather than aspects of our operations within Mr. Tumelty’s primary realm of responsibility.

The strategic objectives used for determiningcomponent that, in 2013, annual incentive payments were established by our management team as part of its annual strategic planning process. The board of directors approved management’s 2013 strategic plan and decided that a strategic objective factor should be added to our executive compensation program to reward our executive officers for executing the board-approved plan and to focus our executives’ attention on our long-term growth. Although the 2013 strategic plan was not formulated for purposes of determining executive compensation, the board of directors adopted the objectives in management’s strategic plan as the objectives for the strategic objective factor because they represent the items that the board and management believe are most critical to our long-term success, although they will not necessarily improve our short-term financial performance.

A participant’s bonus payout will be determined by multiplying his or her target bonus payout amount (which is specified by our compensation committee as a percentage of the individual’s annual base salary) by the applicable revenue factor. The AOI factor is a bonus scaling factor that is then applied to reduce the bonus payout, and the strategic objective factor cancould increase or decrease the bonus payout.payout amounts based on the compensation committee’s evaluation of our achievement of certain strategic goals that were not directly related to short-term revenue or income generation. The strategic objectives component in our 2013 annual incentive program was the first time in our history our annual incentive program included such a component. The compensation committee eliminated this component for 2014 in light of our historical practices and because the committee believed our primary goals of revenue growth with a reasonable level of profitability were sufficiently captured by the program’s collective application of the revenue factor and the AOI threshold.

A target bonus payout expressed as a percentage of annual base salary wasis established for each named executive officer for 2013annually. For 2014, their target payout percentages were as set forth below:follows:

Mr. Cleveland’s target bonus payout for 2013 was increased from his 2012 level of 90% so that he would be near the 50th percentile of the peer group for total potential cash compensation.  Messrs. Judd and Krantz each received an increase in their target bonus payout from 50% to 75% so that they could be placed near the 50th percentile of the peer group for total potential cash compensation. The compensation committee believed it was appropriate for these named executive officers to have potential cash compensation near the median of our peer group for competitive reasons, although we may set pay for our executive officers at a level more or less than the median of our peer group in the future depending on the executive’s responsibilities and contributions, developments to our peer group and competitive circumstances. Mr. Tumelty’s target bonus is based on the compensation committee’s assessment, after considering information provided by Pearl Meyer and their own business experience, of market compensation paid by our talent competitors in the E.U. and represents an amount the committee believes is necessary and appropriate for retention purposes.

The revenue factor is zero for 2013 revenue below specified threshold amounts for Proto Labs and each of its business units, is 50% at those threshold amounts, and increases (with no maximum) in amounts specified by the compensation committee to the degree revenue exceeds the respective threshold amounts.

For 2013, the compensation committee’s decisions regarding the numerical goals associated with the revenue growth and AOI objectives were consistent with the compensation committee’s stated philosophy of designating target objectives that are reasonably achievable but still reflect appreciable growth over the previous year. As a result, the compensation committee approved a threshold consolidated revenue objective for 2013 equal to an increase of the actual revenue before allowances from 2012 of 12%. Our target revenue was 25% revenue growth on a consolidated level. The threshold revenue objective for 2013 for our operations in the E.U., which is relevant to Mr. Tumelty’s 2013 incentive compensation, was 15% growth. The target revenue growth for the E.U. was 26%. The following table summarizes the revenue objectives for 2013, as well as our actual performance during 2013: