UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Applied Materials, Inc.
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Gary E. Dickerson PRESIDENT AND CHIEF EXECUTIVE OFFICER |  |
February 18, 2015
January 25, 2018
Dear Applied Materials Stockholder:
Fellow Shareholders:
We cordially invite you to attend Applied Materials’ 20152018 Annual Meeting of Stockholders,Shareholders, which will be held on Thursday, April 2, 2015March 8, 2018, at 11:00 a.m. Pacific Time at our corporate offices at 3050 Bowers Avenue, Building 1, Santa Clara, California 95054.
At this year’s Annual Meeting, stockholders will be asked to: elect ten directors; approve, on an advisory basis, the compensation of our named executive officers; and ratify the appointment of KPMG LLP as Applied Materials’ independent registered public accounting firm for fiscal year 2015. Additional information about the Annual Meeting can be found in theThe attached Notice of 20152018 Annual Meeting of StockholdersShareholders and Proxy Statement describe the business to be conducted at the Annual Meeting. We have also made available a copy of our 2017 Annual Report on Form10-K with the Proxy Statement.
Your vote is very important to us, and voting your proxy will ensure your representation at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, we hopeurge you willto vote as soon as possible. Votingpossible and submit your proxy will ensure your representation atvia the Annual Meeting. We urgeInternet, or if you requested to review carefully thereceive printed proxy materials, by telephone or by signing, dating and to vote: FOR each of the director nominees; FOR the approval, on an advisory basis, of the compensation of our named executive officers; and FOR ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2015.returning your proxy card.
Thank you for your attention to these important matters and for your continued support of and interest in Applied Materials, particularly as we work toward the completion of our proposed business combination with Tokyo Electron Limited.Depending on the expected timing of the closing of the business combination, we may adjourn or cancel the Annual Meeting.
Materials.
Sincerely,
Gary E. Dickerson
President and Chief Executive Officer
3050 Bowers Avenue Santa Clara, California 95054 Phone:(408) 727-5555 | Mailing Address: Applied Materials, Inc. 3050 Bowers Avenue P.O. Box 58039 Santa Clara, California 95052-8039 |
NOTICE OF 2015
2018 ANNUAL MEETING OF STOCKHOLDERSSHAREHOLDERS
Thursday, April 2, 2015March 8, 2018
at 11:00 a.m. Pacific Time
The 20152018 Annual Meeting of StockholdersShareholders of Applied Materials, Inc. will be held on Thursday, April 2, 2015March 8, 2018, at 11:00 a.m. Pacific Time at our corporate offices at 3050 Bowers Avenue, Building 1, Santa Clara, California 95054 to conduct the following items95054.
Items of business:Business
| 1. | To elect ten directors to serve for aone-year term and until their successors have been duly elected and qualified. |
| 2. | To approve, on an advisory basis, the compensation of our named executive |
| 3. | To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year |
| 4. |
| 5. | To transact any other business that may properly come before the Annual Meeting or any adjournment or postponement of the Annual Meeting. |
Your vote is important. You may vote via the Internet or by telephone, or if you requested to receive printed proxy materials, by signing, dating and returning your proxy card. If you are voting via the Internet or by telephone, your vote must be received by 11:59 p.m. Eastern Time on Wednesday, March 7, 2018. For specific voting instructions, please refer to the information provided in the following Proxy Statement, together with your proxy card or the voting instructions you receive bye-mail or that are provided via the Internet.
If you received a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”) on how to access the proxy materials via the Internet, a proxy card was not sent to you, and you may vote only via the Internet, unless you have requested a paper copy of the proxy materials, in which case, you may also vote by telephone or via the Internet.by signing, dating and returning your proxy card. Shares cannot be voted by marking, writing on and returning the Notice of Internet Availability. Any Notices of Internet Availability that are returned will not be counted as votes. Instructions for requesting a paper copy of the proxy materials are set forth on the Notice of Internet Availability. If you received a proxy card and other proxy materials by mail, you may vote by mailing a completed proxy card, by telephone or over the Internet. Your vote must be received by 11:59 p.m. Eastern Time on Wednesday, April 1, 2015. For specific voting instructions, please refer to the information provided in the following Proxy Statement, together with your proxy card or the voting instructions you receive by e-mail or that are provided via the Internet.
Please note that depending on the expected timing of the closing of the proposed business combination between Applied Materials, Inc. and Tokyo Electron Limited, the Annual Meeting may be adjourned or cancelled.
| By Order of the Board of Directors |
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Thomas F. Larkins Corporate Secretary |
Santa Clara, California
February 18, 2015January 25, 2018
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on March 8, 2018: The Proxy Statement and Annual Report to Shareholders are available atwww.proxyvote.com.
PROXY STATEMENT
Reconciliation ofnon-GAAP adjusted financial measures used in the Compensation Discussion and Analysis section and elsewhere in this Proxy Statement, other than as part of disclosure of target levels, can be found in the Appendix.
2018 PROXY STATEMENT SUMMARY
20152018 PROXY STATEMENT SUMMARY
Your proxy is being solicited on behalf of the Board of Directors of Applied Materials, Inc. We are making this Proxy Statement available to shareholders beginning on January 25, 2018. This summary highlights information contained elsewhere in this Proxy Statement. We encourage you to read the entire Proxy Statement for more information about the topics to be considered at the Annual Meeting prior to voting.
Annual Meeting of Shareholders
ANNUAL MEETINGOF STOCKHOLDERS
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Proposals and Board Recommendations
PROPOSALSAND VOTING RECOMMENDATIONS
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| Board Recommendation | ||||||||||
| Proposal 1 – Election of Directors | Pages 1 to 6 | ✓ FOR each Nominee | |||||||||
| Stephen R. Forrest | Scott A. McGregor | |||||||||
Xun (Eric) Chen | Thomas J. Iannotti | Dennis D. Powell | |||||||||
Aart J. de Geus Gary E. Dickerson | Alexander A. Karsner Adrianna C. Ma | ||||||||||
| Proposal 2 – Executive Compensation | Page 19 | ✓ FOR | |||||||||
Approval, on an advisory basis, of the compensation of our named executive officers for fiscal year 2017 | |||||||||||
| Page 48 | ✓FOR | ||||||||||
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| Proposal 4 – Shareholder Proposal to Provide for Right to Act by Written Consent | Pages 50 to 52 | ✘AGAINST | |||||||||
Shareholder proposal requesting that the Board take steps to permit shareholder action by written consent without a meeting | |||||||||||
| Proposal 5 – Shareholder Proposal for Annual Disclosure ofEEO-1 Data | Pages 53 to 55 | ✘ AGAINST | |||||||||
Shareholder proposal requesting that the Board adopt and enforce a policy to disclose annually Applied’sEEO-1 data | |||||||||||
Applied Materials, Inc. i
PROPOSAL 1—ELECTIONOF DIRECTORSDirector Nominees
Each
| Name and Occupation | Age | Director Since | Independent | Committees | ||||
| Judy Bruner | 59 | 2016 | ✓ | Governance (Chair) | ||||
Executive Vice President, Administration and Chief Financial Officer, SanDisk Corporation (retired) | Audit | |||||||
| Xun (Eric) Chen | 48 | 2015 | ✓ | Compensation | ||||
Chief Executive Officer, BaseBit Technologies, Inc. | Strategy | |||||||
| Aart J. de Geus | 63 | 2007 | ✓ | Strategy (Chair) | ||||
Chairman of the Board of Directors,Co-Chief Executive Officer, Synopsys, Inc. | Investment | |||||||
| Gary E. Dickerson | 60 | 2013 | ||||||
President and Chief Executive Officer, Applied Materials, Inc. | ||||||||
| Stephen R. Forrest | 67 | 2008 | ✓ | Audit | ||||
Professor of Electrical Engineering & Computer Science, Physics, and Materials Science & Engineering, University of Michigan | Strategy Investment | |||||||
| Thomas J. Iannotti | 61 | 2005 | ✓ | Compensation (Chair) | ||||
Senior Vice President and General Manager, Enterprise Services, Hewlett-Packard Company (retired) | ||||||||
| Alexander A. Karsner | 50 | 2008 | ✓ | Compensation | ||||
Managing Partner, Emerson Collective | Governance | |||||||
| Adrianna C. Ma | 44 | 2015 | ✓ | Investment (Chair) | ||||
Managing Partner, Fremont Group | Audit Governance | |||||||
| Scott A. McGregor | 61 | 2018 | ✓ | |||||
President and Chief Executive Officer, Broadcom Corporation (retired) | ||||||||
| Dennis D. Powell | 70 | 2007 | ✓ | Audit (Chair) | ||||
Executive Vice President, Chief Financial Officer, Cisco Systems, Inc. (retired) | Governance Investment |
Board Practices and Composition
Ensuring the Board is composed of directors who possess a wide variety of relevant skills, professional experience and backgrounds, bring diverse viewpoints and perspectives, and effectively represent the long-term interests of shareholders, is a top priority of the Board and the Corporate Governance and Nominating Committee.
| Director Nominee Expertise | Key Attributes | |
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ii 2018 Proxy Statement
Semiconductor Industry and Technology 6 Financial and Accounting 3 Global Business 6 Strategy and Innovation 6 Operations and Infrastructure 4 Government Policy 2 M&A and Organizational Growth 5 Risk Management 6 Public Company Board Experience 8 Executive Leadership 6 Independent Board Chair 89% Director Independence Regular refreshment resulting in average director tenure of 7 years
2018 PROXY STATEMENT SUMMARY
Board Practices Support Thoughtful Board Composition
Board Composition to Support Company Strategy |
The Board and the Corporate Governance and Nominating Committee regularly evaluate the size and composition of the Board to ensure appropriate alignment with the Company’s evolving business and strategic needs. |
Director Succession Planning |
The Corporate Governance and Nominating Committee reviews the short- and long-term strategies and interests of Applied to determine what current and future skills and experience are required of the Board in exercising its oversight function. |
Annual Board Evaluations |
The Board conducts an annual assessment of Board, Board Committees and individual directors to evaluate effectiveness. |
Board Diversity |
The Board values diversity of background, skills and viewpoints, and gender and ethnicity in the recruitment of new directors. |
Board Refreshment |
The Board believes the fresh perspectives brought by new directors are critical to a forward-looking and strategic Board when appropriately balanced by the deep understanding of Applied’s business provided by longer-serving directors. |
We are committed to effective corporate governance that is elected annuallyinformed by our shareholders, promotes the long-term interests of our shareholders, and strengthens Board and management accountability.
Governance Highlights
✓Annual Election of Directors | ✓Shareholder Right to Call a Special Meeting | |
✓Independent Chairman of the Board | ✓Annual Board, Committee and Individual Evaluations | |
✓Highly Independent Board (9 of 10 Directors) and Committees | ✓Robust Board Succession Planning | |
✓Majority Voting for Directors | ✓Regular Executive Sessions of Independent Directors | |
✓No Supermajority Vote Requirements | ✓Active Shareholder Engagement Practices | |
✓Shareholder Proxy Access | ✓No Poison Pill | |
✓Stock Ownership Guidelines for Directors and Executives | ✓Clawback Policy for Annual and Long-Term Incentive Plans |
Shareholder Engagement
We believe that strong corporate governance should include regular engagement with our shareholders to enable us to understand and respond to shareholder concerns. We have a robust shareholder outreach program led by a majoritycross-functional team that includes members of votes cast. Below is summary informationour Investor Relations, Global Rewards and Legal departments. Independent members of our Board are also involved, as appropriate. In the fall, we solicit feedback on our executive compensation program, corporate governance and disclosure practices, and sustainability and corporate citizenship initiatives, as well as any matters voted on at our prior annual meeting. After the filing of our proxy statement, we engage again with our shareholders about each director nominee.important topics to be addressed at our annual meeting. Following our annual meeting, we review the results of the meeting and investor feedback, as well as evaluate emerging trends in corporate governance and other areas. We share feedback we receive from our shareholders with our Human Resources and Compensation Committee, our Corporate Governance and Nominating Committee, and the full Board. See “Shareholder Engagement” on page 12 for more information.
Applied Materials, Inc. iii
Name of Nominee | Age | Director Since | Independent | Committees | ||||||||||
Michael R. Splinter | 64 | 2003 | None | |||||||||||
Gary E. Dickerson | 57 | 2013 | None | |||||||||||
Aart J. de Geus | 60 | 2007 | X | IC, SC | ||||||||||
Stephen R. Forrest | 64 | 2008 | X | IC, SC | ||||||||||
Thomas J. Iannotti | 58 | 2005 | X | HRCC, CGNC | ||||||||||
Susan M. James | 69 | 2009 | X | AC, CGNC (C) | ||||||||||
Alexander A. Karsner | 47 | 2008 | X | CGNC, SC | ||||||||||
Dennis D. Powell | 67 | 2007 | X | AC (C), CGNC, IC | ||||||||||
Willem P. Roelandts | 70 | 2004 | X | HRCC (C), CGNC | ||||||||||
Robert H. Swan | 54 | 2009 | X | AC, IC (C) | ||||||||||
Company Overview
Applied Materials is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. We develop, design, produce and service semiconductor and display equipment for manufacturers that sell into highly competitive and rapidly changing end markets. At Applied Materials, our innovations make possible the technology shaping the future.
2017 Performance Highlights
In 2017, we celebrated our 50th anniversary and deliveredall-time record revenue, operating profit and earnings per share.
Key highlights include:
| ● | Grew revenue to $14.5 billion in fiscal 2017, up 34% from the prior year, resulting in our second consecutive year of record revenue; |
| ● | Achieved record revenue across all of our segments; |
| ● | Grew operating profit to a newall-time record, resulting in record GAAP EPS of $3.17, up 106% over fiscal 2016, and recordnon-GAAP adjusted EPS of $3.25, an increase of 86% over fiscal 2016 (see the Appendix for a reconciliation ofnon-GAAP adjusted measures); |
| ● | Delivered record operating cash flow of over $3.6 billion, equal to 25% of revenue; and |
| ● | Returned $1.6 billion to shareholders through dividends and share repurchases. |
Highlights of five-year performance achievements across key financial measures
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Non-GAAP adjusted operating margin andnon-GAAP adjusted EPS are performance targets under our bonus and long-term incentive plans. See Appendix fornon-GAAP reconciliations.
iv 2018 Proxy Statement
Revenue RECORD HIGH $7.5B FY’13 +93% $14.5B FY’17 Non-GAAP Operating Margin 13.7% FY’13 +14 PTS 27.9% FY’17 Non-GAAP EPS RECORD HIGH $0.59 FY’13 +451% $3.25 FY’17
2018 PROXY STATEMENT SUMMARY
Strategic and Operational Highlights
In fiscal 2017, we continued to drive profitable growth by targeting major technology inflections and introducing new, differentiated, enabling products and services to help our customers address their most critical technological challenges.
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Chief Financial Officer Transition.In August 2017, we welcomed a new Chief Financial Officer, Daniel J. Durn, who succeeded Robert J. Halliday. Mr. Durn brings significant industry experience and knowledge that will further accelerate our strategy.
Stock Price Performance
Our strong strategic and financial performance in fiscal 2017 also resulted in meaningful value creation for our shareholders. As illustrated below, Applied significantly outperformed both our peer group and the S&P 500 Information Technology Index.
FY2013 – FY2017 Total Shareholder Return vs. Key Peers
Applied Materials, Inc. v
Pay Mix
In fiscal 2017, a significant portion of our executive compensation consisted of variable compensation and long-term incentives. As illustrated below, 93% of CEO compensation for fiscal 2017 comprised variable compensation elements, and 75% of Mr. Dickerson’s overall compensation was delivered in equity with multi-year vesting.
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CEO Name and Principal Position Gary E. Dickerson President and Chief Executive Officer Michael R. Splinter Executive Chairman of the Board Randhir Thakur Executive Vice President, General Manager, Silicon Systems Group Robert J. Halliday Senior Vice President, Chief Financial Officer Ali Salehpour Senior Vice President, General Manager, New Markets and Service Group Salary ($) Annual Incentive Bonus ($) Annual Long-Term Incentive Award ($) Total ($) Gary E. Dickerson President and Chief Executive Officer Daniel J. Durn(1) Senior Vice President, Chief Financial Officer Robert J. Halliday Former Senior Vice President, Chief Financial Officer Ali Salehpour Senior Vice President, General Manager, Services, Display and Flexible Technologies Omkaram Nalamasu Senior Vice President and Chief Technology Officer Thomas F. Larkins Senior Vice President, General Counsel and Corporate Secretary vi 2018 Proxy Statement 75% Long-Term Incentives 93% Variable Compensation 68% Long-Term Incentives 88% Variable Compensation 2018 PROXY STATEMENT SUMMARY Key Fiscal 2017 Executive Compensation Highlights Key compensation decisions for fiscal 2017 included: Limited Salary Increases for Select NEOs.Two NEOs received modest salary increases from 2016 levels to reflect each officer’s responsibilities. Annual Bonuses Reflect Strong Company Performance. The average annual bonus payouts to our NEOs was 134% of target bonus, reflecting our strong performance against fiscal 2017 objectives. Adopted New Long-Term Incentive Program.In response to shareholder feedback as well as a broad review of our executive compensation program in fiscal 2016, the HRCC completed a comprehensive redesign of the long-term incentive program that was effective beginning with fiscal 2017 grants. Key redesign elements included: Summary of Changes to Long-Term Incentive Program Wholesale Redesign of the Long-Term Incentive Program ∎ In fiscal 2017, the HRCC enacted a wholesale redesign of the long-term incentive program to address shareholder feedback and meet the needs of the evolving business New equity mix includes performance share units (“PSUs”) to provide rigorous long-term performance alignment and restricted stock units (“RSUs”) to provide a link to shareholder value creation and retention value PSUs (75% for CEO; 50% for all other NEOs) -- new performance measures: 3-year averagenon-GAAP adjusted operating margin 3-year average WFE market share RSUs (25% for CEO; 50% for all other NEOs): 3-year ratable vesting ∎ No performance retesting ability in new PSU design – shares not earned in performance period are forfeited ∎ New PSU metrics have threshold, target and maximumperformance levels that can result in payout below, at or above target Stock Ownership Guidelines. In fiscal 2017, the HRCC approved changes to our stock ownership guidelines to increase the CEO ownership level from 5x to 6x of annual base salary and expanded the applicability of the guidelines (3x of annual base salary) to all Section 16 officers on the CEO Executive Staff. Applied Materials, Inc. vii Alignment of Pay with Performance The following chart shows the alignment between total shareholder return (“TSR”) and the total direct compensation of our viii 2018 Proxy Statement 2018 PROXY STATEMENT SUMMARY Applied is committed to growing its business in a sustainable and socially responsible manner, and we demonstrate our commitment through our corporate citizenship programs and initiatives. We We believe that investing in Fee Category Audit Fees Audit-Related Fees Tax Fees: Tax Compliance and Review Tax Planning and Advice All Other Fees Total Fees People Community Key Sustainability Initiatives Our people are our greatest strength, and we have established practices to nurture our human capital. ● Advancediversity and inclusion throughrecruiting and mentoring programs, sponsoringemployee resource groups and hostingannual diversity events with the participation of our Board, CEO and Executive Staff. ● Promotenext generation of technology leaders by supportingSTEM education programs and promotingparticipation of girls, women and under-represented minorities in STEM education and careers in technology. Sustainable supply chains are core to our success, and we actively promote global best practices. ● Member ofResponsible Business Alliance (formerly EICC), an industry coalition promotingsafe supply chains andenvironmentally responsible, sustainable and ethical business operations. ●Committed to high standards – have adopted theRBA Code of Conduct and require companies in our global supply chain to conform to this Code. We seek to operate and develop products in a way that minimizes environmental impact. ●Water reduction efforts resulted in ~6.3M gallons of water recycled in 2016. ●Reducednon-hazardous waste by 30% in 2016. ●Minimize carbon footprint through on-siterenewable energy production and use ofgreen energy to support 100% of power needs of our two Santa Clara campuses. We maintain the highest ethical standards in interactions with employees, customers, suppliers, competitors and public. ● OurStandards of Business Conduct include key provisions onhuman rights, including prohibitions on use of child labor or forced, bonded or indentured labor in our operations. ●Responsible sourcing of materials for our products. ● Conductglobal training programs and offer24/7 Business Ethics helplines. Applied Materials, Inc. ix PROPOSAL 1—ELECTION OF DIRECTORS PROXY STATEMENT PROPOSAL 1—ELECTION OF DIRECTORS Applied’s Board of Directors is elected each year at the Annual Meeting of If any nominee listed below becomes unable to stand for proxies may vote for any person designated by the Board THE BOARD RECOMMENDS THAT YOU VOTEFOR EACH OF THE FOLLOWING DIRECTOR NOMINEES Judy Bruner Executive Vice President, Administration and Chief Financial Officer, SanDisk Corporation (retired) Independent Director Director since 2016 Age 59 Board Committees: Corporate Governanceand Nominating(Chair) Audit Other Current Public Boards: Rapid7, Inc. Seagate Technology plc Varian Medical Systems Key Qualifications and Expertise: ● Executive leadership and management experience ● Accounting principles, financial controls, financial reporting rules and regulations, and audit procedures ● Global business, industry and operational experience ● Risk management and controls ● Public company board experience Judy Bruner served as Executive Vice President, Administration and Chief Financial Officer of SanDisk Corporation, a supplier of flash storage products, from June 2004 until its acquisition by Western Digital in May 2016. Previously, she was Senior Vice President and Chief Financial Officer of Palm, Inc., a provider of handheld computing and communications solutions, from September 1999 until June 2004. Prior to Palm, Inc., Ms. Bruner held financial management positions at 3Com Corporation, Ridge Computers and Hewlett-Packard Company. She currently serves as a member of the boards of directors of Rapid7, Inc., Seagate Technology plc and Varian Medical Systems, Inc. Ms. Bruner is a member of the board of trustees of the Computer History Museum, and previously served as a member of the board of directors of Brocade Communications Systems, Inc., from 2009 until its acquisition in November 2017. Name of Nominee Michael R. Splinter Gary E. Dickerson Aart J. de Geus Stephen R. Forrest Thomas J. Iannotti Susan M. James Alexander A. Karsner Dennis D. Powell Willem P. Roelandts Robert H. Swan Xun (Eric) Chen Chief Executive Officer, Independent Director Director since 2015 Age 48 Board Committees: Human Resources and Compensation Strategy Other Current Public Boards: None Key Qualifications and Expertise: ● Executive leadership and management experience ● Semiconductor industry leadership ● Global business, industry and operational experience in the technology and information sector ● Mergers and acquisitions, capital markets ● Public company board experience Eric Chen is the Chief Executive Officer andCo-Founder of BaseBit Technologies, Inc., a technology company in Silicon Valley. Dr. Chen has served as CEO of BaseBit Technologies since it was founded in October 2015, except from March 2016 until December 2017, when BaseBit was a portfolio company of Team Curis Group, a group of integrated biotechnology and data technology companies and laboratories, during which time Dr. Chen served as CEO of Team Curis Group. From 2008 to 2015, Dr. Chen served as a managing director of Silver Lake, a leading private investment firm focused on technology-enabled and related growth industries. Prior to Silver Lake, Dr. Chen was a senior vice president and served on the executive committee of ASML Holding N.V. He joined ASML following its 2007 acquisition of Brion Technologies, Inc., a company heco-founded in 2002 and served as Chief Executive Officer. Prior to Brion Technologies, Dr. Chen was a senior vice president at J.P. Morgan. He served as a member of the boards of directors of Qihoo 360 Technology Co. Ltd. from 2014 to July 2016 and of Varian Semiconductor Equipment Associates, Inc. (“Varian”) from 2004 until its acquisition by Applied in 2011. Aart J. de Geus Chairman andCo-Chief Executive Officer, Independent Director Director since 2007 Age 63 Board Committees: Strategy (Chair) Investment Other Current Public Boards: Synopsys, Inc. Key Qualifications and Expertise: ● Executive leadership and management experience ● Semiconductor industry leadership ● Innovation, management development and understanding of global challenges and opportunities ● Navigating a company fromstart-up through various stages of growth ● Mergers and acquisitions ● Public company board leadership Aart J. de Geus is aco-founder of Synopsys, Inc., a provider of electronic design automation software and related services for semiconductor design companies, and currently serves as its Chairman of the Board of Directors andCo-Chief Executive Officer. Since 1986, Dr. de Geus has held various positions at Synopsys, including President, Senior Vice President of Engineering and Senior Vice President of Marketing, and has served as a member of its board of directors. From 1982 to 1986, Dr. de Geus was employed by the General Electric Company, a global infrastructure, finance and media company, where he was the Manager of the Advanced Computer-Aided Engineering Group. PROPOSAL 1—ELECTION OF DIRECTORS Gary E. Dickerson President and Chief Executive Officer, Applied Materials, Inc. Director since 2013 Age 60 Other Current Public Boards: None Key Qualifications and Expertise: ● Executive leadership and management experience ● Semiconductor industry leadership ● Global business, industry and operational experience ● Extensive engineering and technological leadership ● Understanding of complex industry and global challenges ● Expertise in driving innovation and product development Gary E. Dickerson was named President of Applied in June 2012 and was appointed Chief Executive Officer and a member of the Board of Directors in September 2013. Before joining Applied, he served as Chief Executive Officer and a director of Varian, a supplier of semiconductor manufacturing equipment, from 2004 until its acquisition by Applied in November 2011. Prior to Varian, Mr. Dickerson served 18 years withKLA-Tencor Corporation, a supplier of process control and yield management solutions for the semiconductor and related industries, where he held a variety of operations and product development roles, including President and Chief Operating Officer. Mr. Dickerson started his semiconductor career in manufacturing and engineering management at General Motors’ Delco Electronics Division and AT&T Technologies. Stephen R. Forrest Professor of Electrical Engineering & Computer Independent Director Director since 2008 Age 67 Board Committees: Audit Strategy Investment Other Current Public Boards: None Key Qualifications and Expertise: ● Semiconductor, display and alternative energy technologies ● Research and development portfolio management ● Government policy ● Innovation, technology licensing and product commercialization ● Establishing partnerships to develop businesses in new markets focused on alternative energy and other technologies Stephen R. Forrest holds faculty appointments as Professor of Electrical Engineering and Computer Science, as Professor of Physics, and as Professor of Materials Science and Engineering at the University of Michigan, and leads the University’s Optoelectronics Components and Materials Group. From January 2006 to December 2013, Mr. Forrest also served as Vice President for Research at the University of Michigan. From 1992 to 2005, Dr. Forrest served in a number of positions at Princeton University, including Chair of the Electrical Engineering Department, Director of the Center for Photonics and Optoelectronic Materials, and director of the National Center for Integrated Photonic Technology. Prior to Princeton, Dr. Forrest was a faculty member of the Electrical Engineering and Materials Science Departments at the University of Southern California. Applied Materials, Inc. 3 Thomas J. Iannotti Senior Vice President and General Manager, Chairman of the Board Independent Director Director since 2005 Age 61 Board Committees: Human Resources and Compensation (Chair) Other Current Public Boards: Atento S.A. Key Qualifications and Expertise: ● Service management for technology companies on a global, regional and country level ● Senior leadership and management experience ● Global business, industry and operational experience ● International strategic and business development ● Public company board experience Thomas J. Iannotti served as Senior Vice President and General Manager, Enterprise Services, for Hewlett-Packard Company, a technology solutions provider to consumers, businesses and institutions globally, from February 2009 until his retirement in October 2011. From 2002 to January 2009, Mr. Iannotti held various executive positions at Hewlett-Packard, including Senior Vice President and Managing Director, Enterprise Business Group, Americas. From 1978 to 2002, Mr. Iannotti worked at Digital Equipment Corporation, a vendor of computer systems and software, and at Compaq Computer Corporation, a supplier of personal computing systems, after its acquisition of Digital Equipment Corporation. Mr. Iannotti currently serves as a member of the board of directors of Atento S.A. Alexander A. Karsner Managing Partner, Emerson Collective Independent Director Director since 2008 Age 50 Board Committees: Human Resources and Compensation Corporate Governance and Nominating Other Current Public Boards: None Key Qualifications and Expertise: ● Expertise in public policy and government relations ● Domestic and international trade, development and investment markets ● Entrepreneurial leadership ● Renewable energy policy, technologies and commercialization ● Public company board experience Alexander A. Karsner has served as Managing Partner of Emerson Collective, an investment platform fundingnon-profit, philanthropic andfor-profit portfolios advancing education, immigration, the environment and other social justice initiatives, since January 2016. Mr. Karsner has been Founder and CEO of Manifest Energy Inc., an energy technology development and investment firm, since July 2009, and has served as its Executive Chairman since January 2013. From March 2006 to August 2008, he served as Assistant Secretary for Energy Efficiency and Renewable Energy at the U.S. Department of Energy. From August 2002 to March 2006, Mr. Karsner was Founder and Managing Director of Enercorp, a private company involved in international project development, management and financing of energy infrastructure. Mr. Karsner has also worked with Tondu Energy Systems of Texas, Wartsila Power Development of Finland and other multi-national energy firms and developers. He is also Senior Strategist at X, part of Alphabet Inc., and a Precourt Energy Scholar at Stanford University’s School of Civil and Environmental Engineering, and serves on Advisory Boards of MIT Medialab, Sandia National Laboratory and The Polsky Center for Entrepreneurship at the University of Chicago’s Booth School of Business. Mr. Karsner served as a member of the board of directors of Codexis, Inc. from 2009 to 2014. 4 2018 Proxy Statement PROPOSAL 1—ELECTION OF DIRECTORS Adrianna C. Ma Managing Partner, Fremont Group Independent Director Director since 2015 Age 44 Board Committees: Investment (Chair) Audit Corporate Governance and Nominating Other Current Public Boards: None Key Qualifications and Expertise: ● Broad experience with technology companies ● Expertise in global growth investment ● Financial and accounting expertise ● Mergers and acquisitions, capital markets ● Board experience with technology-enabled growth companies Adrianna C. Ma has been a Managing Partner at the Fremont Group, a private investment company, since May 2015. At the Fremont Group, she oversees BF Global, the flagship portfolio of funds, including its investment strategy, asset allocation, manager selection and risk management. From 2005 to April 2015, Ms. Ma served as a Managing Director at General Atlantic LLC, a global growth equity firm, where she invested in and served on the boards of directors of technology-enabled growth companies around the world. Prior to joining General Atlantic, Ms. Ma worked at Morgan Stanley & Co. Incorporated as an investment banker in the Mergers, Acquisitions and Restructuring Department. Ms. Ma served as a member of the board of directors of C&J Energy Services, Inc. from 2013 to 2015. Scott A. McGregor President and Chief Executive Officer, Independent Director Director since 2018 Age 61 Other Current Public Boards: Equifax Inc. (since October 2017) Key Qualifications and Expertise: ● Executive leadership and management experience ● Semiconductor industry leadership ● Global business, industry and operational experience ● Innovation, management development and understanding of global challenges and opportunities ● Public company Board leadership Broadcom Corporation, a world leader in wireless connectivity, broadband, automotive and networking infrastructure, from 2005 until the company was acquired by Avago Technologies Limited in 2016. Mr. McGregor joined Broadcom from Philips Semiconductors (now NXP Semiconductors), where he was President and Chief Executive Officer. He previously served in a range of senior management positions at Santa Cruz Operation Inc., Digital Equipment Corporation (now part of HP), Xerox PARC and Microsoft, where he was the architect and development team leader for Windows 1.0. Mr. McGregor currently serves as a member of the board of directors of Equifax Inc. He previously served as a member of the boards of directors of Ingram Micro Inc. and Xactly Corporation. Applied Materials, Inc. 5 Dennis D. Powell Executive Vice President, Chief Financial Officer, Independent Director Director since 2007 Age 70 Board Committees: Audit (Chair) Corporate Governance and Nominating Investment Other Current Public Boards: Intuit, Inc. Key Qualifications and Expertise: ● Global financial and executive leadership ● Accounting principles, financial controls, financial reporting rules and regulations, and audit procedures ● Mergers and acquisitions ● Risk management and controls ● Public company board experience Dennis D. Powell served as an Executive Advisor at Cisco Systems, Inc., a provider of networking products and services, from February 2008 to September 2010. He served as Cisco’s Chief Financial Officer from May 2003 to February 2008 and, in addition, served as an Executive Vice President from 2007 to 2008 and a Senior Vice President from 2003 to 2007. After joining Cisco in 1997, Mr. Powell also served as Senior Vice President, Corporate Finance and Vice President, Corporate Controller. Before joining Cisco, Mr. Powell worked for 26 years at Coopers & Lybrand LLP, an accounting firm, where he was last a senior partner. Mr. Powell served as a member of the board of directors of VMware, Inc. from 2007 to 2015 and currently serves as a member of the board of directors of Intuit, Inc. Chairman Emeritus James C. Morgan became Chairman Emeritus in March 2009, following his retirement as our director and Chairman of the Board. Chairman of the Board. Mr. Morgan first joined Applied in 1976 and served as Chief Executive Officer from 1977 to 2003. As Chairman Emeritus, Mr. Morgan does not 6 2018 Proxy Statement BOARD AND CORPORATE GOVERNANCE PRACTICES BOARD AND CORPORATE GOVERNANCE PRACTICES Board Composition and Nominee Skills and Experience Our director nominees have a wide variety of relevant skills, professional experience and backgrounds, and collectively bring to our Board diverse viewpoints and perspectives that strengthen its ability to represent the long-term interests of shareholders. The Diversity. Because diverse backgrounds, experiences and Independence. The Governance require that a majority of directors. determined that Tenure. The Board Although our directors are not typically nominated forre-election after they reach the age of 70, after due consideration, the Board waived this policy with respect to Mr. Powell based on its determination that Applied Materials, Inc. 7 Our nominees have an average tenure of 6 years, which is lower than the average tenure of other S&P 500 companies, and four of our nominees have been members of the Board for Regular refreshment resulting in average director tenure of 6 years Board Composition and Refreshment Identification of New Director Candidates.Identifying and recommending individuals for nomination and election to our Board is a principal responsibility of our Governance Committee, which carries out this function through an The Governance Committee regularly considers the In its consideration of potential director candidates, the Governance Committee reviews the short- and long-term strategies and interests of the The Governance Committee also considers succession planning in light of anticipated retirements, and for Board and Committee Chair roles, to maintain relevant expertise and depth of experience. In addition, all director candidates The Governance Committee may retain a search Recent Board Refreshment. As 8 2018 Proxy Statement BOARD AND CORPORATE GOVERNANCE PRACTICES Regular Review of Board Re-nomination of Directors for Based on the Shareholders wishing to nominate a director should follow the specific procedures set forth in our Bylaws. Corporate Governance Guidelines Applied’s Corporate Governance Guidelines establish the governance framework within which the Board conducts its business and fulfills its responsibilities. These guidelines and other important governance materials are available on our website at: http://www.appliedmaterials.com/company/investor-relations/governance-documents. Applied Materials, Inc. 9 The Board regularly reviews our Corporate Governance Guidelines in light of legal and regulatory requirements, evolving best practices and other developments. Board Leadership Our corporate governance framework provides the Board flexibility to determine the appropriate leadership structure for the Company, and whether the roles of Chairman and CEO should be separated or combined. In making this determination, the Board considers many factors, including the needs of the business, the Board’s assessment of its leadership needs from time to time and the best interests of shareholders. If the role of Chairman is filled by a director who does not qualify as an independent director, the Board will designate a Lead Independent Director. The Board believes that it is currently appropriate to separate the roles of Chairman and CEO. The CEO is responsible for setting our strategic direction and theday-to-day leadership of our business, while the Chairman, along with the rest of our independent directors, ensures that the Board’s time and attention are focused on effective oversight of the matters most critical to Applied. Mr. Iannotti, an independent director, currently serves as the Chairman of the Board. Mr. Iannotti has significant experience and knowledge of Applied, working with two CEOs and different management teams at Applied, and the Board believes that his deep knowledge of the company and industry, as well as his strong leadership and governance experience, enable him to lead the Board effectively and independently. Board and Committee Evaluations Our Board recognizes that a thorough, constructive evaluation process enhances our Board’s effectiveness and is an essential element of good corporate governance. Every year, the Governance Committee oversees the design and execution of the evaluation process, which involve assessments of the Board, each standing committee of the Board, and individual directors. Written questionnaires solicit feedback on a range of issues, including Board and Committee structure and composition; meeting process and dynamics; execution of key responsibilities; interaction with management; and information and resources. Following completion of the written questionnaires, the Chairman meets with each director individually to discuss additional input on these topics and to provide individual feedback. Committee chairs lead a discussion of evaluation results for their respective Committees, and a summary of Board and Committee evaluation results is discussed with the full Board, including suggestions for updating policies and practices per evaluation results. Director suggestions for improvements to evaluation questionnaires and process are considered for incorporation for the following year. 2017 Board Evaluation Process 10 2018 Proxy Statement BOARD AND CORPORATE GOVERNANCE PRACTICES Shareholder Rights In addition to direct engagement through our recurring shareholder engagement program discussed below, Applied has instituted a number of mechanisms that allow shareholders to advance their points of view, including: Right to Call a Special Meeting.Our Bylaws Proxy Access.Our Bylaws permit proxy access. Any shareholder (or group of up to 20 shareholders) owning 3% or more of Applied’s common stock continuously for at our Bylaws. Majority Voting.Under our Bylaws, in any uncontested election of directors (an election in which the number of nominees does not exceed the number of directors to be elected), any nominee who receives a greater number of votes cast “for” his or her election than votes cast “against” his or her election will be elected. Our Bylaws provide that in the event an incumbent director receives more “against” than “for” votes, he or she shall tender his or her resignation after certification of the Board’s Role in Risk Oversight Applied’s management hasday-to-day responsibility for identifying risks and assessing them in relation to Company strategies and objectives; implementing suitable risk mitigation plans, processes and controls; and appropriately managing risks in a manner that serves the best interests of Applied, its shareholders and other stakeholders. Applied has implemented an enterprise risk management program (“ERM”), overseen by the Audit Committee, for the purpose of providing an enterprise-wide perspective on Applied’s risks. The risks identified are reported to the Board, which has oversight for risk management, with a focus on the most significant risks facing the Company, including strategic, operational, financial, and legal and compliance risks. The Board in turn delegates oversight responsibility for specific risks to the respective Board Committees in whose area of responsibility and expertise the risks fall. Management reviews the ERM program activities regularly with the Audit Committee and the Board. Throughout the year, the Board and the Committees review and discuss specific risk topics in greater detail. Risk Assessment of Compensation Programs. We have assessed our compensation policies, plans and practices, and determined that they do not create risks that are reasonably likely to have a material adverse effect on Applied. To make this determination, our management reviewed our compensation policies, plans and practices, and assessed the following aspects: design, payment methodology, potential payment volatility, relationship to our financial results, length of performance period, risk-mitigating features, performance measures and goals, oversight and controls, and plan features and values compared to market practices. Management reviewed its analysis with the Human Resources and Compensation Committee, which agreed with this determination. Applied also has in place various controls to mitigate risks relating to compensation policies, plans and practices, such as executive stock ownership guidelines and a clawback policy that enables the recovery of certain incentive compensation payments in certain circumstances. Management Succession Planning The Applied Materials, Inc. 11 technology conferences. The HRCC and Board also regularly discuss matters related to organizational health and discuss individual executive transitions as the need arises over the course of the year. The Board’s goal is Shareholder Engagement We believe that strong corporate governance should include regular engagement with our shareholders to enable us to understand and respond to shareholder concerns. Our senior management team, including our CEO, CFO and members of our Investor Relations team, maintain regular contact with a broad base of investors, including through quarterly earnings calls, an annual analyst day event, individual meetings and other channels for communication, to understand their concerns. In 2017, senior management participated in over 400 meetings with investors, including more than 200 meetings with the CFO and more than 40 with our CEO. In addition, we have a robust shareholder outreach program, developed over the last several years, that focuses on compensation and governance issues of interest to our shareholders. The outreach is a recurring, year-round effort, led by a cross-functional team that includes members of our Investor Relations, Global Rewards and Legal departments, which enables us to build meaningful relationships and trust over time with our shareholders. In the fall, we solicit feedback on our executive compensation program, corporate governance and disclosure practices, and sustainability and corporate citizenship initiatives, as well as any matters voted on at our prior annual meeting. After the filing of our proxy statement, we engage again with our shareholders about important topics to be addressed at our annual meeting. Following our annual meeting, we review the results of the meeting and investor input, as well as evaluate emerging trends in corporate governance and other areas. We share input we receive from our shareholders with our Human Resources and Compensation Committee, our Corporate Governance and Nominating Committee, During 2017, we engaged with a significant cross-section of our shareholder base, including large institutional investors, pension funds, and other investors. We reached out to We have sought and considered shareholder feedback in recent years as we have implemented changes to our compensation program design and certain of our corporate governance practices. ExecutiveCompensation. During the fall of 2016, we conducted extensive shareholder outreach efforts as part of a 12 2018 Proxy Statement BOARD AND CORPORATE GOVERNANCE PRACTICES As a result of this program review and shareholder outreach, the Proxy Access. In the fall of 2015, we discussed with our shareholders their views on Special Meeting Right. We engaged in Many shareholders supported implementation of the right at a 20% ownership threshold. As a result of this effort, and after careful consideration of the issue, in December 2015, we amended our Bylaws to permit shareholders holding at least 20% of our outstanding shares of common stock to call a special meeting. Any shareholder wishing to communicate with any of P.O. Box 58039, Santa Clara, CA 95052, or bye-mail at corporatesecretary@amat.com. The Corporate Secretary reviews correspondence directed to the Board and, at the Corporate Secretary’s discretion, forwards items that he deems appropriate for the Board’s consideration. The independent directors of the Board review and approve the shareholder communication process periodically in order to enable an effective method by which shareholders can communicate with the Board. Stock Ownership Guidelines The Board has adopted stock ownership guidelines to align the interests of our directors and executive officers with those of our shareholders. The guidelines provide thatnon-employee directors should each own Applied stock with a value of at least five times the annual base retainer fornon-employee directors. Applied’s Chief Executive Officer should own Applied stock with a value of at least six times his annual base salary. Each Section 16 officer on the CEO Executive Staff should own Applied stock with a value of at least three times his or her annual base salary. As of December 31, 2017, all of our directors and executive officers had met the stock ownership guidelines. Standards of Business Conduct Applied’s Standards of Business Conduct embody our commitment to ethical and legal business practices. The Board expects Applied’s directors, officers and all other members of its workforce to act ethically at all times and to acknowledge their commitment to Applied’s Standards of Business Conduct. The Standards of Business Conduct are available on our website http://www.appliedmaterials.com/ The Board met five times in fiscal 2017. Each director attended over 75% of all Board and applicable committee meetings held during fiscal 2017. Directors are strongly encouraged to attend the Annual Meeting of Shareholders, and all of the directors serving on our Board at the time attended our 2017 Annual Meeting of Shareholders. The Board has Committee. Each of these committees meets regularly and has a In addition, at each regularly-scheduled Board meeting, the Chair of each committee reports on any significant matters addressed by the committee since the last Board meeting. Each director who serves on the Audit Committee, Human Resources and Compensation Committee, or Copies of the current charters for the Audit, Human Resources and Compensation, and Corporate Governance and Nominating Committees can be found on our website at:http://www.appliedmaterials.com/company/investor-relations/governance-documents. The Board Audit Committee Members: Dennis D. Powell, Chair* Judy Bruner* Stephen R. Forrest+ Adrianna C. Ma* Primary responsibilities: ● Oversee financial statements, internal control over financial reporting and auditing, accounting and financial reporting processes ● Oversee the qualifications, independence, performance and engagement of our independent registered public accounting firm ● Oversee disclosure controls and procedures, and internal audit function ● Review andpre-approve audit and permissiblenon-audit services and fees ● Oversee tax, legal, regulatory and ethical compliance ● Review and approve related-person transactions ● Oversee financial-related risks, enterprise risk management program and cybersecurity * Audit Committee Financial Expert +Appointed to Committee in March 2017 Human Resources and Compensation Committee Members: Thomas J. Iannotti, Chair Xun (Eric) Chen Alexander A. Karsner Primary responsibilities: ● Oversee human resources programs, compensation and employee benefits programs, policies and plans ● Review and advise on management succession planning and executive organizational development ● Determine compensation policies for executive officers and employees ● Review the performance and determine the compensation of executive officers ● Approve and oversee equity-related incentive plans and executive bonus plans ● Review compensation policies and practices as they relate to risk management practices ● Approve the compensation program for Board members Corporate Governance and Nominating Committee Members: Judy Bruner, Chair+ Alexander A. Karsner Adrianna C. Ma+ Dennis D. Powell Primary responsibilities: ● Oversee the composition, structure and evaluation of the Board and its committees ● Identify and recommend qualified candidates for election to the Board ● Establish procedures for director candidate nomination and evaluation ● Oversee corporate governance policies and practices, including Corporate Governance Guidelines ● Review and approval of director service on the board of directors of other companies and oversight of director education ● Review shareholder proposals and recommend to the Board actions to be taken in response to each proposal ● Review and monitor takeover defenses and takeover defense preparedness to maximize long-term shareholder value +Appointed to Committee in March 2017 14 2018 Proxy Statement Compensation Prior to these changes, the cash compensation, consisting of Retainer and Meeting Fees Eachnon-employee director year. The following table Effective Q2 FY 2017 Annual Base Retainer (prorated and paid quarterly) Fee per Committee Meeting Attended Additional Annual Retainers for Committee Service (prorated and paid quarterly): Audit Committee Human Resources and Compensation Committee Corporate Governance and Nominating Committee Strategy Committee Additional Annual Retainers for Chairman and Committee Chairs (prorated and paid quarterly): Chairman of the Board Audit Committee Chair Human Resources and Compensation Committee Chair Corporate Governance and Nominating Committee Chair Strategy Committee Chair Annual Retainer Additional Retainer(s) for Committee Chairs and Lead Independent Director: Audit Committee Chair Human Resources and Compensation Committee Chair Corporate Governance and Nominating Committee Chair Strategy Committee Chair Lead Independent Director Fee per Board Meeting Attended Fee per Committee Meeting Attended In addition, Equity Compensation Annual Grant. Eachnon-employee director elected at an annual meeting receives on that date anon-discretionary grant of restricted stock units with respect to a Vesting.Grants director remains on the Board through the scheduled vesting date. Charitable Matching Contributions Non-employee directors are eligible to participate in The Applied Materials Foundation Matching Gift Program, under which the Foundation annually will match up to $3,000 of anon-employee director’s donations to eligiblenon-profit civic, arts, environmental and Director Compensation for Fiscal 2017 Name Aart J. de Geus Stephen R. Forrest Thomas J. Iannotti Susan M. James Alexander A. Karsner Gerhard H. Parker Dennis D. Powell Willem P. Roelandts James E. Rogers Robert H. Swan Judy Bruner Xun (Eric) Chen Aart J. de Geus Stephen R. Forrest Thomas J. Iannotti Susan M. James(4) Alexander A. Karsner Adrianna C. Ma Scott A. McGregor(5) Dennis D. Powell Willem P. Roelandts(4) STOCK OWNERSHIP INFORMATION Principal The following table shows the number of shares of Name Artisan Partners Limited Partnership. 875 East Wisconsin Avenue, Suite 800 Milwaukee, WI 53202 BlackRock, Inc. 55 East 52nd Street New York, NY 10022 The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 Waddell & Reed 6300 Lamar Avenue Overland Park, KS 66202 The Vanguard Group BlackRock, Inc. Applied Materials, Inc. 17 Directors and Executive Officers The following table shows the number of shares of Name Directors, not including the CEO and Executive Chairman: Aart J. de Geus Stephen R. Forrest Thomas J. Iannotti Susan M. James Alexander A. Karsner Gerhard H. Parker Dennis D. Powell Willem P. Roelandts James E. Rogers Robert H. Swan Named Executive Officers: Gary E. Dickerson Michael R. Splinter Randhir Thakur Robert J. Halliday Ali Salehpour Current Directors and Executive Officers, as a Group (19 persons) Directors, not including the CEO: Judy Bruner Xun (Eric) Chen Aart J. de Geus Stephen R. Forrest Thomas J. Iannotti Alexander A. Karsner Adrianna C. Ma Scott A. McGregor(5) Dennis D. Powell Named Executive Officers: Gary E. Dickerson Daniel J. Durn Robert J. Halliday Thomas F. Larkins Omkaram Nalamasu Ali Salehpour Current Directors and PROPOSAL 2—APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS PROPOSAL 2—APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS Pursuant to Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”), we are asking Our Board of Directors believes that our compensation policies and practices promote a performance-based culture and align our executives’ interests with those of our Pay Aligned with Performance. There is strong alignment between key was delivered in share, as well as strategic and operational objectives, as described on page 32. Please see the“Compensation Discussion and Analysis” section for further discussion of our executive compensation program and the fiscal We are asking our “RESOLVED, that the Even though thissay-on-pay vote is advisory and therefore will not be binding on the Company, the THE BOARD RECOMMENDS THAT YOU VOTEFOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS FOR FISCAL YEAR 2017, AS DISCLOSED IN THIS PROXY STATEMENT Applied Materials is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible the technology shaping the future. We develop, design, produce and service semiconductor and display equipment for manufacturers that sell into highly competitive and rapidly changing end markets. Our competitive positioning is driven by our ability to identify major materials engineering technology inflections early, and to develop highly differentiated solutions for our customers to enable those technology inflections. Through our broad portfolio of products and technologies, innovation leadership and focused investments in research and development, we are enabling our customers’ success, thereby generating record performance for the company and creating significant value for our shareholders. Our Performance Highlights In 2017, we celebrated our 50th anniversary and deliveredall-time record revenue, operating profit and earnings per share. Key highlights include: Highlights of Non-GAAP adjusted operating margin andnon-GAAP adjusted EPS are performance targets under our bonus and long-term incentive plans. See Appendix fornon-GAAP reconciliations. 20 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS Key financial highlights for our reporting segments in fiscal 2017 include the following: Applied’s strategy is to deliver highly differentiated materials engineering products and services that enable major technology inflections and drive our customers’ success. In fiscal Chief Financial Officer Transition. In August 2017, we welcomed a new Chief Financial Officer, Daniel J. Durn, who succeeded Robert J. Halliday. Mr. Durn brings significant industry experience and knowledge that will further accelerate our strategy. Applied Materials, Inc. 21 Stock Price Performance Our strong strategic and financial performance in the S&P 500 Information Technology Index. FY2013 – FY2017 Total Shareholder Return vs. Key Performance Metric 2013 2014 % Change Revenue (in billions) Key Highlights: • Revenue, excluding solar, was highest in seven years Non-GAAP Adjusted (in billions) • Net sales in our Silicon Systems Group segment grew by 25%, highest in seven years Non-GAAP Adjusted Earnings Per Share • Three-year high in both non-GAAP adjusted operating profit margin and non-GAAP adjusted net income Non-GAAP Adjusted Gross Margin % Non-GAAP Adjusted Operating Profit Margin % • Highest orders and non-GAAP adjusted operating profit margins in our Applied Global Services segment since 2007 Share Price (FYE) Key compensation decisions for fiscal Limited Salary Increases for Select NEOs.Two NEOs received modest salary increases from 2016 levels to reflect each officer’s responsibilities. Annual Bonuses Reflect Strong Company Performance. The average annual bonus payouts to our NEOs was 134% of target bonus, reflecting our strong performance against fiscal 2017 objectives. Adopted New Long-Term Incentive Program.In response to shareholder feedback as well as a broad review of our executive compensation program in fiscal 2016, the HRCC completed a comprehensive redesign of the long-term incentive program that was effective beginning with fiscal 2017 grants. Key redesign elements included: Our new long-term incentive program equity mix establishes a more direct balance between rigorous, performance-based incentives and retention-based incentives, both of which the HRCC believes are critical components of our compensation program. Additionally, new performance measures(non-GAAP adjusted operating margin and wafer fabrication equipment (WFE) market share) consider both our absolute and relative performance, and align with our stated strategic priorities to ensure our management team’s long-term incentives match our long-term goals. 22 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS Summary of Changes to Long-Term Incentive Program Wholesale Redesign of the Long-Term Incentive Program ∎ In fiscal 2017, the HRCC enacted a wholesale redesign of the long-term incentive programto address shareholder feedback and meet the needs of the evolving business ∎ New equity mix includes performance share units (“PSUs”) to provide rigorous long-term performance alignment and restricted stock units (“RSUs”) to provide a link to shareholder value creation and retention value ∎ PSUs (75% for CEO; 50% for all other NEOs) -- new performance measures: ∎ 3-year average non-GAAP adjusted operating margin ∎ 3-year average WFE market share ∎ RSUs (25% for CEO; 50% for all other NEOs): ∎ 3-year ratable vesting ∎ No performance retesting ability in new PSU design – shares not earned in performance period are forfeited ∎ New PSU metrics have threshold, target and maximumperformance levels that can result in payout below, at or above target Stock Ownership Guidelines. In fiscal 2017, the HRCC approved changes to our stock ownership guidelines to increase the CEO ownership level from 5x to 6x of annual base salary and expanded the applicability of the guidelines (3x of annual base salary) to all Section 16 officers on the CEO Executive Staff. Applied Materials, Inc. 23 Primary Compensation Elements for Fiscal 2017 The primary elements of our compensation program consist of base salary, annual incentive bonuses and annual long-term incentive awards. Other elements of compensation include a 401(k) savings plan, deferred compensation benefits and other benefits programs that are generally available to all employees. Primary elements of our fiscal 2017 compensation program were as follows: Base Salary (see page 29) ∎ Fixed cash compensation for expectedday-to-day responsibilities Reviewed annually and adjusted when appropriate, based on scope of responsibility, performance, time in role, experience and competitive market for executive talent Annual Incentive Bonuses (see page 29) ∎ Variable compensation paid in cash ∎ NEO annual incentives determined through three-step performance measurement process: ∎ Financial andnon-financial metrics Performance metrics evaluated annually for alignment with strategy and ∎ ∎ Initial Performance Goal Non-GAAP AdjustedEarnings Per Share Corporate Scorecard Business and Strategic Goals Individual Performance Modifier Individual NEO Performance Long-Term Incentives (see page 35) ∎ Performance share units to establishrigorous long-term performance alignment ∎ Performance share units vest based on ∎ Restricted stock units vest ratably over 3 years COMPENSATION DISCUSSION AND ANALYSIS Pay Mix In fiscal FY2017 Compensation Mix1 CEO All Other NEOs 1Represents total direct compensation for Summary of 2017 Total Direct Compensation The following table summarizes elements of annual total direct compensation Annual ($) Annual ($) Total ($) Gary E. Dickerson Daniel J. Durn(1) Robert J. Halliday Ali Salehpour Omkaram Nalamasu Thomas F. Larkins Applied Materials, Inc. 25 The following chart 26 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS Other Key Compensation Practices We are committed to executive compensation practices that drive performance, mitigate risk and align the interests of our leadership team with the interests of our shareholders. Below is a summary of best practices that we have implemented and practices that we avoid because we believe they are not in the best interests of Applied or our shareholders. ✓ ✓ ✓ ✓ ✓ ✓ Compensation Governance and Overview of Compensation Program Philosophy and Governance Framework Our executive compensation program has three principal objectives: We seek to achieve these objectives by: The The HRCC further considers the results of the annual advisory“say-on-pay” vote and shareholder feedback. In response to feedback from our shareholders as well as a broad review of our executive compensation program in 2016, the HRCC made changes to certain elements of the annual incentive bonus program and redesigned the long-term incentive program for fiscal 2017. At our Annual Meeting in 2017, our“say-on-pay” proposal received a substantial majority (98%) of votes cast. The HRCC considered the vote results as strong shareholder support for our executive compensation program. Fiscal 2017 Peer Group Companies The HRCC regularly reviews compensation paid by our peer group, which consists of a broad range of high-technology companies whose businesses are similar to ours and with which we typically compete for executive talent, as a reference point for evaluating our compensation program. For the composition of the fiscal 2017 peer group, we considered companies that met the following criteria: (1) technology companies with manufacturing operations, (2) companies whose revenues were approximatelyone-third to five times that of Applied, (3) companies with global operations that disclose executive compensation pursuant to SEC rules, (4) companies that compete with us for key talent, and (5) companies that devote significant resources to research and development as a percentage of revenue. Based on this assessment, the HRCC determined to exclude Broadcom Corp., which was part of the 2016 peer group, from the fiscal 2017 peer group due to its acquisition by Avago Technologies in 2016. Each of the other companies in the peer group listed below met most, if not all, of the five screening criteria listed above and continued to be included in the peer group; in addition, several of the companies were among our principal U.S. competitors or top U.S. customers. Data gathered on the peer group include base salary, bonus, targeted cash compensation, long-term incentive awards and total direct compensation. The HRCC uses this information as a reference point rather than to target a specific percentile for our NEOs. The peer group data is gathered from the sources described in “Role of Compensation Consultant” below. 28 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS The tables below set forth our fiscal 2017 peer group and related information. Avago Technologies (renamed Broadcom Ltd.) Applied Materials Positioning Relative to Peers Components of Total Direct Compensation Determining Annual Total Direct Compensation At the beginning of fiscal 2017, the HRCC evaluated each NEO’s annual total direct compensation – consisting of annual base salary, annual incentive bonus and annual long-term incentive award. As part of this annual evaluation, the HRCC considers the NEO’s scope of responsibility, performance, skill set, prior experience and achievements, advancement potential, impact on results and expected future contributions to our business. The HRCC also considers the compensation levels of an executive officer relative to other Applied officers, the need to attract and Base Salaries Base salaries and bonus opportunities are designed to attract, motivate, reward and retain executive talent, as well as to align pay with performance. At the beginning of each fiscal year, the HRCC determines each NEO’s targeted total cash compensation (salary and target bonus). Base salaries are an annual fixed level of cash compensation. At the beginning of fiscal 2017, the HRCC increased Mr. Salehpour’s base salary from $550,000 to $600,000 and Dr. Nalamasu’s from $460,000 to $490,000 to reflect each officer’s performance, role and responsibilities, and retention considerations. The HRCC did not change base salaries for the other NEOs in fiscal 2017. The HRCC determined that continuing base salary amounts from fiscal 2016 for those other NEOs was sufficiently competitive to provide adequate retention value and allowed Applied to continue its focus on weighting cash compensation toward performance-based incentives. Annual Incentive Bonus Opportunities Bonus Plan Overview. In fiscal 2017, all of our NEOs participated in the Senior Executive Bonus Plan (the “Bonus Plan”), except for Mr. Durn. Mr. Durn was not eligible to participate in the Bonus Plan for fiscal 2017 due to the timing of his hire two months before the end of the fiscal year. The Bonus Plan is a shareholder-approved bonus program designed to motivate and Determining Target Bonus Amounts. Target bonus amounts for the NEOs are expressed as a percentage of base salary. The HRCC set the annual target bonus amount for each NEO, taking into consideration Mr. Dickerson’s recommendations regarding the annual target bonus amounts Applied Materials, Inc. 29 for each of the NEOs other than himself. In early fiscal 2017, Mr. Dickerson recommended that, for each NEO, the target bonus amounts remain unchanged from fiscal 2016. In making his recommendations, Mr. Dickerson relied on a variety of factors, including publicly-available data and market survey data, as described above, as well as his assessment of overall economic and business conditions. The HRCC considered these same factors in deciding not to increase Mr. Dickerson’s target bonus. Assessing Performance and Payout. The determination of fiscal 2017 performance and annual incentive bonuses for our NEOs consisted of three key steps, as illustrated in the diagram below and the following discussion. The HRCC believes that this multi-step performance framework appropriately emphasizes financial performance, while also providing a mechanism to assess achievement of key business imperatives by individual NEOs Initial Performance Goal. For fiscal 2017, the HRCC chosenon-GAAP adjusted EPS as the initial performance hurdle to establish 162(m) tax deductibility. EPS, an indicator of overall company financial performance, is a measure of profits generated on a per share basis that are available either to reinvest in the business or distribute to shareholders, and has a strong link to share price valuation. If Applied does not achieve a thresholdnon-GAAP adjusted EPS of $1.75 for the fiscal year, no bonus is payable. If this threshold is achieved, the maximum bonus that becomes payable for each NEO is the lowest of: (a) $5 million, (b) 3x a corporate bonus pool funding modifier, multiplied by the target bonus, and (c) 3x the target bonus, as a percentage of base salary. In fiscal 2017, Applied’snon-GAAP adjusted EPS was $3.25, resulting in achievement of the initial performance goal under the Bonus Plan. Adjusted EPS is anon-GAAP measure that excludes certain items from EPS determined in accordance with GAAP (see Appendix for a reconciliation ofnon-GAAP adjusted EPS).Non-GAAP adjusted EPS does not exclude share-based compensation expenses. Balanced Corporate Scorecard. If the initial performance goal is achieved, the HRCC then uses the corporate scorecard to evaluate achievement ofpre-defined corporate objectives and goals for each NEO and as a primary mechanism to exercise negative discretion from the maximum bonus amount. The scorecard is designed to measure financial andnon-financial objectives that are considered by the HRCC to be key drivers 30 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS of the Company’s near-term financial and operational success that will create shareholder value over the longer-term. As in previous years, the fiscal 2017 scorecard measured corporate performance in five broad categories: (1) Financial and Market Performance, (2) Products and Growth, (3) Execution, (4) Customers, Field and Service and (5) People and Organization. These categories align with and support the Company’s strategy of strengthening our materials engineering capabilities to enable major technology inflections for our customers and positioning Applied for sustainable growth to support long-term value creation for its shareholders. Scorecard Category Link to Company Strategy and Performance NEO Objectives and Weightings. Each NEO was assigned individualized weightings for all measures other than the Financial and Market Performance measures (which were weighted at 50% for all NEOs), to reflect the relative impact and contributions of that NEO and his business or organizational unit to Applied’s overall performance with respect to a particular measure. The corporate scorecard objectives and weightings were the same for Mr. Dickerson and Mr. Halliday. All other NEOs shared these objectives, but each had different weightings as set forth in the table below. Goal Setting and Measurement. At the beginning of the fiscal year, the HRCC reviewed objectives, goals and weightings initially proposed by management, provided input and made adjustments, and approved the final corporate scorecard and individual weightings for each NEO. Progress towards achieving the corporate scorecard objectives was evaluated and tracked quarterly during the fiscal year. Scores were awarded for each metric under the scorecard based on the degree to which thepre-determined goals for that metric were achieved. Performance hurdles were set to measure achievement at 0, 0.5, 1.0, 1.5 and 2.0 levels, with a score of 1.0 indicating performance that met expectations and scores over 1.0 indicating extraordinary achievement. At the end of the fiscal year, scores were calculated based on actual performance against objectives and were presented to the HRCC to review, adjust and approve. Applied Materials, Inc. 31 The following table details fiscal 2017 corporate scorecard objectives, their relative weightings for each NEO who participated in the Bonus Plan, the achievements based on performance against objectives and the resulting scores, as approved by the HRCC (see Appendix fornon-GAAP reconciliations). Financial and Market Performance ● Grow wafer fabrication equipment (measured by Gartner) and Display market share ● Estimating 22% of wafer fabrication equipment market share in calendar 2017 and ~70% share gains in Display equipment served available market ● Achieve gross margin targets (gross margin reported externally) ● Achieved 46.1%non-GAAP adjusted gross margin ● Achieve adjusted operating margin goal (operating margin reported externally) ● Achieved 27.9%non-GAAP adjusted operating margin ● Achieve TSR target relative to peers ● Achieved targeted TSR performance in semiconductor equipment peer group Products and Growth ● Win development tool of record and production tool of record positions at key Semiconductor Systems and Display customers ● Exceeded target number of development tool of record and production tool of record positions ● Grow service revenue and number of tools under service contracts ● Increased net tools under service agreements in line with annual target ● Develop organic growth pipeline to deliver targeted incremental fiscal 2019 revenue in new and adjacent markets ● Developed pipeline to deliver risk-adjusted 2019 revenues in excess of published financial model Execution ● Reduceorder-to-cash cycle time per plan ● Achieved below targetedorder-to-cash cycle time ● Improve product success rate and commercialization of winning products ● Implemented “Winning Team” best practices for top 12 programs; developed Capability Maturing Model and assessment plan for Product Development Engine and achieved a winning ROI assessment for 70% of the programs ● Improve operational, quality and safety performance ● Successfully drove improvements in on time delivery, materials cost and safety Customer, Field and Service ● Achieve 5 growth and efficiency metrics at 8 key accounts ● Achieved targeted growth and efficiency metrics at key accounts ● Improve win rate of prioritized opportunities by customer ● Exceeded targets for prioritized opportunities People and Organization ● Improve priority practices and overall employee engagement score relative to 2016 OHI survey results, measured by survey administered by McKinsey ● Increased priority practices scores on average of 3.6 points and overall employee engagement score by 2.7 points ● Implement next phase of employee development and training strategies ● Updated integrated training curriculum and trained over 90% of the targeted population Goals tied to objective and quantifiable metrics (1) Reflects weighted average of the scores of multiple underlying goals. 32 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS Individual Performance Factor. The HRCC also considered the individual performance of each NEO as indicated by that NEO’s individual performance factor (“IPF”). The IPF applied only if the initial performance goal and at least some of the corporate scorecard objectives were achieved. The IPF modified the initial bonus amount as determined based on achievement against the corporate scorecard objectives. The IPF modifier ranges from 0 to 1.5. The HRCC determined the IPFs for all NEOs. Mr. Dickerson’s IPF was based on the HRCC’syear-end assessment of his leadership and the Company’s overall performance during the year. The HRCC determined the IPF for each other NEO taking into consideration Mr. Dickerson’s recommendation, which included his assessment of the achievement of strategic, financial, operational and organizational performance goals specific to the business or organizational unit for which the NEO was responsible, as well as the NEO’s leadership skills and current and expected contributions to the business. For fiscal 2017, the HRCC assigned each NEO an IPF of 1.10. The following table shows the highlights of each NEO’s performance in fiscal 2017 that the HRCC considered in determining their respective IPFs. Fiscal 2017 Individual Performance Highlights Dickerson ● ● Halliday ● ● ● Salehpour ● ● ● Nalamasu ● ● Larkins ● ● Applied Materials, Inc. 33 Actual Bonus Payouts. The NEOs’ performance against corporate scorecard goals and IPF ratings resulted in an average bonus payout of 1.34 of target bonus. The diagram below shows the results for each of the three key steps in determining the NEOs’ fiscal 2017 annual Fiscal 2017 Annual Incentive Calculation Performance Measures Fiscal 2017 Achievement ∎Fiscal 2017 non-GAAP adjusted EPS of $1.75 ✓Achieved non-GAAP adjusted EPS of $3.25 ∎Strong performance on core objectives: – Financial and Market Performance – Products and Growth – Execution – Customer, Field and Service – People and Organization ✓NEO scorecard resultsachieved in a range from 1.19 to 1.30 based on individual weightings ∎Strong NEO performance against personal objectives and individual contribution to business performance ✓IPFachieved at 1.10 for all NEOs Average NEO bonus, as The following table shows for each NEO: (1) the maximum amount payable under the Bonus Plan, (2) the target bonus amounts expressed as a percentage of base salary, (3) the target bonus expressed as a dollar amount and (1) Maximum Bonus Payable ($) (2) Target Salary (%) (3) Target Bonus ($) (4) Actual Bonus ($) Dickerson Durn Halliday Salehpour Nalamasu Larkins 34 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS Pay and Performance Alignment. Our process for determining annual bonus awards has resulted in strong pay and performance alignment. The chart below illustrates the rigor of our CEO Actual Annual Non-GAAP adjusted EPS is a Long-Term Incentives Overview. Applied’s long-term incentive compensation program is intended to help (1) achieve our business objectives, (2) attract, motivate and retain key talent, and (3) align our executives’ interests with shareholders’ interests to maximize long-term shareholder value. Timing of Awards. The HRCC grants equity and other long-term incentive awards to NEOs under our shareholder-approved Employee Stock Incentive Plan (the “Stock Plan”). The HRCC has not granted, nor does it intend to grant, equity awards in anticipation of the Fiscal 2017 Equity Awards The HRCC oversaw a comprehensive review of our compensation programs in 2016 to ensure that they continue to align our management team with the interests of our shareholders, incentivize actions that will drive profitable growth, and attract and retain top talent in a highly competitive industry. As a result of this review, and feedback received from our shareholders, the HRCC approved changes to our long-term incentive program with the Beginning in Applied Materials, Inc. 35 The HRCC believes that this For fiscal 2017, in ($) Dickerson Halliday Salehpour Nalamasu Larkins Size of Performance-Based Equity Awards. In determining the size of the awards, the HRCC considered each NEO’s award as a component of his total direct compensation. Target fiscal 2017 long-term equity awards were determined in light of each NEO’s scope of responsibility, performance, impact on results and expected future contributions to our business, compensation levels relative to other Applied officers, the wholesale changes made to the long-term incentive program and establishment of three-year performance goals, the need to attract and retain talent, and business conditions. In addition, the fiscal Performance Share Units. The long-term incentive program was entirely redesigned to provide for longer performance measurement periods and alignment of performance metrics with our strategic goals. The PSUs will vest three years from the grant date based on achievement of averagenon-GAAP adjusted operating margin for fiscal 2017 through fiscal 2019 and average WFE market share goals for calendar years 2016 through 2018, with equal weighting given to each metric. The number of PSUs that may vest is based on the achievement of threshold, target or maximum levels of each metric and may range from 50% to 200% of the target number of shares, as set forth below. Shares That Threshold Target Maximum If the threshold level is not achieved, then no shares will vest. If achievement falls between threshold, target or maximum levels, the portion of the award that may vest will be determined based on straight-line interpolation. In setting goals for the PSUs, the HRCC considered Applied’s historical results and relative performance, and established goals that are aligned with Applied’s financial and strategic objectives and will require significant effort to achieve the maximum level. 36 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS Restricted Stock Units.The RSU awards are scheduled to vest ratably over three years, providing a link to shareholder value creation and maintaining retention value. New CFO Equity Awards and Compensation Package.In connection with Mr. Durn’s hire, the HRCC granted him the following equity awards 30 days after his start date:(1) new-hire RSUs with a value of $2,500,000, scheduled to vest ratably over three years and subject to acceleration of vesting in the event that Applied terminates Mr. Durn without cause before February 2020; (2) PSUs with a target value of $1,500,000, scheduled to vest in December 2019, subject to achievement of the same goals as the fiscal 2017 PSU awards for our other NEOs – three-year average WFE share and three-year averagenon-GAAP adjusted operating margin goals; and (3) RSUs with a value of $1,500,000, scheduled to vest in three equal installments through 2019. The number of RSUs or PSUs granted was determined by dividing the stated value of the award by $44.73, the closing price of Applied stock on September 6, 2017, the grant date. In addition, Mr. Durn’snew-hire compensation included an initial annual base salary of $600,000 and a target bonus of 110% of his base salary under the Bonus Plan beginning in fiscal year 2018. As Mr. Durn’s employment occurred after the eligibility date for a 2017 bonus award under the Bonus Plan, he was awarded a special bonus of $250,000 to be paid six months following his start date, subject to continued employment. Mr. Durn also received a $500,000sign-on bonus 30 days after his start date. In the event that Mr. Durn resigns or Applied terminates his employment for cause prior to the completion of 24 months of service, Mr. Durn is obligated to repay the full amount of thesign-on bonus, less any amounts withheld by Applied for taxes. Mr. Durn also received relocation benefits under Applied’s standard relocation policy. In developing a compensation package for Mr. Durn, the HRCC considered his experience and expected future contributions to Applied, as well as compensation levels at our peer companies for the CFO position. The HRCC also considered the associatedone-time costs of replacing compensation value that Mr. Durn forfeited by leaving his previous employer. Role and Authority of the Human Resources and Compensation Committee The compensation, and oversees significant employee Each member of the Base Salaries Base salaries and bonus opportunities are designed to attract, motivate, reward and retain executive talent, as well as to align pay with performance. At the beginning of each fiscal year, the HRCC determines each NEO’s targeted total cash compensation (salary and target bonus). Base salaries are an annual fixed level of cash compensation. At the beginning of fiscal 2017, the HRCC increased Mr. Salehpour’s base salary from $550,000 to $600,000 and Dr. Nalamasu’s from $460,000 to $490,000 to reflect each officer’s performance, role and responsibilities, and retention considerations. The HRCC did not change base salaries for the other NEOs in fiscal 2017. The HRCC determined that continuing base salary amounts from fiscal 2016 for those other NEOs was sufficiently competitive to provide adequate retention value and allowed Applied to continue its focus on weighting cash compensation toward performance-based incentives. Annual Incentive Bonus Opportunities Bonus Plan Overview. In fiscal 2017, all of our NEOs participated in the Senior Executive Bonus Plan (the “Bonus Plan”), except for Mr. Durn. Mr. Durn was not eligible to participate in the Bonus Plan for fiscal 2017 due to the timing of his hire two months before the end of the fiscal year. The Bonus Plan is a shareholder-approved bonus program designed to motivate and reward achievement of Applied’s business goals and to attract and retain highly-talented individuals. The annual incentive bonus opportunity for each NEO under the Bonus Plan is directly linked to Applied’s achievement of financial and market performance, operational performance and strategic objectives, in addition to individual performance. Company and individual goals are designed to incentivize management to drive strong operating performance, invest in innovation to drive future growth and create shareholder value. Our Bonus Plan is performance-based and does not include any minimum payment levels. Fiscal 2017 bonuses under this plan are intended to qualify as “performance-based” compensation under Section 162(m). Determining Target Bonus Amounts. Target bonus amounts for the NEOs are expressed as a percentage of base salary. The HRCC set the annual target bonus amount for each NEO, taking into consideration Mr. Dickerson’s recommendations regarding the annual target bonus amounts for each of the NEOs other than himself. In early fiscal 2017, Mr. Dickerson recommended that, for each NEO, the target bonus amounts remain unchanged from fiscal 2016. In making his recommendations, Mr. Dickerson relied on a variety of factors, including publicly-available data and market survey data, as described above, as well as his assessment of overall economic and business conditions. The HRCC considered these same factors in deciding not to increase Mr. Dickerson’s target bonus. Assessing Performance and Payout. The determination of fiscal 2017 performance and annual incentive bonuses for our NEOs consisted of three key steps, as illustrated in the diagram below and the following discussion. The Initial Performance Goal. For fiscal If Applied does not achieve a thresholdnon-GAAP adjusted EPS of $1.75 for the fiscal year, no bonus is payable. If this threshold is achieved, the maximum bonus that becomes payable for each NEO is the lowest of: (a) $5 million, (b) 3x a corporate bonus pool funding modifier, multiplied by the target bonus, and (c) 3x the target bonus, as a percentage of base salary. In fiscal 2017, Applied’snon-GAAP adjusted EPS was $3.25, resulting in achievement of the initial performance goal under the Bonus Plan. Adjusted EPS is anon-GAAP measure that excludes certain items from EPS determined in accordance with GAAP (see Appendix for a reconciliation ofnon-GAAP adjusted EPS).Non-GAAP adjusted EPS does not exclude share-based compensation expenses. Balanced Corporate Scorecard. If the initial performance goal is achieved, the HRCC then uses the corporate scorecard to evaluate achievement ofpre-defined corporate objectives and goals for each NEO and as a primary mechanism to exercise negative discretion from the maximum bonus amount. The scorecard is designed to measure financial andnon-financial objectives that are considered by the HRCC to be key drivers 30 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS of the Company’s near-term financial and operational success that will create shareholder value over the longer-term. As in previous years, the fiscal 2017 scorecard measured corporate performance in five broad categories: (1) Financial and Market Performance, (2) Products and Growth, (3) Execution, (4) Customers, Field and Service and (5) People and Organization. These categories align with and support the Company’s strategy of strengthening our materials engineering capabilities to enable major technology inflections for our customers and positioning Applied for sustainable growth to support long-term value creation for its shareholders. Scorecard Category Link to Company Strategy and Performance NEO Objectives and Weightings. Each NEO was assigned individualized weightings for all measures other than the Financial and Market Performance measures (which were weighted at 50% for all NEOs), to reflect the relative impact and contributions of that NEO and his business or organizational unit to Applied’s overall performance with respect to a particular measure. The corporate scorecard objectives and weightings were the same for Mr. Dickerson and Mr. Halliday. All other NEOs shared these objectives, but each had different weightings as set forth in the table below. Goal Setting and Measurement. At the beginning of the fiscal year, the HRCC reviewed objectives, goals and weightings initially proposed by management, provided input and made adjustments, and approved the final corporate scorecard and individual weightings for each NEO. Progress towards achieving the corporate scorecard objectives was evaluated and tracked quarterly during the fiscal year. Scores were awarded for each metric under the scorecard based on the degree to which thepre-determined goals for that metric were achieved. Performance hurdles were set to measure achievement at 0, 0.5, 1.0, 1.5 and 2.0 levels, with a score of 1.0 indicating performance that met expectations and scores over 1.0 indicating extraordinary achievement. At the end of the fiscal year, scores were calculated based on actual performance against objectives and were presented to the HRCC to review, adjust and approve. Applied Materials, Inc. 31 The following Financial and Market Performance ● Grow wafer fabrication equipment (measured by Gartner) and Display market share ● Estimating 22% of wafer fabrication equipment market share in calendar 2017 and ~70% share gains in Display equipment served available market ● Achieve gross margin targets (gross margin reported externally) ● Achieved 46.1%non-GAAP adjusted gross margin ● Achieve adjusted operating margin goal (operating margin reported externally) ● Achieved 27.9%non-GAAP adjusted operating margin ● Achieve TSR target relative to peers ● Achieved targeted TSR performance in semiconductor equipment peer group Products and Growth ● Win development tool of record and production tool of record positions at key Semiconductor Systems and Display customers ● Exceeded target number of development tool of record and production tool of record positions ● Grow service revenue and number of tools under service contracts ● Increased net tools under service agreements in line with annual target ● Develop organic growth pipeline to deliver targeted incremental fiscal 2019 revenue in new and adjacent markets ● Developed pipeline to deliver risk-adjusted 2019 revenues in excess of published financial model Execution ● Reduceorder-to-cash cycle time per plan ● Achieved below targetedorder-to-cash cycle time ● Improve product success rate and commercialization of winning products ● Implemented “Winning Team” best practices for top 12 programs; developed Capability Maturing Model and assessment plan for Product Development Engine and achieved a winning ROI assessment for 70% of the programs ● Improve operational, quality and safety performance ● Successfully drove improvements in on time delivery, materials cost and safety Customer, Field and Service ● Achieve 5 growth and efficiency metrics at 8 key accounts ● Achieved targeted growth and efficiency metrics at key accounts ● Improve win rate of prioritized opportunities by customer ● Exceeded targets for prioritized opportunities People and Organization ● Improve priority practices and overall employee engagement score relative to 2016 OHI survey results, measured by survey administered by McKinsey ● Increased priority practices scores on average of 3.6 points and overall employee engagement score by 2.7 points ● Implement next phase of employee development and training strategies ● Updated integrated training curriculum and trained over 90% of the targeted population Goals tied to objective and quantifiable metrics (1) Reflects weighted average of the scores of multiple underlying goals. 32 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS Individual Performance Factor. The HRCC also considered the individual performance of each NEO as indicated by that NEO’s individual performance factor (“IPF”). The IPF applied only if the initial performance goal and at least some of the corporate scorecard objectives were achieved. The IPF modified the initial bonus amount as determined based on achievement against the corporate scorecard objectives. The IPF modifier ranges from 0 to 1.5. The HRCC determined the IPFs for all NEOs. Mr. Dickerson’s IPF was based on the HRCC’syear-end assessment of his leadership and the Company’s overall performance during the year. The HRCC determined the IPF for each other NEO taking into consideration Mr. Dickerson’s recommendation, which included his assessment of the achievement of strategic, financial, operational and organizational performance goals specific to the business or organizational unit for which the NEO was responsible, as well as the NEO’s leadership skills and current and expected contributions to the business. For fiscal 2017, the HRCC assigned each NEO an IPF of 1.10. The following table shows the highlights of each NEO’s performance in fiscal 2017 that the HRCC considered in determining their respective IPFs. Fiscal 2017 Individual Performance Highlights Dickerson ● ● Halliday ● ● ● Salehpour ● ● ● Nalamasu ● ● Larkins ● ● Applied Materials, Inc. 33 Actual Bonus Payouts. The NEOs’ performance against corporate scorecard goals and IPF ratings resulted in an average bonus payout of 1.34 of target bonus. The diagram below shows the results for each of the three key steps in determining the NEOs’ fiscal 2017 annual incentive bonuses. Fiscal 2017 Annual Incentive Calculation – Financial and Market Performance – Products and Growth – Execution – Customer, Field and Service – People and Organization ∎Strong NEO performance against personal objectives and individual contribution to business performance Average NEO bonus, as (1) Maximum Bonus Payable ($) (2) Target Salary (%) (3) Target Bonus ($) (4) Actual Bonus ($) Dickerson Durn Halliday Salehpour Nalamasu Larkins 34 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS CEO Actual Annual Bonus vs. Earnings Per Share Non-GAAP adjusted EPS is a performance target under our bonus plan. See Appendix fornon-GAAP reconciliations. Long-Term Incentives Overview. Applied’s long-term incentive compensation program is intended to help (1) achieve our business objectives, (2) attract, motivate and retain key talent, and (3) align our executives’ interests with shareholders’ interests to maximize long-term shareholder value. Timing of Awards. The HRCC grants equity and other long-term incentive awards to NEOs under our shareholder-approved Employee Stock Incentive Plan (the “Stock Plan”). The HRCC has not granted, nor does it intend to grant, equity awards in anticipation of the release of material, nonpublic information that is likely to result in changes to the price of our common stock, such as a significant positive or negative earnings announcement. Similarly, Applied has not timed, nor does it intend to time, the release of material, nonpublic information based on equity award grant dates. Fiscal 2017 Equity Awards The HRCC oversaw a comprehensive review of our compensation programs in 2016 to ensure that they continue to align our management team with the interests of our shareholders, incentivize actions that will drive profitable growth, and attract and retain top talent in a highly competitive industry. As a result of this review, and feedback received from our shareholders, the HRCC approved changes to our long-term incentive program with the goals of increasing differentiation for high performance, balancing long-term and short-term incentives, and simplifying our long-term incentive plan. Beginning in fiscal 2017, the long-term incentive awards for NEOs consist of two forms of equity: performance share units (“PSUs”) and restricted stock units (“RSUs”). The target mix of the awards consists of 75% PSUs and 25% RSUs for the CEO and 50% PSUs and 50% RSUs for the other NEOs. Applied Materials, Inc. 35 The HRCC believes that this new long-term incentive structure establishes a closer direct link to long-term company performance through the PSUs and will also provide a crucial retention value through the RSUs. For fiscal 2017, in December 2016, the HRCC granted the number of PSUs and RSUs listed in the below table to our NEOs. Mr. Durn is not included in the table below as he received his awards at the time he joined in Applied in August 2017. ($) Dickerson Halliday Salehpour Nalamasu Larkins Size of Performance-Based Equity Awards. In determining the size of the awards, the HRCC considered each NEO’s award as a component of his total direct compensation. business conditions. In addition, the fiscal 2017 target grant sizes provided sufficient performance-based equity incentives to align compensation with the long-term interests of our shareholders, were in line with market norms for the NEOs’ respective roles and were sufficient to provide incentive for them. Performance Share Units. The long-term incentive program was entirely redesigned to provide for longer performance measurement periods and alignment of performance metrics with our strategic goals. The PSUs will vest three years from the grant date based on achievement of averagenon-GAAP adjusted operating margin for fiscal 2017 through fiscal 2019 and average WFE market share goals for calendar years 2016 through 2018, with equal weighting given to each metric. The number of PSUs that may vest is based on the achievement of threshold, target or maximum levels of each metric and may range from 50% to 200% of the target number of shares, as set forth below. Shares That Threshold Target Maximum If the threshold level is not achieved, then no shares will vest. If achievement falls between threshold, target or maximum levels, the portion of the award that may vest will be determined based on straight-line interpolation. In setting goals for the PSUs, the HRCC considered Applied’s historical results and relative performance, and established goals that are aligned with Applied’s financial and strategic objectives and will require significant effort to achieve the maximum level. 36 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS Restricted Stock Units.The RSU awards are scheduled to vest ratably over three years, providing a link to shareholder value creation and maintaining retention value. New CFO Equity Awards and Compensation Package.In connection with Mr. Durn’s hire, the HRCC granted him the following equity awards 30 days after his start date:(1) new-hire RSUs with a value of $2,500,000, scheduled to vest ratably over three years and subject to acceleration of vesting in the event that Applied terminates Mr. Durn without cause before February 2020; (2) PSUs with a target value of $1,500,000, scheduled to vest in December 2019, subject to achievement of the same goals as the fiscal 2017 PSU awards for our other NEOs – three-year average WFE share and three-year averagenon-GAAP adjusted operating margin goals; and (3) RSUs with a value of $1,500,000, scheduled to vest in three equal installments through 2019. The number of RSUs or PSUs granted was determined by dividing the stated value of the award by $44.73, the closing price of Applied stock on September 6, 2017, the grant date. In addition, Mr. Durn’snew-hire compensation included an initial annual base salary of $600,000 and a target bonus of 110% of his base salary under the Bonus Plan beginning in fiscal year 2018. As Mr. Durn’s employment occurred after the eligibility date for a 2017 bonus award under the Bonus Plan, he was awarded a special bonus of $250,000 to be paid six months following his start date, subject to continued employment. Mr. Durn also received a $500,000sign-on bonus 30 days after his start date. In the event that Mr. Durn resigns or Applied terminates his employment for cause prior to the completion of 24 months of service, Mr. Durn is obligated to repay the full amount of thesign-on bonus, less any amounts withheld by Applied for taxes. Mr. Durn also received relocation benefits under Applied’s standard relocation policy. In developing a compensation package for Mr. Durn, the HRCC considered his experience and expected future contributions to Applied, as well as compensation levels at our peer Role and Authority of the The HRCC has a written charter approved by the compensation, Each member of Determining Annual Total Direct Compensation At the beginning of fiscal is performance-based. Base Salaries Base salaries and bonus opportunities are designed to attract, motivate, reward and retain executive talent, as well as to align pay with performance. At the beginning of each fiscal year, the Base salaries are an annual fixed level of cash reflect each officer’s performance, role and responsibilities, and retention considerations. The Annual Incentive Bonus Opportunities Bonus Plan Overview.In fiscal Determining Applied Materials, Inc. 29 for each of the NEOs other survey data, as described above, as well as his assessment of Assessing The HRCC believes that this multi-step performance framework appropriately emphasizes financial performance, while also providing a mechanism to assess achievement of key business imperatives by individual NEOs Initial Performance Goal. For fiscal 2017, the HRCC chosenon-GAAP If Applied does not achieve In fiscal 2017, Applied’snon-GAAP adjusted EPS was 30 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS (5) People and Organization. These categories align with and support the Scorecard Category Link to Company Strategy and Performance NEO Objectives and Weightings. Each NEO was assigned individualized weightings Goal Setting and Measurement. At the beginning of adjustments, and approved the final corporate scorecard and individual weightings for each NEO. Progress towards achieving the corporate scorecard objectives was evaluated and tracked quarterly during the fiscal year. Scores were awarded for each metric under the scorecard based on the degree to which thepre-determinedgoals for that metric were achieved. Performance hurdles were set to measure achievement at 0, 0.5, 1.0, 1.5 and Applied Materials, Inc. 31 The following table Fiscal 2014 Secondary Performance Goals Achievement (1) Customers and Field: grow share and revenue at key customers, achieve customer loyalty objectives, and enhance field technical capability (2) Products and Growth: achieve new product development, adoption and penetration milestones, and develop targeted technology pipeline (3) People and Organization: achieve employee engagement and development objectives (4) Execution: improve operational and manufacturing efficiencies and quality, reduce cost (5) Performance: grow fiscal 2014 company and business segment market share, achieve gross margin, adjusted EPS and total shareholder return targets Financial and Market Performance ● Grow wafer fabrication equipment (measured by Gartner) and Display market share ● Estimating 22% of wafer fabrication equipment market share in calendar 2017 and ~70% share gains in Display equipment served available market ● Achieve gross margin targets (gross margin reported externally) ● Achieved 46.1%non-GAAP adjusted gross margin ● Achieve adjusted operating margin goal (operating margin reported externally) ● Achieved 27.9%non-GAAP adjusted operating margin ● Achieve TSR target relative to peers ● Achieved targeted TSR performance in semiconductor equipment peer group Products and Growth ● Win development tool of record and production tool of record positions at key Semiconductor Systems and Display customers ● Exceeded target number of development tool of record and production tool of record positions ● Grow service revenue and number of tools under service contracts ● Increased net tools under service agreements in line with annual target ● Develop organic growth pipeline to deliver targeted incremental fiscal 2019 revenue in new and adjacent markets ● Developed pipeline to deliver risk-adjusted 2019 revenues in excess of published financial model Execution ● Reduceorder-to-cash cycle time per plan ● Achieved below targetedorder-to-cash cycle time ● Improve product success rate and commercialization of winning products ● Implemented “Winning Team” best practices for top 12 programs; developed Capability Maturing Model and assessment plan for Product Development Engine and achieved a winning ROI assessment for 70% of the programs ● Improve operational, quality and safety performance ● Successfully drove improvements in on time delivery, materials cost and safety Customer, Field and Service ● Achieve 5 growth and efficiency metrics at 8 key accounts ● Achieved targeted growth and efficiency metrics at key accounts ● Improve win rate of prioritized opportunities by customer ● Exceeded targets for prioritized opportunities People and Organization ● Improve priority practices and overall employee engagement score relative to 2016 OHI survey results, measured by survey administered by McKinsey ● Increased priority practices scores on average of 3.6 points and overall employee engagement score by 2.7 points ● Implement next phase of employee development and training strategies ● Updated integrated training curriculum and trained over 90% of the targeted population Goals tied to objective and quantifiable metrics (1) Reflects weighted average of the scores of multiple underlying goals. 32 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS The HRCC determined the IPFs for all NEOs. Mr. Dickerson’s IPF was based on the HRCC’syear-end assessment of leadership and the Company’s overall performance during the The following table shows the highlights of each NEO’s performance in fiscal 2017 that the HRCC considered in determining their respective IPFs. Fiscal 2017 Individual Performance Highlights Dickerson ● ● Halliday ● ● ● Salehpour ● ● ● Nalamasu ● ● Larkins ● ● Applied Materials, Inc. 33 Actual Bonus Payouts. The NEOs’ performance against corporate scorecard goals and Fiscal 2017 Annual Incentive Calculation Performance Measures Fiscal 2017 Achievement ∎Fiscal 2017 non-GAAP adjusted EPS of $1.75 ✓Achieved non-GAAP adjusted EPS of $3.25 ∎Strong performance on core objectives: – Financial and Market Performance – Products and Growth – Execution – Customer, Field and Service – People and Organization ✓NEO scorecard resultsachieved in a range from 1.19 to 1.30 based on individual weightings ∎Strong NEO performance against personal objectives and individual contribution to business performance ✓IPFachieved at 1.10 for all NEOs Average NEO bonus, as The following table amount Name Gary E. Dickerson Michael R. Splinter Randhir Thakur Robert J. Halliday Ali Salehpour (1) Maximum Bonus Payable ($) (2) Target Salary (%) (3) Target Bonus ($) (4) Actual Bonus ($) Dickerson Durn Halliday Salehpour Nalamasu Larkins COMPENSATION DISCUSSION AND ANALYSIS CEO Actual Annual Bonus vs. Earnings Per Share Non-GAAP adjusted EPS is a performance target under our bonus plan. See Appendix fornon-GAAP reconciliations. Long-Term Incentives Overview. Applied’s long-term incentive compensation program is intended to help (1) achieve our business objectives, (2) attract, motivate and retain key talent, and (3) align our executives’ interests with Timing of Fiscal 2017 Equity Awards Beginning in fiscal 2017, the Applied Materials, Inc. 35 The HRCC believes that this new long-term incentive structure establishes a closer direct link to long-term company performance through the PSUs and For fiscal 2017, in December 2016, the HRCC granted the number of PSUs and RSUs listed in the below table to our NEOs. Mr. Durn is not included in the table below as he received his awards at the time he joined in Applied in August 2017. ($) Dickerson Halliday Salehpour Nalamasu Larkins Size of Performance-Based Equity Awards.In determining the Name Gary E. Dickerson Michael R. Splinter Randhir Thakur Robert J. Halliday Ali Salehpour business conditions. In addition, the fiscal 2017 target grant sizes provided sufficient performance-based equity incentives to align compensation with the provide incentive for them. The number of PSUs that may vest is based on the Shares That Threshold Target Maximum If the threshold level is not achieved, then no shares will vest. If achievement falls between threshold, target or maximum levels, the portion of the award In 36 2018 COMPENSATION DISCUSSION AND ANALYSIS Restricted Stock Units.The RSU awards are scheduled to New CFO Equity Awards and Compensation Package.In connection with Mr. Durn’s hire, the In In developing a compensation package for Mr. Durn, the HRCC considered his experience and Role and Authority of the The HRCC has a written charter approved by the Board that specifies the HRCC’s duties and responsibilities, which is available on our website at: http://www.appliedmaterials.com/company/investor-relations/governance-documents. In accordance with its charter, the HRCC oversees our programs that foster executive and employee development and retention, with emphasis on leadership development, management capabilities and succession plans. The HRCC also determines executive and director compensation, and oversees significant employee benefits programs, policies and plans. Each member of the HRCC has been determined to be independent under Role of Compensation Consultant The HRCC has the authority to engage independent advisors to assist it in carrying out its responsibilities. During 2017, the HRCC determined that, Semler Brossy, who reports directly to the HRCC and not to management, is independent from Applied, has not provided any services to Applied other than to the HRCC and receives compensation from Applied only for services provided to the HRCC. The HRCC assessed the independence of Applied Materials, Inc. 37 The HRCC typically asks Semler Brossy to attend the HRCC’s meetings, including executive sessions at which management is not present. Semler Brossy communicates regularly with the HRCC Chair outside of committee meetings and also meets with management to gather information and review proposals. Role of Executive Officers and Management in Compensation Decisions For fiscal 2017, the HRCC invited Mr. HRCC also regularly held executive sessions without management present. The CEO, together with Deferred Compensation Plan Retirement Benefits under the 401(k) Plan and Generally Available Benefits Programs During fiscal Applied offers a number of other benefits programs to a broad base of eligible employees, Applied annually benchmarks its overall benefits programs, including the 401(k) plan, Relocation Program Applied maintains a relocation program that is consistent with current practices among global companies. The program is available to all eligible employees. Applied provides competitive relocation benefits to ensure it can fill positions critical to its business needs and provide career development opportunities for high-potential employees. Benefits for employees on international assignment include reimbursement on anafter-tax basis for housing and transportation allowances and living and travel expense reimbursements. Benefits also include tax equalization that is intended to put employees who relocate in service to Applied in the same In 2014, the Board requested that Mr. Dickerson relocate full-time to Japan to continue leading critical efforts toward the then-anticipated completion of a proposed business combination with Tokyo Electron. Board Rationale for Relocation. Recognizing the complexity of a U.S.-Japanese merger, including both geographic and cultural differences, the Board felt strongly that to effect a smooth business combination and increase the likelihood of achieving forecasted business benefits of the merger, it was critical to have senior leadership presence from Applied on the ground in Japan to work closely with Tokyo Electron during the regulatory review period. The Board considered and determined that the anticipated cost savings that would be generated from the merger would significantly outweigh 38 2018 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS the expenses to relocate our senior management to Japan. At the Board’s request, Mr. Dickerson relocated with his family to Japan in August 2014. Relocation Benefits. In accordance with our relocation program, the HRCC approved relocation benefits for Mr. Dickerson, which Disclosure and Payment Timing. Although Mr. Dickerson relocated to Japan for part of 2014 and through fiscal 2019. Stock Ownership Guidelines We have stock ownership guidelines to Position CEO Other Hedging and Pledging Prohibitions Applied has an insider trading policy that, among other things, Clawback Policy We have Section 162(m) of the Internal Revenue Code, as amended by the recently-exacted Tax Cuts and Jobs Act, restricts deductibility for federal income tax purposes of annual individual compensation in excess of $1 million to the NEOs, effective for tax years beginning after 2017, subject to a transition rule for written binding contracts which were in effect on November 2, 2017, and which were not modified in any material respect on or after such date. In Applied Materials, Inc. 39 COMPENSATION COMMITTEE REPORT The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the The Human Resources and Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis for fiscal Committee recommended to the Board that the Compensation Discussion and Analysis be included in Applied’s Proxy Statement for its Shareholders. This report is submitted by the Human Resources and Compensation Committee. Thomas J. Iannotti (Chair) Alexander A. Karsner 40 2018 Proxy Statement Summary Compensation Table for Fiscal 2017, 2016 and 2015 The following table shows compensation information for fiscal Name and Principal Position Gary E. Dickerson President and Chief Executive Officer Michael R. Splinter Executive Chairman of the Board Randhir Thakur Executive Vice President, General Manager, Silicon Systems Group Robert J. Halliday Senior Vice President, Chief Financial Officer Ali Salehpour Senior Vice President, General Manager, New Markets and Service Group Total ($) Gary E. Dickerson 2016 2015 1,019,231 995,385 — — 11,111,985 10,818,374 2,449,440 2,090,000 5,099,766 4,189,049 (6) 19,680,422 18,092,808 Daniel J. Durn(7) 2016 2015 — — — — — — — — — — — — Robert J. Halliday(9) 2016 2015 637,019 613,462 2,203,125 — 4,321,318 4,207,134 1,033,358 961,875 25,818 41,082 8,220,638 5,823,553 Ali Salehpour 2016 2015 560,577 550,000 1,732,500 — 3,086,656 3,005,095 882,651 846,450 9,230 12,815 6,271,614 4,414,360 Omkaram Nalamasu 2016 2015 468,846 460,000 1,380,000 — 2,160,671 2,103,581 622,659 430,100 12,841 15,046 4,645,017 3,008,727 Thomas F. Larkins 2016 2015 489,231 480,000 1,512,000 — 1,975,455 2,103,581 640,494 476,520 12,847 12,808 4,630,027 3,072,909 Name Gary E. Dickerson Michael R. Splinter Randhir Thakur Robert J. Halliday Ali Salehpour Applied Materials, Inc. 41 Grants of Plan-Based Awards for Fiscal 2017 The following table shows all plan-based awards granted to the Name Gary E. Dickerson Michael R. Splinter Randhir Thakur Robert J. Halliday Ali Salehpour Estimated Possible Payouts Estimated Future Payouts All Other (#) Grant ($)(2) Grant Date Target ($) Target (#) Gary E. Dickerson 12/1/2016 12/1/2016 — — — 0 — — 2,000,000 — — 5,000,000 140,158 — — 280,316 — — 560,632 — — — 93,439 — — — — — — — 8,106,739 2,737,762 — Daniel J. Durn 9/6/2017 9/6/2017 — — — — — — 16,768 — 33,535 — 67,070 — — 89,426 — — — — 1,470,174 3,951,735 Robert J. Halliday 12/1/2016 12/1/2016 — — — 0 — — 843,750 — — 2,531,250 36,338 — — 72,675 — — �� 145,350 — — — 72,675 — — — — — — — 2,101,761 2,129,378 — Ali Salehpour 12/1/2016 12/1/2016 — — — 0 — — 810,000 — — 2,430,000 33,223 — — 66,446 — — 132,892 — — — 66,446 — — — — — — — 1,921,618 1,946,868 — Omkaram Nalamasu 12/1/2016 12/1/2016 — — — 0 — — 539,000 — — 1,617,000 18,688 — — 37,376 — — 74,752 — — — 37,376 — — — — — — — 1,080,914 1,095,117 — Thomas F. Larkins 12/1/2016 12/1/2016 — — — 0 — — 528,000 — — 1,584,000 18,688 — — 37,376 — — 74,752 — — — 37,376 — — — — — — — 1,080,914 1,095,117 — 42 2018 Proxy Statement EXECUTIVE COMPENSATION Outstanding Equity Awards at Fiscal 2017Year-End The following table shows all outstanding equity awards held by the Name Gary E. Dickerson Michael R. Splinter Randhir Thakur Robert J. Halliday Ali Salehpour Gary E. Dickerson — — — — — — — — — — — — — — — — — — — — 278,465 356,955 93,439 — (3) (4) (5) 15,786,181 20,235,779 5,297,057 — — — — — — — Daniel J. Durn — — — — — — — — — — 33,535 — (8) 1,901,099 — — 33,535 (9) — Robert J. Halliday — — — — — — — — — — — — — — — 138,816 72,675 — (11) (12) 7,869,479 4,119,946 — — — — — Ali Salehpour — — — — — — — — — — — — — — — — — — — — 77,351 99,154 66,446 — (14) (15) (16) 4,385,028 5,621,040 3,766,824 — — — — — — — Omkaram Nalamasu — — — — — — — — — — — — — — — 69,408 37,376 — (18) (19) 3,934,740 2,118,845 — — — — — Thomas F. Larkins — — — — — — — — — — — — — — 63,459 37,376 — (20) (19) 3,597,491 2,118,845 — — — — — Performance shares were granted on December 7, 2015. Of these, 46,272 shares vested on December 19, 2017 and 46,272 shares are scheduled to vest on December 19 of each of Applied Materials, Inc. 43 Option Exercises and Stock Vested for Fiscal 2017 The following table shows Name Gary E. Dickerson Michael R. Splinter Randhir Thakur Robert J. Halliday Ali Salehpour Gary E. Dickerson Daniel J. Durn Robert J. Halliday Ali Salehpour Omkaram Nalamasu Thomas F. Larkins EXECUTIVE COMPENSATION Non-Qualified Deferred Compensation Applied’s 2016 Deferred Compensation Plan (the “DCP”), restated effective October 12, 2015 (the “Restatement Date”) and formerly known as the 2005 Executive Deferred Compensation Plan, Deferrals made prior to selected by the participants or specified prior to the Restatement Date under the terms of the Under the Non-QualifiedDeferred Compensation Name Gary E. Dickerson Michael R. Splinter Randhir Thakur Robert J. Halliday Ali Salehpour(4) Executive ($) Registrant ($) Gary E. Dickerson Daniel J. Durn Robert J. Halliday Ali Salehpour Omkaram Nalamasu Thomas F. Larkins Employment Applied does not have employment agreements with any of its NEOs, other than appointment as President and CEO. For purposes of Mr. Dickerson’s agreement, “cause” generally means the willful failure to perform his duties after written notice and an opportunity to cure; the willful commission of a wrongful act that caused, or was reasonably likely to cause, substantial damage to Applied, or an act of fraud in the performance of his duties; conviction for the commission of a felony in connection with the performance of his duties; or the order of a federal or state regulatory authority requiring the termination of his employment. Potential Payments Upon Termination or Change of Applied does not currently have change of Potential Payments Upon Termination. Under Mr. Dickerson’s employment agreement Named Executive Officer Gary E. Dickerson Michael R. Splinter Name Gary E. Dickerson Michael R. Splinter(4) Randhir Thakur Robert J. Halliday Ali Salehpour Vesting Acceleration under the Employee Stock Incentive Plan. Our terminated due to his or her death or disability, resignation without good reason or termination for cause. The following table shows the amounts attributable to the accelerated vesting of equity awards under the Named Executive Officer Gary E. Robert J. Halliday Ali Salehpour Omkaram Nalamasu Thomas F. Larkins Certain Relationships and Related Transactions Applied’s Audit Committee is responsible for review, approval, or ratification of “related person transactions” involving Applied or its subsidiaries and related persons. Under SEC rules, a related person is a director, officer, nominee for director, or 5% In addition, the Audit Committee has delegated authority to the Chair of the Audit Committee to review and approve transactions in accordance with specified criteria, if advance review by the Audit Committee is not feasible. Any transactions approved by the Chair must be reported to the Audit Committee at its next regularly-scheduled meeting. The Audit Committee has adopted standingpre-approvals for limited transactions with related persons.Pre-approved transactions are as follows: 46 2018 Proxy Statement EXECUTIVE COMPENSATION PROPOSAL 3—RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We are asking The Audit Committee appoints the independent registered public accounting firm annually. Before appointing KPMG as our independent registered public accounting firm for fiscal qualifications and performance during fiscal Representatives of KPMG will be present at the Annual Meeting. They will be given an opportunity to make a statement if they The following table shows fees paid by Applied for professional services rendered by KPMG for fiscal Fee Category Audit Fees Audit-Related Fees Tax Fees: Tax Compliance and Review Tax Planning and Advice All Other Fees Total Fees Audit Fees Audit-Related Fees Tax Fees: Tax Compliance and Review Tax Planning and Advice All Other Fees Total Fees Audit Fees consisted of fees for (a) professional services rendered for the annual audit of Applied’s consolidated financial statements, (b) review of the interim consolidated financial statements included in quarterly reports and (c) services that are typically provided by Audit-Related Fees Tax Fees consisted of fees for professional services for tax compliance and review, and tax planning and advice. Tax compliance and review services consisted of federal, state and international tax compliance, assistance with tax audits and appeals, and assistance with customs and duties audits. Tax planning and advice services consisted of consultations related to tax compliance matters and certain international operations. All Other Fees for fiscal The Audit Committee has concluded that the provision of thenon-audit services described above was compatible with maintaining the independence of KPMG. THE BOARD RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG AS APPLIED’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2018 48 2018 Proxy Statement PROPOSAL 3—RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Policy on Audit Committee’sPre-Approval of Audit and PermissibleNon-Audit Services of Independent Registered Public Accounting Firm The Audit Committee reviews and, as appropriate,pre-approves all audit and permissiblenon-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services and tax services, as well as specifically designatednon-audit services which, in the opinion of the Audit Committee, will not impair the independence of the independent registered public accounting firm.Pre-approval generally is provided for up to one year, and anypre-approval is detailed as to the particular service or category of services and generally is subject to a specific budget. The independent registered public accounting firm and Applied’s management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with thispre-approval, including the fees for the services performed to date. In addition, the Audit Committee also maypre-approve particular services on acase-by-case basis, as necessary or appropriate. The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Applied specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act. Composition. The Audit Committee of the Board is composed of the directors named below. Each member of the Audit Committee meets the independence and financial experience requirements under applicable SEC rules and Nasdaq listing standards. In addition, the Board has determined that Responsibilities. The Audit Committee operates under a written charter that has been adopted by the Board. The charter is reviewed annually for changes, as appropriate. The Audit Committee is responsible for general oversight of Applied’s auditing, accounting and financial reporting processes, system of internal control over financial reporting, and tax, legal, regulatory and ethical compliance. Applied’s management is responsible for: (a) maintaining Applied’s books of account and preparing periodic financial statements based thereon; and (b) maintaining the system of internal control over financial reporting. The independent registered public accounting firm is responsible for auditing Applied’s annual consolidated financial statements. Review with Management and Independent Registered Public Accounting Firm. The Audit Committee hereby reports as follows: Based on the review and discussions referred to in paragraphs1-3 above, the Audit Committee recommended to the Board, and the Board has approved, that the audited consolidated financial statements be included in Applied’s Annual Report on Form10-K for fiscal year The Audit Committee appointed KPMG as Applied’s independent registered public accounting firm for fiscal year 2018. This report is submitted by the Audit Committee. Dennis D. Powell (Chair) Adrianna C. Ma Applied Materials, Inc. 49 PROPOSAL 4—SHAREHOLDER PROPOSAL TO PROVIDE FOR RIGHT TO ACT BY WRITTEN CONSENT Kenneth Steiner, whose address and stockholding will be provided by us upon request, has submitted the following proposal. The shareholder proposal will be voted on at the 2018 Annual Meeting only if properly presented by or on behalf of the proponent. Applied is not responsible for the accuracy or content of the proposal and supporting statement, which are presented below as received from the proponent. THE BOARD RECOMMENDS A VOTE AGAINST THIS SHAREHOLDER PROPOSAL. Proposal 4 – Right to Act by Written Consent Resolved, Shareholders request that our board of directors undertake such steps as may be necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. This written consent is to be consistent with applicable law and consistent with giving shareholders the fullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any topic for written consent consistent with applicable law. This proposal topic won majority shareholder support at 13 major companies in a single year. This included 67%-support at both Allstate and Sprint. Hundreds of major companies enable shareholder action by written consent. Taking action by written consent in lieu of a meeting is a means shareholders can use to raise important matters outside the normal annual meeting cycle. A shareholder right to act by written consent and to call a special meeting are 2 complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. Taking action by written consent saves the expense of holding a special shareholder meeting. Also our company requires 20% of shares to aggregate their holdings to call a special meeting—a higher level than the 10% of shares permitted by Delaware law. Dozens of Fortune 500 companies provide for both shareholder rights—to act by written consent and to call a special meeting. Our higher 20% threshold for shareholders to call a special meeting is one more reason that we should have the right to act by written consent. Please vote to enhance shareholder value: Right to Act by Written Consent – Proposal 4 Board of Directors Statement in Opposition The Board of Directors recommends that you vote AGAINST Proposal 4 for the following reasons: The Board is committed to strong corporate governance and responsiveness to Applied’s shareholders, and believes in maintaining policies and practices that serve the best interests of all shareholders. Following careful review and consideration, the Board has determined that support for this shareholder proposal is unwarranted, and further believes that this written consent proposal would unfairly enable holders to circumvent the protections, procedural safeguards and advantages provided to all shareholders through our existing shareholder meeting process in a way that may be detrimental to our shareholders. Applied is committed to strong corporate governance practices and has meaningful shareholder rights in place. Applied’s shareholders have the ability to call special meetings, propose actions for consideration at annual meetings, and can nominate directors through proxy access. The Board believes that these rights provide meaningful accountability and establish a democratic process for all shareholders, unlike a written consent right which can be used in a way that disenfranchises shareholders. 50 2018 Proxy Statement PROPOSAL 4—SHAREHOLDER PROPOSAL TO PROVIDE FOR RIGHT TO ACT BY WRITTEN CONSENT Shareholder Interests are Better Served under Existing Special Meeting Right The Board believes that Applied’s shareholders are best served by holding meetings in which all shareholders are provided with notice of the meeting and an opportunity to consider and discuss the proposed actions and vote their shares. In 2015, Applied implemented a shareholder right to call special meetings following an extensive shareholder outreach effort to hear directly from shareholders. Applied’s Bylaws provide that special meetings of Applied’s shareholders may be called at the request of the holders of 20% of Applied’s outstanding common stock (an ownership threshold supported by an overwhelming majority of the shareholders that responded to the outreach), without limitations on aggregation of ownership or minimum holding periods. This is less thanone-half of the percentage of shareholders that would be necessary to act by written consent under the shareholder proposal. Any group of investors proposing to act by written consent could call a special meeting. This special meeting right provides Applied’s shareholders a meaningful ability to propose actions for shareholder consideration between annual meetings. Shareholders also have the ability to propose actions for consideration and vote at annual meetings. All Applied shareholders have the opportunity to participate in annual shareholder meetings and any special shareholder meetings. These shareholder meetings offer important protections and advantages that are absent from the written consent process: Action by Written Consent Can Disenfranchise Shareholders In contrast, adoption of this proposal would make it possible for the holders of a bare majority of the shares of Applied’s outstanding common stock to take significant corporate actions without any fiduciary duties to other shareholders, without any prior notice to Applied or other Applied shareholders, and without giving all shareholders an opportunity to consider and vote on shareholder actions that may have important ramifications for both Applied and its shareholders. This approach would effectively disenfranchise all of those shareholders who do not have, or are not given, the opportunity to participate in the written consent, and who may not be informed about the proposed action until after it has already been taken. If this proposal were implemented, proposed shareholder actions involving important decisions could be approved without the important safeguard of advance notice to all Applied shareholders, and without the benefit of enabling all shareholders to consider arguments for and against, express their views, and vote. This written consent procedure could also result in multiple consents being solicited simultaneously, putting shareholders at risk of confusion and resulting in contradictory actions. The Board believes that the written consent procedure is more appropriate for a closely-held corporation with a small number of shareholders, and not for a widely-held public company such as Applied. Current Strong Corporate Governance Practices Demonstrate Responsiveness and Accountability The Board further believes that Applied’s strong corporate governance practices make adoption of this proposal unnecessary. In addition to giving shareholders an expansive right to call special meetings, Applied’s corporate governance practices provide transparency and accountability of the Board to all Applied shareholders, and demonstrate that Applied is responsive to shareholder concerns: Applied Materials, Inc. 51 recent years shareholder feedback has influenced changes to our executive compensation program and corporate governance practices. In light of Applied’s strong corporate governance practices, including the existing right of shareholders to call special meetings, and the ability of shareholders to nominate directors through proxy access, the Board believes that adoption of the shareholder proposal is unnecessary and is not in the best interests of Applied and its shareholders. 52 2018 Proxy Statement PROPOSAL 5—SHAREHOLDER PROPOSAL FOR ANNUAL DISCLOSURE OFEEO-1 DATA PROPOSAL 5—SHAREHOLDER PROPOSAL FOR ANNUAL DISCLOSURE OFEEO-1 DATA The New York City Employees’ Retirement System, the New York City Fire Department Pension Fund, the New York City Teachers’ Retirement System, the New York City Police Pension Fund and the New York City Board of Education Retirement System, whose addresses and stockholdings will be provided by us upon request, have submitted the following proposal. The shareholder proposal will be voted on at the 2018 Annual Meeting only if properly presented by or on behalf of the proponents. Applied is not responsible for the accuracy or content of the proposal and supporting statement, which are presented below as received from the proponents. THE BOARD RECOMMENDS A VOTE AGAINST THIS SHAREHOLDER PROPOSAL. Annual Disclosure ofEEO-1 Data RESOLVED: Shareholders request that the Board of Directors adopt and enforce a policy requiring Applied Materials, Inc. (the “Company”) to disclose annually itsEEO-1 data – a comprehensive breakdown of its workforce by race and gender according to 10 employment categories —on its website or in its corporate responsibility report, beginning in 2018. Supporting Statement Diversity matters. Numerous studies suggest that companies with comprehensive diversity policies and programs, and strong leadership commitment to implement and fully integrate diversity into their culture and practices, enhance long-term shareholder value. A McKinsey & Company global study (Diversity Matters, February 2015), for example, found that “companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry median.” Workplace diversity provides competitive advantage by generating diverse, valuable perspectives, creativity, innovation and adaptation, increased productivity and morale, while eliminating the limitations of “groupthink.” It also reduces potential legal and reputational risks associated with workplace discrimination and builds corporate reputations as fair employers. The high tech industry of which the company is a part, is characterized by persistent and pervasive underrepresentation of minorities and women, particularly in senior positions. Based on 2014EEO-1 filings, the EEOC Commission estimates that the high tech industry is over 64% male and over 68% white. Blacks, Hispanics and women are under- represented in high tech compared to their representation in all private industries. Black and Hispanic representation at the executive, managerial and professional levels is between one and five percent, and women representation at these levels is between 20% and 30%. All three groups’ representation at these levels in high tech is lower than for all private industries (https://www.eeoc.gov/eeoc/statistics/ reports/hightech/upload/diversity-in-high-tech-report.pdf). Applied Materials provides no information on the gender and racial makeup of its total workforce. This does not allow investors to fully evaluate the company’s diversity initiatives and their impact, especially across job categories and particularly in more senior roles. Without more detailed quantitative information on a comparable basis, shareholders have no way to evaluate and benchmark the effectiveness of these efforts over time and relative to peers. Federal law requires companies with 100 or more employees to annually submit anEEO-1 Report to the Equal Employment Opportunity Commission. The report profiles a company’s workforce by race and gender in 10 job categories, including senior management. Overtwo-thirds of S&P 100 companies now discloseEEO-1 data, including companies in the technology industry such as Apple, Alphabet, Salesforce and Ingram Micro. The proposal does not limit the company from providing more detailed quantitative and qualitative disclosures where appropriate. We also encourage the company to describe the steps it is taking and the challenges it faces in moving forward to achieve its diversity plans and goals. Applied Materials, Inc. 53 Board of Directors Statement in Opposition The Board of Directors recommends that you vote AGAINST Proposal 5 for the following reasons: The Board of Directors has given careful consideration to the shareholder proposal and believes that the disclosure of ourEEO-1 data would not constructively advance our ongoing commitment to diversity and inclusion. Accordingly, the Board recommends a vote AGAINST this proposal. Applied has a Long-Standing Commitment to Diversity We believe that different opinions, experiences and backgrounds enhance the teamwork process and result in better ideas and innovations. Diversity and inclusion are foundational to our successful global talent strategy to attract, develop and retain world-class employees. Our diversity footprint across 17 countries spans various cultures, backgrounds, ages, ethnicities and gender that help weave a rich fabric of talent. Applied’s commitment to diversity takes many forms, including the following key initiatives: headquarters and our Austin location, with the leadership and participation of our Board of Directors, CEO and Executive Staff, to promote a culture of diversity and inclusion. Key themes at these events included the importance of being bold and speaking up, appreciating differences to stimulate learning and develop the best solutions, and creating an inclusive and collaborative environment that is empowering and engaging. These events also include external speakers, interactive workshops, internal sharing among employees and employee resource fairs. 54 2018 Proxy Statement PROPOSAL 5—SHAREHOLDER PROPOSAL FOR ANNUAL DISCLOSURE OFEEO-1 DATA Disclosure ofEEO-1 Data Would Not Further Workplace Diversity FormEEO-1 requires us to categorize our U.S. workforce by gender and race according to certain EEOC-mandated job categories that do not account for any company-or industry-specific factors. It is designed to yield generalized data across all categories of private employers, rather than information specific to any one company. As such,EEO-1 data is not reflective of Applied’s diversity and could be misconstrued in ways that could encumber our efforts for greater diversity and inclusion. In addition,EEO-1 data relies on voluntary self-reporting by our U.S. employees only and does not cover our global workforce, which comprises more than 18,400 employees in 90 locations in 17 countries. This leads to very low comparability of data, which significantly limits the value of disclosure. Disclosure ofEEO-1 Data Could Create a Competitive Disadvantage Because theEEO-1 reports contain data regarding Applied’s workforce composition, the reports could provide key information to our competitors, including the emphasis placed by Applied in each employment category and insights into Applied’s management of its labor costs. Comparison ofEEO-1 filings over time would give competitors a view of trends in Applied’s business. With this historical trend data, a competitor would be able to predict how Applied will react in certain market conditions common to our industry. Moreover, our direct U.S. competitors, with whom we compete for a small pool of talent, do not disclose theirEEO-1 data. For each of the reasons discussed above, we believe that disclosure ofEEO-1 data would provide an incomplete picture of our commitment to diversity and could hinder our diversity efforts, particularly if the information is misconstrued by potential recruits and current employees, as well as cause competitive harm. We are strongly committed to diversity as a top priority to fuel innovation, creativity and engagement in our workforce. We understand that continued progress will require ongoing work, sustained commitment, and greater transparency around both our efforts and their impact. However, for the reasons discussed above, we do not believe that disclosing ourEEO-1 data will meaningfully further our goal of workplace diversity. Applied Materials, Inc. 55 QUESTIONS AND ANSWERS ABOUT THE PROXY STATEMENT AND OUR 2018 ANNUAL MEETING These proxy materials are being provided on or about January 25, 2018 to all shareholders of record of Applied as of January 10, 2018. If you requested to receive printed proxy materials, these materials also include an accompanying proxy card. If you received more than one proxy card, this generally means your shares are registered differently or are in more than one account. Please provide voting instructions for each proxy card or, if you vote via the Internet or by telephone, vote once for each proxy card you receive to ensure that all of your shares are voted. 1. Election of ten directors ✓ FOR each Nominee 2. Approval, on an advisory basis, of the compensation of our named executive officers for fiscal year 2017 ✓ FOR 3. Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2018 ✓ FOR 4. Shareholder proposal requesting that the Board take steps to permit shareholder action by written consent without a meeting ✗ AGAINST 5. Shareholder proposal requesting that the Board adopt and enforce a policy to disclose annually Applied’sEEO-1 data ✗ AGAINST At the time this Proxy Statement was mailed, we were not aware of any other matters to be presented at the Annual Meeting other than those set forth in this Proxy Statement and in the notice accompanying this Proxy Statement. A complete list of these shareholders will be available at our corporate offices at 3050 Bowers Avenue, Building 1, Santa Clara, California 95054 during regular business hours for the ten days prior to the Annual Meeting. This list also will be available during the Annual Meeting at the meeting location. A shareholder may examine the list for any legally valid purpose related to the Annual Meeting. 56 2018 Proxy Statement QUESTIONS AND ANSWERS ABOUT THE PROXY STATEMENT AND OUR 2018 ANNUAL MEETING Shareholders of Record. If your shares are registered directly in your name with Applied’s transfer agent, Computershare, you are considered the shareholder of record with respect to those shares, and these proxy materials are being sent directly to you. As a shareholder of record, you have the right to grant your voting proxy directly to Applied or to vote in person at the Annual Meeting. If you requested printed proxy materials, we have enclosed an accompanying proxy card for you to use. You may also submit voting instructions via the Internet or by telephone by following the instructions on the accompanying proxy card, as described below under “How can I vote my shares?” Beneficial Owners.If your shares are held in a brokerage account or by a broker, bank, or other nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker, bank, or other nominee, which is considered the shareholder of record with respect to those shares. As a beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote the shares in your account. However, because you are not the shareholder of record, you may not vote these shares in person at the Annual Meeting, unless you request and provide at the Annual Meeting a valid proxy from your broker, bank, or other nominee. Your broker, bank, or other nominee has included a voting instruction form for you to use to direct them how to vote your shares. Please instruct your broker, bank, or other nominee how to vote your shares using the voting instruction form you received from them. The use of cameras, recording equipment and other electronic devices (including cell phones, tablets, laptops, etc.) is not permitted at the Annual Meeting. Voting over the Internet. To vote over the Internet, please follow either the instructions included on your proxy card or the voting instructions you receive bye-mail or that are being provided via the Internet. If you vote over the Internet, you do not need to complete and mail a proxy card. Voting by Telephone. If you have requested printed proxy materials, such materials will include instructions for how to vote by telephone. Please follow either the instructions included on your proxy card or voting instruction form. If you vote by telephone, you do not need to complete and mail a proxy card. Voting by Mail. If you have requested printed proxy materials, you may vote by mail by signing the proxy card and returning it in the prepaid and addressed envelope enclosed with the proxy materials. By signing and returning the proxy card, you are authorizing the individuals named on the proxy card to vote your shares at the Annual Meeting in the manner you indicate. We encourage you to sign and return the proxy card even if you plan to attend the Annual Meeting so that your shares will be voted if you are unable to attend the Annual Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted. Voting in Person at the Meeting. If you attend the Annual Meeting and plan to vote in person, we will provide you with a ballot at the Annual Meeting. If you are a shareholder of record, you have the right to vote in person at the Annual Meeting. If you are the beneficial owner of shares held in street name and you wish to vote in person at the Annual Meeting, you will need to bring to the Annual Meeting a legal proxy from your broker or other nominee authorizing you to vote those shares. Applied Employee Plan Participants. If you were a participant in Applied’s Employee Savings and Retirement Plan 401(k) Plan, your proxy represents all shares you owned as of the record date through the 401(k) Plan, assuming that your shares are registered in the same name. Your proxy will serve as voting instructions for the trustee of the 401(k) Plan. If you owned shares through the 401(k) Plan and you do not Applied Materials, Inc. 57 vote, the 401(k) Plan trustee will vote those shares in the same proportion as other 401(k) Plan participants vote their 401(k) Plan shares. We encourage you to provide instructions to the trustee regarding the voting of your shares. Instructions provided over the Internet or by telephone must be received by 11:59 p.m. Eastern Time on March 5, 2018. Please note that Applied Employee Plan Participants may not vote their shares in person at the Annual Meeting. If you own shares purchased through Applied’s Employees’ Stock Purchase Plan or Applied’s Stock Purchase Plan for Offshore Employees that are still held by the plans’ recordkeeper and you do not vote these shares, the shares may be voted in accordance with standard brokerage industry practices only on routine matters. Only the latest validly-executed proxy that you submit will be counted. Abstentions and brokernon-votes are counted as present for the purpose of determining a quorum. You may vote “FOR,” “AGAINST,” or “ABSTAIN” with respect to: If you elect to abstain from voting on any of these four proposals, the abstention will have the same effect as an “AGAINST” vote with respect to such proposals. If you are a shareholder of record and you sign and return your proxy card without giving specific voting instructions, your shares will be voted on the proposals as recommended by our Board and in accordance with the discretion of the persons named on the proxy card with respect to any other matters that may properly come before the Annual Meeting. If your shares are held in street name and you do not instruct your broker on a timely basis on how to vote your shares, your brokerage firm, in its discretion, may either leave your shares unvoted or vote your shares on routine matters. Only the ratification of KPMG LLP as our independent registered public accounting firm is a routine matter. Without your voting instructions, your brokerage firm cannot vote your shares on any other proposal. These unvoted shares, called “brokernon-votes,” refer to shares held by brokers who have not received voting instructions from their clients and who do not have discretionary authority to vote onnon-routine matters. Brokernon-votes are not considered entitled to vote and will not affect the outcome of the vote onnon-routine proposals. Brokernon-votes will not have an effect on the election of any director nominee. 58 2018 Proxy Statement QUESTIONS AND ANSWERS ABOUT THE PROXY STATEMENT AND OUR 2018 ANNUAL MEETING Q: What is the vote requirement to approve each proposal? Vote Required Effect of Abstentions Effect of BrokerNon-Votes 1. Election of ten directors Majority of votes cast No effect No effect 2. Approval, on an advisory basis, of the compensation of our named executive officers for fiscal year 2017 Majority of shares present and entitled to vote thereon Same as vote against No effect 3. Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2018 Majority of shares present and entitled to vote thereon Same as vote against Brokers have discretion to vote 4. Shareholder proposal requesting that the Board take steps to permit shareholder action by written consent without a meeting Majority of shares present and entitled to vote thereon Same as vote against No effect 5. Shareholder proposal requesting that the Board adopt and enforce a policy to disclose annually Applied’sEEO-1 data Majority of shares present and entitled to vote thereon Same as vote against No effect This process is designed to expedite shareholders’ receipt of proxy materials, lower the cost of the Annual Meeting and help conserve natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials viae-mail unless you elect otherwise. Applied Materials, Inc. 59 If you share an address with another shareholder and received only one set of proxy materials and would like to request a separate paper copy of these materials, please: (1) go to www.proxyvote.com and follow the instructions provided; (2) send ane-mail message to investor_relations@amat.com with “Request for Proxy Materials” in the subject line and provide your name, address and the control number indicated on your proxy card or Notice of Internet Availability; or (3) call our Investor Relations department at(408) 748-5227. 60 2018 Proxy Statement Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires Applied’s directors and executive officers, and holders of more than 10% of Applied common stock to file with the SEC reports about their ownership of common stock and other equity securities of Applied. Such directors, officers and 10% SEC rules require us to identify in this Proxy Statement anyone who filed a required report late during the most recent fiscal year. Based on our review of forms we received and written representations from certain of the reporting persons, we believe that during fiscal If A shareholder’s notice of nomination of one or more director candidates to be included in our proxy statement and ballot pursuant to the proxy access right included in Section 2.15 of our Bylaws must be received by our Corporate Secretary at our principal executive offices no earlier than August 28, 2018, and no later than the close of business on September 27, 2018. The notice must contain the information required by our Bylaws, and the shareholder(s) and nominee(s) must comply with the information and other requirements in our Bylaws relating to the inclusion of shareholder nominees in our proxy materials. If a shareholder seeks to propose other business or nominate a director, but does not seek to include a proposal or director nominee in our proxy statement for our Our Bylaws contain specific requirements regarding a In Applied’s filings with the SEC, information is sometimes “incorporated by reference.” This means that we are referring you to information that has previously been filed with the SEC and the information should be considered as part of the particular filing. As provided under SEC rules, the “Audit Committee Report” and the “Human Resources and Compensation Committee Report” contained in this Proxy Statement are not incorporated by reference into any of our other filings with the SEC, except to the extent we specifically incorporate either report by reference into a filing. In addition, this Proxy Statement includes several website addresses. These website addresses are intended to provide inactive, textual references only. The information on these websites is not part of this Proxy Statement. YOU MAY OBTAIN A COPY OF APPLIED’S ANNUAL REPORT ON FORM10-K FOR THE FISCAL YEAR ENDED OCTOBER By Order of the Board of Directors Santa Clara, California Applied Materials, Inc. 61 UNAUDITED RECONCILIATION OFNON-GAAP ADJUSTED FINANCIAL MEASURES Non-GAAP Adjusted Earnings Per Diluted Share Reported earnings per diluted share—GAAP basis Impairment of goodwill and intangible assets Certain items associated with acquisitions1 Acquisition integration costs Gain on derivatives associated with announced business combination, net Certain items associated with announced business combination2 Restructuring charges and asset impairments3, 4, 5, 6 Impairment of strategic investments, net Gain on sale of facilities, net Reinstatement of federal R&D tax credit and resolution of prior years’ income tax filings and other tax items Non-GAAP adjusted earnings per diluted share Weighted average number of diluted shares Non-GAAP Adjusted Earnings Per Diluted Share Reported earnings per diluted share—GAAP basis1 Certain items associated with acquisitions2 Acquisition integration costs Certain items associated with terminated business combination3 Gain on derivatives associated with terminated business combination, net Inventory charges (reversals) related to restructuring and asset impairments4,5 Impairment of goodwill and intangible assets Other gains, losses or charges, net Resolution of prior years’ income tax filings, reinstatement of federal R&D tax credit and other tax items1 Non-GAAP adjusted earnings per diluted share Weighted average number of diluted shares Non-GAAP Adjusted Gross Profit Reported gross profit—GAAP basis Certain items associated with acquisitions1 Non-GAAP Adjusted Gross Profit Non-GAAP Adjusted Gross Margin (% of net sales) (In millions, except percentages) Non-GAAP Adjusted Gross Profit Reported gross profit—GAAP basis Certain items associated with acquisitions1 Acquisition integration costs Non-GAAP adjusted gross profit Non-GAAP adjusted gross margin (% of net sales) Non-GAAP Adjusted Operating Income Reported operating income—GAAP basis Impairment of goodwill and intangible assets Certain items associated with acquisitions1 Acquisition integration costs Loss (gain) on derivatives associated with announced business combination, net Certain items associated with announced business combination2 Restructuring charges and asset impairments3, 4 Gain on sale of facility Non-GAAP adjusted operating income Non-GAAP adjusted operating margin (% of net sales) Applied Materials, Inc. A-1 Non-GAAP Adjusted Operating Income Reported operating income—GAAP basis Certain items associated with acquisitions1 Acquisition integration costs Certain items associated with terminated business combination2 Loss (gain) on derivatives associated with terminated business combination, net Inventory charges (reversals) related to restructuring and asset impairments3,4,5,6 Impairment of goodwill and intangible assets Other gains, losses or charges, net Non-GAAP adjusted operating income Non-GAAP adjusted operating margin Thenon-GAAP adjusted financial measures presented above are adjusted to exclude the impact of certain costs, expenses, gains and losses, including certain items related to mergers and acquisitions; restructuring charges and any associated adjustments; impairments of assets, or investments; gain or loss on sale of strategic investments; certain other discrete adjustments and income tax items. Reconciliations of thesenon-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables presented above. There are limitations in usingnon-GAAP financial measures because thenon-GAAP financial measures are not prepared in accordance with generally accepted accounting principles, may be different fromnon-GAAP financial measures used by other companies, and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. YOU CAN VOTE OVER THE INTERNET OR BY TELEPHONE QUICK AVAILABLE 24 HOURS A DAY APPLIED MATERIALS, INC. encourages you to take advantage of convenient ways to vote. If voting by proxy, you may vote over the Internet, by telephone or by mail. Your Internet or 3225 OAKMEAD VILLAGE DRIVE telephone vote authorizes the named proxies to vote in the same manner as if you marked, signed, and returned your proxy card. To vote over the Internet, by telephone or by mail, P.O. BOX 58039, M/S 1241 please read the SANTA CLARA, CA 95054 VOTE BY INTERNET-www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until11:59 P.M. Eastern Time on ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by Applied Materials, Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically over the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in the future. VOTE BY PHONE-1-800-690-6903Use any touch-tone telephone to transmit your voting instructions up until11:59 P.M. Eastern Time on VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to APPLIED MATERIALS, INC., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS E35556-P01027-Z71625 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED. DETACH AND RETURN THIS PORTION ONLY APPLIED MATERIALS, INC. The Board of Directors 1. Election of Directors Nominees: For Against Abstain 1a. Judy Bruner 1b. Xun (Eric) Chen For Against Abstain 2. Approval, on an advisory basis, of the compensation 1c. Aart J. de Geus of Applied Materials’ named executive officers for fiscal year 2017.1d. Gary E. Dickerson 3. Ratification of the appointment of KPMG LLP as Applied Materials’ independent registered public accounting firm for fiscal year 2018. 1e. Stephen R. Forrest The Board of Directors recommends you vote AGAINST 1f. Thomas J. Iannotti proposals 4 and 5: For Against Abstain 1g. Alexander A. Karsner 4. Shareholder proposal to provide for right to act by written consent 1h. Adrianna C. Ma 5. Shareholder proposal for annual disclosure ofEEO-1 data. 1i. Scott A. McGregor NOTE: The proposals to be voted on may also include such other business as may properly come before the meeting or any adjournment or postponement thereof. 1j. Dennis D. Powell Please indicate if you plan to attend this meeting. Yes No Please sign exactly as your name appears herein. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person. Important notice regarding the availability of proxy materials for the Annual Meeting of Shareholders to be held on March 8, 2018: The Proxy Statement and Annual Report to Shareholders are available at www.proxyvote.com.APPLIED MATERIALS, INC.PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON MARCH 8, 2018 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Gary E. Dickerson, Daniel J. Durn and Thomas F. Larkins, or any of them, each with full power of substitution, as proxies of the undersigned, to attend the Annual Meeting of Shareholders of Applied Materials, Inc. to be held on Thursday, March 8, 2018 at 11:00 a.m. Pacific Time at Applied Materials, Inc.‘s corporate offices at 3050 Bowers Avenue, Building 1, Santa Clara, California 95054, and at any adjournment or postponement thereof, and to vote the number of shares the undersigned would be entitled to vote if personally present on the items set forth on the reverse side and, in their discretion, upon such other business that may properly come before such meeting and any adjournment or postponement thereof.THIS PROXY WILL BE VOTED AS SPECIFIED, OR IF NO CHOICE IS SPECIFIED, WILL BE VOTED FOR EACH OF THE TEN NOMINEES FOR ELECTION AS DIRECTORS (PROPOSAL 1), FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS FOR FISCAL YEAR 2017 (PROPOSAL 2), FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2018 (PROPOSAL 3), AGAINST THE SHAREHOLDER PROPOSAL TO PROVIDE FOR RIGHT TO ACT BY WRITTEN CONSENT (PROPOSAL 4) AND AGAINST THE SHAREHOLDER PROPOSAL FOR ANNUAL DISCLOSURE OFEEO-1 DATA (PROPOSAL 5). Dear Shareholder: On the reverse side of this card are instructions on how to vote over the Internet or by telephone for the election of directors (Proposal 1), for the approval, on an advisory basis, of the compensation of our named executive officers for fiscal year 2017 (Proposal 2), for the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2018 (Proposal 3), against the shareholder proposal to provide for right to act by written consent (Proposal 4) and against the shareholder proposal for annual disclosure ofEEO-1 data (Proposal 5). Please consider voting over the Internet or by telephone. Your vote is recorded as if you mailed in your proxy card. We believe voting this way is convenient. Thank you for your attention to these matters. Applied Materials, Inc. PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED POSTAGE-PAID ENVELOPE. If you vote over the Internet or by telephone, you do not need to return the proxy card. THANK YOU FOR VOTING! (Continued and to be signed on the reverse side)Additional information about the election of directors, a brief biography and a summary of qualifications of each nominee appear under the section titled “Proposal 1—Election of Directors.”The Board unanimously recommends that you vote “FOR” each director nominee.iFiscal 2017 Total Direct CompensationPROPOSAL 2—APPROVAL,ONAN ADVISORY BASIS,OFTHE COMPENSATIONOF OUR NAMED EXECUTIVE OFFICERSWe are asking our stockholders to approve, on a non-binding, advisory basis, the compensation of our named executive officers (“NEOs”). Our Board of Directors believes that our compensation policies and practices promote a performance-based culture and align our executives’ interests with those of our stockholders through a strong emphasis on variable, at-risk compensation tied to the achievement of performance objectives and the creation of stockholder value. Our “say-on-pay” proposals in the previous four consecutive years were each supported by approximately 90% or more of votes cast. Information on the compensation of our named executive officers is summarized below and described in detail in the Compensation Discussion and Analysis section, the Summary Compensation Table and other tables and disclosures contained in this Proxy Statement.Additional information about the approval of the compensation of our named executive officers appears under the section titled “Proposal 2—Approval, on an Advisory Basis, of the Compensation of Our Named Executive Officers.”Fiscal 2014 Company PerformanceFiscal 2014 was a strong performance year. We made significant progress towards our strategic and financial goals as an organization. Our fiscal 2014 financial performance reflects ongoing technology and capacity investments by our semiconductor and display customers, sustainable market share gains in growing markets, as well as significant improvements in our execution, efficiency and costs that we achieved while increasing investment in new product development.Key strategic and operating accomplishments included:Achieved total shareholder return (“TSR”) of approximately 21% for the fiscal year;Won market share gains across multiple products;Increased research and development investments in technologies that provide the greatest opportunities for growth;Delivered material cost savings that contributed to a significant increase in gross margin;Shifted spending from corporate overhead and lower-return programs to fund growth;Moved our Energy and Environmental Solutions segment to positive operating margin for the first time since 2011; andAchieved these results while preparing for our proposed business combination with Tokyo Electron Limited (the “Business Combination”), which will enable us to further accelerate our strategy and work towards delivering even greater value for our stockholders.The following are highlights of our fiscal 2014 executive compensation program:• No Increases to Base Salaries or Target Bonuses: Did not increase our NEOs’ base salaries or target bonus opportunities (except in recognition of one NEO’s expanded responsibilities);All Other NEOs
•1RepresentsAnnual Bonuses Reflect Strong Company Performance: Awarded actual annual incentive payouts to our NEOs that ranged from 110% to 126% of target, reflecting our strong performance over the year and the achievement oftotal direct compensation for fiscal 2014 objectives;2017; excludes new CFO Daniel J. Durn, who joined Applied in August 2017.•Long-Term Incentives Reflect Impact of Business Combination: Modified our long-term incentive program to reflect the challenges and complexities associated with the Business Combination, including:Granted performance units settled in cash rather than equity (as cash awards generally are not subject to a punitive excise tax imposed in connection with the consummationSummary of the Business Combination), with no opportunity to benefit from the 19% stock price appreciation during the fiscal year;iiTied the earnout of the cash-based performance units to an absolute operating profit margin threshold rather than a scaled relative operating profit margin (recognizing the difficulty of setting appropriate relative performance ranges while preparing to close the Business Combination), and further required continued employment over a three-year period; andGranted increased amounts of long-term incentives to certain NEOs (including our CEO) to reflect (1) the challenges of meeting Applied’s long-term financial and strategic goals while preparing to close the Business Combination, and (2) the enhanced need to retain our executive team during the critical period leading up to and following the Business Combination.•Delayed Payment of Retention Bonuses: Amended the terms of retention bonuses granted in fiscal 2013 to extend the retention period to be consistent with the timeframe expected to complete the Business Combination (our CEO and Executive Chairman did not receive a retention bonus).Aligning Pay with Performance.The following chart demonstrates the alignment between key metrics used to determine and inform our compensation decisions (Applied’s non-GAAP adjusted EPS and TSR) and thetable summarizes elements of annual total direct compensation (base salary, annual incentive bonus and annual long-term incentive awards) paid to our CEO during the last five fiscal years (see the Appendix for a reconciliation of non-GAAP adjusted measures):
Notes regarding graph:(1)Compensation is based on annual total direct compensation of Mr. Dickerson for fiscal 2013 and fiscal 2014, and annual total direct compensation of Mr. Splinter for fiscal 2010 through 2012. Annual total direct compensation consists of base salary (annualized for Mr. Dickerson as of the end of fiscal 2013 for purposes of this graph only), annual incentive bonus, and annual long-term incentive awards (grant date fair value of annual equity awards, not cash actually received, for fiscal 2010 through 2013, and total amount of cash-settled performance units for fiscal 2014). The fiscal 2014 compensation primarily reflected an increased amount of cash-settled performance units to reflect the challenges of meeting our long-term financial and strategic goals while preparing to close the Business Combination and the enhanced need to retain our CEO during this critical period.(2)TSR line illustrates the relative change in total shareholder return, assuming $100 was invested in Applied common stock at the end of fiscal 2010 and assuming reinvestment of dividends.(3)Non-GAAP adjusted EPS line illustrates the relative change in non-GAAP adjusted EPS since the end of fiscal 2010 through the end of fiscal 2014.iiiThe following table summarizes annual total direct compensation of our named executive officers (“NEOs”) for fiscal 2014,2017, consisting of (1) base salary, (2) annual cash incentive bonus and (3) full amount of an annual cash long-term incentive award granted in fiscal 2014 (not amount actually received in fiscal 2014)awards (the grant date fair value of stock awards). This table excludes amounts not considered by the HRCC to be annual total direct compensation such as (a) the grant date fair value of restricted stock units and a retention bonus awarded to Mr. Halliday under a 2011 employment agreement entered into in connection with his joining Applied following our acquisition of Varian Semiconductor Equipment Associates, Inc., (b) the grant date fair value of a special equity award granted to Mr. Salehpour in recognition of his expanded responsibilities as part of Applied’s new organizational structure implemented in August 2014, and (c) certain other amountsthat are required by the Securities and Exchange Commission (“SEC”)SEC to be reported in the Summary Compensation Table (see page 4041 of this Proxy Statement). Salary ($) Annual
Cash
Bonus ($)(1) Cash
Long-Term
Incentive
Award ($)(2) 980,000 2,165,273 12,740,000 980,000 2,165,273 6,370,000 575,000 854,883 3,881,250 575,000 980,054 5,750,000 485,385 912,774 2,160,000 Name and Principal Position 1,000,000 2,640,000 10,844,501 14,484,501 138,462 — 2,952,086 3,090,548 625,000 1,113,750 4,231,139 5,969,889 591,346 1,060,290 3,868,486 5,520,122 484,808 770,770 2,176,031 3,431,609 480,000 702,768 2,176,031 3,358,799 (1) Mr. Durn joined Applied in August 2017. Amounts reflect annual cashfor Mr. Durn exclude asign-on bonus earned for fiscal 2014 under the Senior Executive Bonus Plan.(2)Amounts reflect total amounts under cash-settled performance units granted in fiscal 2014. In accordance with applicable SEC rules, the full amountsand anew-hire equity award, both of which are reported for fiscal 2014 in the Summary Compensation Table because they were fully earned based on Applied’s performance in fiscal 2014. However, in orderTable.● Performance measurement periods extended from one year to promote retention, the actual payment of these amounts are made in three equal installments in December 2014, December 2015 and December 2016, with each payment contingent on the NEO remaining employed with Applied on the date the payment is made, subject to certain prorata retirement-related acceleration of vesting for Mr. Splinter, as described in the Compensation Discussion and Analysis section.years;● Tighter alignment of performance metrics with our strategic goals; and ● Re-balanced equity mix to achieve performance alignment and retention goals. The Board unanimously recommends that you vote “FOR”Our new long-term incentive program equity mix establishes a more direct balance between rigorous, performance-based incentives and retention-based incentives, both of which the approval, on an advisory basis,HRCC believes are critical components of our compensation program. Additionally, new performance measures(non-GAAP adjusted operating margin and wafer fabrication equipment (WFE) market share) consider both our absolute and relative performance, and align with our stated strategic priorities to ensure our management team’s long-term incentives match our long-term goals.∎ ∎ ∎ ∎ ∎ ∎ named executive officers.CEO for the last five fiscal years. While TSR has grown significantly over the last four years, our CEO’s total direct compensation has remained relatively flat during that period.
(1) Total direct compensation consists of annual base salary (annualized for 2013 for Mr. Dickerson, who became our CEO in September 2013), annual incentive bonus and annual long-term incentive award (grant date fair value of annual equity awards for all fiscal years, except for fiscal 2014, which consists of the total amount of cash-settled performance units). Total direct compensation shown above excludes other amounts required by the SEC to be reported in the Summary Compensation Table. (2) TSR line illustrates the total shareholder return on our common stock during the period from October 25, 2013 through October 27, 2017, assuming $100 was invested on October 25, 2013 and assuming reinvestment of dividends. ivPROPOSAL 3—RATIFICATIONOFTHE APPOINTMENTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMSustainability and Corporate Citizenshipare askingpublish an annual Citizenship Report on our stockholderswebsite to ratifyhighlight our social responsibility accomplishments and provide key performance data to our shareholders. Sustainability is integrated into our operations, and we have an Environmental, Health and Safety (“EHS”) organization that is focused on maintaining a safe and healthy working environment, demonstrating environmental leadership, and meeting or exceeding regulatory compliance standards. The Head of EHS reports to the appointmentBoard of KPMG LLP as our independent registered public accounting firm for fiscal 2015.The following table shows fees paid by Applied for professional services rendered by KPMG for fiscal 2014Directors on a quarterly basis and 2013, which ended on October 26, 2014provides a morein-depth environmental and October 27, 2013, respectively. All fees shown in the table were approved bysustainability update to the Audit Committee on an annual basis.conformity withoperating our business in a sustainable manner, investing in our people, and investing in our communities benefits Applied and its pre-approval process.shareholders. Fiscal 2014 Fiscal 2013 (In thousands) $ 5,483 $ 5,728 208 77 304 264 124 — — 25 $ 6,119 $ 6,094 Additional information about the ratification of the appointment of KPMG LLP as our independent registered public accounting firm, including about fees paid to KPMG for fiscal 2014 and 2013, appears under the section titled “Proposal 3—Ratification of the Appointment of Independent Registered Public Accounting Firm.”Sustainability● Conduct business in environmentally, socially responsible and ethical manner ● Protect health and safety of workers, customers and community ● Design efficient and sustainable products, to minimize environmental impact ● Attract, develop and retain world-class global workforce ● Value global diversity and respect local cultures where we do business ● Promote personal and career development for employees to encourage innovation and engagement ● Invest in education, arts and culture, civic engagement, and environment in communities where we work and live ● Support employee involvement through charitable donations and volunteer programs Human Capital Management Supply Chain Environment Ethics The Board unanimously recommends that you vote “FOR” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2015.vYour proxy is being solicited on behalf of the Board of Directors of Applied Materials, Inc., a Delaware corporation (“Applied” or the “Company”). This proxy is for use at Applied’s 2015 Annual Meeting of Stockholders to be held at 11:00 a.m. Pacific Time on Thursday, April 2, 2015, at our corporate offices at 3050 Bowers Avenue, Building 1, Santa Clara, California 95054.This Proxy Statement contains important information regarding Applied’s 2015 Annual Meeting of Stockholders, the proposals on which you are being asked to vote, information you may find useful in determining how to vote and voting procedures. These proxy materials are being provided on or about February 18, 2015 to all stockholders of record of Applied as of February 11, 2015, the record date for the Annual Meeting. Stockholders of record who owned Applied common stock at the close of business on February 11, 2015 are entitled to receive notice of, attend and vote at the Annual Meeting. On the record date, there were 1,228,696,722 shares of Applied common stock outstanding.As previously announced, on September 24, 2013, Applied entered into an agreement with Tokyo Electron Limited to effect a strategic combination of our respective businesses. Depending on the expected timing of the closing of the business combination, the Annual Meeting may be adjourned or cancelled.Voting ProceduresAs a stockholder of Applied, you have a right to vote on certain matters affecting Applied. The proposals that will be presented at the Annual Meeting and upon which you are being asked to vote are summarized in the section titled “2015 Proxy Statement Summary” above and are fully set forth in this Proxy Statement. Each share of Applied common stock that you owned at the close of business on the record date entitles you to one vote on each proposal presented at the Annual Meeting.Methods of VotingYou may vote by mail, by telephone, over the Internet, or in person at the Annual Meeting. Votes submitted by mail, by telephone or over the Internet must be received by 11:59 p.m., Eastern Time, on Wednesday, April 1, 2015, unless indicated otherwise below.Voting by Mail. By signing the proxy card and returning it in the prepaid and addressed envelope enclosed with proxy materials delivered by mail, you are authorizing the individuals named on the proxy card to vote your shares at the Annual Meeting in the manner you indicate. We encourage you to sign and return the proxy card even if you plan to attend the Annual Meeting so that your shares will be voted if you are unable to attend the Annual Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted.Voting by Telephone or over the Internet. To vote by telephone or over the Internet, please follow either the instructions included on your proxy card or the voting instructions you receive by e-mail or that are being provided via the Internet. If you vote by telephone or over the Internet, you do not need to complete and mail a proxy card.Voting in Person at the Meeting. If you attend the Annual Meeting and plan to vote in person, we will provide you with a ballot at the Annual Meeting. If your shares are registered directly in your name, you are considered the stockholder of record and you have the right to vote in person at the Annual Meeting. If your shares are held in the name of your broker or other nominee, you are considered the beneficial owner of shares held in street name. As a beneficial owner, if you wish to vote in person at the Annual Meeting, you will need to bring to the Annual Meeting a legal proxy from your broker or other nominee authorizing you to vote those shares. See the section titled “Attending the Annual Meeting” below for further details.Applied Employee Plan Participants. If you are a participant in Applied’s Employee Savings and Retirement Plan (the “401(k) Plan”), your proxy represents all shares you own through the 401(k) Plan, assuming that your shares are registered in the same name. Your proxy will serve as a voting instruction for the trustee of the 401(k) Plan. If you own shares through the 401(k) Plan and you do not vote, the 401(k) Plan trustee will vote those shares in the same proportion as other 401(k) Plan participants vote their 401(k) Plan shares. We encourage you to provide instructions to the trustee regarding the voting of your shares. Instructions provided by telephone or over the Internet must be received by 11:59 p.m. Eastern Time on Monday, March 30, 2015.If you own shares purchased through Applied’s Employees’ Stock Purchase Plan or Applied’s Stock Purchase Plan for Offshore Employees that are still held by the plans’ recordkeeper and you do not vote these shares, the shares may be voted in accordance with standard brokerage industry practices only on routine matters, as described below under the section titled “Abstentions and Broker Non-Votes.”Revoking Your ProxyYou may revoke your proxy at any time before it is voted at the Annual Meeting. To revoke your proxy, you must:• enter a new vote by telephone or over the Internet by 11:59 p.m. Eastern Time on April 1, 2015; or• sign and return another proxy card, which must be received by 11:59 p.m. Eastern Time on April 1, 2015; or• provide written notice of the revocation to Applied’s Corporate Secretary at: Applied Materials, Inc., Attention: Thomas F. Larkins, Corporate Secretary, 3225 Oakmead Village Drive, M/S 1241, P.O. Box 58039, Santa Clara, CA 95054, which must be received by 11:59 p.m. Eastern Time on April 1, 2015; or• attend the Annual Meeting and vote in person.Quorum RequirementA majority of the outstanding shares entitled to vote as of the record date must be present at the Annual Meeting to constitute a quorum and in order to conduct business at the Annual Meeting. Your shares are counted as present if you vote in person at the Annual Meeting, by telephone, over the Internet, or by submitting a properly executed proxy card by mail. Abstentions and broker non-votes are counted as present for the purpose of determining a quorum.Votes Required for the ProposalsProposal 1—Election of Directors. Each share of Applied common stock is entitled to one vote on each of the ten director nominees. In any uncontested election of directors (an election in which the number of nominees does not exceed the number of directors to be elected), any nominee who receives a greater number of votes cast “FOR” his or her election than votes cast “AGAINST” his or her election will be elected. See “Majority Voting” on page 12 of this Proxy Statement for further details. There is no cumulative voting with respect to the election of directors.Proposal 2—Approval, on an Advisory Basis, of the Compensation of Our Named Executive Officers. Advisory approval of the compensation of our named executive officers requires the affirmative vote of a majority of the shares present, in person or by proxy, and entitled to vote at the Annual Meeting.Proposal 3—Ratification of the Appointment of Independent Registered Public Accounting Firm. Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2015 requires the affirmative vote of a majority of the shares present, in person or by proxy, and entitled to vote at the Annual Meeting.Voting InstructionsIf you are a stockholder of record and return a proxy card but do not provide specific voting instructions, your shares will be voted on the proposals as follows:• “FOR” each of the ten named nominees for directors;• “FOR” the approval, on an advisory basis, of the compensation of our named executive officers; and• “FOR” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2015.If other matters properly come before the Annual Meeting and you do not provide specific voting instructions, your shares will be voted in the discretion of the persons named as proxies.Abstentions and BrokerNon-VotesA vote to “abstain” on any of the proposals included in this Proxy Statement, except for Proposal 1—Election of Directors, will have the same effect as a vote against the proposal. A vote to abstain on Proposal 1 will not have an effect on the election of any director nominee.If your shares are held in street name and you do not instruct your broker on a timely basis on how to vote your shares, your brokerage firm, in its discretion, may either leave your shares unvoted or vote your shares on routine matters. Only the ratification of KPMG LLP as our independent registered public accounting firm is a routine matter. Without your voting instructions, your brokerage firm cannot vote your shares on any other proposal. These unvoted shares, called “broker non-votes,” refer to shares held by brokers who have not received voting instructions from their clients and who do not have discretionary authority to vote on non-routine matters. Broker non-votes are not considered entitled to vote and will not affect the outcome of the vote on non-routine proposals. Broker non-votes will not have an effect on the election of any director nominee.Attending the AnnualMeetingOnly Applied stockholders on the record date or their legal proxy holders may attend the Annual Meeting. To be admitted to the Annual Meeting, you will need a form of photo identification and valid proof of ownership of Applied common stock or a valid legal proxy. If you have a legal proxy from a stockholder of record, you must bring a form of photo identification and the legal proxy to the Annual Meeting. If you have a legal proxy from a street name stockholder, you must bring a form of photo identification, a legal proxy from the record holder (i.e., the bank, broker or other holder of record) to the street name stockholder that is assignable, and the legal proxy from the street name stockholder to you. Each stockholder may appoint only one proxy holder to attend on such stockholder’s behalf.Cameras, recording equipment and other electronic devices (including cell phones, tablets, laptops, etc.) will not be allowed into the Annual Meeting.Voting ResultsVotes will be tabulated by an independent inspector of elections appointed for the Annual Meeting. Preliminary voting results will be announced at the Annual Meeting. Final voting results will be reported in a Current Report on Form 8-K, which will be filed with the Securities and Exchange Commission (the “SEC”) within four business days after the Annual Meeting.Electronic Availability of Proxy Materials for 2015 Annual Meeting of StockholdersIn accordance with SEC rules, we are continuing to furnish proxy materials to our stockholders primarily via the Internet, instead of mailing printed copies of those materials to each stockholder. On February 18, 2015, we mailed a Notice of Internet Availability to our stockholders (other than those who had previously requested electronic or paper delivery) containing instructions on how to access our proxy materials, including this Proxy Statement and our Annual Report. The Notice of Internet Availability also instructs you on how to vote over the Internet or by telephone.This process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the Annual Meeting and help conserve natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.Householding of Proxy MaterialsIn a further effort to reduce printing costs and postage fees and conserve natural resources, we have adopted a practice approved by the SEC called “householding.” Under this practice, stockholders who have the same address and last name and who do not participate in electronic delivery of proxy materials will receive only one mailed copy of our proxy materials, unless one or more of these stockholders notifies us that he or she wishes to receive individual copies. Stockholders who participate in householding will continue to receive separate proxy cards.If you share an address with another stockholder and received only one set of proxy materials, and would like to request a separate paper copy of these materials, please: (1) go towww.proxyvote.comand follow the instructions provided; (2) send an e-mail message to investor_relations@amat.com with “Request for Proxy Materials” in the subject line and provide your name, address and the control number indicated on your proxy card or Notice of Internet Availability; or (3) call our Investor Relations department, toll-free, at 1-800-882-0373.Stockholder ListStockholders of record who owned shares of Applied common stock at the close of business on February 11, 2015 are entitled to receive notice of, attend and vote at the Annual Meeting. A complete list of these stockholders will be available at our corporate offices at 3050 Bowers Avenue, Santa Clara, California 95054 during regular business hours for the ten days prior to the Annual Meeting. This list also will be available during the Annual Meeting at the meeting location. A stockholder may examine the list for any legally valid purpose related to the Annual Meeting.Proxy Solicitation CostsApplied will bear the entire cost of proxy solicitation, including the preparation, assembly, printing, mailing and distribution of the proxy materials. We have hired Innisfree M&A Incorporated to assist in the distribution and solicitation of proxies. Solicitations may be made personally or by mail, facsimile, telephone, messenger, or via the Internet. In addition to the estimated proxy solicitation cost of $20,000, plus reasonable out-of-pocket expenses for this service, we will reimburse brokerage firms and other custodians for their reasonable out-of-pocket expenses for forwarding the proxy materials to stockholders.Stockholders.Shareholders. Applied currently has twelveten directors. Upon the recommendation of the Corporate Governance and Nominating Committee, the Board has selectednominated the ten incumbent directorsindividuals listed below as nominees for election at the Annual Meeting. Gerhard H. Parker will retireMeeting, each of whom currently serves as a director of Applied. These nominees bring a wide variety of relevant skills, professional experience and James E. Rogers has decided notbackgrounds, as well as diverse viewpoints and perspectives to represent the long-term interests of shareholders, and to fulfill the leadership and oversight responsibilities of the Board.re-election. The term of office of each of Dr. Parker and Mr. Rogers will expire upon the election of directors at the Annual Meeting. The Board has authorized a reduction inMeeting, the size ofpersons named asfrom twelve to ten directors, effective uponreplace the electionnominee. Alternatively, the proxies may vote for the remaining nominees and leave a vacancy that the Board may fill later, or the Board may reduce the authorized number of directors at the Annual Meeting.directors. As of the date of this Proxy Statement, the Board is not aware of any nominee who is unable or will decline to serve as a director.If any of the nominees listed below becomes unable to stand for election at the Annual Meeting, the persons named as proxies may vote for any person designated by the Board to replace the nominee. Alternatively, the proxies may vote just for the remaining nominees and leave a vacancy that the Board may fill later, or the Board may reduce the authorized number of directors. Each director elected at the Annual Meeting will serve until Applied’s 20162019 Annual Meeting of StockholdersShareholders and until he or she is succeeded by another qualified director who has been elected, or, if earlier, until his or her death, resignation or removal. ✓ 
The nominees for the Board are as follows:Applied Materials, Inc. 1 Age Principal Occupation Director
Since 64 Executive Chairman of the Board of
Directors of Applied Materials, Inc. 2003 57 President and Chief Executive
Officer of Applied Materials, Inc. 2013 60 Chairman and Co-Chief Executive
Officer of Synopsys, Inc. 2007 64 Professor in Electrical Engineering,
Physics, and Materials Science &
Engineering at the University of
Michigan 2008 58 Retired Senior Vice President and
General Manager, Enterprise
Services for Hewlett- Packard
Company 2005 69 Retired Partner of Ernst & Young
LLP 2009 47 Chief Executive Officer of Manifest
Energy Inc. 2008 67 Retired Executive Vice President,
Chief Financial Officer of Cisco
Systems, Inc. 2007 70 Retired Chairman, President, and
Chief Executive Officer of Xilinx,
Inc. 2004 54 Senior Vice President, Finance and
Chief Financial Officer of eBay,
Inc. 2009 
BaseBit Technologies, Inc.
Synopsys, Inc.There is no family relationship among any of the nominees, directors or any of Applied’s executive officers. Applied’s executive officers serve at the discretion2 2018 Proxy Statement
Science, Physics, and Materials Science &
Engineering, University of Michigan
Enterprise Services, Hewlett-Packard Company
(retired)
Broadcom Corporation (retired)Scott A. McGregor served as President and Chief Executive Officer and as a member of the board of directors of 
Cisco Systems, Inc. (retired) Further information about each of the director nominees is provided below.The Board unanimously recommends that you vote “FOR” each director nominee.Michael R. Splinter has been Executive Chairman of the Board of Directors of Applied since September 2013. He was Chairman of the Board of Directors from March 2009 to September 2013. Mr. Splinter served as Chief Executive Officer of Applied from April 2003 until September 2013, and also as President from April 2003 to June 2012. Prior to joining Applied, Mr. Splinter was an executive at Intel Corporation, a manufacturer of chips and computer, networking and communications products, where he held a number of positions, including Executive Vice President and Director of Sales and Marketing, and Executive Vice President and General Manager of the Technology and Manufacturing Group. Mr. Splinter is a director of The NASDAQ OMX Group, Inc.Areas of Relevant Experience: board, executive and technological leadership; semiconductor industry leadership and policy experience; extensive global business, operating, marketing and industry experience; in-depth knowledge of the technology and information sector; and broad exposure to a wide range of issues facing companies in diverse industries.Gary E. Dickerson has been Chief Executive Officer and a member of the Board of Directors of Applied since September 2013. Mr. Dickerson was named President of Applied in June 2012, after joining Applied following its acquisition of Varian Semiconductor Equipment Associates, Inc. (“Varian”) in November 2011. Mr. Dickerson had served as Chief Executive Officer and a director of Varian since 2004. Prior to joining Varian in 2004, Mr. Dickerson served 18 years with KLA-Tencor Corporation, a supplier of process control and yield management solutions for the semiconductor and related industries, where he held a variety of operations and product development roles, including President and Chief Operating Officer. Mr. Dickerson started his semiconductor career in manufacturing and engineering management at General Motors’ Delco Electronics Division and then AT&T, Inc.Areas of Relevant Experience: executive leadership and management experience; extensive semiconductor industry leadership; global business, industry and operational experience; extensive engineering and technological leadership; understanding of complex industry and global challenges and opportunities; and expertise in driving innovation and product development.Aart J. de Geus is a co-founder of Synopsys, Inc., a provider of electronic design automation (EDA) software and related services for semiconductor design companies, and currently serves as its Chairman of the Board of Directors and Co-Chief Executive Officer. Since 1986, Dr. de Geus has served as a director of and held various positions at Synopsys, including President, Senior Vice President of Engineering and Senior Vice President of Marketing. From 1982 to 1986, Dr. de Geus was employed by the General Electric Company, a global infrastructure, finance and media company, where he was the Manager of the Advanced Computer-Aided Engineering Group.Areas of Relevant Experience: growing a start-up to a well-established publicly-traded company; executive and technological leadership; important perspectives on navigating a company through various stages of growth; innovation, management development, and global challenges and opportunities; mergers and acquisitions; and board leadership.Stephen R. Forrest holds faculty appointments as Professor of Electrical Engineering and Computer Science, as Professor of Physics, and as Professor of Materials Science & Engineering at the University of Michigan, and leads the University’s Optoelectronics Components and Materials Group. From January 2006 to December 2013, Mr. Forrest also served as Vice President for Research at the University of Michigan. From 1992 to 2005, Dr. Forrest served in a number of positions at Princeton University, including as Chair of the Electrical Engineering Department, Director of the Center for Photonics and Optoelectronic Materials, and as director of the National Center for Integrated Photonic Technology. Prior to Princeton, Dr. Forrest was a faculty member of the Electrical Engineering and Materials Science Departments at the University of Southern California.Areas of Relevant Experience: extensive knowledge of semiconductor and alternative energy technologies; research and development portfolio management; government policy; technology licensing; product commercialization; and partnering with industry, government, entrepreneurs, and community leaders to develop businesses focused on alternative energy and other technologies to diversify a state’s economy and increase global competitiveness.Thomas J. Iannotti served as Senior Vice President and General Manager, Enterprise Services, for Hewlett-Packard Company, a technology solutions provider to consumers, businesses and institutions globally, from February 2009 until his retirement in October 2011. From 2002 to January 2009, Mr. Iannotti held various executive positions atHewlett-Packard, including as Senior Vice President and Managing Director, Enterprise Business Group, Americas. From 1978 to 2002, Mr. Iannotti worked at Digital Equipment Corporation, a vendor of computer systems and software, and at Compaq Computer Corporation, a supplier of personal computing systems, after its acquisition of Digital Equipment Corporation. Mr. Iannotti currently serves as a member of the board of directors of Atento S.A.Areas of Relevant Experience: broad and deep industry and technology knowledge; leadership skills; senior management; and service management on a global, regional, and country level, including in Asia and Europe.Susan M. Jamesserved as a partner at Ernst & Young LLP, a global leader in assurance, tax, transaction and advisory services, from 1987 to 2006. Ms. James joined Ernst & Young in 1975 and, following her retirement in 2006, served as a consultant to the firm until December 2009. She also served on the Ernst & Young Americas Executive Board of Directors from January 2002 to June 2006. Ms. James is a certified public accountant (inactive) and member of the American Institute of Certified Public Accountants. Ms. James currently serves as a member of the boards of directors of Coherent, Inc. and Yahoo! Inc.Areas of Relevant Experience: extensive financial and accounting expertise, including deep understanding of accounting principles, financial controls, financial reporting rules and regulations, and audit procedures; broad experience with global technology companies; and leadership experience.Alexander A. Karsnerhas served as Chief Executive Officer of Manifest Energy Inc., a clean energy infrastructure development and finance company, since July 2009. From March 2006 to August 2008, he served as Assistant Secretary for Energy Efficiency and Renewable Energy at the U.S. Department of Energy. From April 2002 to March 2006, Mr. Karsner was Managing Director of Enercorp LLC, a private company involved in international project development, management and financing of energy infrastructure. Mr. Karsner has also worked with Tondu Energy Systems of Texas, Wartsila Power Development of Finland and other multi-national energy firms and developers.Areas of Relevant Experience: energy industry and related public policies; leadership in renewable energy policy, technologies and commercialization; expertise in domestic and international trade, development and investment markets; and understanding of issues related to clean energy and alternative technologies.Dennis D. Powell served as an Executive Advisor at Cisco Systems, Inc., a provider of networking products and services, from February 2008 to September 2010. He served as Cisco’s Chief Financial Officer from May 2003 to February 2008, and, in addition, served as an Executive Vice President from 2007 to 2008 and a Senior Vice President from 2003 to 2007. After joining Cisco in 1997, Mr. Powell also served as Senior Vice President, Corporate Finance and Vice President, Corporate Controller. Before joining Cisco, Mr. Powell was employed by Coopers & Lybrand LLP, an accounting firm, for 26 years, where he was last a senior partner. Mr. Powell currently serves as a member of the boards of directors of Intuit, Inc. and VMware, Inc.Areas of Relevant Experience: substantial financial and accounting expertise, including deep understanding of accounting principles, financial controls, financial reporting rules and regulations, and audit procedures; executive management; mergers and acquisitions; risk management; insights on corporate governance; and board leadership.Willem P. Roelandts served as Chairman of the Board of Directors of Xilinx, Inc., a supplier of programmable logic solutions, from July 2003 to February 2009, and as a director from January 1996 to August 2009. Mr. Roelandts served as President and Chief Executive Officer of Xilinx from January 1996 to January 2008. Prior to joining Xilinx, Mr. Roelandts held various executive positions during a 29-year career at Hewlett-Packard Company, where he last served as Senior Vice President and General Manager of Computer Systems Organizations. Mr. Roelandts currently serves as a member of the board of directors of Aruba Networks, Inc.Areas of Relevant Experience: significant expertise with strategic and line management, engineering innovation, market diversification, and executive development; extensive executive management and operational experience on a global basis; deep understanding of factors that drive success at companies that are driven by innovation, research and development; and board leadership.Robert H. Swanhas served as Senior Vice President, Finance and Chief Financial Officer of eBay Inc., a provider of online marketplaces and payment services, since March 2006. From 2003 to March 2006, Mr. Swan was Chief Financial Officer and Executive Vice President of Electronic Data Systems Corporation, a technology services company. Mr. Swan also served as Executive Vice President and Chief Financial Officer of TRW, Inc., a global manufacturing and service company, from 2001 to 2002 and held various executive positions at Webvan Group, Inc., an online grocery delivery service, from 1999 to 2001. Mr. Swan spent the first 15 years of his career at the General Electric Company in various roles.Areas of Relevant Experience: significant financial expertise and global financial management; mergers and acquisitions; risk management and controls; and substantial management and leadership skills.James C. Morgan has served as Applied’s Chairman Emeritus since March 2009. Mr. Morgan spent more than 31 years as a director and employee of Applied, including over 20 years ashaveattend any Board or Committee meetings, has no voting rights and does not receive anyreceives no retainer or meeting fees.Committee MeetingsNominee ConsiderationsBoard met six times in fiscal 2014. Eachchart below illustrates broad categories of skills and expertise that our director attended over 75%nominees offer that we believe contribute to the effective leadership and exercise of all Board and applicable committee meetings held during fiscal 2014, except for Mr. Rogers. Applied’s policy is to strongly encourage its Board members to attendoversight responsibilities by the Annual Meeting of Stockholders, and all Board members attended our 2014 Annual Meeting of Stockholders.Board.The Board has standing Audit, Human Resources
Compensation,perspectives foster thoughtful and robust discussion and decision-making, our Corporate Governance and Nominating Committees. In addition,Committee (the “Governance Committee”) and the Board also hasplace great value on a Strategydiversity of background, skills and viewpoints, gender and ethnicity among the directors when considering potential director candidates and nominees. Among the factors the Governance Committee considers in identifying and an Investment Committee,evaluating a potential director is the extent to which are described in Applied’s Corporate Governance Guidelines.Eachthe candidate would add to the diversity of the Audit, Human Resources and Compensation, and CorporateBoard.and Nominating Committees has a written charter approved byCommittee also expects eachnon-employee director to be free of relationships, interests or affiliations that could give rise to conflicts of interest or interfere with the Board that is reviewed regularly by the respective committees, which may recommend appropriate changes for approval by the Board. Copiesdirector’s exercise of the current charters for the Audit, Human Resources and Compensation, and Corporate Governance and Nominating Committees can be found on our website athttp://www.appliedmaterials.com/investors/corporate-governance. The current membership and primary functions of each of these committees are described in the tables below.Audit CommitteePrimary FunctionsNumber ofMeetingsHeld in Fiscal2014Members:Susan M. James*Dennis D. Powell*+Robert H. Swan*• oversee Applied’s financial statements, system of internal control over financial reporting, and auditing, accounting and financial reporting processes• appoint, compensate, evaluate and, when appropriate, replace Applied’s independent registered public accounting firm• oversee Applied’s tax, legal, regulatory and ethical compliance• review with Applied’s management and Internal Auditor the annual audit plan and matters relating to the Internal Audit department• review and pre-approve audit and permissible non-audit services• review and approve related-person transactions for which approval is required by applicable law• oversee financial-related risks and Applied’s enterprise risk management program• review annually the Audit Committee Charter13*Audit Committee Financial Expert+ChairHuman Resources andCompensationCommitteePrimary FunctionsNumber ofMeetingsHeld in Fiscal2014Members:Thomas J. IannottiWillem P. Roelandts+James E. Rogers• oversee human resources programs, compensation and employee benefits programs, policies and plans relating to Applied’s employees and executives• review matters relating to management succession and executive organization development• determine compensation policies applicable to Applied’s executive officers and all other employees• determine the compensation of the Chief Executive Officer and Applied’s other executive officers• adopt, amend and oversee the administration of all equity-related incentive plans, senior executive bonus plans and major retirement and deferred compensation programs• review and consider compensation policies and practices as they relate to risk management practices• approve the compensation of the members of the Board• review annually the Human Resources and Compensation Committee Charter5+ChairCorporate Governanceand NominatingCommitteePrimary FunctionsNumber ofMeetingsHeld in Fiscal2014Members:Thomas J. IannottiSusan M. James+Alexander A. KarsnerDennis D. PowellWillem P. Roelandts• oversee the composition, structure and evaluation of the Board and its committees, including overseeing an annual self-evaluation process of the Board and its committees• identify qualified candidates for election to the Board• establish procedures for director candidate nomination and evaluation• develop and oversee Applied’s Corporate Governance Guidelines• review Applied’s corporate governance policies and recommend to the Board modifications to the policies as appropriate• review any proposals submitted by stockholders for action at the Annual Meeting of Stockholders and make recommendations to the Board regarding action to be taken in response to each such proposal• review and monitor takeover defenses and takeover defense preparedness to maximize long-term stockholder value• review annually the Corporate Governance and Nominating Committee Charter2+ChairCorporate Governance Guidelines.independent judgment. Applied’s Corporate Governance Guidelines describe, among other matters, the role and functions of the Board, the responsibilities of various Board committees, and the procedures for reporting concerns to the Board. These guidelines are available on our website, along with other important corporate governance materials, athttp://www.appliedmaterials.com/investors/corporate-governance.The Corporate Governance Guidelines provide, among other things, that:theour directors must be independent;the Board shall designate a lead independent, director who, among other things, is responsible for presiding over executive sessions of independent directors;the Board shall appoint all members of Board committees;theand that our Audit, Human Resources and Compensation, and Corporate Governance and Nominating Committees must consist solely of independent directors; andthe independent directors shall meet in executive sessions without the presence of the non-independent director(s) and members of Applied’s management at least twice a year during regularly scheduled Board meeting days and from time to time as deemed necessary or appropriate.As the operation of the Board is a dynamic process, the Board regularly reviews changing legal and regulatory requirements, evolving best practices and other developments, and may modify the Corporate Governance Guidelines from time to time as it deems appropriate.Director Independence.Director independence is determined under Nasdaq listing standards and SEC rules. An “independent director” means a person who is not an officer or employee of Applied or its subsidiaries, or any other individual having a relationshipThe Board has affirmativelyin the opinionall members of the Board would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. To be considered independent, the Board must affirmatively determine that neither thewho served during 2017 and all director nor any member of his or her immediate family, has had any direct or indirect material relationship with Applied within the previous three years,nominees, other than in connection with the director’s service on the Board.The Board considered relationships, transactions and arrangements with each of the directors and concluded that none of the non-employee directors, or any of his or her immediate family members, has any relationship with Applied that would impair his or her independence. The Board has determined that each member of the Board, other than Messrs. Splinter andMr. Dickerson, is an independent director under applicable Nasdaq listing standards and SEC rules. Messrs. Splinter and Dickerson do not meet the independence standards because they are employees of Applied. In addition, the Board has also determined that all directors who serve on the Audit, Human Resources and Compensation, and Corporate Governance and Nominating Committeesour Chief Executive Officer, are independent directors under applicable Nasdaq listing standards and SEC rules.Leadership Structure. Under our Corporate Governance Guidelines, the roles of Chairman and Chief Executive Officer may be filled by the same or different individuals. This allows the Board flexibility to determine whether the two roles should be combined or separated based upon the Company’s needs and the Board’s assessment of its leadership from time to time. Following a careful review of its leadership structure, the Board determinedbelieves that it was appropriate to separate the role of Chairman and Chief Executive Officer in September 2013 in connection with the appointment of Mr. Dickerson as Chief Executive Officer. The Board’s leadership structure continues to include a Lead Independent Director.Mr. Splinter has held the role of Executive Chairman since September 2013, having previously served as Applied’s Chairman since March 2009 and as Chief Executive Officer since April 2003, until the appointment of Mr. Dickerson as Chief Executive Officer and member of the Board effective September 1, 2013. Mr. Splinter’s industry and management experience enables him to understand the prioritiesnew ideas and perspectives of Applied’s customers, suppliers and workforce, as well as the competitive landscape. In addition, Mr. Splinter has a deep understanding of the complex industries in which Applied operates and their global challenges and opportunities. As Executive Chairman, Mr. Splinter has been primarily focused on providing leadership on strategic projects, industry-wide initiatives and major public policy issues, as well as providingare critical support of the proposed business combination with Tokyo Electron with respect to customer relations, regulatory, integration planning and other matters.The Board’s independent directors, including the Lead Independent Director, provide effective oversight of management. Mr. Roelandts, an independent director, currently serves as Applied’s Lead Independent Director. The Lead Independent Director helps ensure a strong, independent and active Board. He presides at all meetings of the Board at which the Executive Chairman is not present, including executive sessions of the independent directors; has the authority to call meetings of the independent directors; serves as liaison between the Executive Chairman and the independent directors; approves information sent to the Board; provides input on and approves meeting agendas for the Board; approves meeting schedules to assure that there is sufficient time for discussion of all agenda items; has the authority to retain outside advisors and consultants who report directly to the Board on board-wide issues; serves as aliaison for consultation and direct communication with stockholders; and performs such other duties as deemed necessary by the Board from time to time. The Lead Independent Director regularly communicates with other directors between scheduled Board meetings. The Board, including each of its committees, also has complete and open access to any member of management and the authority to retain independent advisors as the Board or such committees deem appropriate. In addition, all members of the Audit Committee, the Corporate Governance and Nominating Committee, and the Human Resources and Compensation Committee are independent directors, and the committee chairs have authority to hold executive sessions without management and non-independent directors present.Board’s Role in Risk Oversight.Applied is subject to a variety of risks, which generally include any event, circumstance or outcome that could adversely affect Applied’s ability to achieve its objectives or adversely impact Applied’s business, operations, financial condition or reputation. Some risks can be readily perceivedforward-looking and even quantified, while othersstrategic Board, as are unexpected or unforeseeable. Risks can be external, such as those arising from the macroeconomic or industry environment, government policies or regulations, competitors’ activities,valuable experience and natural disasters. Alternatively, risks can arise as a resultdeep understanding of Applied’s business and financial activities, operations or strategies.Applied’s managementindustries that longer-serving directors offer. Our Governance Guidelines do not impose a tenure limit on Board service, and ongoing Board refreshment has day-to-day responsibility for identifying risks and assessing them in relation to Company strategies and objectives; implementing suitable risk mitigation plans, processes and controls; and appropriately managing risksresulted in a mannerbalanced range of tenures which ensures both continuity and fresh perspectives among our director nominees.serves the best interestsit would be beneficial to have Mr. Powell continue to serve as director due to his financial and accounting expertise, his deep knowledge of Applied, its stockholders and other stakeholders.Our Board of Directors is responsible for overseeing major risks facing the Company, and reviewing management planshis leadership role as Chair of the Audit Committee.their mitigation. Generally, various committees of Applied’s Board of Directors oversee risks associated with their respective areas of responsibility and expertise. For example, in carrying out its oversight of risks related to financial matters, our Audit Committee oversees, reviews and discusses with management, the Internal Auditor and the independent accountants, Applied’s major risk exposures and the steps management has taken to monitor and mitigate those exposures. Our Human Resources and Compensation Committee oversees risks associated with Applied’s compensation policies, plans and practices. Our Corporate Governance and Nominating Committee oversees the management of risks related to corporate governance matters, including director independence and board composition and organization.four years or less.
Applied has implementedenterprise risk management (“ERM”) program forongoing, year-round process.purposesize and composition of providing an enterprise-wide perspective on the Company’s risks, with the objective of identifying and mitigating key risks. Our Audit Committee is responsible for overseeing this program, including the identification of major risks facing the Company. These identified risks are then reported to the Board, which in turn delegates oversight responsibility for them to the respective Board committee(s) in whose area of responsibility and expertise the risks fall. Management reviews the ERM program activities regularly with the Audit Committee and the Board.Senior management and other employees also report to the Board and assesses whether the composition appropriately aligns with the Company’s evolving business and strategic needs. The focus is on ensuring that the Board is composed of directors who possess a wide variety of relevant committees from time to time on risk-related issues. Our Chief Executive Officerskills, professional experience and Chief Financial Officer report on certain risksbackgrounds, bring diverse viewpoints and exposures relating to all or partperspectives, and effectively represent the long-term interests of shareholders.Company; heads of our principal business unitsCompany to determine what current and other members of senior management report on the risksfuture skills and exposures associated with their respective areas of responsibility; and the General Counsel reviews risks related to legal, compliance and regulatory matters. The full Board receives a comprehensive report prepared annually by the finance and legal organizations that identifies risk exposures and associated business processes to manage those risks. Applied’s management and other employees with responsibilities in a particular area review and contribute to sections of this report that relate to the risks and risk controls associated with that area. The Audit Committee reviews and discusses matters covered in this report.Director Nominations. The Corporate Governance and Nominating Committeeexperience are required of the Board in exercising its oversight function. Specific search criteria evolve over time to reflect the Company’s dynamic business and strategic needs and the changing composition of the Board, and may focus on such factors as:● Operating experience or thought leadership in key markets, industries, technologies or business models that are aligned with the Company’s strategic growth plans; ● Business or cultural background in regions where the company does significant business; ● Senior executive leadership and management experience; and ● Subject matter expertise in such areas as corporate finance and financial reporting, governance, compensation and marketing. for director nominees. This committeeare also expected to possess or demonstrate:● Sound judgment, analytical and inquisitive perspective, and practical wisdom; ● Strategic mindset and engaged and collaborative approach; ● Independence, personal and professional ethics, integrity and values; and ● Commitment to representing the long-term interests of Applied’s shareholders. firmsfirm to assist in identifying and evaluating new candidates for director nominees.nominees and may also consider referrals from directors, shareholders or other sources. Mr. McGregor, who joined our Board in January 2018, was identified and vetted as a potential candidate by a third-party search firm for consideration by the Governance Committee. The Governance Committee evaluates and interviews potential Board candidates and makes appointment recommendations to the full Board. All members of the Board may interview candidates.set fortha result of the foregoing process, the Board has added four new directors over the last three years. The appointments of Dr. Chen and Ms. Ma in the Corporate Governance Guidelines, the Corporate Governance2015, Ms. Bruner in 2016, and Nominating Committee strives for a mix of skillsMr. McGregor in 2018 have brought valuable and diverse backgrounds and perspectives (functional, gender, cultural and geographic) that is effective forto the Board. Every effort is made to complement and supplement the skillsoverall composition of the existingBoard:● Dr. Chen is an accomplished CEO with technological expertise and extensive experience in technology-enabled and related growth industries around the world. ● Ms. Ma has a broad financial perspective and a strong technical background, as well as experience in global growth investing, capital markets and mergers and acquisitions. ● Ms. Bruner is a well-respected former CFO with deep experience in the global high-tech industry and expertise in driving business growth and scale. ● Mr. McGregor is a former CEO who brings to our Board deep experience in the global semiconductor industry, as well as experience in innovation, management development, and understanding global challenges and opportunities. and strengthen any identified areasComposition that Drives Refreshment
improvement. Election at Annual Meeting. In considering whether to recommendre-nomination of a director for election at our Annual Meeting, the Governance Committee considers factors such as:● The extent to which the director’s skills, qualifications and experience continue to contribute to the success of our Board; ● Feedback from the annual Board evaluations and individual discussions between eachnon-employee director and our Chairman; ● Attendance and participation at, and preparation for, Board and Committee meetings; ● Shareholder feedback, including the support received by director nominees elected at our 2017 Annual Meeting; ● Outside board and other affiliations, including any actual or perceived conflicts of interest; and ● The extent to which the director continues to contribute to the diversity of our Board. Corporate Governance and Nominating Committee’s recommendation, the Board selects director nominees and recommends them for election by Applied’s stockholders, and also fills any vacancies that may arise between Annual Meetings of Stockholders. Directors added to the Board to fillvacancies are generally recommended for election at the next Annual Meeting of Stockholders.Shareholder Recommendations or Nominations. The Board also may consider recommendations of director candidates from other sources. In selecting the director nominees, the Board assesses the independence, character and acumen of candidates and endeavors to establish a mix of background and experience in a number of areas of core competency, including: business judgment; management; accounting and finance; knowledge of the industries (including technologies and markets) in which we operate; manufacturing and service; leadership; strategic vision; international markets and global challenges; marketing; crisis/risk management; research and development; government; and other areas relevant to our business. Additional criteria include a candidate’s personal and professional ethics, integrity and values; willingness to devote sufficient time to prepare for and attend meetings and participate effectively on the Board; and commitment to representing the long-term interests of Applied’s stockholders.The Corporate Governance and Nominating Committee, or a screening committee of the Board, evaluates and interviews potential Board candidates. All members of the Board may interview the final candidate(s). The Corporate Governance and Nominating Committee also will consider potential director candidates recommended by stockholders. The same identification and evaluation procedures described above apply to all candidates for director nomination, including candidates submitted by stockholders.Stockholdersshareholders. Shareholders wishing to recommend a prospective candidate for consideration by the Corporate Governance and Nominating Committee should submit the candidate’s name, biographical data and a description of his or her qualifications in light of the criteria listed above to:to Thomas F. Larkins, Corporate Secretary, Applied Materials, Inc., 3225 Oakmead Village Drive, M/S 1241, P.O. Box 58039, Santa Clara, CA 95054. Stockholders95052, or bye-mail at corporatesecretary@amat.com.
provide that any stockholderpermit shareholders holding at least 20% of record entitledour outstanding shares of common stock to votecall a special meeting.the Annual Meeting who intendsleast three years may nominate up to nominate atwo individuals or 20% of our Board, whichever is greater, as director must notify Applied’s Corporate Secretary not more than 105 days and not less than 75 days priorcandidates for election to the first anniversary ofBoard, and require us to include such nominees in our annual meeting proxy statement if the preceding year’s Annual Meeting. The notice must meet othershareholders and nominees satisfy the requirements contained in the Bylaws, a copy of which can be obtained from Applied’s Corporate Secretary at the address set forth above.stockholdershareholder vote. The CorporateOur Governance and Nominating Committee, composed entirely of independent directors, will consider the offer of resignation, taking into consideration all factors it deems relevant, and recommend to the Board the action to be taken. The Board must take action on the recommendation within 90 days following certification of the stockholdershareholder vote. No director who tenders an offer of resignation may participate in the vote on the Corporate Governance and Nominating Committee’s recommendation or the Board’s determination of whether to accept the resignation offer. Applied will publicly disclose the Board’s decision, including, if applicable, the reasons for rejecting an offer to resign.● Our Audit Committee oversees the enterprise risk management program, as well as risks related to financial, regulatory, compliance, cybersecurity and environmental, health and safety matters, and regularly reviews with management, the head of internal audit and the independent accountants the steps taken to monitor and mitigate risk exposures. ● Our Governance Committee oversees the management of risks related to corporate governance matters, including director independence and Board composition and succession. ● Our Human Resources and Compensation Committee oversees risks associated with Applied’s compensation policies, plans and practices, organizational talent and culture, and management succession. Corporate Governance Guidelines state that upon a changeBoard has delegated to the Human Resources and Compensation Committee (“HRCC”) primary responsibility for management succession planning and executive organizational development. The HRCC reviews and advises on management’s succession and development programs for the CEO and other senior executives, with an eye toward ensuring readiness of succession candidates who can assume top management positions without undue interruption. Board members have opportunities throughout the year to engage with members of senior management in a director’s principal occupation or retirement, he or shevariety of settings, including Board meetings and events, preparatory meetings, analyst meetings and internal and external business andexpected to offerhave a long-term and continuing process for effective senior leadership development and succession and to resign.ensure that there are ready choices available when the time is right.will reviewand our Board on an ongoing basis throughout the appropriateness of the director’s continued Board membership and recommend to the Board the action to be taken.year.Stockholders’ Right
Call a Special Meeting. At our last annual meeting in March 2014, our stockholders approved a stockholder proposal requesting a right for holders of at least 10%over 50% of our outstanding shares and spent a significant amount of time discussing key business, Board, governance, executive compensation, and sustainability matters, as well as other topics of interest to callour shareholders.special meeting (the “Proposal”).broad review of our executive compensation program and in response to shareholder input at the time of our 2016 Annual Meeting. We contacted the holders of approximately 43% ofThe Board appreciatesour outstanding shares, and takes very seriouslyengaged in active discussions with holders representing 25% of our shares outstanding.interestsHuman Resources and Compensation Committee made several changes to the annual bonus program effective beginning in fiscal 2016, and completed a comprehensive redesign of the stockholderslong-term incentive program effective beginning in fiscal 2017. These changes enhanced alignment with Applied’s strategic priorities and directly reflected the input provided by shareholders.this issue. In determiningproxy access. Shareholders expressed varying points of view: while some indicated support for proxy access, others expressed concerns about the potential costs and disruption that it could impose without appropriate responseterms and safeguards. Following these discussions, we amended our Bylaws in December 2015 to implement proxy access with terms that reflected the Proposal, the Board considered the current circumstances relating to the Company’s proposed Business Combination with Tokyo Electron, which was approvedviews expressed by our stockholdersshareholders.June 2014. Applied has committed and continuesan extensive shareholder outreach effort in the spring of 2015 to dedicate tremendous efforts to prepare to consummatediscuss the Business Combination and has also made strong progress in preparing for integrationimplementation of the two companies as soon as the Business Combination closes.The Board took into account the time, resources and expense that would be required to develop a deliberate and measured approach to implementing the Proposal, and the concern about diverting focus from the critical ongoing work on the Business Combination. The Board also considered the outreach to stockholders that the Company would undertake on this issue to ensure that provisions implemented would be supported by, and satisfactory to, Applied stockholders, and determined that, given the pending closing of the Business Combination, engagement on this issue would not be appropriate at this time, as it might cause unwarranted confusion about the Company’s intention and expectation to merge.The Board also considered the fact that following the consummation of the Business Combination, the combined company will be governed by Dutch law, which provides that one or more stockholders representing at least 10% of the issued share capital of the combined company may call a special meeting of stockholders.Based on these considerations, the Board determined that it was not appropriate to adopt responsive provisions to the Proposal at this time. However, if the Business Combination does not close, the Board, following consultation with stockholders, intends to determine and implement an appropriate response to the Proposal that would provide stockholders with theshareholder right to call a special meeting.StandardsShareholder CommunicationsBusiness Conduct. For many years,our directors regarding Applied may write to the director, c/o Thomas F. Larkins, Corporate Secretary, Applied Materials, Inc., 3225 Oakmead Village Drive, M/S 1241, thatatat:investors/corporate-governancecompany/investor-relations/governance-documents.Stock Ownership Guidelines.adopted stock ownership guidelinesthree principal committees performing the functions required by applicable SEC rules and Nasdaq listing standards to more closely alignbe performed by independent directors: the interests of our directors and NEOs with those of our stockholders. The guidelines provide that non-employee directors should each maintain an investment in Applied stock with a value of at least $325,000. Applied’s Chief Executive Officer and Executive Chairman ofAudit Committee, the Board should each maintain an investment in Applied stock that is equal to at least five times his or her annual base salary. NEOs other than the Chief Executive Officer and Executive Chairman should each maintain an investment in Applied stock that is equal to at least three times his or her annual base salary. In determining whether the required investment levels have been met, shares are valued using the closing price of Applied stock on the date(s) acquired. In each case, and unless an exception is made by the Board’s Human Resources and Compensation Committee, such investment levels should be achieved no later than five years followingand the Corporate Governance and Nominatingdirector’swritten charter approved by the Board that is reviewed annually by the respective committee and by the Board.officer’s initial election or appointment.Corporate Governance and Nominating Committee is an independent director under applicable Nasdaq listing standards and SEC rules.Stockholder Communications. Any stockholder wishing to communicate with any of our directors regarding Applied may write to the director, c/o Thomas F. Larkins, Corporate Secretary, Applied Materials, Inc., 3225 Oakmead Village Drive, M/S 1241, P.O. Box 58039, Santa Clara, CA 95054. The Corporate Secretary will forward these communications directly to the director(s). The independent directors13reviewalso has a Strategy Committee and approve the stockholder communication process periodicallyan Investment Committee, whose roles and responsibilities are described in order to enable an effective method by which stockholders can communicate with the Board.Applied’s Corporate Governance Guidelines.Meetings in
Fiscal 2017: 12Meetings in
Fiscal 2017: 5Meetings in
Fiscal 2017: 8ofProgram for DirectorsRetainerWe compensate ournon-employee directors for their service on the Board with a combination of cash and Meeting Fees.equity awards. Directors who are employees of Applied do not receive any additional compensation for their service as directors. TheIn March 2017, the Human Resources and Compensation Committee, comprised solely of independent directors, approved changes to the compensation program fornon-employee directors after consideration of market data and based on the recommendation of its independent compensation consultant. These changes, which were effective beginning with the second fiscal quarter of 2017, included:● Increasing the annual base retainer from $65,000 to $70,000 and the additional annual retainer for Committee chairs; ● Increasing the value of annual equity awards from $200,000 to $225,000; ● Replacing Committee meeting fees with annual retainers for members of the Audit Committee, Human Resources and Compensation Committee, Corporate Governance and Nominating Committee, and Strategy Committee; and ● Maintaining meeting fees for members of the Investment Committee and otherad-hoc committees that do not meet regularly and increasing the meeting fee forad-hoc committee chairs. a retainerannual retainers and committee meeting fees, and the grant date fair market value of annual equity awards for ournon-employee directors hashad not changed since fiscal 2009.whocurrently receives an annual cash retainer for his or her service on the Board, as well as additional cash retainers if he or she serves for less thanas the full fiscal year receives a prorated amountChairman of the annual retainer basedBoard, on the portion of the fiscal year the director served. Non-employee directors who serve as chair of a committee or as Lead Independent Director receive an additional retainer for each such position held (which is similarlythe chair of a committee. Annual retainers are paid quarterly and are prorated ifbased on the director serves for less thandirector’s service during the full fiscal year).below reflects thesets forth cash compensation fornon-employee directors forin effect during fiscal 2014.2017. Effective
through
Q1 FY 2017
as of $ 65,000 $ 70,000 $ 2,000 $ 0 $ 0 $ 25,000 $ 0 $ 12,500 $ 0 $ 10,000 $ 0 $ 10,000 $ 150,000 $ 150,000 $ 20,000 $ 25,000 $ 15,000 $ 20,000 $ 10,000 $ 12,500 $ 10,000 $ 12,500 Fiscal 2014 $ 65,000 $ 20,000 $ 15,000 $ 10,000 $ 10,000 $ 15,000 $ 0 $ 2,000 tonon-employee directors receive $2,000 per meeting for service on the retainer andInvestment Committee or otherad-hoc committee of which they are a member, or $3,000 per meeting fees described above, non-employeeif they are the chair of such a committee.Non-employee directors are reimbursed for travel and other reasonableout-of-pocket expenses related to attendance at Board and committee meetings, business events on behalf of Applied, and seminars and programs on subjects related to their Board responsibilities.Charitable Matching Contributions. Non-employee directors are eligible to participate in The Applied Materials, Foundation Matching Gift Program, under which the Foundation annually will match up to $2,000 of a non-employee director’s donations to eligible non-profit civic, arts, environmental and educational organizations. Non-employee directors are subject to the same maximum matching amount and other terms as those for Applied’s employees.Inc. 15Fiscal 2014 AwardsInitial Grant.. During fiscal 2014, each Upon initial appointment or election to the Board, anon-employee director received an automatic, non-discretionaryreceives a grant of 10,615 restricted stock units (“RSUs”) under the Applied Materials, Inc. Employee Stock Incentive Plan. Thewith respect to a number of shares of this award wasApplied common stock with a fair market value on the numberdate of RSUsgrant equal to $225,000 (rounded down to the nearest whole share) equal to $200,000, divided by 100%,pro-rated based on the period starting on the day of initial appointment or election and ending on the day of the fair market valuenext scheduled annual meeting of shareholders.sharenumber of shares of Applied common stock with a fair market value on the grant date, which was the date of our 2014grant equal to $225,000 (rounded down to the nearest whole share). Anon-employee director who is initially appointed or elected to the Board on the day of an annual meeting of stockholders (“2014shareholders receives only an annual grant. Each of ournon-employee directorsre-elected at the 2017 Annual Grants”). The 2014 Annual Meeting received a grant of 6,019 restricted stock units on that date.are scheduledmade to ournon-employee directors vest in full on the earlier of March 1 2015,of the year following the date of grant or the next annual meeting, provided thenon-employeeIf not already vested, the vestingVesting of these grants will be accelerated in full upon anon-employee director’s earlier termination of service on the Board due to disability or death. In addition,death, or upon a change of control of Applied the vesting of the 2014 Annual Grants will accelerate in full if the director ceases to be anon-employee director (and does not become a member of the board of directors of any successor corporation or its parent). The Business Combination is not consideredNon-employee directors may elect in advance to be a changedefer receipt of control undervested shares until their termination of service on the Employee Stock Incentive Plan.Board.The Human ResourcesLimit on Awards.Under our amended and Compensation Committee of our Board may modify the number of RSUs granted to non-employee directors under therestated Employee Stock Incentive Plan, in the future and may amend, terminate or suspend the Employee Stock Incentive Plan at any time and for any reason, and will obtain stockholder approval to the extent necessary or desirable to comply with applicable laws.Vesting Acceleration. In March 2014, the vesting schedule for all equity awards held by non-employee directors, which consists solely of RSUs, was changed to provide for acceleration of vesting as of the date that is three trading days prior to the expected date of consummation of the Business Combination, provided that the awards remain outstanding through such date. This accelerated vesting is expected to mitigate or eliminate the impact of an excise tax that would be imposed under Section 4985 of the Internal Revenue Code (the “Code”) on unvested awards outstanding as of the closing of the Business Combination. Code Section 4985 generally imposes a punitive 15% excise tax on the valuegrants of equity awards held byto any individualnon-employee director may not exceed a fair market value totaling more than $400,000 in any fiscal year.executive officers duringeducational organizations.Non-employee directors are subject to the period six months before to six months after consummation of the Business Combination. Assuming the Business Combination occurred on October 24, 2014, the last business day of fiscal 2014, a total of 13,782 restricted stock units held by each non-employee director would have accelerated vesting.same maximum matching amount and other terms as those for Applied’s employees.Deferred and Retirement-Eligible Shares. Notwithstanding the vesting acceleration described above, a number of RSUs held by certain non-employee directors might not be settled prior to the consummation of the Business Combination and as a result, may be subject to the Section 4985 excise tax. This consists of shares that the directors would otherwise receive upon the vesting of RSUs but as to which they have previously elected to defer settlement, andcertain shares that would vest upon the directors’ retirement for those directors who are retirement-eligible before the originally scheduled vesting date of the shares. In order to comply with applicable rules under Section 409A of the Code, deferred shares held by any non-employee director who continues onto the Board of Directors of the combined company after the closing of the Business Combination, Eteris N.V. (“Eteris”), will not be settled prior to the consummation of the Business Combination. Deferred shares held by those Applied non-employee directors who do not continue on the Eteris Board are expected to be settled shortly prior to the consummation of the Business Combination, to the extent permitted by the deferred compensation rules of Section 409A. This settlement is expected to mitigate or eliminate the Section 4985 excise tax that otherwise would apply to the deferred shares. Also to comply with Section 409A, shares held by Dr. Parker and Mr. Roelandts (regardless of whether they continue onto the Eteris Board) that, but for the vesting acceleration noted above, would vest on March 1, 2015 or upon their retirement from the Applied Board, also may not be settled prior to the consummation of the Business Combination (other than in accordance with the originally applicable vesting schedule). Of the ten current non-employee members of the Applied Board, three are expected to join the Eteris Board.All currently outstanding unvested RSUs held by the non-employee directors are scheduled to vest on March 1, 2015, and will be paid in shares, subject to the deferral elections and restrictions described in the preceding paragraph. Shares that are unsettled as of the consummation of the Business Combination may be subject to the Section 4985 excise tax. The maximum number of shares that may be subject to the excise tax under Section 4985 for Dr. Parker and Mr. Roelandts is 3,167 shares and 24,858 shares, respectively. The following maximum number of shares also may be subject to the Section 4985 excise tax: 60,154 shares for Ms. James; 52,906 shares for Mr. Powell; 81,845 shares for Mr. Rogers; and 43,495 shares for Mr. Swan. Each of Messrs. de Geus, Forrest, Iannotti and Karsner does not hold any shares that, after vesting acceleration, would be subject to the Section 4985 excise tax. In order to address the adverse tax consequences to non-employee directors relating to shares that cannot be settled prior to the Business Combination, Applied agreed to pay the Section 4985 excise tax that may be imposed on such shares, as well as an amount sufficient to pay all taxes related to Applied’s payment of the Section 4985 taxes. The amount of these taxes for each non-employee director will depend on the number of shares held by him or her to which the Section 4985 excise tax applies, the value of a share of Applied’s common stock as of the consummation of the Business Combination, the non-employee director’s applicable tax rate, and certain other factors. Payment of these taxes is intended to place these non-employee directors in the same position as most other Applied equity holders, and to mitigate adverse tax consequences resulting from their continuing as members of the Board though the consummation of the Business Combination.The following table shows compensation information for Applied’s non-employee directors for fiscal 2014.Director CompensationFor Fiscal 2014 Fees Earned
or Paid in
Cash
($) Stock
Awards
($)(1)(2) Option
Awards
($)(3) Non-Equity
Incentive Plan
Compensation
($) Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings All Other
Compensation
($)(4) Total
($) 71,000 195,847 — — — — 266,847 71,000 195,847 — — — — 266,847 79,000 195,847 — — — 500 275,347 103,000 195,847 — — — 2,000 300,847 75,000 195,847 — — — 1,000 271,847 81,000 195,847 — — — — 276,847 115,000 195,847 — — — — 310,847 107,000 195,847 — — — — 302,847 73,000 195,847 — — — — 268,847 91,000 195,847 — — — — 286,847 Name Fees Earned
or Paid in
Cash
($) Stock
Awards
($)(1)(2) All Other
Compensation
($)(3) Total
($) 108,026 222,643 3,000 333,669 91,625 222,643 2,000 316,268 92,125 222,643 — 314,768 96,390 222,643 — 319,033 202,760 222,643 1,750 427,153 41,017 — — 41,017 94,669 222,643 2,000 319,312 102,956 222,643 — 325,599 — — — — 130,750 222,643 — 353,393 76,717 — — 76,717 (1) Amounts shown do not reflect compensation actually received by the directors. Instead, these amounts represent the aggregate grant date fair value of stock awards granted in fiscal 20142017 (consisting of 10,6156,019 restricted stock units granted to each continuing director on March 4, 2014)9, 2017), as determined pursuant to FASB Accounting Standards Codification 718 (also referred to as “ASC(“ASC 718”). The assumptions used to calculate the value of stock awards are set forth in Note 1211 of the Notes to Consolidated Financial Statements included in Applied’s Annual Report on Form10-K for fiscal 20142017 filed with the SEC on December 17, 2014.15, 2017.(2) Including the 10,615 restricted stock units granted to each director on March 4, 2014, eachEach continuing director had 13,7826,019 restricted stock units outstanding at the end of fiscal 2014.2017. In addition, certain directors had restricted stock units that havehad vested in previous years and for which pursuant to such director’s election to defer, will be converted to shares of Applied common stock and paid to him or her onsettlement was deferred until the date of his or her termination of service from the Board, as follows: Mr. Chen, 10,219 units; Ms. James, 56,987 units; Mr. Powell, 52,906 units; Mr. Roelandts, 21,691 units; Mr. Rogers, 78,678Ma, 10,219 units; and Mr. Swan, 40,328Powell, 57,191 units.(3) Non-employee directors did not receive any option grants during fiscal 2014 and did not have any option awards outstanding at the end of fiscal 2014.(4)Amount shown represents The Applied Materials Foundation’s matching contribution of the director’s donations to eligiblenon-profit organizations under organizations.(4) The Applied Materials Foundation Matching Gift Program.term of office for each of Ms. James and Mr. Roelandts expired upon the election of directors at the 2017 annual meeting of shareholders on March 9, 2017, so they did not receive annual grants in fiscal 2017.(5) Mr. McGregor was appointed to the Board in fiscal 2018. Mr. Splinter, our Executive Chairman of the Board, and Mr. Dickerson, our President and CEO, are both employees of the Company and therefore they did not receive any retainer or meeting fees, or any RSUs automatically granted to non-employee directors, in fiscal 2014. Fiscal 2014 compensation information for Messrs. Splinter and Dickerson can be found in the Summary Compensation Table on page 40.16 2018 Proxy StatementStockholdersShareholdersAppliedour common stock beneficially owned as of January 25, 2015December 31, 2017 by each person known by Applied to own 5% or more of Appliedour common stock. In general, “beneficial ownership” refers to shares that an entity or individual had the power to vote or the power to dispose of, and shares that such entity or individual had the right to acquire within 60 days after January 25, 2015.December 31, 2017. Shares Beneficially Owned Number Percent(1) 73,774,458 (2) 6.0 % 69,512,621 (3) 5.7 % 66,565,720 (4) 5.4 % 65,407,237 (5) 5.3 % (1)Shares Beneficially Owned Name Number Percent(1)
100 Vanguard Blvd.
Malvern, PA 1935570,920,938 (2) 6.7 %
55 East 52nd Street
New York, NY 1005566,066,425 (3) 6.3 % (1) Percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of 1,228,672,9771,051,802,947 shares of common stock outstanding as of January 25, 2015.December 31, 2017.(2) The Schedule 13G filed with the SEC jointly by Artisan Partners Limited Partnership, Artisan Investments GP LLC, Artisan Partners Holdings LP and Artisan Partners Asset Management Inc. on January 30, 2015 indicates that as of December 31, 2014, each of these entities had shared power to direct the disposition of 73,774,458 shares and shared voting power over 68,352,552 shares.(3)The amended Schedule 13G filed with the SEC by BlackRock, Inc. (“BlackRock”) on February 2, 2015 indicates that as of December 31, 2014, BlackRock had sole power to direct the disposition of 69,512,621 shares and sole voting power over 59,061,358 shares.(4)The amended Schedule 13G filed with the SEC by The Vanguard Group (“Vanguard”) on February 10, 20159, 2017 indicates that as of December 31, 2014,2016, Vanguard had sole dispositive power to direct the disposition of 64,585,092over 69,034,547 shares, shared dispositive power to directover 1,886,391 shares, sole voting power over 1,701,589 shares, and shared voting power over 209,026 shares.(3) The amended Schedule 13G filed with the dispositionSEC by BlackRock, Inc. (“BlackRock”) on January 19, 2017 indicates that as of 1,980,628December 31, 2016, BlackRock had sole dispositive power over 66,066,425 shares and sole voting power over 2,106,62555,558,435 shares.(5)The Schedule 13G filed with the SEC jointly by Waddell & Reed Financial, Inc. (“WDR”), Waddell & Reed Financial Services, Inc. (“WRFSI”), Waddell & Reed, Inc. (“WRI”), Waddell & Reed Investment Management Company (“WRIMCO”) and Ivy Investment Management Company (“IICO”) on February 13, 2015 indicates that as of December 31, 2014, WDR had sole power to dispose of and sole power to vote 65,407,237 shares, each of WRFSI and WRI had sole power to dispose of and sole power to vote 34,992,840 shares, WRIMCO had sole power to dispose of and sole power to vote 34,992,840 shares, and IICO had sole power to dispose of and sole power to vote 30,414,397 shares.Appliedour common stock beneficially owned as of January 25, 2015December 31, 2017 by: (1) each director and director nominee, (2) each Named Executive Officer (“NEO”),NEO and (3) the current directors and executive officers as a group. In general, “beneficial ownership” refers to shares that a director or executive officer had the power to vote or the power to dispose of, and shares that such individual had the right to acquire within 60 days after December 31, 2017. Shares Beneficially Owned Total
Number of
Shares(1) Common
Stock(2) Right to
Acquire(3) Other
Stock-Based
Holdings(4) 112,460 98,678 13,782 — 89,760 75,978 13,782 — 66,460 52,678 13,782 — 74,614 3,845 13,782 56,987 13,782 — 13,782 — 195,744 181,962 (5) 13,782 — 74,723 8,035 13,782 52,906 121,885 86,412 13,782 21,691 141,391 48,931 13,782 78,678 111,350 57,240 13,782 40,328 585,944 585,944 (6) — — 1,692,618 1,692,618 (7) — — 238,087 238,087 (8) — — 82,611 82,611 — — 111,009 111,009 — — 4,177,243 3,781,333 (9) 145,320 250,590 (1)The total beneficial ownership for any individualShares Beneficially Owned Name Number(1) Percent(2) 10,777 (3) * 20,389 (4) * 137,678 (3) * 75,178 (3) * 73,178 (3) * 16,238 (3) * 18,815 (4) * — * 83,656 (6) * 2,050,555 (7) * 29,810 (8) * 254,131 * 274,058 * 199,062 * 135,080 * the total for the group is less than 1%. Percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of 1,228,672,977 shares of common stock outstandingExecutive Officers, as of January 25, 2015, plus the number of shares of common stock that such person or group had the right to acquire within 60 days after January 25, 2015.a Group (18 persons)3,672,686 (9) * (2)*Less than 1% (1) Except as otherwise indicated and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all of their shares of common stock.(3)(2)IndicatesPercentage ownership is calculated by dividing the number of shares that the named individualbeneficially owned by such person or group hasby the sum of 1,051,802,947 shares of common stock outstanding as of December 31, 2017, plus the number of shares of common stock that such person or group had the right to acquire through the vesting ofwithin 60 days after December 31, 2017.(3) Includes 6,019 restricted stock units that are scheduled to vest within 60 days of January 25, 2015.after December 31, 2017.(4) Number of shares representsIncludes (a) 10,278 restricted stock units that have vested and which, pursuant to the director’s election to defer, will be converted to shares of Applied common stock and paid to him or herthe director on the date of his or herthe director’s termination of service from the Applied Board.Board and (b) 6,019 restricted stock units that are scheduled to vest within 60 days after December 31, 2017.(5) Includes 484 shares held in a family foundation, which is a charitable trust. Dr. Parker disclaims beneficial ownershipMr. McGregor was appointed to the Board on January 22, 2018. Upon his appointment, he received an automatic grant of the 484 shares held in the family foundation.472 restricted stock units that are scheduled to vest within 60 days of December 31, 2017.(6) Includes 110,000(a) 57,638 restricted stock units that have vested and which, pursuant to Mr. Powell’s election to defer, will be converted to shares of unvestedApplied common stock and paid to him on the date of his termination of service from the Applied Board and (b) 6,019 restricted stock.stock units that are scheduled to vest within 60 days after December 31, 2017.(7) Includes (a) 69,900an option to purchase 1,000,000 shares of unvested restricted stock and (b) 300,000 shares held in a family trust.that is exercisable within 60 days after December 31, 2017.(8) Includes 5,100 sharesConsists of unvested restricted stock.stock units that are scheduled to vest within 60 days after December 31, 2017.(9) Includes 185,000(a) an option to purchase 1,000,000 shares that is exercisable within 60 days after December 31, 2017, (b) 111,563 restricted stock units that are scheduled to vest within 60 days after December 31, 2017 and (c) 78,194 restricted stock units that have vested and which, pursuant to each director’s election to defer, will be converted to shares of unvested restricted stock.Applied common stock and paid to the director on the date of the director’s termination of service from the Applied Board.Business Combination18 2018 Proxy StatementOn September 24, 2013, we entered into an agreement with Tokyo Electron to effect a strategic combination of our respective businesses. In June 2014, the shareholders of Applied and Tokyo Electron approved the proposed Business Combination. Based on the number of shares of Applied common stock and shares of Tokyo Electron common stock expected to be issued and outstanding immediately prior to the closing of the transaction, it is anticipated that, immediately following the transaction, former Applied stockholders and former Tokyo Electron shareholders will own approximately 68% and 32%, respectively, of the new combined company. The closing of the Business Combination is subject to customary conditions, including regulatory approvals.stockholdersshareholders to approve, on anon-binding, advisory basis, the compensation of our NEOs, as described in this Proxy Statement. We seek this approval each year. Our “say-on-pay”annual“say-on-pay” proposals in the previous four consecutive years werehave been supported by approximately 90% or moreour shareholders each year since we began providing this vote in 2011, and received the support of 98% of votes cast.cast in 2017.stockholdersshareholders through a strong emphasis onat-risk compensation tied to the achievement of performance objectives and the creation of stockholdershareholder value. Our executive compensation program is also designed to attract and retain highly-talented executives who are critical to the successful implementation of Applied’s strategic plan.metrics used to determinefinancial and inform our compensation decisions (Applied’s non-GAAP adjusted EPS and TSR)company performance metrics and the annual total direct compensation (base salary, annual incentive bonus and annual long-term incentive awards) paid to our CEO during the last five fiscal years. See page 23pages 26 and 35 for a chartcharts illustrating this alignment.Approximately 90%Significant Portion of Executive OfficerCEO Pay Tied to Performance.Consists of Variable Compensation and Long-Term Incentives Performance-based incentive. In fiscal 2017, 93% of our CEO’s compensation (cashcomprised variable compensation elements, and long-term incentive awards) represented approximately 90%75% of NEOs’ annual total directhis overall compensation (base salary, annual incentive bonus and annual long-term incentive award)fiscal 2014.equity with multi-year vesting. Performance objectives include financial objectives relating to adjusted operating profit margin, operating profit,gross margin and adjusted earnings per share.20142017 compensation of our NEOs.stockholdersshareholders to approve the compensation of our NEOs as described in this Proxy Statement by voting in favor of the following resolution:stockholdersshareholders approve, on anon-binding, advisory basis, the compensation paid to the Company’s named executive officers as disclosed in the Company’s Proxy Statement for the 20152018 Annual Meeting of StockholdersShareholders pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis section, the Summary Compensation Table, other compensation tables, narrative discussion and related disclosure.”Human Resources and Compensation CommitteeHRCC and the Board value the opinions of our stockholders,shareholders, and will consider the outcomeresults of the vote when making future compensation decisions for our NEOs. ✓ The Board unanimously recommends that you vote “FOR” the approval, on an advisory basis, of the compensation of our named executive officers, as disclosed in this Proxy Statement.Applied Materials, Inc. 19EXECUTIVE COMPENSATION DISCUSSION AND RELATED INFORMATIONANALYSISCompensation DiscussionOur Business and AnalysisStrategy● Grew revenue to $14.5 billion in fiscal 2017, up 34% from the prior year, resulting in our second consecutive year of record revenue; ● Achieved record revenue across all of our segments; ● IntroductionGrew operating profit to a newall-time record, resulting in record GAAP EPS of $3.17, up 106% over fiscal 2016, and recordnon-GAAP adjusted EPS of $3.25, an increase of 86% over fiscal 2016 (see the Appendix for a reconciliation ofnon-GAAP adjusted measures);● Delivered record operating cash flow of over $3.6 billion, equal to 25% of revenue; and This Compensation Discussion and Analysis (“CD&A”) describes the principles and material elements● Returned $1.6 billion to shareholders through dividends and share repurchases. our executive compensation program, how we applied those principles in determining the material elements of our NEOs’ compensation for fiscal year 2014, and how we use our compensation program to drive performance. We believe that our actions in fiscal 2014 and in prior years demonstrate that we have effectively linked pay to performance.five-year performance achievements across key financial measuresOur NEOs for fiscal 2014 are:Gary E. Dickerson, President and Chief Executive Officer;Michael R. Splinter, Executive Chairman of the Board;Randhir Thakur, Executive Vice President, General Manager, Silicon Systems Group;Robert J. Halliday, Senior Vice President, Chief Financial Officer; andAli Salehpour, Senior Vice President, General Manager, New Markets and Service Group
● Executive SummarySemiconductor Systems segment: we delivered record annual revenue of $9.5 billion, up 38% from the prior year.● Applied Global Services segment: we grew revenue to a record $3.0 billion, up 17% from fiscal 2016. We accelerated our momentum by introducing new ways to help our customers manage increasing complexity. ● Display and Adjacent Markets segment: we delivered manufacturing equipment for increasingly larger and more advanced TVs as well as high-resolution mobile displays, growing revenue to a record $1.9 billion, and achieving the highest year-over-year growth of 58% for the company. Company InitiativesStrategic and Industry EnvironmentOperational Highlights
2014,2017, we continued to enhancedrive profitable growth by executing against our leadershipstrategy. Key highlights include:● Increased our investments in research and development by more than $230 million over fiscal 2016, to almost $1.8 billion, and converted over 90% of our development positions into volume production wins. ● Delivered strong growth in key areas of our semiconductor equipment business in fiscal 2017 – our process equipment business and our metrology and inspection business deliveredall-time record revenues, and our physical vapor deposition (PVD), chemical mechanical polishing (CMP) and thermal products had an especially strong year, driven by the mass adoption of advanced interconnects in logic as well as increasing use of logic-like processes in memory. ● Made strong gains in patterning and 3D NAND memory, and positioned the company to grow in DRAM as customers transition to new higher performance devices. ● Built upon Applied’s large installed base of manufacturing systems and drove a 25% increase in the number of tools under comprehensive service agreements; these agreements enable us to generate more value by helping our customers achieve and maintain higher yields, and optimize factory output and operating costs. ● Ramped a new generation of equipment in our Display business for Gen 10.5 display factories, allowing customers to manufacture larger and more advanced TVs, and established the leading position in thin-film encapsulation, which enables next generation OLED displays for mobile devices. precision materials engineering. Our customers are navigating the biggest changesfiscal 2017 also resulted in technology in decades. These major changes in technology provide a catalystmeaningful value creation for our growth, create new precision materials engineering steps, expandshareholders. As illustrated below, Applied significantly outperformed both our available marketspeer group and fuel strong demand for our products. Applied is uniquely positioned to apply our differentiated capabilities in precision materials engineering to enable major technology transitions for our customers and to deliver market share gains and profitable growth for Applied.Business and Financial Performance HighlightsPeersFiscal 2014 was a strong performance year. We made significant progress towards our strategic and financial goals as an organization. Our fiscal 2014 financial performance reflects ongoing technology and capacity investments by our semiconductor and display customers, sustainable market share gains in growing markets, as well as significant improvements in our execution, efficiency and costs that we achieved while increasing investment in new product development.Key strategic and operating accomplishments included:Achieved total shareholder return (“TSR”) of approximately 21% for the fiscal year;Won market share gains across multiple products;Increased research and development investments in technologies that provide the greatest opportunities for growth;Delivered material cost savings that contributed to a significant increase in gross margin;Shifted spending from corporate overhead and lower-return programs to fund growth;Moved our Energy and Environmental Solutions segment to positive operating margin for the first time since 2011; andAchieved these results while preparing for our proposed business combination with Tokyo Electron (the “Business Combination”), which will enable us to further accelerate our strategy and work towards delivering even greater value for our stockholders.The table below shows the key highlights of Applied’s financial and market performance in fiscal 2014 (see the Appendix for a reconciliation of non-GAAP adjusted measures): $7.5 $9.1 +21%
Operating Income $1.03 $1.78 +73% $0.59 $1.07 +81% 42.1% 44.1% +2 points 13.7% 19.6% +5.9 points $17.71 $20.99 +19% In fiscal 2014, we continued to improve the Company’s TSR and to deliver long-term value for stockholders. The graph on the left below shows the one- and three-year TSR as of October 26, 2014 (the last day of fiscal 2014) for Applied common stock as compared to the one- and three-year TSR as of the same date for our fiscal 2014 peer group companies. All TSR values, including in tables and graphs, shown assume reinvestment of dividends. See “Key Fiscal 2014 Peer Group Companies” for more information about the companies included in this peer group. In addition, the graph on the right shows the one- and three-year TSR as of October 26, 2014 for Applied common stock, the NASDAQ Composite, the S&P 500, and the PHLX Semiconductor Sector indices.
Fiscal 20142017 Executive Compensation HighlightsOur fiscal 2014 compensation program was designed to recognize, motivate, and retain a unified senior management team in an extremely competitive marketplace and ensure that executive pay is appropriately reflective of performance. Several decisions during the year reflected the unique circumstances of the Business Combination, with an intent to incentivize and retain our leadership team during the critical period prior to the closing of the transaction, while continuing to effectively operate Applied’s business and stay focused on longer-term goals. Specifically, our HumanResources and Compensation Committee (the “Committee”) considered the impact of Section 4985, which generally imposes a punitive 15% excise tax on the value of equity awards held by executive officers and directors during the period six months before to six months after consummation of the Business Combination. The Committee’s objective was to minimize the punitive impact of Section 4985 without undermining the objectives of Applied’s overall compensation program.20142017 include: •● No IncreasesPerformance measurement periods extended from one year to Base Salaries or Target Bonuses: Did not increase our NEOs’ base salaries or target bonus opportunities (except in recognition of one NEO’s expanded responsibilities); •● Annual Bonuses Reflect Strong Company Performance: Awarded actual annual incentive payouts toTighter alignment of performance metrics with our NEOs that ranged from 110% to 126% of target, reflecting our strong performance over the yearstrategic goals; and the achievement of fiscal 2014 objectives; •●Re-balanced equity mix to achieve performance alignment and retention goals. Element of Pay Philosophy Structure ∎ Long-Term Incentives Reflect ImpactBased on performance against
pre-established financial,
operational, strategic and individual
performance measures
provide a comprehensive
assessment of Business Combination: Modified our long-term incentive program to reflect the challengesexecutive
performancecomplexities associated with the Business Combination, including:market trendsGranted performance units settled in cash rather than equity (as cash awards generally are not subject to Section 4985), with no opportunity to benefit from the 19% stock price appreciation during the fiscal year;Tied the earnout of the cash-based performance units to an absolute operating profit margin threshold rather than a scaled relative operating profit margin (recognizing the difficulty of setting appropriate relative performance ranges while preparing to close the Business Combination), and further required continued employment over a three-year period; andGranted increased amounts of long-term incentives to certain NEOs (including our CEO) to reflect (1) the challenges of meeting Applied’s long-term financial and strategic goals while preparing to close the Business Combination, and (2) the enhanced need to retain our executive team during the critical period leading up to and following the Business Combination. •
achievement of3-yearnon-GAAP adjusted operating marginand3-yearwafer fabrication equipment market sharegoals∎ Delayed Payment of Retention Bonuses: Amended the terms ofRestricted stock units to providelink to shareholder value creation and retention bonuses granted in fiscal 2013 to extend the retention period to be consistent with the timeframe expected to complete the Business Combination (our CEO and Executive Chairman did not receive a retention bonus).value2014, we continued our strong commitment to pay for performance by aligning2017, a significant portion of our executive compensation consisted of variable compensation and long-term incentives. As illustrated below, 93% of CEO compensation for fiscal 2017 comprised variable compensation elements, and 75% of Mr. Dickerson’s overall compensation was delivered in equity with demonstrated performance. As shown by the charts below, the performance-based incentivesmulti-year vesting.our NEOs constituted approximately 90%fiscal 2017; excludes new CFO Daniel J. Durn, who joined Applied in August 2017.(basefor our NEOs for fiscal 2017, consisting of (1) base salary, (2) annual incentive bonus and full amount of(3) annual long-term incentive awards (the grant date fair value of stock awards):. This table excludes amounts not considered by the HRCC to be annual total direct compensation that are required by the SEC to be reported in the Summary Compensation Table (see page 41 of this Proxy Statement).Name and Principal Position Salary
($)
Incentive
Bonus
Long-Term
Incentive Award
President and Chief Executive Officer 1,000,000 2,640,000 10,844,501 14,484,501
Senior Vice President, Chief Financial Officer 138,462 — 2,952,086 3,090,548
Former Senior Vice President, Chief Financial Officer 625,000 1,113,750 4,231,139 5,969,889
Senior Vice President, General Manager, Services, Display and Flexible Technologies 591,346 1,060,290 3,868,486 5,520,122
Senior Vice President and Chief Technology Officer 484,808 770,770 2,176,031 3,431,609
Senior Vice President, General Counsel and Corporate Secretary 480,000 702,768 2,176,031 3,358,799 (1) Mr. Durn joined Applied in August 2017. Amounts for Mr. Durn exclude asign-on bonus and anew-hire equity award, both of which are reported in the Summary Compensation Table. 
Overall Alignment of Pay andwith Performancedemonstratesshows the alignment between key metrics used to determinetotal shareholder return (“TSR”) and inform our compensation decisions (Applied’s non-GAAP adjusted EPS and TSR) and the annual total direct compensation (base salary, annual incentive bonus and annual long-term incentive awards) paid toof our CEO duringfor the last five fiscal years. While TSR has grown significantly over the last four years, (see the Appendix for a reconciliation of non-GAAP adjusted measures):our CEO’s total direct compensation has remained relatively flat during that period.Notes regarding graph: (1) Compensation is based on annual total direct compensation of Mr. Dickerson for fiscal 2013 and fiscal 2014, and annual total direct compensation of Mr. Splinter for fiscal 2010 through 2012. Annual totalTotal direct compensation consists of annual base salary (annualized for 2013 for Mr. Dickerson, as of the end of fiscal 2013 for purposes of this graph only)who became our CEO in September 2013), annual incentive bonus and annual long-term incentive awardsaward (grant date fair value of annual equity awards not cash actually received,for all fiscal years, except for fiscal 2010 through 2013, and2014, which consists of the total amount of cash-settled performance units for fiscal 2014)units). The fiscal 2014Total direct compensation primarily reflected an increased amount of cash-settled performance unitsshown above excludes other amounts required by the SEC to reflectbe reported in the challenges of meeting our long-term financial and strategic goals while preparing to close the Business Combination and the enhanced need to retain our CEO during this critical period.Summary Compensation Table. (2) TSR line illustrates the relative change in total shareholder return on our common stock during the period from October 25, 2013 through October 27, 2017, assuming $100 was invested in Applied common stock at the end of fiscal 2010on October 25, 2013 and assuming reinvestment of dividends.(3)Non-GAAP adjusted EPS line illustrates the relative change in non-GAAP adjusted EPS since the end of fiscal 2010 through the end of fiscal 2014.•WHAT WE DO WHAT WE DO NOT DO Pay for Performance– Significant majority of NEO target compensation is performance-based and tied topre-established performance goals aligned with our short- and long-term objectives. Ò No Guaranteed Bonuses– Our annual bonus plans are performance-based and do not include any minimum payment levels. Objective performance criteria: Our performance-based compensation program uses a varietyMitigation of objectiveRisk– Use of varied performance measures in incentive programs mitigates risk that executives will be motivated to reflect our various financial and strategic goals forpursue results with respect to any one performance measure to the period.detriment of Applied as a whole. •Ò No Hedging or Pledging– Our insider trading policy prohibits all NEOs and directors from engaging in hedging or other speculative trading, or pledging their shares. No executive pensions or perquisites: We do not provide any executive pension or executive retirement plans, guaranteed bonuses, company-paid personal travel or executive health plans.• Limited change of control benefits: Our plans do not provide for any benefits that would be triggered by a change of control, other than the double-trigger vesting acceleration provisions (requiring both a change of controlCompensation Recoupment Policy– Both our annual cash bonus plan and termination of employment) that apply to employee equity awards under the Employee Stock Incentive Plan. The Business Combination is not considered to be a change of control under the Employee Stock Incentive Plan.•Clawback policy: We have anour stock incentive compensationplan contain “clawback” policyprovisions providing for reimbursement of incentive compensation from an executive officer underNEOs in certain circumstances. •Ò No Perquisites– We do not provide material perquisites or other personal benefits to our NEOs or directors, except in connection with business-related relocation. Stock ownership guidelines: We haveOwnership Guidelines– All officers and directors are subject to stock ownership guidelines to more closely align thetheir interests of our directors and NEOs with those of our stockholders.shareholders’ interests. •Ò No Dividends on Unvested Equity Awards– We do not pay dividends or dividend equivalents on unvested equity awards. Limited gross-up payments:Double-TriggerChange-in-Control Provisions– Equity awards for all NEOs require a “double-trigger” of both achange-in-control and termination of employment for vesting acceleration benefits to apply.Ò No Executive Pensions– We do not generally pay taxesoffer any executive pension or executive retirement plans.AnnualSay-On-Pay Vote– We seek annual shareholder feedback on our executives’ behalf through “gross up” payments, other than for business-related relocation,executive compensation program.Ò No TaxGross-Ups– We do not pay tax equalization related to expatriate assignments, and, for the fiscal 2015 equity awards only, to mitigate the punitive Section 4985 tax that may be incurredgross-ups, except in connection with the Business Combination.business-related relocation or expatriate assignments.Further details about these practicesApplied Materials, Inc. 27the reasons behind them are discussed below under “Base Salaries,” “Annual Incentive Bonus Opportunities,” “Long-Term Incentive Compensation,” and“Employment Agreements and Retention Arrangements.”Decision-Making Framework(1) to attract, reward and retain highly talented executive officers and other key employees;● To attract, reward and retain highly-talented executive officers and other key employees; (2) to motivate these individuals to achieve short-term and long-term goals that enhance stockholder value; and● To motivate these individuals to achieve short-term and long-term goals that enhance shareholder value; and (3) to support Applied’s core values and culture.● To support our core values and culture. providing compensation that is competitive with the practices of other leading, high technology companies; and● Providing compensation that is competitive with the practices of other leading, high-technology companies; and linking rewards to company and individual performance by:● Linking rewards to company and individual performance by: setting challenging performance goals for executive officers and other key employees;∎ Setting challenging performance goals for executive officers and other key employees; providing short-term and long-term incentives for achieving these goals; and∎ Balancing retention needs with performance objectives; and providing equity incentives intended to motivate executive officers and key employees to increase long-term stockholder value while aligning with stockholders’ interests.∎ Providing a high proportion of total target compensation in the form of equity incentives to motivate executive officers and key employees to increase long-term value in alignment with shareholders’ interests. CommitteeHRCC uses these principles to determine base salaries, short-term cash incentivesannual incentive bonuses and long-term incentive awards. The CommitteeHRCC also considers Applied’s business objectives, the skills and experience of the executive, competitive practices and trends, and corporate considerations, (includingincluding the affordability of the compensation levelprogram.Fiscal 2017 Peer Group Advanced Micro Devices, Inc. Micron Technology, Inc. Motorola Solutions, Inc. Cisco Systems, Inc. NetApp, Inc. Corning Inc. NVIDIA Corp. EMC Corp. QUALCOMM, Inc. Intel Corp. SanDisk Corp. Juniper Networks, Inc. Seagate Technology plc KLA-Tencor Corp. Texas Instruments Incorporated Lam Research Corp. Western Digital Corp. 
affordabilityretain talent, and business conditions, and compensation levels at our peer companies for comparable positions; however, no individual element of compensation is targeted to a peer percentile range. The HRCC uses peer group data as a tool to assess how our executives’ compensation compares to the market rather than as a means to establish specific target compensation levels. Actual pay results vary based on the overall performance of the Company and individual NEO performance, as the largest portion of NEO compensation program)is performance-based.regulatory requirements.reward achievement of Applied’s business goals and to attract and retain highly-talented individuals. The Committee further considersannual incentive bonus opportunity for each NEO under the Bonus Plan is directly linked to Applied’s achievement of financial and market performance, operational performance and strategic objectives, in addition to individual performance. Company and individual goals are designed to incentivize management to drive strong operating performance, invest in innovation to drive future growth and create shareholder value. Our Bonus Plan is performance-based and does not include any minimum payment levels. Fiscal 2017 bonuses under this plan are intended to qualify as “performance-based” compensation under Section 162(m).
Financial and Market Performance Financial, market share and TSR goals align with a focus on delivering sustainable performance that increases shareholder value Products and Growth Reinforces strategy of developing new and differentiated products and services, and positioning Applied and its products for future revenue and market share growth Execution Incentivizes increased efficiency in operational process, product development success and quality and safety performance Customers, Field and Service Promotes focus on driving customer loyalty relative to competitors’ achievements and improving growth and efficiency at key accounts People and Organization Drives focus on greater employee engagement to promote hiring, retention and development of key talent Weightings Objectives Dickerson
and
Halliday Salehpour Nalamasu Larkins Achievements Score 50.0% 50.0% 50.0% 50.0% 0.6 (1) 1.5 1.5 1.0 15.0% 19.0% 32.0% 15.0% 1.7 (1) 1.0 1.5 15.0% 15.0% 8.0% 15.0% 0.5 1.0 1.1 (1) 10.0% 10.0% 0.0% 10.0% 1.0 1.5 10.0% 6.0% 10.0% 10.0% 1.5 2.0 NEO Deliveredall-time record-high revenue and operating profit, representing a year-over-year increase of more than 30% and 70%, respectively Made strategic investments to create long-term sustainable profitable growth across the company and position Applied to capitalize on major technology inflections Executed tax strategy to optimize tax rate and cash management Raised $2.2 billion in debt capital to support financial flexibility Successfully transitioned Mr. Durn into the Chief Financial Officer role Deliveredall-time record Applied Global Services (AGS) revenues of $3.0 billion Delivered record revenues in Display of $1.9 billion Won more than 85% of targeted applications in Display Delivered more than 10 new ideation programs and progressed 7 existing ideation programs to incubation Secured external funding for R&D programs and executed targeted number of Applied Ventures deals to provide strategic insight into new and adjacent markets Developed and implemented global IP protection model Addressed highly complex legal matters with successful resolution advisory “say-on-pay” voteincentive bonuses.
multiple of target: 1.34stockholder feedback. At(4) the actual fiscal 2017 bonus amount approved by the HRCC and paid to the NEO. NEO
Bonus as a
Percentage
of Base $ 5,000,000 200% $ 2,000,000 $ 2,640,000 — — — — $ 2,531,250 135% $ 843,750 $ 1,113,750 $ 2,430,000 135% $ 810,000 $ 1,060,290 $ 1,617,000 110% $ 539,000 $ 770,770 $ 1,584,000 110% $ 528,000 $ 702,768 2014scorecard and alignment between the actual annual bonus awards for our CEO and our non-GAAP adjusted EPS achievements.Meeting,Bonus vs. Earnings Per Share
strong majority (89.47%performance target under our bonus plan. See Appendix fornon-GAAP reconciliations.votes cast)release of material, nonpublic information that is likely to result in changes to the price of our stockholderscommon stock, such as a significant positive or negative earnings announcement. Similarly, Applied has not timed, nor does it intend to time, the release of material, nonpublic information based on equity award grant dates.NEO compensation program describedgoals of increasing differentiation for high performance, balancing long-term and short-term incentives, and simplifying our long-term incentive plan.our 2014 proxy statement (the fourth consecutive yearfiscal 2017, the long-term incentive awards for NEOs consist of approximately 90% or more support)two forms of equity: performance share units (“PSUs”) and restricted stock units (“RSUs”). The Committee took into considerationtarget mix of the awards consists of 75% PSUs and 25% RSUs for the CEO and 50% PSUs and 50% RSUs for the other NEOs.strong stockholder supportnew long-term incentive structure establishes a closer direct link to long-term company performance through the PSUs and will also provide a crucial retention value through the RSUs.CEO LTI Vehicle Mix All Other NEO LTI
Vehicle Mix
implementingDecember 2016, the HRCC granted the number of PSUs and RSUs listed in the below table to our NEOs. Mr. Durn is not included in the table below as he received his awards at the time he joined in Applied in August 2017. NEO Total Value
of Awards(1)
Equivalent
Target
Number of
PSUs(2)
Equivalent
Number of
RSUs(2)
$ 11,250,000 280,316 93,439 $ 4,375,000 72,675 72,675 $ 4,000,000 66,446 66,446 $ 2,250,000 37,376 37,376 $ 2,250,000 37,376 37,376 (1) Value of awards is based on Applied’s stock price on the grant date. Amounts shown in the “Stock Awards” column of the Summary Compensation Table represent grant date fair value determined pursuant to Accounting Standards Codification 718. (2) Number of shares calculated by dividing value of awards by $30.10, the closing price of Applied stock on December 1, 2016, the grant date. 2014 executive2017 target grant sizes provided sufficient performance-based equity incentives to align compensation program.with the long-term interests of our shareholders, were in line with market norms for the NEOs’ respective roles and were sufficient to provide incentive for them.
Achievement Level Percentage of
May Vest50% 100% 200% CommitteeHRCC has a written charter approved by the Board that specifies the Committee’sHRCC’s duties and responsibilities, (availablewhich is available on Applied’sour website at at:http://www.appliedmaterials.com/investors/corporate-governance)company/investor-relations/governance-documents. Under thisIn accordance with its charter, the CommitteeHRCC oversees our programs that foster executive compensation program, reviews and approves the compensation philosophy for employees, and reviews and approves the compensation of the NEOs, other executive officers, and members of the Board. The Committee also oversees Applied’s strategic human resources programs, including executiveemployee development and retention, with emphasis on leadership development, management capabilities and succession planning, majorplans. The HRCC also determines executive and directorbenefit plans,benefits programs, policies and equity compensation plans.Committee isHRCC has been determined to be independent as determined under Nasdaq, SEC and Internal Revenue Code (“Code”) rules. The CommitteeHRCC may delegate any of its responsibilities to subcommittees. See “Board Meetings and Committee MeetingsCommittees” for more information about the Committee.HRCC.Role ofDetermining Annual Total Direct Compensation ConsultantThe Committee hasAt the power to engage independent advisors to assist it in carrying out its responsibilities. Forbeginning of fiscal 2014,2017, the Committee continued to engage Semler Brossy Consulting Group (“Semler Brossy”) as its independent executiveHRCC evaluated each NEO’s annual total direct compensation consultant. Semler Brossy, who reports directly to the Committee and not to management, is independent from Applied, has not provided any services to Applied other than to the Committee, and receives compensation from Applied only for services provided to the Committee. The Committee assessed the independence– consisting of Semler Brossy pursuant to SEC rules and concluded that the work of Semler Brossy has not raised any conflict of interest.Semler Brossy reviews and advises on all principal aspects of the executive compensation program. Its main responsibilities are to:advise on alignment of pay and performance;review and advise on executive total compensation, including base salaries, short- and long-term incentives, associated performance goals, and retention and severance arrangements;advise on trends in executive compensation;provide recommendations regarding the composition of our peer group;analyze peer group proxy statements, compensation survey data, and other publicly available data (and apply its experience with other companies to this analysis); andperform any special projects requested by the Committee.The Committee typically asks Semler Brossy to attend the Committee’s meetings, including executive sessions at which management is not present. Semler Brossy communicates regularly with the Committee’s Chair outside of Committee meetings, and also meets with management to gather information and review proposals. Semler Brossy is expected to remain the Committee’s independent consultant until determined otherwise by the Committee or Semler Brossy.Role of Executive Officers and Management in Compensation DecisionsFor fiscal 2014, the Committee invited Mr. Dickerson (as CEO), Mr. Splinter (as Executive Chairman) and other executives, including the heads of Global Human Resources and Global Rewards, to attend its meetings, and also regularly held executive sessions without management present. The CEO, together with the Committee, typically assesses the performance of our NEOs and other executive officers. The CEO presents to the Committee his evaluation of each executive officer’s performance over the past year and makes recommendations to the Committee regarding base salaries, bonus targets and actual payments, performance goals and weightings, and long-term incentive awards for executive officers. The Committee considers these recommendations in making its final determinations, generally after considering input from Semler Brossy. The Committee discusses the CEO’s proposed compensation with the Executive Chairman, and the Committee always makes final decisions regarding the CEO’s compensation when he is not present.In formulating its compensation recommendations for fiscal 2014, management considered data primarily from a survey conducted by Radford Survey + Consulting, as well as publicly-available information about the peer group provided by Semler Brossy.Risk Assessment of Compensation ProgramsApplied has determined that its compensation policies, plans and practices are appropriately balanced and do not create risks that are reasonably likely to have a material adverse effect on the Company. To make this determination, Applied’s management reviewed compensation policies, plans and practices that: covered the Company’s executive officers, as well as the global employee population; were structured differently from those of other business units; or represented a significant portion of the Company’s compensation expense. Next, management assessed the followingfeatures of these policies, plans and practices: design, payment methodology, potential payment volatility, relationship to the Company’s financial results, length of performance period, risk-mitigating features, performance measures and goals, oversight and controls, and plan features and values compared to market practices. Management then reviewed with the Committee the findings of this assessment.Moreover, Applied has in place various controls to mitigate risks relating to compensation policies, plans and practices, such as executive stock ownership guidelines and a clawback policy that enables the recovery of certain incentive compensation payments in certain circumstances. Compensation Design and Performance FrameworkThe primary elements of our compensation program consist ofannual base salary, annual incentive bonuses,bonus and annual long-term performance-based incentive awards. These primary elements were chosen after considering a numberaward. As part of factors, including our desire to drive long-term strategy and continuous improvement in financial and operational performance, as well asthis annual evaluation, the competitive pay practices of our peer group. Each primary element is intended to support one or more ofHRCC considers the principal objectives of our compensation philosophy, and the Committee regularly reviews and assesses these elements. Other elements of compensation include a 401(k) savings plan, deferred compensation benefits, and other benefits programs that are generally available to all employees.In setting compensation levels for each NEO, the Committee considers, among other factors, each element of compensation; the compensation package as a whole; compensation levels at our peer companies for comparable positions; and the executive’sNEO’s scope of responsibility, performance, skill set, prior experience and achievements, advancement potential, impact on results and expected future contributions to our business. The HRCC also considers the compensation levels of an executive officer relative to other Applied officers, the need to attract and retain talent, and business conditions, and compensation levels at our peer companies for comparable positions; however, no individual element of compensation is targeted to a peer percentile range. The HRCC uses peer group data as a tool to assess how our executives’ compensation compares to the market rather than as a means to establish specific target compensation levels. Actual pay results vary based on the overall performance of the Company and individual NEO performance, as the largest portion of NEO compensation is performance-based.Fiscal 2014 Peer Group CompaniesApplied Materials, Inc. 29Committee compares our executive compensation program with compensation paidHRCC believes that this multi-step performance framework appropriately emphasizes financial performance, while also providing a mechanism to assess achievement of key business imperatives by a peer group consisting of a broad range of high technology companies whose businesses are similar to ours and with which we typically compete for executive talent.individual NEOs2014,2017, the Committee usedHRCC chosenon-GAAP adjusted EPS as the initial performance hurdle to establish 162(m) tax deductibility. EPS, an indicator of overall company financial performance, is a measure of profits generated on a per share basis that are available either to reinvest in the business or distribute to shareholders, and has a strong link to share price valuation.Financial and Market Performance Financial, market share and TSR goals align with a focus on delivering sustainable performance that increases shareholder value Products and Growth Reinforces strategy of developing new and differentiated products and services, and positioning Applied and its products for future revenue and market share growth Execution Incentivizes increased efficiency in operational process, product development success and quality and safety performance Customers, Field and Service Promotes focus on driving customer loyalty relative to competitors’ achievements and improving growth and efficiency at key accounts People and Organization Drives focus on greater employee engagement to promote hiring, retention and development of key talent peer group:table details fiscal 2017 corporate scorecard objectives, their relative weightings for each NEO who participated in the Bonus Plan, the achievements based on performance against objectives and the resulting scores, as approved by the HRCC (see Appendix fornon-GAAP reconciliations). Weightings Objectives Dickerson
and
Halliday Salehpour Nalamasu Larkins Achievements Score 50.0% 50.0% 50.0% 50.0% 0.6 (1) 1.5 1.5 1.0 15.0% 19.0% 32.0% 15.0% 1.7 (1) 1.0 1.5 15.0% 15.0% 8.0% 15.0% 0.5 1.0 1.1 (1) 10.0% 10.0% 0.0% 10.0% 1.0 1.5 10.0% 6.0% 10.0% 10.0% 1.5 2.0 NEO Deliveredall-time record-high revenue and operating profit, representing a year-over-year increase of more than 30% and 70%, respectively Made strategic investments to create long-term sustainable profitable growth across the company and position Applied to capitalize on major technology inflections Executed tax strategy to optimize tax rate and cash management Raised $2.2 billion in debt capital to support financial flexibility Successfully transitioned Mr. Durn into the Chief Financial Officer role Deliveredall-time record Applied Global Services (AGS) revenues of $3.0 billion Delivered record revenues in Display of $1.9 billion Won more than 85% of targeted applications in Display Delivered more than 10 new ideation programs and progressed 7 existing ideation programs to incubation Secured external funding for R&D programs and executed targeted number of Applied Ventures deals to provide strategic insight into new and adjacent markets Developed and implemented global IP protection model Addressed highly complex legal matters with successful resolution Advanced Micro Devices, Inc.Performance Measures Harris Corporation NetApp, Inc.Fiscal 2017 Achievement Agilent Technologies, Inc.Intel CorporationQualcomm Inc. Broadcom CorporationJuniper Networks, Inc.SanDisk Corporation Cisco Systems, Inc.∎Fiscal 2017 non-GAAP adjusted EPS of $1.75KLA-Tencor CorporationSeagate Technology Corning Inc.✓Achieved non-GAAP adjusted EPS of $3.25Lam Research CorporationSunPower Corporation EMC CorporationMicron Technology, Inc.Texas Instruments Inc. First Solar, Inc.∎Strong performance on core objectives: Motorola Solutions, Inc.✓NEO scorecard resultsachieved in a range from 1.19 to 1.30 based on individual weightings Western Digital Corporation✓IPFachieved at 1.10 for all NEOs
multiple of target: 1.34In assemblingThe following table shows for each NEO: (1) the fiscal 2014 peer group, we consider companies that meetmaximum amount payable under the following criteria: (1) technology companies with manufacturing operations;Bonus Plan, (2) companies whose revenues were approximately one-third to five times that of Applied; (3) companies with global operations that disclose executive compensation pursuant to SEC rules; (4) companies that compete with Applied for key talent; and (5) companies based in the U.S. with significant levels of resources dedicated to research and developmenttarget bonus amounts expressed as a percentage of revenue. The companies above met most of these criteria; in addition, certain ofbase salary, (3) the companies were among Applied’s principal U.S. competitors or Applied’s top U.S. customers. Thetarget bonus expressed as a dollar amount and (4) the actual fiscal 2014 peer group is unchanged from fiscal 2013. The Committee may make other changes in2017 bonus amount approved by the peer group as it deems appropriate inHRCC and paid to the future.NEO. NEO
Bonus as a
Percentage
of Base $ 5,000,000 200% $ 2,000,000 $ 2,640,000 — — — — $ 2,531,250 135% $ 843,750 $ 1,113,750 $ 2,430,000 135% $ 810,000 $ 1,060,290 $ 1,617,000 110% $ 539,000 $ 770,770 $ 1,584,000 110% $ 528,000 $ 702,768 Data gathered onPay and Performance Alignment. Our process for determining annual bonus awards has resulted in strong pay and performance alignment. The chart below illustrates the peer group include base salary,rigor of our scorecard and alignment between the actual annual bonus targeted cashawards for our CEO and our non-GAAP adjusted EPS achievements.CEO LTI Vehicle Mix All Other NEO LTI
Vehicle Mix NEO Total Value
of Awards(1)
Equivalent
Target
Number of
PSUs(2)
Equivalent
Number of
RSUs(2)
$ 11,250,000 280,316 93,439 $ 4,375,000 72,675 72,675 $ 4,000,000 66,446 66,446 $ 2,250,000 37,376 37,376 $ 2,250,000 37,376 37,376 (1) Value of awards is based on Applied’s stock price on the grant date. Amounts shown in the “Stock Awards” column of the Summary Compensation Table represent grant date fair value determined pursuant to Accounting Standards Codification 718. (2) Number of shares calculated by dividing value of awards by $30.10, the closing price of Applied stock on December 1, 2016, the grant date. ManagementTarget fiscal 2017 long-term equity awards were determined in light of each NEO’s scope of responsibility, performance, impact on results and the Committee use this survey dataexpected future contributions to assess theour business, compensation levels relative to other Applied officers, the wholesale changes made to the long-term incentive program and establishment of three-year performance goals, the need to attract and retain talent, and Achievement Level Percentage of
May Vest50% 100% 200% groupcompanies for the CFO position. The HRCC also considered the associatedone-time costs of replacing compensation value that Mr. Durn forfeited by leaving his previous employer.levels paid withinHuman Resources and Compensation Committeetargeted percentile range discussed below. Deferred Board that specifies the HRCC’s duties and responsibilities, which is available on our website at: http://www.appliedmaterials.com/company/investor-relations/governance-documents. In accordance with its charter, the HRCC oversees our programs that foster executive and employee development and retention, with emphasis on leadership development, management capabilities and succession plans. The HRCC also determines executive and directorplans and otheroversees significant employee benefits generally are not considered, as they are not a material elementprograms, policies and plans.an NEO’s overall compensation package.the HRCC has been determined to be independent under Nasdaq, SEC and Internal Revenue Code rules. The peer group data is gathered from the sources described inHRCC may delegate any of its responsibilities to subcommittees. See “Role of Executive OfficersBoard Meetings and Management in Compensation DecisionsCommittees” above.for more information about the HRCC.2014,2017, the CommitteeHRCC evaluated theeach NEO’s annual total direct compensation – consisting of annual cash compensation plusbase salary, annual incentive bonus and annual long-term incentive awards –award. As part of each NEO. The Committee targeted a range withinthis annual evaluation, the 50th to the 75th percentile of Applied’s peer group for each of these NEOs’ total direct compensation, but not a particular point within the range. The Committee believes that seeking to pay within this range furthers our goals of attracting, rewarding and retaining highly talented individuals, and motivating them to achieve goals that enhance stockholder value. Targeting a percentile range for total direct compensation allows the Committee to meet Applied’s objectives while retaining flexibility to tailor compensation based on individual circumstances. However, each individual element of compensation varies and is not necessarily targeted to a percentile range. For both cash compensation and long-term incentives, the Committee may vary from the targeted range, depending onHRCC considers the NEO’s scope of responsibility, job performance, skill set, prior experience and achievements, advancement potential, impact on results and expected future contributions to our business, as well asbusiness. The HRCC also considers the compensation levellevels of an executive officer relative to other Applied officers, pressuresthe need to attract and retain talent, and business conditions. Assessmentconditions, and compensation levels at our peer companies for comparable positions; however, no individual element of an individual NEO’s job performance, othercompensation is targeted to a peer percentile range. The HRCC uses peer group data as a tool to assess how our executives’ compensation compares to the market rather than the CEO’s, isas a means to establish specific target compensation levels. Actual pay results vary based on the CEO’s determination of that NEO’s achievement of stated business goals, as well as the CEO’s subjective evaluation of the NEO’s contributions, leadership abilities, demonstration of Applied’s core values, skills, and future potential. In assessing the CEO’s job performance, the Committee considers similar factors, as well as input from the Executive Chairman. Actual pay results may be outside of the targeted range due to theoverall performance of the Company and individual NEO or of the Company,performance, as performance-driven incentive compensation comprises the largest partportion of ourNEO compensation program.Mr. Dickerson’s and Mr. Halliday’s targeted total direct compensation at the beginning of fiscal 2014 was above the 50th to 75th percentile targeted range. For Mr. Dickerson, the Committee believed this was appropriate in light of several factors, including his continued leadership as our President and CEO in focusing on new strategies for profitable growth, planning for the successful closing of the Business Combination and leading post-close integration, and the continued demands of running our business. The Committee recognized that leading the efforts to manage and close the Business Combination while simultaneously striving to meet Applied’s long-term financial and strategic goals would present singular challenges and be extremely demanding. The Committee also considered Mr. Dickerson’s expected future contributions to our business, and to the combined business following the Business Combination. Mr. Dickerson’s compensation also was set higher than the compensation of our other NEOs due to the distinctive nature and broad scope of a CEO’s leadership responsibilities, the unique accountability a CEO carries with respect to the company’s performance, and the particularly competitive market for attracting and retaining highly talented CEOs. For Mr. Halliday, the Committee believed his targeted total direct compensation was appropriate because of his demonstrated leadership as our CFO, his leadership of our Mergers and Acquisitions and Global Information Systems groups, and his critical role in preparing to close the Business Combination and planning for post-closing integration, as well as his expected future contributions to our business and to the combined company following the closing of the Business Combination. All our other NEOs’ targeted total direct compensation at the beginning of fiscal 2014 was within the 50th to 75th percentile targeted range. Components of Total Direct CompensationCommitteeHRCC determines each officer’sNEO’s targeted total cash compensation (salary and target bonus).compensation for our executive officers.compensation. At the beginning of fiscal 2017, the HRCC increased Mr. Salehpour’s base salary from $550,000 to $600,000 and Dr. Nalamasu’s from $460,000 to $490,000 toCommitteeHRCC did not increase or otherwise change NEO base salaries for the other NEOs in fiscal 2014, except in recognition of the expanded responsibilities assumed by Mr. Salehpour, as further discussed below.2017. The Committee, in consultation with management, decidedHRCC determined that continuing base salary amounts from fiscal 2013 met the goal of sufficiently recognizing executives2016 for their time and service,those other NEOs was sufficiently competitive to provide adequate retention value and allowed Applied to continue its focus on weighting NEO cash compensation toward performance-based incentives.2014,2017, all of our NEOs participated in the Senior Executive Bonus Plan (the “Bonus Plan”). The annual incentive bonus opportunity, except for each NEO underMr. Durn. Mr. Durn was not eligible to participate in the Bonus Plan is linkedfor fiscal 2017 due to Applied’s performance in achieving strategic and financial objectives and to individual performance. Company and individual objectives are designed to incentivize management to proactively address cyclical industry conditions, drive strong operating performance, invest in innovation to drive future growth, and create stockholder value. The process we use for annual incentives is:
Bonus Plan Overview.the timing of his hire two months before the end of the fiscal year. The Bonus Plan is a stockholder-approved annualshareholder-approved bonus program for our senior executives, including our NEOs. The Bonus Plan is designed to motivate and reward achievement of Applied’s business goals and to attract and retain highly talentedhighly-talented individuals. BonusesThe annual incentive bonus opportunity for each NEO under the Bonus Plan is directly linked to Applied’s achievement of financial and market performance, operational performance and strategic objectives, in addition to individual performance. Company and individual goals are designed to incentivize management to drive strong operating performance, invest in innovation to drive future growth and create shareholder value. Our Bonus Plan is performance-based and does not include any minimum payment levels. Fiscal 2017 bonuses under this plan are intended to qualify as “performance-based” compensation under Section 162(m) of the Code and are paid only to the extent that performance goals actually are achieved..Fiscal 2014 Target Bonus Amounts. Target bonus amounts for each of the NEOs are expressed as a percentage of base salary. The Committee setsHRCC set the annual target bonus amount for Mr. Dickerson, and takeseach NEO, taking into consideration Mr. Dickerson’s recommendations in settingregarding the annual target bonus amountsNEOs.than himself. In early fiscal 2014,2017, Mr. Dickerson recommended that, for each NEO, the target bonuses of the other NEOsbonus amounts remain unchanged from fiscal 2013.2016. In making this recommendation,his recommendations, Mr. Dickerson relied on a variety of factors, including publicly availablepublicly-available data and marketindividual performance, current and anticipated contributions by each NEO, internal equity and overall economic and business conditions. In determiningThe HRCC considered these same factors in deciding not to increase Mr. Dickerson’s target bonus amount, the Committee considered the same factors used by Mr. Dickerson to determine the target bonus amounts for the other NEOs. No change was made to the CEO’s target bonus amount.bonus.In September 2014, based on Mr. Dickerson’s recommendation, the Committee increased Mr. Salehpour’s target bonus amount, in connection with his assuming increased responsibilities during the year as head of the New Markets and Service Group. This expanded role resulted from a new organizational structure implemented in August 2014 to better align the Company to our growth opportunities, increase focus on key areas of value creation, and pave the way for rapid integration with Tokyo Electron. The Committee believed that target bonus amounts for the NEOs for fiscal 2014 were consistent with our philosophy of linking pay to our performance and helped us reach our target annual total direct compensation of within the 50th to 75th percentile range relative to the peer group. Fiscal 2014 Performance and Payout. The determination of actual fiscal 20142017 performance and annual incentive bonuses for our NEOs consisted of fourthree key steps, as shownillustrated in the diagram below and the following additional discussion:discussion.StepPerformance MetricProcess
1Initial Performance Goal• A threshold requirement that, if met, allows for overall payoutsup to a maximum amount for each individual NEO• For fiscal 2014, Applied had to achieve positive adjusted operating profit for the year in order to fund the bonus poolIf performance is met…2Determination of OverallBonus Pool Funding• A total bonus pool is funded based on performance against pre-determined financial and operating objectives• For fiscal 2014, the bonus pool was funded based on performance against non-GAAP adjusted EPS goals set by the Committee at the beginning of the fiscal year• The aggregate bonuses paid to all plan participants cannot exceed the funded amountIf performance is met…
3Secondary PerformanceGoals• The initial allocation of the funded bonus pool to individual NEOs is based on performance against secondary goals• For fiscal 2014, secondary goals were shared by all NEOs, although the weightings of specific goals varied by individualFinal adjustment…4Individual PerformanceFactor• The final allocation of the funded bonus pool is further modified by each NEO’s Individual Performance Factor (IPF)• The IPF is based on an assessment of individual objectives established at the beginning of each fiscal year for the NEOs other than Mr. Dickerson and Mr. Splinter• The IPF for Mr. Dickerson and Mr. Splinter are based on the Committee’s overall year-end assessment of their performanceFiscal 2014 Initial Performance Goal. For any bonus to be payable to an NEO for a particular fiscal year, the Company must achieve the initial performance goal specified by the Committee. For fiscal 2014, the Committee chose the achievement of adjusted operating profit as the initial performance goal under the Bonus Plan. “Adjusted operating profit” for purposeshurdle to establish 162(m) tax deductibility. EPS, an indicator of the Bonus Planoverall company financial performance, is a non-GAAP measure of profits generated on a per share basis that excludes certain items from operating profit determinedare available either to reinvest in accordance with GAAP. the business or distribute to shareholders, and has a strong link to share price valuation.positivea thresholdnon-GAAP adjusted operating profitEPS of $1.75 for the fiscal year, then no bonus is payable. If positive adjusted operating profitthis threshold is achieved, the maximum bonus that becomes payable for each NEO is the lowest of: (a) $5 million, (b) 3x a corporate bonus pool funding modifier, multiplied by the target bonus, and (c) 3x the target bonus, as a percentage of base salary (which percentagesalary.set at the beginning$3.25, resulting in achievement of the fiscal year, but based oninitial performance goal under the NEO’s base salary on the last dayBonus Plan. Adjusted EPS is anon-GAAP measure that excludes certain items from EPS determined in accordance with GAAP (see Appendix for a reconciliation of the fiscal year), and (c) 0.4% ofnon-GAAP adjusted operating profit for each NEO other than Mr. Dickerson and Mr. Splinter, for both of whom this maximum is 0.8% ofEPS).Non-GAAP adjusted operating profit.EPS does not exclude share-based compensation expenses.Funding of Bonus Plan.Balanced Corporate Scorecard. If the initial performance goal is achieved, the CommitteeHRCC then reviewsuses the level of adjusted earnings per share (“adjusted EPS”), which is a non-GAAP measure that excludes certain charges, achieved by the Companycorporate scorecard to determine the funding level of the Bonus Plan. At the time the EPS goal was set, the Committee expected that each NEO’s actual fiscal year bonus would be substantially lower than the maximum payment permitted under the Bonus Plan uponevaluate achievement of the initial performance goal. The EPS goal is expected to reduce the bonus amount from the maximum available.pre-definedFiscal 2014 Secondary Performance Goals. The Committee also determines secondary performance corporate objectives and goals for each NEO that are considered if and only if the initial performance goal is met and the bonus pool is funded based on adjusted EPS performance. Even if the performance goals are fully achieved, the Committee hasas a primary mechanism to exercise negative discretion to decrease (but not increase) bonuses from the maximum bonus payable determined uponamount. The scorecard is designed to measure financial andnon-financial objectives that are considered by the achievement of the initial performance goal. The secondary performance goals create additional incentive for our NEOs since at least some of the secondary performance goals must be achieved in order for any bonusHRCC to be payable. If none of the secondary performance goals is achieved, no bonus becomes payable. The Committee believes that this dual-level performance framework appropriately emphasizes Company achievement of adjusted operating profit and adjusted EPS, which are important measures of operating and financial performance, while providing necessary flexibility to focus on the achievement of key business imperatives by individual NEOs.driversForof the Company’s near-term financial and operational success that will create shareholder value over the longer-term. As in previous years, the fiscal 2014,2017 scorecard measured corporate performance in developingfive broad categories: (1) Financial and Market Performance, (2) Products and Growth, (3) Execution, (4) Customers, Field and Service andsecondary performance goalsCompany’s strategy of strengthening our materials engineering capabilities to enable major technology inflections for our customers and theirpositioning Applied for sustainable growth to support long-term value creation for its shareholders.Financial and Market Performance Financial, market share and TSR goals align with a focus on delivering sustainable performance that increases shareholder value Products and Growth Reinforces strategy of developing new and differentiated products and services, and positioning Applied and its products for future revenue and market share growth Execution Incentivizes increased efficiency in operational process, product development success and quality and safety performance Customers, Field and Service Promotes focus on driving customer loyalty relative to competitors’ achievements and improving growth and efficiency at key accounts People and Organization Drives focus on greater employee engagement to promote hiring, retention and development of key talent management considered the importance of shared goals for all measures other than the NEOs,Financial and analyzedMarket Performance measures (which were weighted at 50% for all NEOs), to reflect the relative importanceimpact and contributions of each goalthat NEO and his business or organizational unit to Applied’s business strategyoverall performance with respect to a particular measure. The corporate scorecard objectives and the anticipated difficulty of achieving the goals in the aggregate. In fiscal 2014, we developed secondary performance goals that were shared by all NEOs in order to emphasize effective cross-functional performance, a culture of collaboration and the importance of fostering unity within the leadership team. While the secondary performance goalsweightings were the same for allMr. Dickerson and Mr. Halliday. All other NEOs shared these objectives, but each had different weightings as set forth in the weightingstable below.certain goals varied among the NEOs to reflect their influence over both Applied’s overall performance and their individual business units and functions. The Committee considered and provided input on performancefiscal year, the HRCC reviewed objectives, goals and weightings initially proposed by management, which was incorporated intoprovided input and madeweightings2.0 levels, with a score of 1.0 indicating performance that subsequentlymet expectations and scores over 1.0 indicating extraordinary achievement. At the end of the fiscal year, scores were calculated based on actual performance against objectives and were presented to the HRCC to review, adjust and approved by, the Committee.approve.showsdetails fiscal 2014 secondary performance goals,2017 corporate scorecard objectives, their relative weightings for each NEO who participated in the Bonus Plan, the achievements based on performance against objectives and levels of achievement:the resulting scores, as approved by the HRCC (see Appendix fornon-GAAP reconciliations). Relative
Weightings Dickerson
and
Splinter Thakur Halliday Salehpour 10 % 10 % 10 % 10 % Partially Achieved 15 % 12.5 % 15 % 17.5 % Fully Achieved 10 % 5 % 10 % 10 % Fully Achieved 15 % 12.5 % 15 % 7.5 % Fully Achieved 50 % 60 % 50 % 55 % Fully Achieved Weightings Objectives Dickerson
and
Halliday Salehpour Nalamasu Larkins Achievements Score 50.0% 50.0% 50.0% 50.0% 0.6 (1) 1.5 1.5 1.0 15.0% 19.0% 32.0% 15.0% 1.7 (1) 1.0 1.5 15.0% 15.0% 8.0% 15.0% 0.5 1.0 1.1 (1) 10.0% 10.0% 0.0% 10.0% 1.0 1.5 10.0% 6.0% 10.0% 10.0% 1.5 2.0 Fiscal 2014 Individual Performance Factor.In determining the final allocation of the bonus pool, the Committee considers The HRCC also considered the individual performance of each NEO as indicated by that NEO’s individual performance factor (“IPF”). The IPF appliesapplied only if the Bonus Plan is fundedinitial performance goal and at least some of the secondary performance goals arecorporate scorecard objectives were achieved. WhileThe IPF modified the secondary performance goals are shared by all NEOs, the IPF is based on performance against personal objectives established at the beginning of the year for NEOs other than Mr. Dickerson and Mr. Splinter. For Dr. Thakur, Mr. Halliday, and Mr. Salehpour, individual objectives included business unit or functional group objectives,initial bonus amount as well asindividual objectives related to special initiatives and personal development. The IPFs for Mr. Dickerson and Mr. Splinter were determined based on achievement against the Committee’s corporate scorecard objectives. The IPF modifier ranges from 0 to 1.5.theirhisyear, which included their success in achieving strong financial performance while preparing foryear. The HRCC determined the Business Combination. The Committee believes this balance of shared and personal goals is critical to an overall assessment of performance.The IPF modifies the bonus allocation as determined after the secondary performance goals. The modifier may range from 0% to 200%. However, the aggregate bonuses paid under the plan cannot exceed the overall bonus pool funding. The Committee determines the IPF rating for Mr. Splinter and Mr. Dickerson. Mr. Dickerson recommends IPF ratings to the Committee for each other NEO.Determining Actual Fiscal 2014 Bonuses. In fiscal 2014, Applied achieved an adjusted operating profitNEO taking into consideration Mr. Dickerson’s recommendation, which included his assessment of $1.78 billion, resulting inthe achievement of strategic, financial, operational and organizational performance goals specific to the initial performance goal underbusiness or organizational unit for which the Bonus Plan. “Adjusted operating profit” for purposes of the Bonus Plan is a non-GAAP measure that excludes certain items from operating profit. Items excluded from fiscal 2014 operating profit determined in accordance with GAAP were those associated with restructuring and asset impairment charges, acquisition, integration and deal costs associated with prior transactions,NEO was responsible, as well as the Business Combination, gain on a derivative associated withNEO’s leadership skills and current and expected contributions to the Business Combination,business. For fiscal 2017, the HRCC assigned each NEO an IPF of 1.10.NEO Deliveredall-time record-high revenue and operating profit, representing a year-over-year increase of more than 30% and 70%, respectively Made strategic investments to create long-term sustainable profitable growth across the company and position Applied to capitalize on major technology inflections Executed tax strategy to optimize tax rate and cash management Raised $2.2 billion in debt capital to support financial flexibility Successfully transitioned Mr. Durn into the Chief Financial Officer role Deliveredall-time record Applied Global Services (AGS) revenues of $3.0 billion Delivered record revenues in Display of $1.9 billion Won more than 85% of targeted applications in Display Delivered more than 10 new ideation programs and progressed 7 existing ideation programs to incubation Secured external funding for R&D programs and executed targeted number of Applied Ventures deals to provide strategic insight into new and adjacent markets Developed and implemented global IP protection model Addressed highly complex legal matters with successful resolution gain onIPF ratings resulted in an average bonus payout of 1.34 of target bonus. The diagram below shows the sale of a facility. The Bonus Plan providesresults for the exclusion of certain charges, and the specific fiscal 2014 adjustments were appropriate to better evaluate the operating and financial performanceeach of the Company and to consistently compare Applied’s results with those of its peer companies.three key steps in determining the NEOs’ fiscal 2017 annual incentive bonuses.To determine the funding available under the Bonus Plan, the Committee analyzed the achievement of adjusted EPS, which was $1.07 for fiscal 2014. Adjusted EPS is a non-GAAP measure, and for fiscal 2014 excluded certain charges such as acquisition, integration and deal costs associated with prior transactions, as well as the Business Combination, gain on a derivative associated with the Business Combination, gain on the sale of a facility, the reinstatement of federal R&D tax credit, and the resolution of audits of prior years’ income tax filings and other tax items. A reconciliation of this non-GAAP adjusted financial measure to our financial results prepared in accordance with GAAP is included in the Appendix. A multiplier is applied depending on the adjusted EPS achieved. Funding the Bonus Plan within a range of 1.0x to 1.24x required an adjusted EPS for fiscal 2014 within a range of $1.00 to $1.29, and an adjusted EPS above or below this range would have increased or decreased the multiplier. The actual adjusted EPS of $1.07 resulted in a multiplier of 1.06x for funding of the Bonus Plan. The Committee increased the funding multiplier to 1.11x based on strong fiscal 2014 financial performance, including an approximately 21% one-year TSR performance, 81% year-over-year improvement in non-GAAP adjusted EPS and 43% year-over-year improvement in non-GAAP adjusted operating profit margin. The Committee also considered the leadership team’s achievement of these strong financial results while dedicating significant time and effort in preparing for the consummation of the Business Combination, reorganizing the business and leadership to enable a smooth transition after the closing of the Business Combination and otherwise planning for post-closing integration.In determining a bonus amount that it believed was appropriate for each NEO, the Committee reviewed the achievement levels of the secondary performance goals and considered the NEOs’ respective weightings for each goal and also considered each NEO’s overall individual performance for the year. The Committee analyzed the achievement of secondary goals by reviewing actual performance against goals previously approved by the Committee. In assessing the overall individual performance of the NEOs, the Committee reviewed the CEO’s performance evaluation for each NEO other than himself and Mr. Splinter. The CEO’s assessment was based on business unit or functional group objectives, as well as individual objectives related to special initiatives and personal development that had been set at the beginning of the year. In assessing the individual performance of Mr. Dickerson and Mr. Splinter, the Committee considered their leadership through a challenging year and individual efforts to close the Business Combination and plan for the new combined company. For each of the NEOs, the Committee also considered the challenges of the year, and the NEOs’ success in managing the business with strong performance, including very positive TSR performance and EPS and operating profit margin improvements, while navigating the complexities of the Business Combination strategies.
multiple of target: 1.34 below shows for each NEO: (1) the maximum amount payable under the Bonus Plan, (2) the target bonus amounts (expressed bothexpressed as a percentage of base salary, and(3) the target bonus expressed as a dollar amount) based on the bonus percentages established by the Committee for fiscal 2014, (2) the maximumpayable under the Bonus Plan and (3)(4) the actual fiscal 20142017 bonus amount approved by the Committee. UnderHRCC and paid to the Bonus Plan, no annual bonus may exceed $5 million for any individual, even if the level of adjusted operating profit achieved would allow for a higher bonus.NEO. Target Bonus
(% of base salary) Target Bonus
($) Maximum Bonus
Payable(1) Actual Bonus
Amount Paid
($) 175 % $ 1,715,000 $ 5,000,000 $ 2,165,273 175 % $ 1,715,000 $ 5,000,000 $ 2,165,273 135 % $ 776,250 $ 2,328,750 $ 854,883 135 % $ 776,250 $ 2,328,750 $ 980,054 135 % $ 742,500 $ 1,815,000 $ 912,774 (1)Based on Applied’s fiscal 2014 adjusted operating profit of $1.78 billion, the maximum bonus payable for fiscal 2014 would have been $14.25 million for each of Mr. Dickerson and Mr. Splinter and $7.12 million for each of the other NEOs (representing 0.8% and 0.4%, respectively, of such adjusted operating profit). However, under the Bonus Plan, the maximum annual bonus payable is the lower of $5 million and 3x the NEO’s target bonus. Under the Bonus Plan, 3x the target bonus is calculated based on the NEO’s target bonus (as a percentage of base salary) set at the beginning of the fiscal year and his base salary on the last day of the fiscal year. Mr. Salehpour’s target bonus was 110% at the beginning of fiscal 2014. Based on Mr. Salehpour’s salary of $550,000 on the last day of fiscal 2014, 3x his target bonus of 110% would be equal to $1,815,000. Accordingly, this amount was Mr. Salehpour’s maximum bonus payable. NEO
Bonus as a
Percentage
of Base $ 5,000,000 200% $ 2,000,000 $ 2,640,000 — — — — $ 2,531,250 135% $ 843,750 $ 1,113,750 $ 2,430,000 135% $ 810,000 $ 1,060,290 $ 1,617,000 110% $ 539,000 $ 770,770 $ 1,584,000 110% $ 528,000 $ 702,768 Splinter Bonus. For Mr. Splinter’s bonus award, the Committee provided that, if, prior to the end of fiscal 2014, Mr. Splinter retired within two months before, or any time after, consummation of the Business Combination, he would remain eligible to receive a prorated portion of the bonus if actual performance of initial and secondary performance goals is achieved during fiscal 2014. Mr. Splinter’s prorated bonus would be calculated based on the number of full months that he worked during fiscal 2014. The Committee believed that providing for a prorated bonus for Mr. Splinter was appropriate because of his critical role in moving Applied toward a successful completion of the Business Combination (including through his support of the proposed Business Combination with respect to customer relations, regulatory matters, integration planning and navigating cultural issues between the companies), as well as to provide Mr. Splinter continued incentive to drive performance for Applied. Mr. Splinter remained employed by Applied through the end of fiscal 2014 and was eligible for his full bonus amount.34 2018 Proxy StatementLong-Term Incentive CompensationPay and Performance Alignment. Our process for determining annual bonus awards has resulted in strong pay and performance alignment. The chart below illustrates the rigor of our scorecard and alignment between the actual annual bonus awards for our CEO and our non-GAAP adjusted EPS achievements.stockholders’shareholders’ interests to maximize long-term stockholdershareholder value.AwardsAwards.. The CommitteeHRCC grants equity and other long-term incentive awards to NEOs under our stockholder-approvedshareholder-approved Employee Stock Incentive Plan (the “Stock Plan”). The CommitteeHRCC has not granted, nor does it intend to grant, equity awards in anticipation of the release of material, nonpublic information that is likely to result in changes to the price of our common stock, such as a significant positive or negative earnings announcement. Similarly, Applied has not timed, nor does it intend to time, the release of material, nonpublic information based on equity award grant dates.Determination Among Different TypesThe HRCC oversaw a comprehensive review of Awards. In considering whetherour compensation programs in 2016 to grant performance shares, restricted stock units, stock options, other typesensure that they continue to align our management team with the interests of awards, orour shareholders, incentivize actions that will drive profitable growth, and attract and retain top talent in a combinationhighly competitive industry. As a result of awards during any fiscal year,this review, and feedback received from our shareholders, the Committee considers both current and expected incentive and retention needs, market competitiveness and business strategies. The Committee also considers the expense against earnings for accounting purposes compared to the expected benefit of new awards to Applied and the NEOs, as well as the value of awards already held by the NEOs. The Committee and management regularly monitor the environment in which Applied operates and makeHRCC approved changes to our long-term incentive program to help us meetwith the goals of increasing differentiation for high performance, balancing long-term and short-term incentives, and simplifying our goals, which include achieving long-term stockholder value and attracting, motivating and retaining top talent. The CEO makes recommendations with respect toincentive plan. type and size of awards, other than for himself. The Committee then determines individual awards for each NEO, with consideration given to the CEO’s recommendations, as well as the size and value of other long-term incentive awards held byfor NEOs consist of two forms of equity: performance share units (“PSUs”) and restricted stock units (“RSUs”). The target mix of the NEO,awards consists of 75% PSUs and 25% RSUs for the NEO’s jobCEO and 50% PSUs and 50% RSUs for the other NEOs.contributions to Applied’s success, skill set, prior experience, time in his position, internal equity, pressures to attract and retain talent, market competitiveness, and business conditions and strategies.Fiscal 2014 Cash-Settled Performance Unitswill also provide a crucial retention value through the RSUs.CEO LTI Vehicle Mix All Other NEO LTI
Vehicle Mix NEO Total Value
of Awards(1)
Equivalent
Target
Number of
PSUs(2)
Equivalent
Number of
RSUs(2)
$ 11,250,000 280,316 93,439 $ 4,375,000 72,675 72,675 $ 4,000,000 66,446 66,446 $ 2,250,000 37,376 37,376 $ 2,250,000 37,376 37,376 (1) Value of awards is based on Applied’s stock price on the grant date. Amounts shown in the “Stock Awards” column of the Summary Compensation Table represent grant date fair value determined pursuant to Accounting Standards Codification 718. (2) Number of shares calculated by dividing value of awards by $30.10, the closing price of Applied stock on December 1, 2016, the grant date. fiscal 2014 awards under our long-term incentive program, the Committee considered the program’s objectives, including the goal of aligning our executives’ interests with stockholders’ interests to maximize long-term stockholder value. This objective has been achieved in previous years through grants of equity awards that were subject to both performance goals and additional time-based vesting requirements. For fiscal 2014, the Committee granted performance units that will be settled or paid out in cash (not stock) under our Stock Plan, subject to achievement of an annual adjusted operating profit margin goal and time-based vesting requirements. In making that decision, the Committee considered, among other factors, that the NEOs held performance-based equity awards that, even if performance goals were achieved, would still be subject to continued employment requirements with Applied over multiple years. The Committee believed that cash-settled performance units subject to an annual adjusted operating profit margin goal, coupled with the NEOs’ equity holdings that were still subject to performance goals and time-based vesting, would maintain the alignmentsize of the NEOs’ interests withawards, the long-term interests of our stockholders.The Committee also considered the impact of Section 4985, including its potential impact on morale. Section 4985 imposes a punitive 15% excise tax on the value of equity awards held by individuals who are executive officers or directors at any time during the period from six months before to six months after consummation of the Business Combination. The Committee believed that the excise tax would negatively affect the incentive and retention value of long-term incentive equity awards, and in turn employee morale and retention, during a period of transition, uncertainty and tremendous effort in preparing for the consummation of the Business Combination. The excise tax does not apply to awards that will be settled in cash. The Committee believed that granting cash-settled performance units would help to alleviate the extra tax burden that the NEOs would face as a result of Section 4985, while still providing key retention and performance incentives. The Committee also believed that the NEOs should not be penalized for making business and strategic decisions, such as entering into the Business Combination, that are intended to create long-term value for stockholders. For the same reasons, the Committee decided that the performance units would not include TSR as an additional goal, as it has done in previous years, because including a TSR goal likely would have also made the awards subject to the punitive excise tax.The Committee granted the cash-settled performance units listed below to our NEOs in fiscal 2014. Amounts shown in the table reflect total amounts under cash-settled performance units. In accordance with applicable SEC rules, the full amounts are reported for fiscal 2014 in the Summary Compensation Table on page 40 because they were fully earned based on Applied’s performance in fiscal 2014. However, in order to promote retention, the actual payment of these amounts are made in three equal installments in December 2014, December 2015 and December 2016, with each payment contingent on the NEO remaining employed with Applied on the date the payment is made, subject to certain prorata retirement-related acceleration of vesting for Mr. Splinter, as described below. Amount of Cash-Settled
Performance Units $ 12,740,000 $ 6,370,000 $ 3,881,250 $ 5,750,000 $ 2,160,000 In determining these award amounts, the CommitteeHRCC considered each NEO’s long-term incentive award as a component of his total direct compensation. The Committee also considered that these awards were cash-based and as a result, there was no potential for the NEOs to be rewarded for any increases in stock value that would have been possible if the awards were equity-based. The Committee believed that this could potentially have a negative effect on Applied’s retention efforts at a time when retention of our NEOs was of paramount importance, both to manage the business and drive toward a successful completion of the Business Combination and integration with Tokyo Electron. Accordingly, the amounts of theTarget fiscal 2017 long-term equity awards were determined in light of each NEO’s scope of responsibility, performance, impact on results and expected future contributions to our business, compensation levels relative to other Applied officers, the wholesale changes made to the long-term incentive program and establishment of three-year performance goals, the need to attract and retain talent, andintentlong-term interests of delivering appropriate incentives similarour shareholders, were in line with market norms for the NEOs’ respective roles and were sufficient to those that equity awards had provided in previous years.Annual Adjusted Operating Profit Margin GoalPerformance Share Units.. The cash-settledlong-term incentive program was entirely redesigned to provide for longer performance units granted by the Committee to the NEOs in fiscal 2014 required the achievementmeasurement periods and alignment of an annual adjusted operating profit margin goal. Even if this performance goal was achieved, the NEO must also remain an employee formetrics with our strategic goals. The PSUs will vest three years from the grant date in order for allbased on achievement of the amounts to vest.averagenon-GAAPIn order for the NEO’s fiscal 2014 cash-settled performance units to become eligible for time-based vesting, Applied had to achieve an annual adjusted operating profit margin of at least 10% in any one offor fiscal 2017 through fiscal 2019 and average WFE market share goals for calendar years 2014, 2015 or 2016. The Committee approved an absolute rather than a scaled relative adjusted operating profit margin goal as in previous years in recognition of the difficulty in setting appropriate relative performance ranges while preparing2016 through 2018, with equal weighting given to close the Business Combination. The Committee believed that an absolute annual adjusted operating profit margin was an appropriate goal because it both continued to require effort in maintaining recent successes in operating profit improvements while not being so difficult to achieve that it might diminish NEO focus on other critical strategic initiatives and financial goals. The Committee felt this balance was important particularly in a challenging year during which the NEOs would have to both drive Applied’s financial performance while devoting tremendous effort in managing the complexities of the Business Combination to close it, as well as in operating the combined businesses post-closing.For purposes of calculating fiscal 2014 annual adjusted operating profit margin, which is a non-GAAP measure, certain charges were excluded, such as restructuring and asset impairment charges, acquisition, integration and deal costs associated with prior transactions, as well as the Business Combination, gain on a derivative associated with the Business Combination, and gain on the sale of a facility. For fiscal 2014, Applied achieved an annual adjusted operating profit margin of 19.6%. A reconciliation of this non-GAAP adjusted financial measure to our financial results prepared in accordance with GAAP is included in the Appendix. As a result, 100% of the cash-settled performance units became eligible for time-based vesting over three years. SEC disclosure rules require that the entire “earned amount” (the entire amount that become eligible for time-based vesting) be reported as fiscal 2014 non-equity incentive plan compensation. See footnote 2 to the Summary Compensation Table on page 40.Time-Based Vesting. In addition to achieving the adjusted operating profit margin goal, the NEO must remain an employee of Applied through December 19, 2016 in order for all amounts to vest. The three-year vesting schedule was intended to retain and reward our NEOs during the immediate critical period to close the Business Combination and to integrate the businesses post-closing. We believe that the performance goal and the vesting schedule demonstrate Applied’s commitment to pay for performance and further our goal to retain our NEOs.Splinter Award. For Mr. Splinter’s cash-settled performance units, the Committee provided that if, prior to the end of the award’s three-fiscal-year performance period, Mr. Splinter retires within two months before, or any time after, consummation of the Business Combination, a prorated portion of his award would remain outstanding and eligible to vest if the performance goal actually is achieved during the performance period (in which case, the time-based vesting for such prorated amount would be considered satisfied). The prorated amount would be calculated based on the number of full months that Mr. Splinter worked during the award’s performance period. The Committee believed that providing for a prorated amount for Mr. Splinter was appropriate to retain him because of his critical role in completing the Business Combination, as well as providing Mr. Splinter continued incentive to drive performance for Applied.Recognition Equity Awardeach metric.In September 2014,Committee granted Mr. Salehpour 120,000 performance shares. Theachievement of threshold, target or maximum levels of each metric and may range from 50% to 200% of the target number of shares, as set forth below. Achievement Level Percentage of
May Vest50% 100% 200% is subject to Applied’s achieving an annual adjusted operating profit margin of at least 10% in any one of fiscal years 2015, 2016, 2017 or 2018. In determining annual adjusted operating profit margin, a non-GAAP measure, certain chargesthat may vest will be excluded. determined based on straight-line interpolation.additionsetting goals for the PSUs, the HRCC considered Applied’s historical results and relative performance, and established goals that are aligned with Applied’s financial and strategic objectives and will require significant effort to achievingachieve the adjusted operating profit margin goal, Mr. Salehpour must remain an employee of Applied through October 1,maximum level.in order for all the sharesProxy Statementvest. The award was granted in recognition of Mr. Salehpour’s assuming additional responsibilities in heading the New Markets and Service Group, which was formed as part ofvest ratably over three years, providing a new organizational structure implemented in August 2014link to better align the Company to our growth opportunities, increase focus on key areas ofshareholder value creation and pavemaintaining retention value.wayHRCC granted him the following equity awards 30 days after his start date:(1) new-hire RSUs with a value of $2,500,000, scheduled to vest ratably over three years and subject to acceleration of vesting in the event that Applied terminates Mr. Durn without cause before February 2020; (2) PSUs with a target value of $1,500,000, scheduled to vest in December 2019, subject to achievement of the same goals as the fiscal 2017 PSU awards for rapid integrationour other NEOs – three-year average WFE share and three-year averagenon-GAAP adjusted operating margin goals; and (3) RSUs with Tokyo Electron. a value of $1,500,000, scheduled to vest in three equal installments through 2019. The number of RSUs or PSUs granted was determined by dividing the stated value of the award by $44.73, the closing price of Applied stock on September 6, 2017, the grant date.determiningaddition, Mr. Durn’snew-hire compensation included an initial annual base salary of $600,000 and a target bonus of 110% of his base salary under the Bonus Plan beginning in fiscal year 2018. As Mr. Durn’s employment occurred after the eligibility date for a 2017 bonus award under the Bonus Plan, he was awarded a special bonus of $250,000 to make this grant,be paid six months following his start date, subject to continued employment. Mr. Durn also received a $500,000sign-on bonus 30 days after his start date. In the Committee also consideredevent that Mr. Salehpour had not received an equity grant uponDurn resigns or Applied terminates his promotion to Senior Vice President in September 2013.In granting performance shares to Mr. Salehpour, the Committee considered linkageemployment for cause prior to the Company’s performance, alignment withcompletion of 24 months of service, Mr. Durn is obligated to repay the interestfull amount of our stockholders,thesign-on bonus, less any amounts withheld by Applied for taxes. Mr. Durn also received relocation benefits under Applied’s standard relocation policy.impact on retention,expected future contributions to Applied, as well as compensation levels at our peer companies for the comparability of Mr. Salehpour’s overall compensation with other executives.CFO position. The CommitteeHRCC also considered the impactassociatedone-time costs of replacing compensation value that Mr. Durn forfeited by leaving his previous employer.15% punitive excise taxHuman Resources and Compensation CommitteeSection 4985Nasdaq, SEC and Internal Revenue Code rules. The HRCC may delegate any of its responsibilities to subcommittees. See “Board Meetings and Committees” for more information about the HRCC.would be imposed on his performance shares. Assince it had engaged Semler Brossy Consulting Group (“Semler Brossy”) as independent compensation consultant since 2008, it was appropriate to initiate a result,request for proposal (“RFP”) process for independent compensation consultant services. The purpose of the Committee providedRFP was to ensure that the vestingHRCC continues to receive comprehensive, expert consultant services and recommendations that reinforce the Company’s business strategy. Our current consultant, Semler Brossy, was invited to respond to the RFP, as were several other companies which provide independent compensation consultant services. After a thorough interview process with the candidates, the HRCC renewed its engagement with Semler Brossy for independent compensation consultant services in 2017.30%Semler Brossy pursuant to SEC rules and concluded that the work of unvested performance shares would accelerate asSemler Brossy for the HRCC has not raised any conflict of three trading days prior to theexpected closing dateSemler Brossy reviews and advises on all principal aspects of the Business Combination, subjectexecutive compensation program. Its main responsibilities are as follows:● Advise on alignment of pay and performance; ● Review and advise on executive total compensation, including base salaries, short- and long-term incentives, associated performance goals, and retention and severance arrangements; ● Advise on trends in executive compensation; ● Provide recommendations regarding the composition of our peer group; ● Analyze peer group proxy statements, compensation survey data and other publicly available data; and ● Perform any special projects requested by the HRCC. Salehpour’s continued employmentDickerson (as CEO) and other executives, including the heads of Global Human Resources and Global Rewards, to attend its meetings. TheApplied through the accelerated vest dateHRCC, assesses the performance of our NEOs and only if Mr. Salehpour is expectedother executive officers. The CEO presents to be considered a “disqualified individual” under Section 4985. The Committee believed that this partial vesting acceleration would alleviate a portionthe HRCC his evaluation of each executive officer’s performance over the extra tax burden that Mr. Salehpour would incur as a result ofpast year and makes recommendations to the successful closing of the Business Combination, while substantially preserving theHRCC regarding base salaries, bonus targets and actual payments, performance goals and weightings, and long-term incentive awards for executive officers. The HRCC considers these recommendations in making its final determinations, in addition to considering input from Semler Brossy. The HRCC discusses the CEO’s proposed compensation and retention value of his equity award, as it remains subject to time-based vesting and Mr. Salehpour’s continued future employment.makes final decisions regarding the CEO’s compensation when he is not present.Fiscal 2015 Performance-Based Equity AwardsAdditional Compensation Programs and PoliciesAs part of its annual compensation review in December 2014, the Committee granted to our NEOs (except Mr. Splinter, who did not receive an award) long-term incentive equity awards for fiscal 2015. These equity awards are subject to Applied’s achieving a targeted level of annual adjusted operating profit margin and targeted levels of TSR relative to an index peer group, as well as additional time-based vesting requirements over a four-year period. The Committee did not grant Mr. Splinter a long-term incentive award for fiscal 2015, as the Committee believed that the terms of Mr. Splinter’s retention agreement already provided sufficient incentive and retention value until his expected retirement at the end of March 2015.The Committee recognized that the fiscal 2014 cash-settled performance units did not allow our leadership team to participate in the stock price appreciation that they had helped to create for our stockholders in fiscal 2014, when there was an approximately 19% stock price appreciation during the fiscal year. The Committee also recognized that the cash-settled units failed to sufficiently reward performance in accordance with Applied’s compensation philosophy and as a result, could have a negative impact on retention. The return to granting equity awards continues to strongly align our executives’ interests with those of our stockholders and also motivates our NEOs to improve TSR to create long-term stockholder value.The Committee also considered the negative impact of the 15% punitive excise tax on the incentive value of the fiscal 2015 equity awards. To preserve the long-term incentive and retention value of the equity awards, the Committee did not provide for the acceleration of vesting upon the consummation of the Business Combination. Rather, the Committee approved payment by Applied of any Section 4985 excise tax, and related taxes on such payment, that is imposed on these awards. The payment is subject to each NEO’s continued employment through the closing of the Business Combination. This payment does not increase the benefit of the awards to the NEOs, but is simply intended to place them in the same position as if there were no punitive excise tax. This avoids reducing the retention and incentive benefits, and avoids penalizing the NEOs for making the business and strategic decision to enter into the Business Combination. The payment is limited only to the equity awards granted in December 2014, and the NEOs remain responsible for paying their own excise taxes on other equity awards that they may have outstanding at the closing of the Business Combination. Additional Compensation Programs and PoliciesApplied’s 2005 ExecutiveOur 2016 Deferred Compensation Plan (the “2005 Plan”“DCP”) allows our NEOs and other eligible employees to voluntarily to defer receipt, on apre-tax basis a portion of some of the compensation they have earned. Under the 2005 Plan,their eligible employees have been permitted to defer more compensation than they otherwise would be permitted to defer under Applied’s 401(k) savings plan due to the annual deferral and compensation limits imposed by the Code. Applied has offered the 2005 Plan as a competitive practice to help us attract and retain top talent, and we reevaluate this plan from time to time. Amounts credited to the 2005 Plan are credited with deemed interest, but Applied doesearnings. We do not provide matching or other employer contributions under this plan. DueDeferrals made prior to its conservative design, including thatOctober 2015 under the DCP are credited with deemed interest and are subject to the distribution rules in place prior to the plan does not provide above-market or preferential earnings on deferred compensation, the benefits providedamendment in October 2015. Beginning in fiscal 2016, participants are permitted to notionally invest new deferrals in certain investment options newly available under the plan are not considered a material element of an NEO’s overall compensation package. The ability to electplan. Additionally, for new deferrals, of compensation under the 2005 Plan was suspended effective as of October 1, 2014 asDCP provides new distribution rules forin-service distributions and upon a result of certain tax considerations related to the Business Combination.qualifying separation from service, disability and change in control. See“Nonqualified “Nonqualified Deferred Compensation”below for more information about the 2005 Plan.DCP.2014, substantially2017, all full-time and part-time (working 20 or more hours a week) U.S. employees, including the NEOs, were eligible to participate in Applied’s 401(k) plan, atax-qualified retirement plan. Eligible Applied 401(k) plan participants receive matching contributions from Applied. WeOther than the 401(k) plan, we do not provide defined benefit pension plans or defined contribution retirement plans to the NEOs or other employees, except for: (a) the 401(k) plan, or (b) as required in certain countries outside the United StatesU.S. for legal or competitive reasons.including:including atax-qualified employee stock purchase plan, medical, dental and vision insurance, long-term and short-term disability plans, life and accidental death and dismemberment plans, health and dependent care flexible spending accounts, business travel insurance, wellness programs, relocation/expatriate programs, educational assistance, employee assistance program and certain other country-specificcountry- specific benefits. In connection with the Business Combination, Mr. Dickerson relocated from California to Japan in August 2014 to continue leading the Company’s efforts toward the completion of the Business Combination and preparing for post-closing integration. Mr. Dickerson received benefits under the Company’s standard relocation program available to all employees on international assignment. See footnote 3 of the Summary Compensation Table for additional information regarding Mr. Dickerson’s relocation benefits.The 401(k) plan and other generally available benefits programs allow Applied to remain competitive for employee talent, and the Committee believes that these programs generally enhance employee productivity. The main objectives of Applied’s benefits programs are to give our eligible employees access to health care, financial assistance with survivor and disability benefits, assistance in achieving retirement financial goals and enhanced health and productivity, and to support global workforce mobility, in full compliance with applicable legal requirements. These benefits are not considered by the Committee in determining an individual NEO’s total compensation.but excluding the 2005 Plan, against those of our peers. Applied generally targets itsApplied’s overall broad-based benefits programs excluding the 2005 Plan,are at approximately the market median, which the CommitteeHRCC believes allows us to remain competitive in attracting and retaining talent. We also evaluate the competitiveness of our 401(k) plan against plans of other technology companies.Employment Agreements and Retention ArrangementsEmployment Agreements. In August 2013, Applied entered into employment agreements with Mr. Dickerson in connection with his appointment as President and CEO, and with Mr. Splinter in connection with his appointment as Executive Chairman of the Board.Mr. Dickerson’s employment agreement provides that if Applied terminates his employment other than for cause and other than due to death or disability, he would be entitled to receive a lump sum payment equal to 275% of his then-current base salary. This severance amount is the same as that which had been provided for Mr. Splinter while he was CEO from 2003 to 2013, and would be subject to Mr. Dickerson’s agreeing to a release of claims and non-solicitation and non-disparagement provisions in favor of Applied.Mr. Splinter’s employment agreement provides that if his employment is terminated under certain circumstances, he would be entitled to receive a lump sum payment equal to the sum of (i) 275% of his then-current base salary and (ii) an amount equal to 18 months of continued health coverage premiums. The level of salary severancebenefits provided under the agreementprograms discussed above are not considered by the HRCC in determining an individual NEO’s total compensation.asposition, from atax-liability perspective, that they would be in if they were still located in the U.S.had beenare reported in the Summary Compensation Table. The relocation benefits were provided to Mr. Dickerson under the term sheetrelocation program that Mr. Splinter entered into when he became CEO in 2003. The salary severance (as well as the amountis available to all employees on global assignment. These benefits included housing, transportation and moving expenses, a cost of living adjustment, education expense reimbursements, relocation allowance, amounts for health coverage continuation) would be triggered upon his resignation for good reason or Applied’s termination of his employment without cause. Mr. Splinter also would receive certain long-term incentive award vesting acceleration upon his retirement, which terms were modified by his retention agreement. See “Employment Agreements and Retention Arrangements” on page 45 for additional information.Amended Retention Arrangements. In connection with the proposed Business Combination, and to provide retention and performance incentives for the NEOs, the Committee approved retention agreements for our NEOs in September and December 2013 that included deemed achievement of performance measures and acceleration of time-based vesting for certain outstanding equity awards held by our NEOs, as well as cash retention bonuses for our NEOs,except Mr. Dickerson and Mr. Splinter. The restricted stock units granted to Mr. Halliday in November 2013 pursuant to his employment agreement entered into in 2011taxes incurred in connection with the Varian acquisition were also subjectrelocation, as well as tax equalization for the incrementaltax-liability resulting from his relocation to Japan in service of Applied. Tax equalization ensures that the same vesting acceleration. The terms oftax costs incurred by Mr. Dickerson on the original retention arrangements are described further under “Employment Agreements and Retention Arrangements” on page 45. The performance measures that otherwiseinternational assignment be equivalent to what the tax costs would have been deemed achieved underhad he remained in the retention arrangementsU.S. Tax payments were not paid to Mr. Dickerson but were paid directly to the appropriate tax authorities. While the amounts of the relocation benefits are attributed to Mr. Dickerson in fact achieved in Decemberthe Summary Compensation Table, they did not provide any additional compensation to him and are not part of his ongoing pay.as a result,2015, the NEOs will not receive a benefittiming and disclosure of relocation payments extend beyond this period. Mr. Dickerson is subject to income taxes in Japan on income earned for the period of time of his international assignment, including continuing Japanese tax liabilities related to his equity awards. Japan assesses income tax on compensation earned while an individual is resident in Japan. Performance shares are deemed earned over the period during which they vest and stock options are deemed earned from the target achievement of their equity awards upon the consummation of the Business Combination.In December 2014, the Committee amended these retention agreements (except forgrant to exercise. Mr. Splinter’s) to provide that with respect to each NEO’sDickerson has outstanding equity awards that were granted prior to September 2013 (as well ashe earned during the equity award grantedperiod of his international assignment in November 2013 to Mr. Halliday), vesting of the portion of each award that is otherwise scheduled to vest in calendar year 2015 based solely on continued employment withJapan. Applied, will accelerate as of three trading days prior to the expected closing of the Business Combination. This vesting acceleration is conditioned upon the closing of the Business Combination and will apply only if the NEO is expected to be a “disqualified individual” and subject to a 15% excise tax under Section 4985 on such equity awards.The NEOs’ original agreements provided that the portion of equity awards that were otherwise scheduled to vest in calendar year 2014 would accelerate vesting three trading days before the expected closing of the Business Combination. By December 2014, it appeared unlikely that the Business Combination would close in 2014, so, consistent with the original acceleration terms, the Committee approved the acceleration of any vesting scheduled for calendar year 2015. This partial acceleration of vesting helps to mitigate some, but not all, of the 15% excise tax impact on our NEOs. The excise tax will still apply to any outstanding equity awards held by the NEOs upon consummation of the Business Combination.The Committee also amended the retention agreements to delay the payment date of the retention bonus for each NEO (other than Mr. Dickerson, whose agreement did not provide for a retention bonus) from March 31, 2015 to the earlier of (1) the date that is six months after the closing or termination of the Business Combination and (2) December 11, 2015, subject to the NEO’s continued employment. The Committee approved this delay in light of the critical need to retain the executives through an integration period following closing or any termination of the Business Combination.The consent of each NEO was required for the above amendments to the retention agreements to become effective, and each NEO provided his consent.Also in December 2014, the Committee approved the Section 4985 tax assistance related to equity awards granted to the NEOs (except for Mr. Splinter, who did not receive an equity award) in December 2014, as described under “Fiscal 2015 Performance-Based Equity Awards” above.In approving the actions described above, the Committee considered the complexity of the Business Combination, and the expected lengthy period to close it, as well as the need to reduce the risk of losing leadership talent at a critical time for the Company, while substantially preserving the long-term incentive and retention value of the NEOs’ equity awards. The equity modifications, retention bonuses and Section 4985 tax assistance in part are intended to provide retention incentives to focus and motivate our NEOs prior to and following the closing of the Business Combination, to plan for and lead the post-closing integration. The Committee also recognized the need for our NEOs to continue to drive Applied toward the additional growth and positive results that may be achieved through the successful consummation of the Business Combination, and the importance of motivating the NEOs to continue to effectively operate Applied’s business and encourage them to stay focused on longer-term goals with as few distractions as possible.Halliday Retention Arrangements From Varian Acquisition. Under the offer letter entered into with Mr. Halliday in May 2011 in connection with Applied’s acquisition of Varian,providing tax equalization benefits to Mr. Halliday was entitled to receive a grant of 120,000 restricted stock units and a cash bonus of $2,600,000, in each case, if he remained employed with Applied throughDickerson under the two-year anniversary ofrelocation program, will be responsible for incremental taxes on the Varian acquisition. When the offer letter was negotiated, the Committee considered the importance to Applied of the success of the Varian transaction, the complexity of running the Varian business post-merger and the need for a strong leader to successfully integrate Varian into Applied. The Committee also considered that Mr. Halliday would have been entitled to substantial compensation under his Varian change in control agreement if he opted to leave in connection with the acquisition, instead of staying with Applied. Mr. Halliday was being hired tohead the Varian business, and the Committee deemed Mr. Halliday critical to the success of the Varian business,equity awards as well as key to integration efforts. Accordingly, the Committee considered the bonus and restricted stock units appropriate and necessary to attract Mr. Halliday to join, and stay with, Applied, and to successfully manage the Varian business. The Varian acquisition closed in November 2011, and Mr. Halliday received his restricted stock unit grant and cash bonus in November 2013. In accordance with the terms of his May 2011 offer letter, the restricted stock units are scheduledthey continue to vest over three years from their grant date, subject to Mr. Halliday’s continued employment with us.more closelyhelp align the interests of our directors and NEOs with those of our stockholders.shareholders. In fiscal 2017, the HRCC approved changes to our stock ownership guidelines to increase the CEO ownership level from 5x to 6x of his annual base salary and apply the guidelines to all Section 16 officers on the CEO Executive Staff. The guidelines require achievingprovide that officers should meet the following investmentownership levels in Applied stock within five years from the individual’s initial election or appointment:common stock: Required InvestmentOwnership Level and Executive Chairman 5x6x base salaryNEOsOfficers 3x base salary Non-employee Directors$325,000 in valueAt the endAs of fiscal 2014,December 31, 2017, all of the NEOs whose five-year ownership deadline had passed had met the stock ownership guidelines.discouragesprohibits our NEOs from engaging in hedging and speculation by prohibiting insiders from short sales and trading in publicly listed options foror other speculative transactions relating to Applied shares. During fiscal 2014, none of the shares, ofor pledging their Applied stock held by our executive officers or directors were pledged as collateral.shares.an incentive compensationa “clawback” policy that allows the Board to require reimbursement of incentive compensation from an executive officer in the event intentional misconduct by the officer is determined to be the primary cause of a material negative restatement of the Company’sApplied’s financial results. The extent of the compensation that may be recovered is theafter-tax portion of any bonus paid to, and any performance-based equity awards earned by, the NEO within the 12 months after filing of the financial statements, if the compensation would not have been paid to the NEO had Applied’s financial results been reported properly. The policy applies to financial statements filed in a rolling three-year, look-back period. This clawback policy is in addition to any policies or recovery rights that are providedrequired under applicable laws, including the Sarbanes-Oxley Act and the Dodd-Frank Act.AccountingTax DeductibilityTax Considerationsdesigning ourthe past, Section 162(m)’s deductibility limitation was subject to an exception for compensation that qualified as ‘performance-based’. Our compensation programs we considerwere designed to permit Applied to qualify for the potential accounting effects on Applied andperformance-based exception, although the tax effects on Applied and our employees. In allocating among different elementsCompany reserved the right to pay compensation that did not qualify as ‘performance-based’. While the HRCC has considered the deductibility of compensation we consideras a factor in making compensation decisions, it has retained the accounting expense associated with each separate element of compensation and the potential reward of that element. Applied aims to limit total compensation expense and meet the goals of our compensation programs. For example, if compensation expense increases under one program, Applied may seek to decrease expenses under another program.Applied also seeksflexibility to provide tax-advantaged benefitscompensation that is consistent with the Company’s goals for employees where practical and affordable, including, for example, the 401(k) plan, the Employees’ Stock Purchase Plan and the 2005 Plan. In choosing the elements of ourits executive compensation program, and allocating among them, Applied considers whethereven if such compensation would not be fully tax-deductible. The HRCC is continuing to assess the element may be “performance-based” compensation for purposesimpact of Section 162(m) of the Code. Under Section 162(m), Applied receives a federal income tax deduction forCode, as amended, on our compensation paid to the CEO and the three other most highly compensated executive officers (excluding the CFO) on compensation that is less than $1 million during any fiscal year or is “performance-based” under Section 162(m). Our Stock Plan and Bonus Plan are intended to permit (but not require) the Committee to award compensation that is “performance-based” and thus fully tax-deductible by Applied. However, the Committee has authorized in the past, and may authorize in the future, compensation that is not fully tax deductible, but which promote other important considerations, such as incentive and retention needs.programs.Also, Section 280G, Section 4999, Section 409A and Section 4985 of the Code impose additional taxes beyond ordinary income taxes under specified circumstances. Code Sections 280G and 4999 impose additional taxes on certain payments or benefits in connection with a change of control of Applied, and also provide that Applied or its successorcould lose a tax deduction on these payments and benefits. Section 409A imposes additional taxes on certain non-qualifying “deferred compensation.” To assist in preventing the imposition of additional tax under Section 409A, Applied has structured its compensation and benefits arrangements in a manner intended to comply with Section 409A. As discussed above, in fiscal 2014, the Committee also considered the impact of the punitive excise tax under Section 4985 on the value of equity awards held by NEOs in connection with the proposed Business Combination, and approved the payment by Applied of any Section 4985 excise tax, and related taxes on such payment, that is imposed on the equity awards granted to the NEOs in December 2014.Compensation Committee Interlocks and Insider ParticipationHUMAN RESOURCES ANDDuring fiscal 2014, the following directors were members of Applied’s Human Resources and Compensation Committee: Thomas J. Iannotti, Willem P. Roelandts (Chair) and James E. Rogers. None of the Committee members has at any time been an officer or employee of Applied.None of Applied’s NEOs serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving on Applied’s Board or Human Resources and Compensation Committee.Human Resources and Compensation Committee ReportSecurities Exchange Act, of 1934, as amended (the “Exchange Act”), except to the extent that Applied specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.2014.2017. Based on the review and discussions, the Human Resources and Compensation20152018 Annual Meeting of Stockholders.Willem P. Roelandts (Chair)James E. Rogers2014, 20132017, 2016 and 20122015 for our named executive officers.NEOs.Summary Compensation TableFor Fiscal 2014, 2013 and 2012 Year Salary
($) Stock
Awards
($)(1) Option
Awards
($)(1) Non-Equity
Incentive Plan
Compensation
($)(2) All Other
Compensation
($) Total ($) 2014 980,000 — — 14,905,273 539,732 (3) 16,425,005 2013 776,538 (4) 4,684,000 3,011,110 1,560,650 287,171 10,319,469 2012 2,860,396 (5) 11,872,000 (6) — 550,000 117,567 15,399,963 2014 980,000 — — 8,535,273 12,718 (7) 9,527,991 2013 980,000 6,733,250 — 1,560,650 12,783 9,286,683 2012 980,000 6,727,500 — 1,500,000 12,558 9,220,058 2014 575,000 — — 4,736,133 13,604 (8) 5,324,737 2013 575,000 2,927,500 — 667,575 12,922 4,182,997 2012 575,000 6,586,500 (9) — 698,000 13,254 7,872,754 2014 575,000 2,038,800 (10) — 6,730,054 2,971,113 (11) 12,314,967 2013 484,528 1,984,750 — 768,488 322,300 3,560,066 2012 — — — — — — 2014 485,385 2,575,200 (12) — 3,072,774 12,343 (13) 6,145,702 2013 353,885 3,549,200 (14) — 545,952 12,279 4,461,316 2012 — — — — — — (1)The NEOs were not granted annual equity awardsName and Principal Position Year Salary
($)(1)Bonus
($)(2)Stock
Awards
($)(3)Non-Equity
Incentive Plan
Compensation
($)(4)All Other
Compensation
($)
President and Chief Executive Officer2017 1,000,000 — 10,844,501 2,640,000 838,204 (5) 15,322,705
Senior Vice President, Chief Financial Officer2017 138,462 500,000 5,421,909 — 411,239 (8) 6,471,610
Former Senior Vice President, Chief Financial Officer2017 625,000 — 4,231,139 1,113,750 12,705 (10) 5,982,594
Senior Vice President, General Manager, Services, Display and Flexible Technologies2017 591,346 — 3,868,486 1,060,290 12,058 (11) 5,532,180
Senior Vice President, Chief Technology Officer2017 484,808 — 2,176,031 770,770 12,323 (12) 3,443,932
Senior Vice President, General Counsel
and Corporate Secretary2017 480,000 — 2,176,031 702,768 12,899 (13) 3,371,698 (1) Applied’s fiscal 2016 contained 53 weeks, and fiscal 2017 and 2015 each contained 52 weeks. Amounts shown reflect salaries for services rendered for the number of weeks in the respective fiscal years. (2) Amount shown for Mr. Durn is anew-hire bonus of $500,000, which is subject to repayment by Mr. Durn if he resigns or his employment is terminated by Applied for cause within two years of his hire. Amount shown for fiscal 2014. The stock award granted2016 for each other NEO is a retention bonus paid to Mr. Salehpour wasthe applicable NEO in recognitionthe beginning of his expanded responsibilities as partfiscal 2016, six months after the termination of Applied’s new organizational structure implemented in August 2014. The stock award granteda proposed business combination with Tokyo Electron, pursuant to Mr. Halliday was under a 2011 employment agreement entered into in connection with his joining Applied following our acquisitionthe terms of Varian Semiconductor Equipment Associates, Inc. the NEO’s amended and restated retention agreement.(3) Amounts shown do not reflect compensation actually received by the executive officer. Instead, the amounts reported represent the aggregate grant date fair value of target stock awards or a stock option granted in the respective fiscal years, as determined pursuant to ASC 718 (but excluding the effect of estimated forfeitures for performance-based awards). For fiscal 2017, the grant date fair value of maximum number of stock awards for each NEO is as follows: Mr. Dickerson: $18,951,240; Mr. Durn: $6,892,083; Mr. Halliday: $6,332,900; Mr. Salehpour: $5,790,104; Dr. Nalamasu: $3,256,945; and Mr. Larkins: $3,256,945. See “Fiscal 2017 Equity Awards” on page 35 for more information regarding the stock awards. The assumptions used to calculate the value of stock awards are set forth in Note 1211 of the Notes to Consolidated Financial Statements included in Applied’s Annual Report onForm 10-K for fiscal 20142017 filed with the SEC on December 17, 2014.15, 2017.(2)(4)Amounts consist of (a) bonuses earned under the Senior Executive Bonus Plan and the Applied Incentive Plan for services rendered in the respective fiscal yearsyears.(5) Amount includes Applied’s matching contribution of $12,150 under thetax-qualified 401(k) Plan, Applied’s payment on behalf of Mr. Dickerson of $780 in term life insurance premiums and (b)a payment of $1,125 under Applied’s Patent Incentive Award Program. Amount also includes $34,226 paid by Applied on behalf of Mr. Dickerson for fiscal 2014, fully-earnedtax consultation, $254,131 for taxes incurred and $535,792 of tax equalization payments for Japanese tax liabilities and taxes incurred as a result of these payments made under Applied’s relocation program in connection with Mr. Dickerson’s international assignment in Japan in contemplation of the closing of a proposed business combination with Tokyo Electron. Tax equalization ensures that the tax costs incurred by Mr. Dickerson on the international assignment are equivalent to what the tax costs would have been had he remained in the U.S. The tax equalization amounts under cash-settled performance units. Annual cash bonuses and fully-earned amounts of cash-settled performance unitswere not paid to Mr. Dickerson but were paid directly to the appropriate tax authorities. See“Relocation Program” on page 38 for fiscal 2014 are as follows:more information regarding Mr. Dickerson’s international assignment. Fiscal 2014
Annual Cash
Bonus($) Cash-Settled
Performance
Units Granted in
Fiscal 2014($) 2,165,273 12,740,000 2,165,273 6,370,000 854,883 3,881,250 980,054 5,750,000 912,774 2,160,000 In accordance with applicable SEC rules, the full amounts of the cash-settled performance units are reported for fiscal 2014 because they were fully earned based on Applied’s performance in fiscal 2014. However, in order to promote retention, the actual payment of these amounts are made in three equal installments in December 2014, December 2015 and December 2016, with each payment contingent on the NEO remaining employed with Applied on the date the payment is made, subject to certain prorata retirement-related acceleration of vesting for Mr. Splinter. See “Compensation Discussion and Analysis—Long-Term Incentive Compensation—Fiscal 2014 Cash-Settled Performance Units” for additional information about these cash-settled performance units.(3)(6)Amount includes:includes (a) Applied’s matching contribution of $11,700$11,925 under thetax-qualified 401(k) Plan, (b) Applied’s payment on behalf of Mr. Dickerson of $1,018$960 in term life insurance premiums and (c) a payment of $169,400 of accrued dividends upon the vesting of restricted stock, and (d) a payment of $750 to Mr. Dickerson$875 under Applied’s Patent Incentive Award Program. Amount also includes: (i)includes payments made under Applied’s relocation program in connection with Mr. Dickerson’s international assignment in Japan in contemplation of the closing of a proposed business combination with Tokyo Electron and his repatriation to the U.S. following the termination of the business combination. These amounts are as follows: $84,136 in housing, moving, and other direct assignment-related expenses for fiscal 2016 covered under our relocation program; $3,352,117 paid by Applied for taxes incurred in connection with assignment-related expenses in 2015 and 2016 due to the timing of final determination of tax liabilities and tax filings; and $1,649,753 of tax equalization payments for Japanese tax liabilities and taxes incurred as a result of these payments.(7) Mr. Durn was appointed CFO effective August 24, 2017. (8) Amount consists of (a) Applied’s matching contribution of $1,038 under thetax-qualified 401(k) Plan, (b) Applied’s payment on behalf of Mr. DickersonDurn of $343,465 for certain expenses for benefits provided$780 in term life insurance premiums, (c) alump-sum payment of $7,500 to him and his immediate family members in connection with hiscover incidental costs related to Mr. Durn’s relocation, from California to Japan, which include amounts for moving expenses, cost of living adjustment, transportation allowance, a one-time relocation allowance of $81,667, education expenses for Mr. Dickerson’s minor dependents of $63,846, and expenses relating to housing search and housing of $102,560, and (ii)(d) Applied’s payment on behalf of Mr. DickersonDurn of $13,399$268,302 for relocation expenses and (e) the reimbursement to Mr. Durn of $133,619 for taxes incurred in connection with his relocation.(9) Mr. Halliday stepped down as CFO on August 24, 2017. (4)(10)Mr. Dickerson’s annual base salary was set at $750,000 upon his appointment as President in June 2012 and increased to $980,000 upon his appointment as CEO effective September 2013.(5)Of this amount, $2,618,088 represents compensation paid to Mr. Dickerson for working on integration matters in connection with our acquisition of Varian Semiconductor Equipment Associates, Inc. (“Varian”) prior to his appointment as our President. Mr. Dickerson’s annual base salary was set at $750,000 upon his appointment as President.(6)Amount includes a grant date fair value of $5,769,500 for an award of 550,000 shares of performance-based restricted stock intended to replace the economic value of severance benefits forgone by Mr. Dickerson by not terminating his employment with Applied before May 11, 2013.(7)Amount consists of (a) Applied’s matching contribution of $11,700$11,925 under thetax-qualified 401(k) Plan and (b) Applied’s payment on behalf of Mr. SplinterHalliday of $1,018$780 in term life insurance premiums.(8)(11)Amount consists of (a) Applied’s matching contribution of $11,475$11,278 under thetax-qualified 401(k) Plan, (b) Applied’s payment on behalf of Dr. Thakur of $879 in term life insurance premiums, and (c) a payment of $1,250 to Dr. Thakur under Applied’s Patent Incentive Award Program.(9)Amount includes a grant date fair value of $3,661,500 for a special retention award of 300,000 performance shares.(10)Amount reflects the grant date fair value of 120,000 restricted stock units granted under an employment agreement entered into with Mr. Halliday in connection with our acquisition of Varian in November 2011.(11)Amount consists of (a) Applied’s matching contribution of $11,418 under the tax-qualified 401(k) Plan, (b) Applied’s payment on behalf of Mr. Halliday of $782 in term life insurance premiums, (c) a retention bonus of $2,600,000 under an employment agreement entered into with Mr. Halliday in connection with our acquisition of Varian in November 2011, (d) Applied’s payment on behalf of Mr. Halliday of $357,219 for certain expenses in connection with his relocation from Massachusetts to California, which includes $43,444 in mortgage assistance, $18,317 of moving expenses, and $294,932 related to the sale of Mr. Halliday’s home, and (e) Applied’s payment on behalf of Mr. Halliday of $1,694 for taxes incurred in connection with his relocation.(12)Amount reflects the grant date fair value of 120,000 performance shares granted in recognition of Mr. Salehpour’s assuming additional responsibilities as part of Applied’s new organizational structure implemented in August 2014.(13)Amount consists of (a) Applied’s matching contribution of $11,700 under the tax-qualified 401(k) Plan and (b) Applied’s payment on behalf of Mr. Salehpour of $643$780 in term life insurance premiums.(14)(12)Amount includesconsists of (a) Applied’s matching contribution of $10,855 under thetax-qualified 401(k) Plan, (b) Applied’s payment on behalf of Dr. Nalamasu of $718 in term life insurance premiums and (c) a grant date fair valuepayment of $1,792,700 for a new-hire award of 182,000 restricted stock units.$750 under Applied’s Patent Incentive Award Program.(13) Amount consists of (a) Applied’s matching contribution of $12,150 under thetax-qualified 401(k) Plan and (b) Applied’s payment on behalf of Mr. Larkins of $749 in term life insurance premiums. named executive officersNEOs during fiscal 2014, which ended on October 26, 2014. The stock awards identified in the table below are also reported in the Outstanding Equity Awards at Fiscal 2014 Year-End table below.2017.Grants of Plan-Based AwardsFor Fiscal 2014 Estimated Possible Payouts
Under Non-Equity
Incentive Plan Awards(1) Estimated Future Payouts
Under Equity
Incentive Plan Awards All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#) All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) Exercise
or Base
Price of
Option
Awards
($/share) Grant
Date Fair
Value of
Stock and
Option
Awards
($)(2) Grant
Date Threshold
($) Target
($) Maximum
($) Threshold
(#) Target
(#) Maximum
(#) 12/8/2013 — 12,740,000 12,740,000 — — — — — — — — 0 1,715,000 5,000,000 — — — — — — — 12/8/2013 — 6,370,000 6,370,000 — — — — — — — — 0 1,715,000 5,000,000 — — — — — — — 12/8/2013 — 3,881,250 3,881,250 — — — — — — — — 0 776,250 2,328,750 — — — — — — — 11/10/2013 — — — — — — 120,000 (3) — — 2,038,800 12/8/2013 — 5,750,000 5,750,000 — — — — — — — 0 776,250 2,328,750 12/8/2013 — 2,160,000 2,160,000 — — — — — — — 9/9/2014 — — — 0 120,000 (4) 120,000 (4) — — — 2,575,200 — 0 742,500 1,815,000 — — — — — — —
UnderNon-Equity
Incentive Plan Awards(1)
Under Equity
Incentive Plan Awards
Stock
Awards:
Number of
Shares of
Stock or
UnitsAll Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)Exercise
or Base
Price of
Option
Awards
($/share)
Date Fair
Value of
Stock and
Option
AwardsName Threshold
($)Maximum
($)Threshold
(#)Maximum
(#)(1) Amounts shown (except those indicated as granted on December 8, 2013) were estimated possible payouts for fiscal 20142017 under the Senior Executive Bonus Plan. These amounts were based on the individual officer’sNEO’s fiscal 20142017 base salary and position. The maximum amount shown is three times the target amount for the named executive officer,NEO, except the amount for (a) each of Messrs.Mr. Dickerson, and Splinter, which is the maximum amount payable per participant in any performance period under the Senior Executive Bonus Plan and (b) Mr. Salehpour, which was calculated using his target bonus percentage at the beginning of fiscal 2014 and his base salary at the end of fiscal 2014.Plan. Actual bonuses received by the executive officersNEOs for fiscal 20142017 under the Senior Executive Bonus Plan are reported in the Summary Compensation Table under the column titled“Non-Equity Incentive Plan CompensationCompensation..” Amounts shown as granted on December 8, 2013 consist of cash-settled performance units granted under the Employee Stock Incentive Plan, which are subject to a performance goal, as well as additional time-based vesting requirements. The maximum and target amount of the cash-settled performance units represents the total amount that may be earned if annual adjusted operating profit margin is at least 10% in any of fiscal years 2014, 2015 or 2016. See“Compensation Discussion and Analysis – Long-Term Incentive Compensation – Fiscal 2014 Cash-Settled Performance Units”for additional information about these performance units.(2) Amounts shown do not reflect compensation actually received by the named executive officers.NEOs. Instead, the amounts represent the aggregate grant date fair value of the awards as determined pursuant to ASC 718 (but excluding the effect of estimated forfeitures for performance-based awards). The assumptions used to calculate the awards’ value are set forth in Note 1211 of the Notes to Consolidated Financial Statements included in Applied’s Annual Report on Form10-K for fiscal 20142017 filed with the SEC on December 17, 2014.(3)The award shown consists of 120,000 restricted stock units granted to Mr. Halliday under the Employee Stock Incentive Plan pursuant to an employment agreement entered into with him in connection with our acquisition of Varian in November 2011, that are subject to time-based vesting through November 2016.(4)The award shown consists of 120,000 performance shares granted to Mr. Salehpour under the Employee Stock Incentive Plan, which are subject to a performance goal, as well as additional time-based vesting requirements. The maximum and target number of shares shown represents the total number of shares that may be earned if annual adjusted operating profit margin is at least 10% in any of fiscal years 2015, 2016, 2017 or 2018. See“Compensation Discussion and Analysis – Long-Term Incentive Compensation – Recognition Equity Award”for additional information about this award.15, 2017.named executive officersNEOs at the end of fiscal 2014, which ended on October 26, 2014.2017.Outstanding Equity Awards at Fiscal 2014 Year-End Option Awards(1) Stock Awards(1) Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) Option
Exercise
Price ($) Option
Expiration
Date Number of
Shares or
Units of
Stock
That
Have
Not
Vested (#) Market
Value of
Shares
or
Units of
Stock
That
Have
Not
Vested
($)(2) Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#) Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other Rights
That Have Not
Vested ($)(2) 250,000 750,000 (3) — 15.06 9/1/2020 — — — — — — — — — 110,000 (4) 2,404,600 (5) — — — — — — — 245,000 (6) 5,142,550 — — — — — — — — — 150,000 (7) 3,148,500 — — — — — — — 400,000 (8) 8,396,000 — — — — — 87,500 (9) 1,836,625 — — — — — — — 25,000 (10) 524,750 — — — — — — — — — 233,000 (11) 4,890,670 — — — — — — — 233,000 (12) 4,890,670 — — — — — — — 109,000 (13) 2,287,910 — — — — — — — 575,000 (14) 12,069,250 — — — — — 62,500 (9) 1,311,875 — — — — — — — 147,000 (15) 3,085,530 — — — — — — — — — 233,000 (12) 4,890,670 — — — — — — — 90,000 (16) 1,889,100 — — — — — — — 250,000 (17) 5,247,500 — — — — — — — 17,000 (18) 356,830 — — — — — 40,000 (19) 839,600 — — — — — — — 30,000 (20) 629,700 — — — — — — — 120,000 (21) 2,518,800 — — — — — — — — — 100,000 (22) 2,099,000 — — — — — 136,500 (23) 2,865,135 — — — — — — — — — 150,000 (24) 3,148,500 — — — — — — — 120,000 (25) 2,518,800 (1)Option Awards Stock Awards(1) Name Number of
Securities
Underlying
Unexercised
Options
(#)
ExercisableNumber of
Securities
Underlying
Unexercised
Options
(#)
UnexercisableEquity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)Option
Exercise
Price
($)Option
Expiration
DateNumber
of Shares
or Units
of Stock
That
Have Not
Vested
(#)Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(2)Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
(#)Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($)(2)1,000,000 — — 15.06 9/1/2020 — — —
280,316
(6)—
15,891,114— — — — — 55,891 (7) 3,168,461 — —
1,901,099— — — — — 108,292 (10) 6,139,073 —
72,675
(6)—
4,119,946— — — — — 30,000 (13) 1,700,700 —
66,446
(6)—
3,766,824— — — — — 54,146 (17) 3,069,537 —
37,376
(6)—
2,118,845— — —
— — — 54,146 (17) 3,069,537 —
37,376
(6)—
2,118,845(1) Stock awards consist of restricted stock units, performance shares performance-based restricted stock and performance units,PSUs, all of which will be converted into Applied common stock on aone-to-one basis upon vesting. All future vesting of shares is subject to the NEO’s continued employment with Applied through each applicable vest date. Notwithstanding the vesting schedule described belowSee“Long-Term Incentives”on page 35 for equity awards, the vesting of the portion of all equity awards granted prior to September 2013 (as well as the award granted in November 2013 to Mr. Halliday) that are otherwise scheduled to vest during calendar year 2015 based solely on continued employment with Applied will accelerate as of three trading days prior to the expected closing of the Business Combination (provided that the NEO is a “disqualified individual” and subject to a 15% excise tax under Section 4985 on such equity awards).more information regarding these awards.(2) The marketMarket value was determined by multiplying the number of such shares by the closing price of Applied common stock of $20.99$56.69 on October 24, 2014,27, 2017, the last trading day of fiscal 2014,2017, as reported on the Nasdaq Global Select Market.(3) The stock option wasPerformance shares were granted on September 1, 2013. 250,000December 8, 2014. Of these, 139,233 shares subject to the stock optionvested on December 19, 2017 and 139,232 shares are scheduled to vest on September 1 of each of 2015, 2016 and 2017.December 19, 2018.(4) The performance-based restricted stock wasPerformance shares were granted on JuneDecember 7, 2015. Of these, 118,985 shares vested on December 19, 20122017 and is118,985 shares are scheduled to vest on JuneDecember 19 2015.(5)Amount includes $95,700 in dividends accrued on shares of unvested restricted stock.(6)Consistseach of performance shares granted on June 19, 20122018 and 2019. On December 14, 2017, an additional 70,000 performance237,970 shares that became eligible to vest due to achievement of a TSR goal related to the grant. 122,500Of these additional TSR shares, 118,985 shares vested on December 19, 2017, 54,492 shares are scheduled to vest on July 1 of each of 2015December 19, 2018 and 2016.(7)The performance shares were granted on June 19, 2012. Provided specified performance goals are achieved, 112,50054,493 shares are scheduled to vest on JulyDecember 19, 2019. The additional TSR shares were earned based on Applied’s TSR for thetwo-year period ended fiscal 2017 ranking at the 98th percentile among the companies in the S&P 500 Information Technology Index.(5) Restricted stock units were granted on December 1, 2015 and 37,5002016. Of these, 31,146 shares vested on December 19, 2017, 31,146 shares are scheduled to vest on JulyDecember 19, 2018 and 31,147 shares are scheduled to vest on December 19, 2019.(6) PSUs were granted on December 1, 2016. The shares are scheduled to vest on December 19, 2019, depending on the achievement of specified performance goals. The number of shares reported in the tableshown is the target amount, and the actual number of shares that may vest ranges from 0% to 140%200% of the target amount, depending on the achievement of specified performance goals.(8)(7)The performance sharesRestricted stock units were granted on December 5, 2012.September 6, 2017. Of these, 200,00018,631 shares vestedare scheduled to vest on December 19, 2014February 1, 2018 and 100,00018,630 shares are scheduled to vest on February 1 of each of 2019 and 2020.(8) Restricted stock units were granted on September 6, 2017. Of these, 11,179 shares are scheduled to vest on January 15, 2018 and 11,178 shares are scheduled to vest on December 19 of each of 20152018 and 2016. On December 19, 2014, an additional 200,000 performance shares became eligible to vest due to achievement of TSR goal related to the grant. Of these additional TSR shares, 100,000 shares vested2019.(9) PSUs were granted on December 19, 2014 and 50,000September 6, 2017. The shares are scheduled to vest on December 19, of each of 2015 and 2016.(9)The performance shares were granted2019, depending on December 6, 2010. These shares vested on December 19, 2014.(10)The performance-based restricted stock was granted on December 6, 2010. These shares vested on December 19, 2014.(11)The performance-based restricted stock was granted on December 5, 2011. Of these, 174,750 shares vested on December 19, 2014 and 58,250 shares are scheduled to vest on December 19, 2015. On December 19, 2014, an additional 46,600 shares of restricted stock became eligible to vest due tothe achievement of TSR goal related to the grant. Of these additional TSR shares, 34,950 shares vested on December 19, 2014 and 11,650 shares are scheduled to vest on December 19, 2015.(12)The performance shares were granted on December 5, 2011. Of these, 174,750 shares vested on December 19, 2014 and 58,250 shares are scheduled to vest on December 19, 2015. On December 19, 2014, an additional 46,600 performance shares became eligible to vest due to achievement of TSR goal related to the grant. Of these additional TSR shares, 34,950 shares vested on December 19, 2014 and 11,650 shares are scheduled to vest on December 19, 2015.(13)The performance units were granted on December 5, 2011. Of these, 81,750 units vested on December 19, 2014 and 27,250 units are scheduled to vest on December 19, 2015. On December 19, 2014, an additional 21,800 performance units became eligible to vest due to achievement of TSR goal related to the grant. Of these additional TSR shares, 16,350 units vested on December 19, 2014 and 5,450 units are scheduled to vest on December 19, 2015.(14)The performance shares were granted on December 5, 2012. Of these, 287,500 shares vested on December 19, 2014 and 143,750 shares are scheduled to vest on December 19 of each of 2015 and 2016. On December 19, 2014, an additional 287,500 performance shares became eligible to vest due to achievement of TSR goal related to the grant. Of these additional TSR shares, 143,750 shares vested on December 19, 2014 and 71,875 shares are scheduled to vest on December 19 of each of 2015 and 2016.(15)Consists of performance shares granted on June 19, 2012 and an additional 42,000 performance shares that became eligible to vest due to achievement of TSR goal related to the grant. 73,500 shares are scheduled to vest on July 1 of each of 2015 and 2016.(16)The performance shares were granted on June 19, 2012. Provided specified performance goals are achieved, 67,500 shares are scheduled to vest on July 1, 2015 and 22,500 shares are scheduled to vest on July 1, 2016.goals. The number of shares reported in the tableshown is the target amount, and the actual number of shares that may vest ranges from 0% to 140%200% of the target amount, depending on the achievement of specified performance goals.(17)(10)The performancePerformance shares were granted on December 5, 2012.8, 2014. Of these, 125,00054,146 shares vested on December 19, 20142017 and 62,50054,146 shares are scheduled to vest on December 19, 2018.(11) 20152018 and 2016.2019. On December 19, 2014,14, 2017, an additional 125,000 performance92,544 shares became eligible to vest due to achievement of a TSR goal related to the grant. Of these additional TSR shares, 62,50046,272 shares vested on December 19, 20142017 and 31,25023,136 shares are scheduled to vest on December 19of each of 2018 and 2019. The additional TSR shares were earned based on Applied’s TSR for thetwo-year period ended fiscal 2017 ranking at the 98th percentile among the companies in the S&P 500 Information Technology Index. (12) Restricted stock units were granted on December 1, 2016. Of these, 24,225 shares vested on December 19, 2017 and 24,225 shares are scheduled to vest on December 19 of each of 20152018 and 2016.2019.(18)(13)The performance-based restricted stock wasPerformance shares were granted on September 9, 2014. These shares are scheduled to vest on October 1, 2018.(14) Performance shares were granted on December 5, 2011.8, 2014. Of these, 12,75038,676 shares vested on December 19, 20142017 and 4,25038,675 shares are scheduled to vest on December 19, 2018.(15) Performance shares were granted on December 7, 2015. Of these, 33,051 shares vested on December 19, 2017, 33,051 shares are scheduled to vest on December 19, 2018 and 33,052 shares are scheduled to vest on December 19, 2019. On December 19, 2014,14, 2017, an additional 3,40066,103 shares of restricted stock became eligible to vest due to achievement of a TSR goal related to the grant. Of these additional TSR shares, 2,55033,051 shares vested on December 19, 20142017 and 850 shares are scheduled to vest on December 19, 2015.(19)The restricted stock units were granted on November 10, 2011. These shares vested on November 10, 2014.(20)The restricted stock units were granted on December 3, 2012. Of these, 10,000 shares vested on January 1, 2015 and 10,000 shares are scheduled to vest on January 1 of each of 2016 and 2017.(21)The restricted stock units were granted on November 10, 2013. Of these, 40,000 shares vested on November 10, 2014 and 40,000 shares are scheduled to vest on November 10 of each of 2015 and 2016.(22)The performance shares were granted on February 25, 2013. Of these, 50,000 shares vested on December 19, 2014 and 25,00016,526 shares are scheduled to vest on December 19 of each of 20152018 and 2019. The additional TSR shares were earned based on Applied’s TSR for thetwo-year period ended fiscal 2017 ranking at the 98th percentile among the companies in the S&P 500 Information Technology Index.(16) Restricted stock units were granted on December 1, 2016. Of these, 22,148 shares vested on December 19, 2017 and 22,149 shares are scheduled to vest on December 19 of each of 2018 and 2019. (17) Performance shares were granted on December 8, 2014. Of these, 27,073 shares vested on December 19, 2017 and 27,073 shares are scheduled to vest on December 19, 2018. (18) Performance shares were granted on December 7, 2015. Of these, 23,136 shares vested on December 19, 2017 and 23,136 shares are scheduled to vest on December 19 of each of 2018 and 2019. On December 19, 2014,14, 2017, an additional 50,000 performance46,272 shares became eligible to vest due to achievement of a TSR goal related to the grant. Of these additional TSR shares, 25,00023,136 shares vested on December 19, 20142017 and 12,50011,568 shares are scheduled to vest on December 19 of each of 20152018 and 2016.2019. The additional TSR shares were earned based on Applied’s TSR for thetwo-year period ended fiscal 2017 ranking at the 98th percentile among the companies in the S&P 500 Information Technology Index.(23)(19)The restrictedRestricted stock units were granted on November 29, 2012.December 1, 2016. Of these, 45,500 shares vested on December 1, 2014 and 45,500 shares are scheduled to vest on December 1 of each of 2015 and 2016.(24)The performance shares were granted on December 5, 2012. Of these, 75,00012,458 shares vested on December 19, 20142017 and 37,50012,459 shares are scheduled to vest on December 19 of each of 20152018 and 2016.2019.(20) Performance shares were granted on December 7, 2015. Of these, 21,153 shares vested on December 19, 2017 and 21,153 shares are scheduled to vest on December 19 of each of 2018 and 2019. On December 19, 2014,14, 2017, an additional 75,000 performance42,306 shares became eligible to vest due to achievement of a TSR goal related to the grant. Of these additional TSR shares, 37,50021,153 shares vested on December 19, 2014 and 18,7502017, 10,576 shares are scheduled to vest on December 19, of each of 20152018 and 2016.(25)The performance shares were granted on September 9, 2014. Provided specified performance goals are achieved, 30,00010,577 shares are scheduled to vest on October 1 of each of 2015, 2016,December 19, 2019. The additional TSR shares were earned based on Applied’s TSR for thetwo-year period ended fiscal 2017 and 2018 (subject toranking at the acceleration of vesting as to 30% of98th percentile among the unvested shares as of three trading days prior tocompanies in the expected closing date of the Business Combination, provided Mr. Salehpour is a “disqualified individual” under Section 4985 through the accelerated vest date).S&P 500 Information Technology Index. all stock options exercised and the value realized upon exercise, and all stock awards that vested and the value realized upon vesting for each NEO during fiscal 2014, which ended on October 26, 2014.2017.Option Exercises and Stock Vested For Fiscal 2014 Option Awards Stock Awards Number of Shares
Acquired on
Exercise
(#) Value Realized
on Exercise
($) Number of Shares
Acquired on
Vesting
(#)(1) Value Realized
on Vesting
($)(2) 708,196 9,401,409 465,000 10,662,300 — — 194,500 3,283,160 100,000 1,065,254 250,500 5,078,100 — — 50,000 886,800 — — 45,500 787,150 Option Awards Stock Awards Name Number of Shares
Acquired on
Exercise
(#) Value Realized
on Exercise
($) Number of Shares
Acquired on
Vesting
(#)(1) Value Realized
on Vesting
($)(2) — — 454,628 14,748,132 — — — — — — 205,965 6,509,405 — — 216,369 7,502,040 — — 159,234 5,387,301 — — 113,500 3,681,940 (1) Of the amounts shown in this column, Applied withheld the following number of shares to cover tax withholding obligations: 242,638246,636 shares for Mr. Dickerson; 101,483 shares for Mr. Splinter; 130,712 shares for Dr. Thakur; 24,910102,098 shares for Mr. Halliday; and 17,099111,816 shares for Mr. Salehpour.Salehpour; 81,580 shares for Dr. Nalamasu; and 54,745 shares for Mr. Larkins.(2) The valueValue realized equals the fair market value of Applied common stock on the vesting date, multiplied by the number of shares that vested. For Mr. Dickerson, amount includes $169,400 of accrued dividend paid upon vesting of restricted stock.None of the named executive officers had any accumulated pension benefits as of the end of fiscal 2014 under any of Applied’s defined benefit pension plans. Applied provides defined benefit pension plans only to employees located in certain of its offices outside of the United States.(the “2005 Plan”) is anon-qualified deferred compensation plan that allows eligible employees, including executive officers, to voluntarily defer receipt of all or a portion of their: (1) eligiblesign-on bonus payments, if any, (2) up to 40% of their base salaries, above a specified amount, (3) eligible annual bonus payments, if any, and (4) eligible severance payments, if any. The abilityelect new deferrals of compensationthe Restatement Date are retained as separate “rollover” accounts under the 2005 Plan was suspended effective as of October 1, 2014 as a result of certain tax considerations relatedDCP. These deferrals continue to the Business Combination.The amounts deferred under the 2005 Plan arebe credited with deemed interest in the sum of (a) theyield-to-maturity of five-year U.S. Treasury notes, plus (b) 1.50%. The deemed interest rate under the 2005 PlanDCP for fiscal 20142017 was 2.15%3.09% from October 28, 201331, 2016 to December 31, 20132016 and 2.94%3.40% from January 1, 20142017 to October 26, 2014. The deferred29, 2017. Deferred amounts in the rollover accounts, plus deemed interest thereon, are generally payable on the same date2005 Plan.DCP. Beginning in fiscal 2016, new deferrals under the DCP are credited with deemed investment returns, gains or losses based upon investment crediting options newly available under the DCP. Applied does not make any matching or other employer contributions to the plan.2005 Plan, in the event ofDCP, a change in control (as defined under that plan)prior to the Restatement Date), would trigger the distribution of all deferred balances would be required. Our proposed Business Combination will constitutein the rollover accounts. For new account balances after the Restatement Date, the DCP provides new distribution rules forin-service distribution options and upon a “changequalifying separation from service, disability and change in control” event undercontrol, including the 2005 Plan,option to change the time and form of payment within three (3) months following a change in control, as such term is defined in the DCP. Distributions are payable from the general assets of Applied or from the assets of a grantor trust (known as a result, will require the distribution of all deferred balances, but will not result in any benefit enhancements for any NEOs. The 2005 Plan is discussed further under the section titled “Compensation Discussion and Analysis—rabbi trust) established by Applied.Plan” above.for Fiscal 2017Mr. Halliday’s employment agreement (discussed below) provided for accelerated vesting of shares of Varian restricted stock that had been converted into restricted cash as part of the Varian acquisition. Restricted cash that otherwise was scheduled to vest at any time between January 1, 2012 and November 10, 2012, the one-year anniversary of the Varian acquisition, vested and was paid to Mr. Halliday on the one-year anniversary of the acquisition. Amounts that were scheduled to vest after that anniversary accelerated vesting on the one-year anniversary of the Varian acquisition, but would be paid with interest through late 2014 according to the original vesting schedule of Mr. Halliday’s Varian restricted stock. See the section titled “Employment Agreements and Retention Arrangements” below for additional information.The following table shows certain information regarding NEO deferred compensation.Non-Qualified Deferred CompensationFor Fiscal 2014 Executive
Contributions in
Last Fiscal Year
($) Registrant
Contributions in
Last Fiscal Year
($) Aggregate
Earnings in
Last Fiscal Year
($)(1) Aggregate
Withdrawals/
Distributions
($) Aggregate
Balance at Last
Fiscal Year End
($) — — — — — — — — — — — — — — — — — 3,544 (2) 1,094,436 (3) — 46,910 — 6,497 — 247,846 Name
Contributions in
Last Fiscal Year
Contributions in
Last Fiscal Year Aggregate
Earnings in
Last Fiscal Year
($)(1) Aggregate
Withdrawals/
Distributions
($) Aggregate
Balance at Last
Fiscal Year End
($) — — — — — — — — — — 1,234,955 — 268,059 — 1,722,811 1,089,307 — 147,052 — 1,759,518 765,452 — 121,787 184,729 2,310,399 — — — — — (1) There were no above-market or preferential earnings for fiscal 2014.2017.(2)Amount consists of interest earned on restricted cash.(3)Amount consists of restricted cash distributions.(4)All amounts for Mr. Salehpour are under the 2005 Plan.Agreements and Retention ArrangementsAgreementEmployment AgreementsMessrs. Dickerson and Splinter, which were entered into in connection with their appointment as President and Chief Executive Officer, and Executive Chairman of the Board, respectively, effective September 2013, and an employment agreement with Mr. Halliday, whichDickerson. The agreement with Mr. Dickerson was entered into in connection with his joining Applied following our acquisition of Varian in November 2011.Gary E. Dickerson. Mr. Dickerson’s employment agreement, dated August 14, 2013, provides for an initial base salary of $980,000 and a target bonus for fiscal 2013 of 175% of his base salary. Mr. Dickerson also received a stock option for 1,000,000 shares of common stock, which is scheduled to vest annually as to 25% of the shares over four years, subject to his continued employment. The agreement provides that if Applied terminates Mr. Dickerson’shis employment other than for cause and other than due to death or disability, he would then be entitled to receive a lump sum payment equal to 275% of his then-current base salary, provided that he executes an agreement containing a release of claims andnon-solicitation andnon-disparagement provisions in favor of Applied.Michael R. Splinter. Mr. Splinter’s employment agreement, dated August 15, 2013, provides for a base salaryApplied Materials, Inc. 45$980,000 and a target bonus for Applied’s fiscal 2013 of 175% of his base salary. The agreement also provides that if (a) Mr. Splinter remains employed with Applied through, and terminates on, March 31, 2015, or (b) Applied terminates his employment other than for cause and other than due to death or disability or he resigns for good reason, in each case prior to March 31, 2015, he would then be entitled to receive a lump sum payment equal to the sum of (i) 275% of his then-current base salary and (ii) an amount equal to 18 months of continued health coverage premiums. Under Mr. Splinter’s employment agreement (as modified by his retention arrangement described below), upon his retirement, any time-based vesting requirements applicable to his then-outstanding equity awards that, as of December 20, 2013, were not subject to performance goals, will lapse fully. In order to receive these benefits related to his equity awards, Mr. Splinter will be required to execute an agreement containing a release of claims and non-solicitation and non-disparagement provisions in favor of Applied.ControlFor purposesMr. Splinter’s agreement, “cause” has the same meaning as incontrol agreements or arrangements with any of its NEOs.as described above. For purposes of Mr. Splinter’s agreement, “good reason” generally means a materialreduction in his base salary and/or target bonus, or a material reduction in his duties or responsibilities as Executive Chairman, in each case without his consent and after providing Applied with notice and an opportunity to cure. For purposes of Mr. Splinter’s agreement, “retirement” generally means Mr. Splinter’s termination of service occurring on or after age 65, or his termination of service occurring on or after age 60 after having completed at least 10 full years of service with Applied, but excludes any termination of his employment by Applied for cause.Robert J. Halliday. Under Mr. Halliday’s employment agreement,above, he received (a) following the closing of the Varian acquisition, a bonus of $200,000 and a grant of 120,000 restricted stock units, (b) following the first anniversary of the Varian acquisition, a retention bonus of $200,000 and (c) following the two-year anniversary of the Varian acquisition, a retention bonus of $2,600,000 and a grant of 120,000 restricted stock units. Each restricted stock units award is scheduled to vest over three years from the respective grant date. If Mr. Halliday’s employment had terminated after the 18-month anniversary of the Varian acquisition but prior to its two-year anniversary (which occurred in November 2013), as a result of his death or disability, Applied’s termination of his employment without cause, or his resignation for good reason, Mr. Halliday would have been entitled to receive the retention bonus otherwise payable on the two-year anniversary$2,750,000 (275% of the Varian acquisition.In addition, Mr. Halliday’s employment agreement provided for accelerated vesting of shares of Varian restricted stock that had been converted into restricted cash as part of the Varian acquisition. Restricted cash that otherwise was scheduled to vest at any time between January 1, 2012 and November 10, 2012, the one-year anniversary of the Varian acquisition, instead vested and was paid to Mr. Halliday on the one-year anniversary of the acquisition. Amounts that were scheduled to vest after that anniversary also instead accelerated vesting on the one-year anniversary of the Varian acquisition, but would be paid with interest through late 2014 according to the original vesting schedule of Mr. Halliday’s Varian restricted stock. See the section titled “Non-Qualified Deferred Compensation” above for deferred amounts for Mr. Halliday.Retention AgreementsIn connection with the proposed Business Combination and to provide retention and performance incentives for Applied’s executive officers, Applied entered into retention agreements with its NEOs in October 2013 (with respect to Mr. Splinter, in December 2013). The retention agreements provided vesting acceleration for certain outstanding equity awards and an opportunity for the NEOs (except Messrs. Dickerson and Splinter) to earn a retention bonus. These retention agreements (except for Mr. Splinter’s) were amended in December 2014 (the “2014 Amendment”).Retention Bonus. The retention agreements, except those entered into with Messrs. Dickerson and Splinter, provide for a retention bonus equal to a percentage of the NEO’s then-currenthis annual base salary as follows: 352.5% for eachat the end of Dr. Thakur and Mr. Halliday; and 315% for Mr. Salehpour, subject to the NEO’s continued employment withfiscal 2017) had Applied through the payment date. The original retention agreements provided that the bonus would payable on the earlier of the date that is six months following the completion of the Business Combination or March 31, 2015. The 2014 Amendment delayed the payment date of the retention bonus to the earlier of (1) the date that is six months after the closing or termination of the Business Combination or (2) December 11, 2015.Target Achievement of Equity Awards. The retention agreements provided that, with respect to each outstanding performance-based equity award granted to the NEOs before September 24, 2013, the relative operating profit margin goal applicable to such awards will be deemed satisfied at target levels (the “target achievement”) effective as of three trading days prior to the expected date of the consummation of the Business Combination, or if the Business Combination is terminated the date of termination. Additional shares that have become eligible to be earned based on achievement of the TSR goal also will have their relative operating profit margin goal deemed satisfied at target levels. All performance goals were in fact achieved in December 2014 and as a result, the NEOs will not receive a benefit from the target achievement of their equity awards upon the consummation of the Business Combination.Except with respect to the vesting acceleration described below, all of these awards will remain subject to time-based vesting and the continued employment of the NEO over the vesting period. In addition, under Mr. Splinter’s retention agreement, the target achievement will apply upon the earliest of any of (a) Mr. Splinter’s remaining employed with Applied through March 31, 2015, (b) Applied’s termination of his employment without cause or (c) his termination of his employment for good reason. In each case, for Mr. Splinter, the benefits described in this paragraph are subject tohis executing an agreement containing a release of claims and non-solicitation and non-disparagement provisions in favor of Applied. The 2014 Amendment did not modify the terms of the target achievement of equity awards.Vesting Acceleration of Equity Awards. The retention agreements also provided that the portion of equity awards held by the NEOs that were granted before September 24, 2013 that otherwise was scheduled to vest during calendar year 2014 based solely on continued employment will accelerate vesting as of, and provided that the awards remain outstanding through, the date that is three trading days prior to the expected date of the consummation of the Business Combination. Awards for which the applicable performance goals are deemed satisfied at target levels as of the same date that this vesting acceleration occurs also will be subject to this vesting. As the closing of the Business Combination would not (and in fact, it did not) occur in 2014, the 2014 Amendment instead provides for the acceleration of any vesting that is scheduled during calendar year 2015. This vesting acceleration also applies to an equity award granted to Mr. Halliday in November 2013. All vesting acceleration is conditioned on the closing of the Business Combination, and will apply only if the executive is expected to be considered a “disqualified individual” and otherwise subject to a punitive excise tax under Section 4985.Mr. Splinter’s retention agreement provides that the acceleration of vesting also will apply to all unvested portions of his equity awards granted before September 24, 2013 and subject to performance goals as of December 20, 2013, whether scheduled to vest before, during or after 2014. In addition, under Mr. Splinter’s retention agreement, the acceleration described for him in this paragraph would also apply upon the earliest of any of (a) Mr. Splinter’s remaining employed with Applied through March 31, 2015, (b) Applied’s termination of his employment without cause, or (c) his termination of his employment for good reason. The benefits described in this paragraph are subject to Mr. Splinter’s executing an agreement containing a release of claims and non-solicitation and non-disparagement provisions in favor of Applied.Other Retention ArrangementsSplinter Bonus and Award. Mr. Splinter was eligible to earn an annual cash incentive bonus under the Senior Executive Bonus Plan for fiscal 2014 based on achievement of certain performance goals. For this bonus award, if, prior to the end of fiscal 2014, Mr. Splinter retired within two months before, or any time after, consummation of the Business Combination, he would remain eligible to receive a prorated portion of the bonus if actual performance of initial and secondary performance goals is achieved during fiscal 2014. Mr. Splinter’s prorated bonus would be calculated based on the number of full months that he worked during fiscal 2014. Mr. Splinter remained employed by Applied through the end of fiscal 2014 and was eligible for his full bonus amount. Mr. Splinter’s annual cash incentive bonus opportunity for fiscal 2015 is subject to similar prorata provisions.In December 2013, under Applied’s long-term incentive compensation program for fiscal 2014, Mr. Splinter was granted cash-settled performance units that may become eligible for time-based vesting upon the achievement of a performance goal. For this award, if, prior to the end of the award’s three-fiscal-year performance period, Mr. Splinter retires within two months before, or any time after, consummation of the Business Combination, a prorated portion of his award would remain outstanding and eligible to vest if the performance goal actually is achieved during the performance period (in which case, the time-based vesting for such prorated amount would be considered satisfied). The prorated amount would be calculated based on the number of full months that Mr. Splinter worked during the award’s performance period.Salehpour Award. In September 2014, Mr. Salehpour received a recognition award of performance shares. The vesting of 30% of such unvested performance shares are scheduled to accelerate as of the date that is three trading days prior to the expected date of the consummation of the Business Combination. Such vesting acceleration is conditioned on the closing of the Business Combination, and will apply only if Mr. Salehpour is expected to be considered a “disqualified individual” and otherwise subject to a punitive excise tax under Section 4985.Applied does not have any change of control agreements with any of its NEOs, and has not entered into any agreements or arrangements, other than the retention arrangements described above, with its NEOs in connection with the Business Combination. The Business Combination is not expected to result in the accelerated vesting or payment of compensation or benefits under the terms of any Applied equity plans.Potential Payments Under Employment Agreements and Retention Arrangements or Upon Change of ControlPotential Cash Severance Payments under Employment Agreements. The following table shows the cash severance payment that each of Messrs. Dickerson and Splinter would have been entitled to receive had his employment been terminated under specified circumstances under his respective employment agreement with Applied, assuming termination of employment on October 24, 2014,27, 2017, the last business day of fiscal 2014. Cash
Payments ($) Other
Benefits 2,695,000 (1) — 2,712,787 (2) — (1)Amount equals 275% of Mr. Dickerson’s annual base salary at the end of fiscal 2014. Payment assumes Applied terminated Mr. Dickerson’s employment without cause, as provided under his employment agreement.(2)Amount equals 275% of Mr. Splinter’s annual base salary at the end of fiscal 2014, plus $17,787 for 18 months of health coverage premiums. Payment assumes Applied terminated Mr. Splinter’s employment without cause or he resigned for good reason, as provided under his employment agreement.Potential Payments Under Retention Arrangements. Under the retention agreements described above, our NEOs are2017. No other NEO was entitled to certain benefits with respect to equity awards covering Applied common stock upon the consummation of the Business Combination. In addition, Mr. Splinter is eligible to receive certain benefits with respect to his equity awardsseverance payment under specified circumstances under his retention andan employment agreements. The following table shows information about these benefits payable to the NEOs, assuming the Business Combination (or employment termination, with respect to certain equity benefits for Mr. Splinter) had occurredagreement in effect on October 24, 2014, the last business day of fiscal 2014, and that each NEO would have been considered a “disqualified individual” under Section 4985 as of that date.27, 2017. Value of
Vesting
Acceleration
($)(1)(2) Retention Bonus
and Other Cash
Incentives
($)(3) Total ($) 4,198,000 — 4,198,000 28,913,725 1,946,389 30,860,114 8,658,375 2,026,875 10,685,250 2,728,700 2,026,875 4,755,575 3,284,935 1,732,500 5,017,435 (1)Amounts represent the value of the unvested portion of equity awards granted prior to September 24, 2013 (as well as an equity award granted on November 10, 2013 to Mr. Halliday) held by the NEOs that otherwise is scheduled to vest during calendar year 2014 (as well as, with respect to Mr. Splinter, all of the unvested portion of his equity awards granted prior to September 24, 2013 that are subject to performance-based vesting), and which may be accelerated under the retention agreements. The amount for Mr. Salehpour also includes the value of 36,000 shares or 30% of the unvested portion of his performance shares granted on September 9, 2014 that may be accelerated. Amounts included in this column and discussed in footnote 4 below are based on the closing price of $20.99 per share of Applied common stock on October 24, 2014, the last business day of fiscal 2014.(2)Amounts in this column and discussed in footnotes 1 and 4 to this table include those awards subject to performance goals, which goals are deemed satisfied at target levels pursuant to the retention arrangements, including the following additional shares that would have accelerated vesting based on achievement of a TSR goal that had been measured before October 24, 2014: none for each of Messrs. Dickerson, Halliday and Salehpour, 115,000 for Mr. Splinter and 37,500 for Dr. Thakur. All performance goals were in fact achieved in December 2014 and as a result, the NEOs will not receive the benefit from the target achievement of their equity awards upon the consummation of the Business Combination.(3)Amounts represent the retention bonus that would have been earned by the NEOs under the terms of the retention agreement, as described above, provided that the NEO remains employed by Applied until the earlier of the date six months following the closing of the Business Combination or March 31, 2015. Messrs. Dickerson and Splinter were not entitled to receive a retention bonus. The amounts represent a percentage of base salaries for the NEOs as follows: 352.5% for each of Dr. Thakur and Mr. Halliday; and 315% for Mr. Salehpour. For Mr. Splinter, if he retires within two months before, or any time after, consummation of the Business Combination, he will remain eligible to earn a prorated amount of the cash-settled performance units granted to him in December 2013, as well as a prorated amount of his bonus for fiscal 2014. The amount shown for Mr. Splinter represents an estimated prorated portion of his cash-settled performance units, which amount was calculated assuming that performance was achieved at target level, Mr. Splinter retired as of, and the Business Combination was consummated on, October 24, 2014. The amount for Mr. Splinter does not include a prorated bonus for fiscal 2014, as he was employed through the end of the fiscal year and was eligible for the full amount of the bonus under the standard terms of the bonus plan.(4)If Applied had terminated Mr. Splinter’s employment without cause or Mr. Splinter resigned for good reason on October 24, 2014, then regardless of whether the Business Combination had occurred on the same date, Mr. Splinter would have received vesting acceleration valued at the same amount shown in the table. If Mr. Splinter had retired (without good reason) on October 24, 2014, assuming that the Business Combination did not close on that date, then the value of the vesting acceleration of his equity awards would have been $2,361,375.Employee Stock Incentive Plan provides that the vesting of equity awards granted under the plan to employees, including the NEOs, will be accelerated in full upon a change of control of Applied if the successor corporation (or its parent or subsidiary) does not assume or provide a substitute for the outstanding awards. Separately, certain equity awards will be accelerated in full if the award holder is terminated without cause or resigns employment with Applied for good reason, in each case, within 12 months following a change of control of Applied. This double-trigger accelerated vesting does not apply if the applicable award agreement specifically states that it will not apply or if the participant’s employment isdisability. The Business Combination is not considered to be a change of control under the Employee Stock Incentive Plan.Employee Stock Incentive Plan following a change of control in which the awards are not assumed or substituted for, or within 12 months following a change of control in which the NEO is terminated without cause or resigns for good reason, in each case assuming the change of control and termination or resignation occurred on October 24, 2014,27, 2017, the last business day of fiscal 2014.2017. Value of Vesting Acceleration VestingAcceleration($($)(1) Dickerson(2)Dickerson 24,798,55057,210,131 Michael R. Splinter(3)Daniel J. Durn 12,069,250Randhir Thakur10,977,7706,970,659 5,247,50022,248,444 8,532,43519,240,41611,241,967 10,904,718 (1) (1)Amount based on the target number of PSUs, performance shares and restricted stock units and restricted stock for which vesting would have been accelerated, multiplied by $20.99,$56.69, the closing price of Applied common stock on October 24, 2014.27, 2017. (2)The amount for Mr. Dickerson also includes (a) a stock option for 750,000 shares, multiplied by $5.93 (the difference between $20.99 and $15.06, the stock option’s per share exercise price), and (b) $95,700 of accrued dividends payable upon accelerated vesting of 110,000 shares of restricted stock.(3)The amount for Mr. Splinter represents the value of equity awards with vesting acceleration under the Employee Stock Incentive Plan. Amount does not include any additional vesting acceleration provided under his retention agreement, as described above. Pursuant to Mr. Splinter’s retention agreement, if (a) Applied had terminated his employment without cause or he had resigned for good reason on October 24, 2014, then he would have received additional accelerated vesting under his equity awards valued at $16,844,475; or (b) Mr. Splinter had retired (without good reason) on October 24, 2014, then he would have received additional accelerated vesting of his equity awards valued at $2,361,375.stockholdershareholder of a company since the beginning of the previous fiscal year, and their immediate family members. Applied has adopted written policies and procedures that apply to any transaction or series of transactions in which the Company(1) Applied or a subsidiary is a participant, (2) the amount involved exceeds $120,000 and (3) a related person has a direct or indirect material interest.TheIn accordance with these policies and procedures, the Audit Committee determines whether the related person has a material interest in a transaction and may, in its discretion, approve, ratify or take other action with respect to the transaction. The Audit Committee reviews all material facts related to the transaction and takes into account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the related person’s interest in the transaction, and the purpose and the potential benefits to the Company,Applied of the transaction.● Any transaction with another company with which a related person’s only relationship is as an employee, director, or beneficial owner of less than 10% of that company’s shares, if the aggregate amount involved does not exceed the greater of $1 million or 2% of that company’s total annual revenues; ● Any charitable contribution, grant, or endowment by Applied or The Applied Foundation to a charitable organization, foundation, or university with which a related person’s only relationship is as an employee (other than an executive officer) or a director, if the amount involved does not exceed the lesser of $1 million or 2% of the charitable organization’s total annual receipts; ● Compensation to executive officers or directors that has been approved by the Human Resources and Compensation Committee; any transaction with another company with which a related person’s only relationship is as an employee, director, or beneficial owner of less than 10% of that company’s shares, if the aggregate amount involved does not exceed the greater of $1 million or 2% of that company’s total annual revenues;● Transactions in which all shareholders receive proportional benefits or where the rates or charges involved are determined by competitive bids; and ● Banking-related services involving a bank depository of funds, transfer agent, registrar, trustee under a trust indenture, or similar service. any charitable contribution, grant, or endowment by Applied or The Applied Foundation to a charitable organization, foundation, or university with which a related person’s only relationship is as an employee (other than an executive officer) or a director, if the amount involved does not exceed the lesser of $1 million or 2% of the charitable organization’s total annual receipts;Materials, Inc. 47compensation to executive officers or directors that has been approved by the Human Resources and Compensation Committee;transactions in which all stockholders receive proportional benefits or where the rates or charges involved are determined by competitive bids; andbanking-related services involving a bank depository of funds, transfer agent, registrar, trustee under a trust indenture, or similar service.stockholdersshareholders to ratify the appointment of KPMG LLP (“KPMG”) as Applied’s independent registered public accounting firm for fiscal 2015,2018, which began on October 27, 201430, 2017 and will end on October 25, 2015.28, 2018. Although ratification is not legally required, Applied is submitting the appointment of KPMG to our stockholdersshareholders for ratification in the interestas a matter of good corporate governance. In the event that this appointment is not ratified, the Audit Committee of the Board will reconsider the appointment.2015,2018, the Audit Committee considered the firm’s20142017 and 2013.2016. In addition, the Audit Committee reviewed andpre-approved audit and permissiblenon-audit services performed by KPMG in fiscal 20142017 and 2013,2016, as well as the fees paid to KPMG for such services. In its review ofnon-audit service fees and its appointment of KPMG as Applied’s independent registered public accounting firm, the Audit Committee considered whether the provision of such services was compatible with maintaining KPMG’s independence.desire to do sowish and will be available to respond to appropriate questions.20142017 and 2013,2016, which ended on October 26, 201429, 2017 and October 27, 2013,30, 2016, respectively. All of the fees shown in the table were approved by the Audit Committee in conformityaccordance with itspre-approval process. Fiscal 2014 Fiscal 2013 (In thousands) $ 5,483 $ 5,728 208 77 304 264 124 — — 25 $ 6,119 $ 6,094 Fee Category Fiscal 2017 Fiscal 2016 (In thousands) $ 6,354 $ 5,507 322 608 440 549 3 — — 55 $ 7,119 $ 6,719 thean independent registered public accounting firm in connection with statutory and regulatory filings or engagements. Audit fees for fiscal 20142017 include fees for services provided in connection with the reviewa $2.2 billion public offering of the registration statement filed in connection with the announced business combination with Tokyo Electron. Audit fees for fiscal 2013 include fees incurred for services in connection goodwill impairment actions taken in fiscal 2013.senior unsecured notes. consisted of included fees for assurance and related services that were reasonably related to the performance of the audit or review of Applied’s consolidated financial statements and are not reported under “Audit Fees.” Audit-related fees includealso included fees incurred for services in connection with compliance with government-funded grant requirements, and audits of financial statements of certain employee benefit plans.plans and accounting consultations related to proposed new accounting standards.20132016 consisted of fees for services in connection with a contract compliance audit. ✓ The Board unanimously recommends that you vote “FOR” the ratification of the appointment of KPMG as Applied’s independent registered public accounting firm for fiscal 2015.Susan M. James,each of Judy Bruner, Adrianna C. Ma and Dennis D. Powell and Robert H. Swan areis an “audit committee financial experts”expert” as defined by SEC rules.1. The Audit Committee has reviewed and discussed with management and the independent registered public accounting firm, KPMG LLP, together and separately, Applied’s audited consolidated financial statements contained in Applied’s Annual Report on Form10-K for fiscal year 2014.2017.2. The Audit Committee has discussed with KPMG matters required to be discussed by applicable standards of the Public Company Accounting Oversight Board. 3. The Audit Committee has received from KPMG the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG’s communications with the Audit Committee concerning independence, and has discussed with KPMG its independence. 20142017 for filing with the SEC.20152018 and recommends to stockholdersshareholders that they ratify the appointment of KPMG as Applied’s independent registered public accounting firm for fiscal year 2015.Susan M. JamesJudy BrunerRobert H. Swan● All shareholders are provided with notice of the meeting and an opportunity to consider the proposed actions and vote their shares. ● The meeting and the shareholder vote take place in a transparent manner on a specified date that is publicly announced well in advance, giving all shareholders a chance to express their views and cast their votes. ● The meeting provides shareholders with a forum for discussion and consideration of the proposed action. ● Accurate and complete information about the proposed action is widely distributed in the proxy statement before the meeting, which must contain information about the proposed action as specified by the Securities and Exchange Commission and promotes well-informed consideration on the merits of the proposed action. ● The Board is able to analyze and provide a recommendation with respect to actions proposed to be taken at a shareholder meeting. ● Annual Election of Board of Directors. All of Applied’s directors are elected annually by shareholders, and shareholders can remove directors with or without cause. ● Majority Voting Standard. Applied has adopted a majority voting standard for the election of directors in uncontested elections. ● Proxy Access for Director Nominations. Applied has adopted a proxy access bylaw, following extensive outreach and with the support of our shareholders, that allows any shareholder (or group of up to 20 shareholders) owning 3% or more of Applied’s common stock continuously for at least three years, to nominate and include in Applied’s proxy statement director nominees constituting up to 20% of the Board (or at least two director nominees). ● Majority Voting for Charter and Bylaw Amendments. Applied’s charter and bylaw provisions do not have supermajority voting provisions—shareholders can approve binding charter and bylaw amendments with a majority vote. ● No Shareholder Rights Plan. Applied does not have a shareholder rights plan, or poison pill. ● Independent Board Leadership. Applied has separated the roles of Chairman of the Board and Chief Executive Officer. The Chairman of the Board is an independent director—as are all of the chairs of the committees of the Board. ● Shareholder Engagement. We regularly engage with our investors to solicit their views on important issues, and in Ò THE BOARD RECOMMENDS THAT YOU VOTEAGAINST THIS PROPOSAL REQUESTING OUR BOARD OF DIRECTORS TAKE STEPS TO PERMIT SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING ● Hiring Initiatives – Applied dedicates time and resources to find and solicit candidates through myriad sources, including partnering with a recruiter focused on hiring women, veterans, minorities and individuals with disabilities, use of recruiting software specifically designed to source such candidates, andon-site networking and informational events to attract college students in STEM, including at historically black colleges and universities. For U.S. hires, we are committed to ensuring that qualified female candidates are presented for 50% of director-level positions and that 50% of the candidates for our new college graduate programs are women or under-represented minorities. For our new college graduate hiring programs, we continue to focus on increasing the diversity of our pipeline of talent and are proud that over 35% of our 2017 new college graduate hires in the U.S. were women. ● GlobalDiversity and Inclusion Team. We have created a senior leadership role within our Human Resources department that reports directly to our Chief Human Resources Officer to advance our diversity and inclusion efforts globally at every level of our organization. Our Head of Diversity and Inclusion is responsible for developing and implementing the strategic framework for our Diversity and Inclusion program, as well as initiatives to increase the company’s ability to attract and retain an inclusive population, and promoting diversity within the company. ● Diversity Messaging and Events. Applied emphasizes the importance of diversity and inclusion in our workplace policies and Standards of Business Conduct, as well as through messaging and events. For the past 7 years, we have held large-scale company events at our Santa Clara ● Women in Leadership. We continue to focus on advancing women into leadership positions and have a targeted talent development program to build our internal pipeline of female engineers for senior leadership roles through our Women in Engineering Talent Development Program. Individuals in this program are provided the opportunity to participate in conferences, internal and external professional skill development workshops, roundtables focused on career development with internal and external executives, and mentoring programs. We also sponsor employees to attend conferences across the country focused on women’s leadership development, including IEEE Women in Engineering International Leadership Conference, Watermark Conference for Women, Texas Conference for Women and Massachusetts Conference for Women. In response to the popularity of these opportunities, we have been increasing our sponsorship levels every year. ● Diverse Employee Resource Groups. We believe in bringing together people with shared backgrounds and interests to engage with and learn from each other outside their daily work lives. We provide funding for 16 employee resource groups representing 8 diverse segments of our global employee population, many of which host workshops for diverse STEM students to build our talent pipeline and sponsor their members to attend conferences and professional development events. Each of these employee resource groups has an executive sponsor to provide guidance and ensure open communications between members and management. ● Community Engagement. We have a long history of supporting nonprofit organizations and educational institutions with a focus on providing women and young people of diverse backgrounds with educational opportunities, particularly in STEM, such as Mexican American Engineers and Scientists, Society of Women Engineers, Youth Science Institute and City Year. We have supported the Breakthrough Collaborative partnership in Santa Clara and Austin for the past 15 years, helping more than 1,800 students become the first in their families to attend college. ● Awards and Recognitions. We are honored to be consistently recognized for our diversity and social achievements by many industry organizations and publications. Over the years, Applied leaders have been recognized by theCalifornia Diversity Council as some of the Top 50 Most Powerful Women in Technology and by theYWCA Silicon Valley Tribute to Women Awards. We are also pleased to be amongFORTUNE magazine’s World’s Most Admired Companies,The EthisphereInstitute’s World’s Most Ethical Companies,CorporateKnights’ Global 100 Most Sustainable Corporations, andCR Magazine’s 100 Best Corporate Citizens. As an employer, we have been named one ofComputerworld’s Best Places to Work in IT for seven consecutive years and one of the top companies for military veterans as a designated Military Friendly Employer for the 12th consecutive year, for our long-term commitment to hiring military professionals. Ò THE BOARD RECOMMENDS THAT YOU VOTEAGAINST THIS PROPOSAL REQUESTING OUR BOARD OF DIRECTORS ADOPT AND ENFORCE A POLICY REQUIRING THE ANNUAL DISCLOSURE OF OUREEO-1 DATA Q: Why am I receiving these materials? A: The Board of Directors of Applied Materials is providing these materials to you in connection with its solicitation of proxies for use at Applied’s 2018 Annual Meeting of Shareholders. The 2018 Annual Meeting will be held on Thursday, March 8, 2018, at our corporate offices at 3050 Bowers Avenue, Building 1, Santa Clara, California 95054. Shareholders are invited to attend the Annual Meeting and to vote on the proposals described in this proxy statement. Q: What information is contained in these materials? A: This Proxy Statement contains important information regarding the 2018 Annual Meeting, the proposals on which you are being asked to vote, the voting process and procedures, and information you may find useful in determining how to vote. Q: What proposals will be voted on at the Annual Meeting? What are the Board’s recommendations? A: The following table describes the proposals to be voted on at the Annual Meeting and the Board’s voting recommendations: Proposal Board Recommendation Q: What is the record date? How many shares are entitled to vote? A: Shareholders who owned Applied common stock at the close of business on January 10, 2018, the record date, are entitled to vote at the Annual Meeting. On the record date, there were 1,053,532,173 shares of Applied common stock outstanding. Each share of Applied common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on. Q: What is the difference between holding shares as a shareholder of record and as a beneficial owner? A: Most Applied shareholders hold their shares as beneficial owners (through a broker, bank, or other nominee) rather than as a shareholder of record (directly in their own name). Q: Can I attend the Annual Meeting? A: Applied shareholders on the record date or their legal proxy holders may attend the Annual Meeting. To be admitted to the Annual Meeting, you will need a form of photo identification and valid proof of ownership of Applied common stock or a valid legal proxy. If you have a legal proxy from a shareholder of record, you must bring a form of photo identification and the legal proxy to the Annual Meeting. If you have a legal proxy from a street name shareholder, you must bring a form of photo identification, a legal proxy from the record holder (i.e., the bank, broker or other holder of record) to the street name shareholder that is assignable, and the legal proxy from the street name shareholder to you. Each shareholder may appoint only one proxy holder to attend on such shareholder’s behalf. Q: How can I vote my shares? A: You may vote over the Internet, by telephone, by mail, or in person at the Annual Meeting. Votes submitted by telephone or over the Internet must be received by 11:59 p.m., Eastern Time, on Wednesday, March 7, 2018, unless otherwise indicated. Q: Can I change my vote or revoke my proxy? A: If you are a shareholder of record, you may change your vote or revoke your proxy at any time before the Annual Meeting. To change your vote or revoke your proxy, you must: ● Sign and return a later-dated proxy card, or enter a new vote over the Internet or by telephone; or ● Provide written notice of the revocation to Applied’s Corporate Secretary at: Applied Materials, Inc., Attention: Thomas F. Larkins, Corporate Secretary, 3225 Oakmead Village Drive, M/S 1241, P.O. Box 58039, Santa Clara, CA 95052, or bye-mail at corporatesecretary@amat.com, before the proxies vote your shares at the Annual Meeting; or ● Attend the Annual Meeting and vote in person. Q: What is the quorum requirement for the Annual Meeting? A: A majority of the outstanding shares entitled to vote as of the record date must be present at the Annual Meeting to constitute a quorum and in order to conduct business at the Annual Meeting. Your shares are counted as present if you vote in person at the Annual Meeting, over the Internet, by telephone, or by submitting a properly executed proxy card by mail. Q: How are votes counted? A: You may vote “FOR,” “AGAINST,” or “ABSTAIN” with respect to each of the director nominees. If you elect to abstain from voting on the election of directors, the abstention will not have any effect on the election of directors. In tabulating the voting results for the election of directors, only “FOR” and “AGAINST” votes are counted. ● The approval, on an advisory basis, of the compensation of our named executive officers for fiscal year 2017; ● The ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2018; ● The shareholder proposal to provide for right to act by written consent without a meeting; and ● The shareholder proposal for annual disclosure ofEEO-1 data. A: The following table describes the proposals to be considered at the Annual Meeting, the vote required to elect directors and to adopt each of the other proposals, and the manner in which votes will be counted: Proposal Q: Who will count the votes? Where can I find the voting results of the Annual Meeting? A: Votes will be tabulated by an independent inspector of elections appointed for the Annual Meeting. Preliminary voting results will be announced at the Annual Meeting. Final voting results will be reported in a Current Report on Form8-K, which will be filed with the SEC following the Annual Meeting. Q: Who will bear the cost of soliciting votes for the Annual Meeting? A: Applied will bear the entire cost of proxy solicitation, including the preparation, assembly, printing, mailing and distribution of the proxy materials. We have hired Innisfree M&A Incorporated to assist in the distribution and solicitation of proxies. Solicitations may be made personally or by mail, facsimile, telephone, messenger, or via the Internet. In addition to the estimated proxy solicitation cost of $20,000, plus reasonableout-of-pocket expenses for this service, we will reimburse brokerage firms and other custodians for their reasonableout-of-pocket expenses for forwarding the proxy materials to shareholders. Q: Why did I receive aone-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? A: In accordance with SEC rules, we are furnishing proxy materials to our shareholders primarily via the Internet, instead of mailing printed copies of those materials to each shareholder. On January 25, 2018, we commenced mailing a Notice of Internet Availability to our shareholders (other than those who had previously requested electronic or paper delivery) containing instructions on how to access our proxy materials, including this Proxy Statement and our Annual Report. The Notice of Internet Availability also instructs you on how to vote over the Internet. Q: I share an address with another shareholder and we received only one paper copy of the proxy materials. How can I obtain an additional copy of the proxy materials? A: Under a practice approved by the SEC called “householding,” shareholders who have the same address and last name and who do not participate in electronic delivery of proxy materials will receive only one mailed copy of our proxy materials, unless one or more of these shareholders notifies us that he or she wishes to receive individual copies. Shareholders who participate in householding will continue to receive separate proxy cards. stockholdersshareholders are required by SEC rules to furnish Applied with copies of all Section 16(a) forms they file.2014,2017, all Section 16(a) filing requirements were satisfied on a timely basis.Stockholder Proposals—2016Shareholder Proposals or Nominations for 2019 Annual MeetingApplied does not expect to hold an annual meeting of stockholders in 2016 if the proposed Business Combination is completed before the expected date of such meeting. However, in the event we do hold an annual meeting in 2016, stockholders may submit proposals for action if they comply with SEC rules and Applied’s Bylaws. youa shareholder would like us to consider including a proposal in the proxy statement for our 2019 annual meeting pursuant toRule 14a-8 of the Exchange Act, the proposal must be received by our Corporate Secretary at our principal executive offices on or before September 27, 2018.20162019 annual meeting, of stockholders, if held, itnotice must be received by our Corporate Secretary at our principal executive offices on or before October 21, 2015. If you intend to submit a proposal at the 2016 annual meeting of stockholders, if held, but do not intend to include the proposal in our proxy statement for that meeting, you must provide appropriate notice to us no earlier than December 19, 2015November 23, 2018, and no later than January 18, 2016. the close of business on December 23, 2018.stockholder’sshareholder’s ability to nominate a director or to submit a proposal for consideration at an upcoming meeting. If you would like a copy of our Bylaws, please contact:contact our Corporate Secretary by mail addressed to Thomas F. Larkins, Corporate Secretary, Applied Materials, Inc., 3225 Oakmead Village Drive, M/S 1241, P.O. Box 58039, Santa Clara, CA 95054.95052, or bye-mail at corporatesecretary@amat.com.26, 201429, 2017 ON OUR WEBSITE ATwww.appliedmaterials.com OR WITHOUT CHARGE BY SENDING A WRITTEN REQUEST TO APPLIED MATERIALS, INC., 3050 BOWERS AVENUE, P.O. BOX 58039, M/S 1261, SANTA CLARA, CALIFORNIA 95052-8039, ATTN: INVESTOR RELATIONS.February 18, 2015January 25, 2018 Fiscal Year 2014 2013 2012 2011 2010 (In millions, except per share amounts) $ 0.87 $ 0.21 $ 0.09 $ 1.45 $ 0.70 — 0.21 0.33 — — 0.13 0.14 0.19 0.03 0.05 0.02 0.02 0.05 0.01 0.01 (0.02 ) — — — — 0.05 0.01 — — — — 0.03 0.10 (0.01 ) 0.12 — — 0.01 (0.01 ) — — — — (0.02 ) — 0.02 (0.03 ) (0.02 ) (0.16 ) — $ 1.07 $ 0.59 $ 0.75 $ 1.29 $ 0.88 1,231 1,219 1,277 1,330 1,349 Fiscal Year 2017 2016 2015 2014 2013 (In millions, except per share amounts) $ 3.17 $ 1.54 $ 1.12 $ 0.87 $ 0.21 0.16 0.16 0.14 0.13 0.14 — — — 0.02 0.02 — — 0.03 0.05 0.01 — — (0.05 ) (0.02 ) — — — 0.03 — 0.03 — — — — 0.21 (0.01 ) 0.01 0.01 — — (0.07 ) 0.04 (0.09 ) 0.02 (0.03 ) $ 3.25 $ 1.75 $ 1.19 $ 1.07 $ 0.59 1,084 1,116 1,226 1,231 1,219 1 Amounts for fiscal 2017 included the recognition of the previously unrecognized foreign tax credits. Amounts for fiscal 2015 included an adjustment to decrease the provision for income taxes by $28 million with a corresponding increase in net income, resulting in an increase in diluted earnings per share of $0.02. The adjustment was excluded in Applied’snon-GAAP adjusted results and was made primarily to correct an error in the recognition of cost of sales in the U.S. related to intercompany sales, which resulted in overstating profitability in the U.S. and the provision for income taxes in immaterial amounts in each year since fiscal 2010. 2 These items are incremental charges attributable to completed acquisitions, consisting of inventory fair value adjustments on products sold and amortization of purchased intangible assets.23These items are incremental charges related to the announcedterminated business combination agreement with Tokyo Electron Limited, consisting of acquisition-related and integration planning costs.34Results for fiscal 2015 primarily included $35 million of inventory charges, $17 million of restructuring charges and asset impairments related to cost reductions in the twelve months ended October 27,solar business, and a $2 million favorable adjustment of restructuring reserves related to prior restructuring plans.5 Results for fiscal 2013 included $39 million of employee-related costs, net, related to the restructuring program announced on October 3, 2012, and restructuring and asset impairment charges of $26 million related to the restructuring program announced on May 10, 2012, partially offset by a favorable adjustment of $2 million related to other restructuring plans. Fiscal Year 2017 (In millions, except
percentages) $ 6,532 172 $ 6,704 46.1 % 4Results for the twelve months ended October 28, 2012 included employee-related costs of $106 million related to the restructuring program announced on October 3, 2012, restructuring and asset impairment charges of $48 million related to the restructuring program announced on May 10, 2012, and severance charges of $14 million related to the integration of Varian.5Results for the twelve months ended October 30, 2011 included favorable adjustments of $36 million related to a restructuring program announced on July 21, 2010, $19 million related to a restructuring program announced on November 11, 2009, and $5 million related to a restructuring program announced on November 12, 2008, partially offset by asset impairment charges of $30 million primarily related to certain fixed and intangible assets.6Results for the twelve months ended October 31, 2010 included asset impairment charges of $108 million and restructuring charges of $45 million related to a restructuring program announced on July 21, 2010, restructuring charges of $84 million associated with a restructuring program announced on November 11, 2009, and asset impairment charges of $9 million related to a facility held for sale. Fiscal Year 2014 2013 $ 3,843 $ 2,991 158 166 1 3 $ 4,002 $ 3,160 44.1 % 42.1 % $ 1,520 $ 432 — 278 183 201 34 38 (30 ) 7 73 17 5 63 (4 ) (4 ) $ 1,781 $ 1,032 19.6 % 13.7 % 1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. Fiscal Year 2017 2016 2015 2014 2013 (In millions, except percentages) $ 3,868 $ 2,152 $ 1,693 $ 1,520 $ 432 191 188 185 183 201 3 2 2 34 38 — — 50 73 17 — — (89 ) (30 ) 7 — (3 ) 49 5 63 — — — — 278 (12 ) 8 6 (4 ) (4 ) $ 4,050 $ 2,347 $ 1,896 $ 1,781 $ 1,032 27.9 % 21.7 % 19.6 % 19.6 % 13.7 % 1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. 2 These items are incremental charges related to the announcedterminated business combination agreement with Tokyo Electron Limited, consisting of acquisition-related and integration planning costs.3 Results for fiscal 2016 included adjustments associated with the twelve months ended October 26,cost reductions in the solar business.4 Results for fiscal 2015 primarily included $35 million of inventory charges, $17 million of restructuring charges and asset impairments related to cost reductions in the solar business, and a $2 million favorable adjustment of restructuring reserves related to prior restructuring plans. 5 Results for fiscal 2014 included $5 million of employee-related costs net, related to the restructuring program announced on October 3, 2012.46Results for the twelve months ended October 27,fiscal 2013 included $39 million of employee-related costs, net, related to the restructuring program announced on October 3, 2012, and restructuring and asset impairment charges of $26 million related to the restructuring program announced on May 10, 2012, partially offset by a favorable adjustment of $2 million related to other restructuring plans.Directions to Applied Materials Bowers CampusUse ofNon-GAAP Adjusted Financial Measures3050 Bowers Avenue, Building 1, Santa Clara, California 95054Management usesnon-GAAP adjusted financial measures to evaluate the Company’s operating and financial performance and for planning purposes, and as performance measures in its executive compensation program. Applied believes these measures enhance an overall understanding of our performance and investors’ ability to review the Company’s business from the same perspective as the Company’s management and facilitate comparisons of the current period’s results with prior periods on a consistent basis by excluding items that we do not believe are indicative of our ongoing operating performance.
DIRECTIONS FROM HIGHWAY 101:Exit onto Bowers Avenue/Great America Parkway.Proceed to Bowers Avenue.Cross Scott Boulevard.Applied Materials Bowers Campus is on your right.Turn RIGHT into the 2nd driveway between Buildings 1 and 2.Proceed between Buildings 1 and 2 to the covered parking lot.The entrance to Building 1 is located to the left of the parking lot.DIRECTIONS FROM INTERSTATE 280:Exit onto Lawrence Expressway/Stevens Creek Boulevard.Proceed to Lawrence Expressway North. Continue for approximately 4 miles.Turn RIGHT onto Arques Avenue.Proceed on Arques Avenue, which becomes Scott Boulevard.Turn RIGHT onto Bowers Avenue.Applied Materials Bowers Campus is on your right.Turn RIGHT into the 2nd driveway between Buildings 1 and 2.Proceed between Buildings 1 and 2 to the covered parking lot.The entrance to Building 1 is located to the left of the parking lot.
3225 OAKMEAD VILLAGE DRIVEP.O. BOX 58039, M/S 1241SANTA CLARA, CA 95054— · EASY— · CONVENIENT— · 7 DAYS A WEEK20152018 Proxy Statement and then follow these easy steps:INTERNET -www.proxyvote.comApril 1, 2015.March 7, 2018. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. PHONE - 1-800-690-6903April 1, 2015.March 7, 2018. Have your proxy card in hand when you call and then follow the instructions.TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:M82207-P61216_Z64939KEEP THIS PORTION FOR YOUR RECORDS— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —DETACH AND RETURN THIS PORTION ONLYunanimously recommends you voteFOR all of the nominees listed below andFOR proposals 2 and 3: Nominees:ForAgainstAbstain1a. Aart J. de Geus¨¨¨1b. Gary E. Dickerson¨¨¨1c. Stephen R. Forrest¨¨¨1d. Thomas J. Iannotti¨¨¨1e. Susan M. James¨¨¨1f. Alexander A. Karsner¨¨¨1g. Dennis D. Powell¨¨¨1h. Willem P. Roelandts¨¨¨1i. Michael R. Splinter¨¨¨1j. Robert H. Swan¨¨¨For Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) DateAgainstAbstain2.To approve, on an advisory basis, the compensation of Applied Materials’ named executive officers.¨¨¨3.To ratify the appointment of KPMG LLP as Applied Materials’ independent registered public accounting firm for fiscal year 2015.¨¨¨NOTE:The proposals to be voted on may also include such other business as may properly come before the meeting or any adjournment or postponement thereof.YesNoPlease indicate if you plan to attend this meeting.¨¨Signature [PLEASE SIGN WITHIN BOX]DateSignature (Joint Owners)Date
Important notice regarding the availability of proxy materials for the Annual Meeting of Stockholders to be held on April 2, 2015: Notice, Proxy Statement and Annual Report with Form 10-K are available electronically at www.proxyvote.com.— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —M82208-P61216_Z64939 APPLIED MATERIALS, INC.PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON APRIL 2, 2015THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSThe undersigned hereby appoints Gary E. Dickerson, Robert J. Halliday and Thomas F. Larkins, or any of them, each with full power of substitution, as proxies of the undersigned, to attend the Annual Meeting of Stockholders of Applied Materials, Inc. to be held on Thursday, April 2, 2015 at 11:00 a.m. Pacific Time at Applied Materials, Inc.’s corporate offices at 3050 Bowers Avenue, Building 1, Santa Clara, California 95054, and at any adjournment or postponement thereof, and to vote the number of shares the undersigned would be entitled to vote if personally present on the items set forth on the reverse side and, in their discretion, upon such other business that may properly come before such meeting and any adjournment or postponement thereof.THIS PROXY WILL BE VOTED AS SPECIFIED, OR IF NO CHOICE IS SPECIFIED, WILL BE VOTED FOR EACH OF THE TEN NOMINEES FOR ELECTION AS DIRECTORS (PROPOSAL 1), FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS (PROPOSAL 2), AND FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2015 (PROPOSAL 3).Dear Stockholder:On the reverse side of this card are instructions on how to vote over the Internet or by telephone for the election of directors (Proposal 1), for the approval, on an advisory basis, of the compensation of our named executive officers (Proposal 2), and for the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2015 (Proposal 3). Please consider voting over the Internet or by telephone. Your vote is recorded as if you mailed in your proxy card. We believe voting this way is convenient.Thank you for your attention to these matters.Applied Materials, Inc.PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED POSTAGE-PAID ENVELOPE.If you vote over the Internet or by telephone, you do not need to return the proxy card.THANK YOU FOR VOTING!(Continued and to be signed on the other side)
