Proto Labs, Inc.

5540 Pioneer Creek Drive

Maple Plain, Minnesota 55359

(763) 479-3680

Fax: (763) 479-2679

April 4, 2023

Dear Fellow Shareholder:

The Board of Directors of Proto Labs, Inc. cordially invites you to join our 2023 Annual Meeting of Shareholders (the “Annual Meeting”) on Wednesday, May 17, 2023 at 8:30 a.m. Central Time. Our Annual Meeting will be a “virtual meeting” of shareholders, which will be conducted exclusively online via live webcast.

We will be using the “Notice and Access” method of furnishing proxy materials via the Internet to our 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 4, 2023, we will mail to our 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 via the Internet. The Notice also contains instructions on how to receive a paper copy of your proxy materials.

It is important that your shares be represented at the Annual Meeting, whether or not you plan to participate. Please vote electronically via the Internet or, if you receive a paper copy of the proxy card by mail, you may vote by Internet, telephone or by returning your signed proxy card in the envelope provided. If you do participate in the Annual Meeting and desire to vote at that time, you may do so as described in the Proxy Statement.

We hope that you will be able to participate in the Annual Meeting.

Very truly yours,

 

Archie C. Black

 

YOUR VOTE IS IMPORTANT

Whether or not you plan to join 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 2023 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 17, 2023.

Our Proxy Statement for the 2023 Annual Meeting of Shareholders and our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 are available at www.proxyvote.com.

The board of directors of Proto Labs, Inc. is soliciting proxies for use at the Annual Meeting to be held on May 17, 2023, and at any adjournment or postponement of the meeting.

The Notice also instructs as to how you may submit your proxy via the Internet. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice. Any request to receive proxy materials by mail will remain in effect until you revoke it.

Vote Required. Generally, directors are elected by a majority of the votes cast with respect to the director, meaning that the votes cast “for” a director must exceed the votes cast “against” the director. However, in a contested election of directors in which the number of nominees exceeds the number of directors to be elected, the directors are elected by a plurality of the votes present in person or by proxy at the meeting. The election of directors at the Annual Meeting will be an uncontested election, and therefore directors will be elected by a majority of the votes cast with respect to the director.

The proposal to ratify the selection of our independent registered public accounting firm must be approved by the affirmative vote of the greater of (a) a majority of the shares of our common stock present online or by proxy at the Annual Meeting and entitled to vote or (b) a majority of the minimum number of shares of common stock entitled to vote that would constitute a quorum. For the advisory say-on-pay vote, there is no minimum approval necessary since it is advisory. However, if the advisory say-on-pay resolution in this Proxy Statement receives more votes “for” than “against,” then it will be deemed to be approved. The say-on-pay vote is advisory and is not binding on the board of directors. The proposal to approve an amendment to the Proto Labs, Inc. 2022 Long-Term Incentive Plan must be approved by the affirmative vote of the greater of (a) a majority of the shares of our common stock present online or by proxy at the Annual Meeting and entitled to vote or (b) a majority of the minimum number of shares of common stock entitled to vote that would constitute a quorum. For the shareholder proposal, if properly presented at the Annual Meeting, it must be approved by the affirmative vote of the greater of (a) a majority of the shares of our common stock present online or by proxy at the Annual Meeting and entitled to vote or (b) a majority of the minimum number of shares of common stock entitled to vote that would constitute a quorum.

A properly executed proxy marked “ABSTAIN” with respect to a proposal will be counted for purposes of determining whether there is a quorum and will be considered present in person or by proxy and entitled to vote, but will not be deemed to have been voted in favor of such proposal. Abstentions will have no effect on the voting for the election of directors or approval of the advisory say-on-pay resolution. Abstentions will have the same effect as voting against the proposal to ratify the selection of our independent registered public accounting firm, the proposal to approve an amendment to the Proto Labs, Inc. 2022 Long-Term Incentive Plan, the shareholder proposal entitled Fair Elections, and any other item properly presented at the Annual Meeting or any adjournments or postponements thereof.

If your shares are held on account at a brokerage firm, bank or similar organization, you will receive voting instructions from your bank, broker or other nominee describing how to vote your shares. You must follow those instructions to vote your shares. You will receive the Notice that instructs how to access our proxy materials on the Internet and vote your shares via the Internet. It also instructs how to request a paper copy of our proxy materials. If you hold your shares in street name and want to vote virtually during the Annual Meeting, then you must obtain a legal proxy from your broker or nominee.

Proxies that are voted via the Internet or by telephone in accordance with the voting instructions provided, and proxy cards that are properly signed, dated and returned, will be voted in the manner specified.

Joining the Annual Meeting will not by itself revoke a previously granted proxy. Unless you decide to vote your shares virtually at the Annual Meeting, you should revoke your prior proxy in the same way you initially submitted it—that is, by Internet, telephone or mail.

For shares held in street name. If you hold shares through a broker, you will receive voting instructions from your broker. If you do not submit voting instructions to your broker and your broker does not have discretion to vote your shares on a particular matter, then your shares will not be counted in determining the outcome of the vote on that matter at the Annual Meeting. See “What is the effect of broker non-votes and abstentions?” as described above. Your broker will not have discretion to vote your shares for any matter to be voted upon at the Annual Meeting other than the ratification of the selection of our independent registered public accounting firm. Accordingly, it is important that you provide voting instructions to your broker for the matters to be voted upon at the Annual Meeting.

If any matters not described in this Proxy Statement are properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote your shares. If the Annual Meeting is adjourned or postponed, the proxy holders can vote your shares on the new meeting date as well, unless you have revoked your proxy instructions, as described under “Can I revoke or change my vote?”

If you hold shares through a broker, please see above under “What happens if I don’t vote shares that I own?”

Broadridge Financial Solutions, Inc.

Householding Department

51 Mercedes Way

Edgewood, New York 11717

1-800-542-1061

Broadridge will deliver the requested documents to you promptly upon receipt of your request.

The following table sets forth information as of March 22, 2023 regarding the beneficial ownership of our common stock by:

The percentage of beneficial ownership is based on 26,202,723 shares of common stock outstanding as of March 22, 2023. 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.

Archie Black leads our board of directors in his role as Chairman. Our board of directors believes that its leadership structure is appropriate for our Company in light of the importance of maintaining independent board leadership and engagement.

As Chairman, Mr. Black:

Our management is responsible for defining the various risks facing our Company, formulating risk management policies and procedures, and managing our risk exposures on a day-to-day basis. The board’s responsibility is to monitor our risk management processes by using board meetings, management presentations and other opportunities to educate itself concerning our 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 our 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 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 our Company, including operational, credit, liquidity, legal and cybersecurity risks, to assess whether management has reasonable controls in place to address these risks.

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 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 our Secretary. Recommendations must be received by the Secretary within the timelines specified in our Bylaws to be considered by the nominating and governance committee for possible

nomination at our Annual Meeting of Shareholders the following year. Our Bylaws 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 Bylaws 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. Shareholders may also have the opportunity to include nominees in our proxy statement by complying with the requirements set forth in Section 2.17 of our Bylaws. Recommendations must be received by the Secretary within the timeframes noted under “Submission of Shareholder Proposals and Nominations.”

Our Bylaws include a “proxy access” provision for director nominations under which eligible shareholders may nominate candidates for election to our board and inclusion in our proxy statement. The “proxy access” provision permits an eligible shareholder, or an eligible group of up to 20 shareholders, owning continuously for at least three years shares of our Company representing an aggregate of at least three percent of the voting power entitled to vote in the election of directors, to nominate and include in our annual meeting proxy materials director nominees not to exceed the greater of (i) two or (ii) 25 percent of the number of directors then serving on our board, or, if such amount is not a whole number, the closest whole number below 25 percent, but not less than two. Such nominations are subject to certain eligibility, procedural, and disclosure requirements set forth in section 2.17 of our Bylaws, including the requirement that our Company must receive notice of such nominations not less than 120 calendar days prior to the anniversary date of the prior year’s annual proxy materials mailing, except as otherwise provided in section 2.17 of our Bylaws. Section 2.17 of our Bylaws provides the exclusive method for a shareholder to include nominees for election to the board of directors in the Company’s proxy materials, other than with respect to Rule 14a-19 to the extent applicable with respect to the form of proxies.

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 Dr. Robert Bodor, our Chief Executive Officer, all of the directors and director nominees are “independent directors” as defined by Section 303A.02 of the New York Stock Exchange Listed Company Manual.

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 at www.protolabs.com under the investor relations section. Annually, our employees are required to complete code of conduct and business ethics training. 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.

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 at www.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.

During 2022, the full board of directors met five times in person and held seven meetings via videoconference. Five of the meetings were preceded and/or followed by an executive session of the independent directors, chaired by Mr. Black or the acting chair of the meeting. Each of our then-serving directors attended at least 75% percent of the meetings of the board and any committee on which they served in 2022. 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. All of our then-serving directors attended the 2022 Annual Meeting of Shareholders.

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 at www.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 2022, are described below.

Effective May 17, 2023, the composition of each committee will be as follows:

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 New York Stock Exchange (“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 seven times in 2022.

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 five times in 2022.

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 the NYSE independence standards and is a “non-employee director” as that term is defined in Rule 16b-3 under the Securities Exchange Act of 1934. The compensation committee met eight times in 2022.

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 us, (2) whether the transaction is material to 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 shareholders and the terms of the transaction are fair to 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 us to a related person for the related person’s service to us 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.

Since the beginning of 2022, we have not engaged in any related party transactions as defined above.

Eight 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 eight 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 any executive officer. Each nominee listed below is currently a director of Proto Labs and has been duly elected by shareholders.

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

As set forth in our Third Amended and Restated Articles of Incorporation, as amended, each director shall be elected by the vote of the majority of the votes cast with respect to the director. A majority of the votes cast means that the votes cast “for” a director nominee must exceed the votes that are voted “against” that director.

The compensation provided to our named executive officers for 2022 is set forth in detail in the Summary Compensation Table and the other tables, accompanying footnotes and narrative that follow in this section. This Compensation 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 2022 affecting the compensation of our named executive officers. Throughout this section, we refer to the following individuals as our “named executive officers” or “NEOs”:

This section provides an overview of our performance, key decisions and actions made by our compensation committee during the course of the year, a summary of the governance features of our executive compensation program, and a history of our say-on-pay results.

Like many companies, Proto Labs faced internal and external disruptions to our business in 2022. Throughout the year, we worked to overcome these challenges, and we achieved our strategic goals to enable us to drive future growth. Despite the obstacles of the macroeconomic environment and internal challenges, our business strategy and market opportunity remain strong. 2022 was highlighted by low double digit organic revenue growth in our CNC machining and 3D printing services and we generated $48.5 million in revenue from our Hubs business. In 2022, we also made significant progress on the integrated Proto Labs and Hubs offer, allowing our customers to realize the benefits of a unique integrated CNC offer. We established an important platform that will allow us to prove the value of our comprehensive offer strategy.

Although our total shareholder return (“TSR”) was not as strong as our peer group and reference indices at the end of 2022, it has been historically very strong, exceeding that of the peer group, the S&P 500 and the Russell 2000 Growth Index from our IPO through 2020. While our TSR has declined in 2021 and 2022 relative to these measures, our board of directors and senior management team believe this is temporary and are taking actions designed to drive profitable revenue growth and ultimately shareholder value creation in the future. We are strongly committed to our Company’s long-term sustainable growth.

 

The information above reflects the period of time ending December 31, 2022, and the “peer group” reflected in the chart above represents the compensation peer group used for 2022 compensation developed by our independent compensation consultant Pearl Meyer. The peer group includes the following companies: 3D Systems Corporation, Badger Meter, Inc., Cerence Inc., Enerpac Tool Group Corp, ESCO Technologies, Inc., FARO Technologies, Inc., Helios Technologies Inc., Novanta Inc., Power Integrations, Inc., Raven Industries, Inc., RBC Bearings Incorporated, Semtech Corporation, SPS Commerce, Inc., Universal Display Corporation, and Vicor Corporation.

Although Proto Labs’ TSR performance shown in the chart above trailed that of the peer group, the compensation committee believes that pay and performance are appropriately aligned. Our 2021 and 2022 annual cash incentive payouts for our named executive officers were well below the target amounts. Additionally, long-term incentives awarded to our named executive officers are well below their initial grant date fair value; specifically, all outstanding stock options are underwater and no PSUs have been paid out in the last three years.

In 2022, the Company made a number of important decisions as it relates to our named executive officer compensation program.

Our compensation committee is committed to establishing an executive compensation program that reflects strong corporate governance attributes. The following table summarizes those corporate governance attributes.

The compensation committee values the opinions of our shareholders. At our 2022 annual meeting, the say-on- pay proposal received the approval of approximately 94% of the shares voted on the proposal. We considered this result to be an endorsement by our shareholders of our compensation program and maintained the majority of the fundamental features of our 2021 program for 2022. Further, since our Company began holding the say-on- pay vote, our shareholders have been overwhelmingly supportive of our compensation programs, with the say-on-pay proposal receiving greater than 90% support in each year.

Daniel Schumacher was appointed as Chief Financial Officer of the Company effective June 3, 2022. Prior to his appointment, Mr. Schumacher served as the Company’s Interim Chief Financial Officer, beginning December 1, 2021. The terms of his employment as Chief Financial Officer are summarized in the section titled “Employment Agreements.”

Arthur R. Baker III, Chief Technology Officer, involuntarily terminated employment with the Company effective April 15, 2022. Due to the nature of his separation from the Company, Mr. Baker was entitled to receive severance benefits. In accordance with his severance agreement, he executed a release of claims against the Company and is required to comply with a restrictive covenants agreement with respect to non-disclosure and non-competition. He received a severance package of 12 months of annualized base salary, paid in installments subject to limited

exceptions; a pro rata cash incentive payment amount for 2022, paid in a lump sum; an amount equal to the employer’s portion of health premiums for Mr. Baker and his dependents for the first 12 months of coverage under COBRA; and a pro rata immediate vesting for a portion of his unvested equity-based awards scheduled to vest in the year following his termination date.

Oleg Ryaboy was appointed as the Company’s Chief Technology Officer, effective September 9, 2022. The terms of his employment are summarized in the section titled “Employment Agreements.”

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 Company in a dynamic and changing business environment, and that a competitive executive compensation program is essential 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.

Executives covered by this philosophy include the Chief Executive Officer (CEO), any “officer” of the Company as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, and any other management-level employee reporting directly to the CEO.

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

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

Our compensation committee regularly receives and considers 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 our Company and development/career opportunities, as well as with our compensation philosophy, external market data and considerations of internal equity. With the assistance of our CFO, our CEO also has provided recommendations to the compensation committee regarding the establishment of performance goals for the annual cash incentive plan based on the operating budget approved by our board of directors. Our CEO regularly attends meetings of our compensation committee, except where the CEO’s own compensation is being 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 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 our CEO, peer group compensation and market data from third party compensation surveys (including Pearl Meyer, our independent compensation consultant), our compensation philosophy and key principles, the pay practices of a set of comparable companies, feedback received from shareholders concerning say-on-pay, and the committee’s collective experience and knowledge. We define our relevant peer group for executive talent, with assistance of Pearl Meyer, in the technology and industrial sectors, also taking into account size of the company, business models, and other factors. 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’s relative performance. We target total compensation levels within a competitive range of the market median we calculated from the surveys and other compensation data we utilized. As a result, we do not establish specific compensation amounts or parameters for any executive officer position based on market data, recognizing that factors unique to each individual will ultimately determine that individual’s compensation, which may not necessarily be within the median range. In evaluating 2022 compensation, each of our executive officers was at or below the targeted range. Our compensation committee approves all awards to our executive officers under our 2022 Long-Term Incentive Plan.

In 2021, the compensation committee requested that its independent compensation consultant, Pearl Meyer, review our peer group used for executive compensation in 2022. Pearl Meyer used a multi-step process that went beyond basic financial characteristics to construct a peer group that we believe fits our 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 2022.

Pearl Meyer employed the following robust process to construct the proposed peer group.

Overall, the new peer group used for 2022 compensation is similar to Proto Labs in terms of profitability and Proto Labs is approximately median in size of the peer group.

The compensation committee also reviewed the peer groups used for comparison by proxy advisory firms.

This process resulted in a select number of changes as shown below.

* Some companies were retained that did not meet all screening criteria for year-over-year continuity.

Below is information about companies in the peer group, as well as the corresponding information for Proto Labs, that Pearl Meyer referenced when constructing the peer 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. As discussed above, we do not establish a percentile which any part of our executive’s compensation or any executive’s overall compensation must meet or exceed.

In 2022, the compensation committee requested that Pearl Meyer again review our peer group to be used for 2023 executive compensation. Pearl Meyer used the same multi-step process to recommend changes to the peer group used for 2023 compensation.

Our executive compensation program historically has been comprised of three primary elements—base salary, an annual cash incentive, and equity-based long-term incentives. The primary elements of our compensation program for 2022 were consistent with our 2021 compensation program. 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 additional specific purposes of each element as reflected in our 2022 compensation program.

We seek to minimize perquisites for executive officers which are unique to our executive officers. Our compensation committee has not adopted a formal or informal policy for allocating compensation among the various elements, or between fixed and at-risk, cash and non-cash elements or between long- and short-term compensation; however, the committee considers total compensation and then adjusts the mix among each element of compensation based on market comparisons, individual role and performance. As noted earlier, however, we do place greater emphasis on incentive-based and variable forms of compensation for executives with more significant responsibilities, reflecting their greater capacity to affect our performance and results.

At the time an executive officer is first hired, his or her base salary generally is 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 history, internal pay equity considerations and market factors.

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 an 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.

The annual base salary of each of our named executive officers is set forth in the table below, as well as the increases from 2021:

All of our named executive officers participate in our annual incentive program. The annual incentive program payouts for 2022 were a function of two metrics:

Revenue growth and AOI were selected as the primary financial objectives for determining the 2022 annual incentive payouts because our primary objective continues to be to grow our Company profitably.

The compensation committee approved 2022 revenue and AOI objectives for our Company as a whole and for each of our major geographic business units (the United States, Europe, Middle East and Africa (“EMEA”) and Japan). The compensation committee approved a modification in the performance metrics for annual bonuses in connection with our Company’s exit from the Japanese market on May 31, 2022. Global performance continued to include the Japanese revenue attainment factor through May 31, 2022, and following that date, global performance excludes the Japanese attainment factor from both planned performance and actual performance. All other factors used to determine annual bonuses remained the same. The inclusion of business unit performance objectives enables us to tailor annual incentive opportunities so as to reward each executive officer for the performance of those portion(s) of our Company for which the officer had the most direct responsibility. The following are the percentage allocations for revenue and AOI across each named executive officer’s target bonus opportunity.

A target payout expressed as a percentage of annual base salary is established for each named executive officer annually. For 2022, their target payout percentages were as follows:

The revenue factor of our plan pays out 100% at targeted revenue achievement on a consolidated basis or for each region, as applicable, for each named executive officer. The payout would be zero for 2022 revenue below the threshold of 88% attainment of the annual targets for our Company as a whole and each of its business units. The payment is 30% of the annual bonus at the threshold amounts of 88% attainment, and increases in amounts specified by the compensation committee to the degree revenue exceeds the respective threshold amounts up to a maximum of 200%.

The AOI factor pays out 100% at targeted AOI achievement on a consolidated basis for each named executive officer. The payout would be zero for 2022 if AOI is below 40% of the target amount (the threshold amount). AOI payouts increase above threshold in amounts specified by the compensation committee, to the degree that AOI exceeds the threshold amount, up to a maximum of 200%. For AOI performance between threshold and target, the payout factor would increase proportionately between 40% and 100%, or about 0.2 percentage points for each basis point in additional AOI, and between target and maximum, the payout factor would increase proportionately between 100% and 200%, or about 0.2 percentage points for each basis point in additional AOI. For 2022, the AOI performance was below threshold and therefore no payout was made for that factor.

The compensation committee may, in its discretion, adjust annual incentive payout amounts on an individual basis. The compensation committee exercised that discretion with regard to Mr. Kenison’s 2022 annual incentive award, granting a 20% discretionary annual incentive award to partially offset the unexpected negative economic impact in the Americas region.

The following table summarizes the 2022 thresholds and targets for the revenue factor and the AOI factor approved by the compensation committee and the actual performance during 2022 in terms of both revenue and AOI, as well as the related payout factors:

The annual incentive amount paid to, as well as such amount’s percentage of target achieved for, each named executive officer in 2022 were as follows:

Our compensation committee considers the employee’s total compensation and then adjusts the mix among base salary, annual incentive and long-term incentive based on market comparisons, individual role and performance. Our compensation committee generally has determined the size of individual grants using its collective business judgment and experience, taking into account factors such as the role and responsibility of the individual executive, an evaluation of the expected and actual performance of each executive, internal pay equity considerations and market factors. We generally have not utilized a formulaic approach to determine the size of individual equity awards to our executives. In 2022, the compensation committee has continued to structure the long-term incentive program for our named executive officers to include a mix of stock options, RSUs and PSUs.

In addition to annual equity awards, in certain cases we have granted equity awards in connection with an individual’s initial employment with us, upon promotions or other changes in responsibilities, or in recognition of significant achievements. These additional equity awards are made outside our typical annual grant cycle, and are subject to our equity award approval policy summarized below in “Other Compensation and Equity-Related Policies—Equity Award Approval Policy.”

In accordance with our pay-for-performance philosophy, under which the Company’s under performance is reflected in the named executive officers’ compensation, the compensation committee determined that none of the PSUs granted in 2018, 2019, or 2020 were earned or vested because our Company’s performance was below the financial threshold goals. In addition, all outstanding stock options held by the named executive officers were underwater as of December 31, 2022.

As noted above, in 2022 the compensation committee awarded stock options, RSUs and PSUs to our named executive officers. Such grants, which were made in 2022 pursuant to the 2022 Long-Term Incentive Plan (the “LTIP”), were as follows:

The aggregate grant date fair value of equity awarded to Dr. Bodor in 2022 closely aligns his equity-based compensation with comparable peers in the market and reflects his recent promotion to CEO. Further, 87% of Dr. Bodor’s compensation is considered to be “at risk”.

The stock options awarded to our named executive officers have an exercise price equal to 100% of the fair market value of a share of our common stock on the date of grant. Each stock option granted will vest and becomes exercisable as to 25% of the shares in four annual installments beginning on February 13, 2023 and has a 10-year term. For stock options granted prior to an individual becoming a named executive officer, the vesting date and schedule may differ. Unvested options will immediately become vested and exercisable in full upon the named executive officer’s death or disability and if, within one year of a change in control, the named executive officer’s employment is terminated without cause or for good reason.

The RSUs awarded to our named executive officers will vest as to 25% of the shares in four annual installments beginning on February 13, 2023. For RSUs granted prior to an individual becoming a named executive officer, the vesting date and schedule may differ. Unvested RSUs will immediately vest in full upon the named executive officer’s death or disability and if, within one year of a change in control, the named executive officer’s employment is terminated without cause or for good reason. No dividend equivalents are paid on the RSUs.

The PSUs awarded to our named executive officers are expressed in terms of a target number of PSUs (as noted in the table above), with between 0% and 200% of that target number of shares capable of being earned and vesting at the end of the January 1, 2022 to December 31, 2024 performance period depending on our Company’s three-year cumulative TSR performance relative to the Russell 2000 Growth Index. The pay and performance scale for the 2022 PSU grants is as follows:

If our TSR is less than 0% over the performance period, the PSU payout is capped at 100% of target. In making the decision in 2020 to move to relative TSR from our historical practice of measuring organic revenue and adjusted EPS growth, the compensation committee reflected on the difficulty of setting multi-year financial goals, and the potential for misalignment of pay and performance. Further, the compensation committee believes that relative TSR represents a good alignment tool for purpose of compensating management on shareholder return performance. The compensation committee plans to continually evaluate the PSU program in the future to determine the best metrics and structure to motivate and reward management.

The number of PSUs determined to have been earned at the end of the performance period will vest at that time, and each vested PSU will be paid out in one share of our common stock. A PSU award will be forfeited if the award recipient’s employment ends before the scheduled vesting date except in situations involving retirement, disability, a qualifying termination under a severance agreement, death or a change in control. If employment ends due to retirement, disability or a qualifying termination under a severance agreement before the scheduled vesting date, a pro rata portion of the number of PSUs that would have been earned at the end of the performance period if employment had continued will vest on the scheduled vesting date. The pro rata portion will be based on the portion of the performance period that elapsed prior to the date of termination. If employment ends due to an award recipient’s death, a pro rata portion (determined in the same manner) of the target number of PSUs will vest

at that time. If a change in control of our Company occurs before the scheduled vesting dates of the award, the performance period will be truncated and a pro rata portion of the number of PSUs determined to have been earned during the truncated performance period will vest as of the date of the change in control. The pro rata portion will be based on the portion of original performance period that elapsed prior to the date of the change in control.

The PSUs awarded to our named executive officers in 2020 were expressed in terms of a target number of PSUs, with between 0% and 150% of that target number of shares capable of being earned and vesting at the end of the January 1, 2020 to December 31, 2022 performance period depending on our Company’s three-year cumulative TSR performance relative to the Russell 2000 Growth Index. The pay and performance scale for the 2020 PSU grants was as follows:

The Company’s three-year relative TSR was at the 13th percentile, 0% of target. As such, none of the PSUs granted in 2020 were earned by the named executive officers.

Our named executive officers generally receive health and welfare benefits under the same programs and subject to the same terms as our other salaried employees. These benefits include medical, dental and vision benefits, short- and long-term disability insurance, accidental death and dismemberment insurance and basic life insurance. Our named executive officers are also eligible to participate in our 401(k) retirement plan, under which our Company provides a matching contribution in an amount equal to 100% of the first 3% of compensation contributed by a participant and 50% of the next 2% of compensation contributed. We also provide supplemental benefits to our executive officers who are based outside of the United States as part of compensation packages that are intended to be competitive in the respective local markets.

Dr. Bodor’s employment agreement, dated January 29, 2021 (the “CEO Agreement”), provides that his employment with the Company is at-will and his employment may be unilaterally terminated by Dr. Bodor or the Company at any time for any reason, subject to the terms of the CEO Agreement. Pursuant to the CEO Agreement, Dr. Bodor receives an initial annual base salary of $500,000 and is eligible for an annual target cash incentive bonus payment equal to 100% of his annual base salary. Dr. Bodor will be eligible for an annual equity grant on terms and conditions that are comparable to those applicable to grants made to other senior executives of the Company.

Dr. Bodor’s severance benefits are summarized under “Potential Payments Upon Termination or Change in Control.”

On December 1, 2021, the Company entered into a letter employment agreement (the “Interim CFO Agreement”) with Daniel Schumacher to serve as an Interim Chief Financial Officer.

Mr. Schumacher served as Interim Chief Financial Officer for approximately 6 months, during which his Interim CEO Agreement provided for an annualized base salary of $296,153 and a pro-rated annual target cash incentive bonus payment of $110,000 for fiscal year 2022. Mr. Schumacher also received an additional equity grant pursuant to the Company’s Long-Term Incentive Plan, of RSUs valued at $150,000, to be vested in full after one year. The Interim CFO agreement did not provide for severance.

On June 3, 2022, the Company entered into a new offer letter agreement (the “CFO Agreement”) with Mr. Schumacher. Under the CFO Agreement, Mr. Schumacher has served as Chief Financial Officer since June 3, 2022.

Pursuant to the CFO Agreement, Mr. Schumacher receives an annualized base salary of $360,000 and was eligible for an annual target cash incentive bonus payment of $234,000 for fiscal year 2022. Mr. Schumacher also received an additional equity grant pursuant to the Company’s Long-Term Incentive Plan comprised of RSUs valued at $300,000, $150,000 in Options and $150,000 in PSUs. The CFO Agreement does not provide for severance but the Company has entered into a severance agreement with Mr. Schumacher, summarized under “Potential Payments Upon Termination or Change in Control”.

On September 2, 2022, the Company entered into a letter employment agreement (the “CTO Agreement”) with Oleg Ryaboy to serve as Chief Technology Officer. The CTO Agreement provides that his employment is at-will and his employment may be unilaterally terminated by Mr. Ryaboy or the Company at any time for any reason. Pursuant to the CTO Agreement, Mr. Ryaboy receives an annualized base salary of $350,000 and was eligible for an annual target cash incentive bonus payment of $75,000 for fiscal year 2022. In 2023 and beyond, Mr. Ryaboy will be eligible for an annual target cash incentive bonus payment equal to 50% of his annual base salary. Mr. Ryaboy also received an equity grant pursuant to the Company’s Long-Term Incentive Plan comprised of RSUs valued at $375,000 and $125,000 in stock options. Mr. Ryaboy will be eligible for an annual equity grant under the Company’s Long Term Incentive Plan. The CTO Agreement does not provide for severance.

We have entered into severance arrangements on our form of severance agreement with our named executive officers, with the exception of Dr. Bodor, whose employment agreement provides for severance benefits, and Mr. Ryaboy. For a summary of the material terms and conditions of our agreements with the named executive officers providing for payments in connection with termination of employment and changes in control of our Company, see “Potential Payments upon Termination or Change in Control.”

The equity award agreements under the LTIP provide for “double trigger” acceleration of exercisability or vesting of equity awards in connection with a change in control, meaning that both a change in control and either a failure to continue, assume or replace outstanding awards or a termination of employment are necessary before acceleration will occur. The compensation committee believes that the double trigger structure avoids an unintended windfall to executives who retain their employment and their equity awards in the event of a friendly change in control, but still provides them appropriate incentives to cooperate in negotiating any change in control in which they believe they could lose their jobs.

In 2014, we adopted an Executive Officer Incentive Compensation Recovery Policy for recovery of incentive compensation from our executive officers under certain circumstances, and in May 2019 we adopted an expanded version of such policy (as expanded, the “Clawback Policy”), which was updated in May 2022. 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 the adoption of the policy where the compensation committee has determined that either:

In the circumstances described in (1) above, 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. In the circumstances described in (2) above, we will, to the extent deemed appropriate by our compensation committee, seek to recover or cancel an executive officer’s incentive compensation that was awarded, vested or paid during any fiscal year in which the misconduct occurred.

The Company expects to revise its Clawback Policy in the next year to comply with new NYSE and SEC rules once they are finalized.

In 2014, we adopted stock ownership guidelines applicable to our executive officers, which we updated in 2018 and 2021. 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. Until an executive officer has achieved compliance with the ownership guidelines, the individual must retain 100% of the “net profit shares” resulting from any option exercise or from the exercise, vesting or settlement of any other form of equity-based compensation award. For these purposes, “net profit shares” refers to that portion of the number of shares subject to the exercise, vesting or settlement of an award that the covered individual would receive had he or she authorized the Company to withhold shares otherwise deliverable in order to satisfy any applicable exercise price or withholding taxes. As of December 31, 2022, all of our named executive officers, except for Bjoern Klaas, were either in compliance with the guidelines or within the five-year period to achieve compliance with the guidelines. The compensation committee granted Mr. Klaas a one-year extension to meet the requirements of the stock ownership guidelines.

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 eleventh 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.

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 without shareholder approval.

Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), disallows a tax deduction with respect to excess parachute payments to certain executives of companies which undergo a change in control. In addition, Code Section 4999 imposes a 20% excise tax on the individual with respect to the excess parachute payment. Parachute payments are compensation linked to or triggered by a change in control and may include, but are not limited to, bonus payments, severance payments, certain fringe benefits, and payments and acceleration of vesting from long-term incentive plans including stock options and other equity-based compensation. Excess parachute payments are parachute payments that exceed a threshold determined under Code Section 280G based on the executive’s prior compensation. As discussed above, we do not provide tax gross-ups on income attributable to severance or other payments that are deemed made in connection with a change in control.

Code Section 409A requires that “nonqualified deferred compensation” be deferred and paid under plans or arrangements that satisfy the requirements of the statute with respect to the timing of deferral elections, timing of payments and certain other matters. Failure to satisfy these requirements can expose employees and directors to accelerated income tax liabilities, substantial additional taxes and interest on their vested compensation under such plans. Accordingly, as a general matter, it is our intention to design and administer our compensation and benefit plans and arrangements for all of our employees and directors, including our named executive officers, so that they are either exempt from, or satisfy the requirements of, Code Section 409A.

Code Section 162(m) disallows a tax deduction to public companies for compensation of more than $1 million paid in any taxable year to each “covered employee,” consisting of the CEO and the three other highest paid executive officers employed at the end of the year (other than the CFO), plus any person who served as CEO or CFO at any time the year, as well as any person who was ever identified as a covered employee in 2017 or any subsequent year.

The compensation committee assists the board of directors in establishing a philosophy and policies regarding executive and director compensation; provides oversight of the administration of our director and executive compensation programs and administers our equity-based plans; reviews the compensation of directors, named executive officers and senior management and prepares any report on executive compensation required by the rules and regulations of the SEC or other regulatory body, including this compensation committee report.

In performing its oversight responsibilities, the compensation committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on the review and discussions, the compensation committee has recommended to the board that the Compensation Discussion and Analysis be included in this Proxy Statement for the 2023 Annual Meeting of Shareholders.

COMPENSATION COMMITTEE

Rainer Gawlick, Chair

Moonhie Chin

Donald G. Krantz

Management and the compensation committee, with the assistance of the compensation consultant, assess the risk of the employee compensation policies and practices, including those that apply to our executive officers. Management has reviewed our compensation plans, program design and existing practices as well as global and local compensation policies, programs and practices applicable to all employees. Management then analyzed the likelihood and magnitude of potential risks, focusing on whether any of our compensation policies and practices varied significantly from our overall risk and reward structure, whether any such policies and practices incentivized individuals to take risks that were inconsistent with our goals, and whether any such policies and practices have resulted in establishing an inappropriate balance between short-term and long-term incentive arrangements.

Management has discussed the findings of the risk assessment with the compensation committee. Based on the assessment, we have concluded that our compensation policies and practices are aligned with the interests of shareholders, appropriately reward pay for performance and do not create risks that are reasonably likely to have a material adverse effect on our Company.

Our compensation committee has considered the relationships that its compensation consultant has had with our Company, the members of the compensation committee and our executive officers, as well as the policies that such compensation consultant has in place to maintain its independence and objectivity, and has determined that the work performed by the compensation consultant has raised no conflicts of interest.

The employment agreements for Messrs. Bodor, Schumacher and Ryaboy are summarized in the Compensation Discussion and Analysis. None of the other NEOs employed as of the end of fiscal year 2022 were parties to employment agreements. The following table summarizes the compensation provided to or earned by our named executive officers during our three most recently completed fiscal years:

The annual incentive plan is described in the Compensation Discussion and Analysis (“CD&A”). The long-term incentive program, including a description of types of equity awards, vesting schedules, performance conditions, and events that would accelerate vesting, for grants made in 2022 is summarized in the CD&A. No dividends or dividend equivalents are paid on RSUs or PSUs. The following table summarizes the grants of plan-based awards made to our named executive officers during the year ended December 31, 2022: