Reconciliation of non-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.

Applied’s Board of Directors is elected each year at the Annual Meeting of Stockholders. Applied currently has eleven directors. Upon the recommendation of the Corporate Governance and Nominating Committee, the Board has selected the eleven nominees listed below for election at the Annual Meeting, each of whom currently serves as a director of Applied. 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.

Each director elected at the Annual Meeting will serve until Applied’s 2017 Annual Meeting of Stockholders 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.

If any nominee 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 for the remaining nominees and leave a vacancy that the Board may fill later, or the Board may reduce the authorized number of directors. There is no family relationship among any of the nominees, directors or any of Applied’s executive officers.

James C. Morgan has served as our Chairman Emeritus since March 2009. Mr. Morgan spent more than 31 years as a director and employee of Applied, including over 20 years as 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 have voting rights and does not receive any retainer or meeting fees.

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/investor-relations/corporate-governance.

Our Corporate Governance Guidelines provide that:

The Board regularly reviews our Corporate Governance Guidelines in light of legal and regulatory requirements, evolving best practices and other developments.

Director Independence

Director independence is determined under Nasdaq listing standards and SEC rules. The Board has affirmatively determined that each member of the Board, other than Mr. Dickerson, our Chief Executive Officer, is an independent director under applicable Nasdaq listing standards and SEC rules.

Board Leadership

Our corporate governance framework provides the Board flexibility to determine the appropriate leadership structure for the Company, and there is no fixed policy on whether the roles of Chairman or Chief Executive Officer should be separate 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 stockholders. 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 Chief Executive Officer. The Chief Executive Officer is responsible for setting our strategic direction and the day 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. Roelandts, an independent director, currently serves as our Chairman. Prior to his appointment as Chairman in June 2015, Mr. Roelandts served as our Lead Independent Director, while Mr. Splinter served as our Executive Chairman.

Board 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 stockholders, is a top priority of the Board and the Corporate Governance and Nominating Committee. In assessing Board composition, the Board and the Corporate Governance and Nominating Committee also consider tenure, succession planning and diversity on the Board. The Board believes that new ideas and perspectives are critical to a forward-looking and strategic Board, as is the valuable experience and deep understanding of Applied’s business and industries that longer-serving directors bring. In 2015, the Board added two new directors—Dr. Chen and Ms. Ma—each of whom brings unique and valuable background and perspectives to the overall composition of the Board. Dr. Chen is an accomplished chief executive officer 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.

Director Nominations

The Corporate Governance and Nominating Committee of the Board considers candidates for director nominees and strives for a mix of skills and diverse perspectives. Based on the Corporate Governance and Nominating Committee’s recommendation, the Board selects director nominees and recommends them for election by Applied’s stockholders.

The Board assesses the independence, character and acumen of director 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 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 evaluates and interviews potential Board candidates and makes appointment recommendations to the full Board. All members of the Board may interview candidates. The committee may retain search firms to assist in identifying and evaluating candidates for director nominees. The Corporate Governance and Nominating Committee will also consider potential director candidates recommended by stockholders. The same identification and evaluation procedures apply to all candidates for director nomination, including candidates submitted by stockholders. In 2015, Dr. Chen and Ms. Ma were identified as potential candidates by our Chief Executive Officer and by a non-employee director, respectively. Dr. Chen and Ms. Ma were vetted by a third-party search firm, which also identified other candidates for consideration by the Corporate Governance and Nominating Committee.

Stockholders wishing to recommend a 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 Thomas F. Larkins, Corporate Secretary, Applied Materials, Inc., 3225 Oakmead Village Drive, M/S 1241, P.O. Box 58039, Santa Clara, CA 95052. Stockholders wishing to nominate a director should follow the specific procedures set forth in 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 stockholder vote. Our Corporate 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 stockholder 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.

Proxy Access

In December 2015, we amended our Bylaws to allow proxy access. Any stockholder (or group of up to 20 stockholders) owning 3% or more of Applied’s common stock continuously for at least three years may nominate up to two individuals or 20% of our Board, whichever is greater, as director candidates for election to the Board, and require us to include such nominees in our annual meeting proxy statement if the stockholders and nominees satisfy the requirements contained in our Bylaws.

Stockholder’s Right to Call a Special Meeting

At our 2014 annual meeting, stockholders were presented with a non-binding advisory stockholder proposal requesting a right for holders of at least 10% of our outstanding shares to call a special meeting. While the Board did not believe that 10% was an appropriate ownership threshold, it did not propose an alternative threshold or engage in extensive stockholder outreach at that time, as it believed that such efforts would cause confusion in the context of the then-pending business combination with Tokyo Electron Limited. For the same reason, in considering an appropriate response to stockholder approval of this proposal, the Board determined that it was not appropriate to adopt responsive provisions to the proposal while the transaction was still pending. The Board committed, however, that if the business combination did not close, the Board would, following consultation with stockholders, determine and implement an appropriate response to the proposal that would give stockholders the right to call a special meeting.

Following the termination of the business combination in April 2015, we engaged in an extensive outreach effort to hear directly from our stockholders on this issue. As a result of these efforts, and after careful consideration of the issue, in December 2015, the Board amended our Bylaws to permit stockholders holding at least 20% of our outstanding shares of common stock to call a special meeting.

In implementing this right, the Board acknowledged that a stockholder right to call a special meeting at an appropriate threshold may serve as an effective balance between ensuring the Board’s accountability to stockholders and enabling the Board and management to operate in an effective manner. In determining an appropriate ownership threshold, the Board gave significant weight to (1) our concentrated stockholder base, noting that two of our largest stockholders together held more than 10% of our outstanding shares, and four of our stockholders together held approximately 20% of our outstanding shares, (2) benchmarking data revealing that

a significant majority of companies in the S&P 500 that provide stockholders the right to call a special meeting do so at an ownership threshold of 25% or higher and that, of our comparable peer companies incorporated in Delaware, none provided a stockholder right to call a special meeting at an ownership threshold of less than 20%, and (3) the results of our direct discussions with stockholders, which involved outreach to holders of approximately 50% of our outstanding shares.

Of our stockholders that responded to our outreach efforts, which consisted of holders of over 32% of our outstanding shares, over 95% supported the implementation of the right at a 20% ownership threshold, instead of at 10%. Of particular significance, given the concentrated ownership of our outstanding shares, all seven of our largest stockholders, which together held over 26% of our outstanding shares, supported implementation at a 20% ownership threshold. Our three largest holders that had voted in favor of the initial stockholder proposal (which together held approximately 10% of our outstanding shares) supported implementation at a 20% ownership threshold and indicated that they would have been supportive of a 20% ownership threshold in 2014 had they been presented with that alternative. In addition, several of our largest stockholders explicitly affirmed that a 10% ownership threshold was too low, noting that adopting a higher threshold of between 20% to 25% mitigates the potential for meetings being called by a small group with a narrow set of interests, expending management time and shareholder money.

Accordingly, the Board concluded that a 20% threshold would strike a reasonable and more appropriate balance: it enhances stockholder rights while protecting against the risk that a relatively small minority of stockholders, including those with special interests, could call special meetings with the resulting expense and disruption to our business.

Board’s Role in Risk Oversight

Applied’s management 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 risks in a manner that serves the best interests of Applied, its stockholders and other stakeholders.

Our Board is responsible for overseeing major risks facing the Company and reviewing management plans for their mitigation. Generally, committees of the Board 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 head of internal audit 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.

Applied has implemented an enterprise risk management (“ERM”) program for the purpose of providing an enterprise-wide perspective on Applied’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 Applied. These identified risks are then reported to the Board, which in turn delegates oversight responsibility for them 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. Senior management and other employees also report to the Board and its committees from time to time on risk-related issues.

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 their: 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.

Board Effectiveness

The Board and each of its principal committees performs an annual self-assessment to evaluate its effectiveness. The areas addressed in the evaluations include Board or committee structure and composition, meetings and processes, execution of key responsibilities, interaction with management, and resources. The self-assessment includes completion of a questionnaire and open-ended questions tailored for the Board and each committee, as well as one-on-one discussions with the Chairman. A summary of results for the Board and each committee evaluation is presented to and discussed among the Board and each committee.

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 at: http://www.appliedmaterials.com/investor-relations/corporate-governance.

Stock Ownership Guidelines

The Board has adopted stock ownership guidelines to align the interests of our directors and NEOs with those of our stockholders. The guidelines provide that non-employee directors should each own Applied stock with a value of at least $325,000. Applied’s Chief Executive Officer should own Applied stock with a value of at least five times his annual base salary. Each NEO other than the Chief Executive Officer should own Applied stock with a value of at least three times his or her annual base salary. In determining whether the

required stock ownership levels have been met, shares are valued using the closing price of Applied stock on the date acquired. These stock ownership levels should be achieved no later than five years following a director’s or officer’s initial election or appointment. At the end of fiscal 2015, all of our directors and NEOs whose five-year ownership deadline had passed had met the stock ownership guidelines.

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 95052. 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 stockholder communication process periodically in order to enable an effective method by which stockholders can communicate with the Board.

The Board met eight times in fiscal 2015. Each director attended over 75% of all Board and applicable committee meetings held during fiscal 2015. Directors are strongly encouraged to attend the Annual Meeting of Stockholders, and ten of our directors serving on our Board at the time attended our 2015 Annual Meeting of Stockholders.

The Board has three principal committees performing the functions required by applicable SEC rules and Nasdaq listing standards to be performed by independent directors: the Audit Committee, the Human Resources and Compensation Committee, and the Corporate Governance and Nominating Committee.

Each of these committees meets regularly and has a written charter approved by the Board that is reviewed annually by the respective committee and by the Board.

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 Corporate Governance and Nominating Committee is an independent director under applicable Nasdaq listing standards and SEC rules.

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/investor-relations/corporate-governance.

The Board also has a Strategy Committee and an Investment Committee, whose role and responsibilities are described in Applied’s Corporate Governance Guidelines.

 Audit Committee

 Human Resources and Compensation Committee

 Corporate Governance and Nominating Committee

Retainer and Meeting Fees

Directors who are employees of Applied do not receive any compensation for their service as directors. The following table sets forth cash retainers and meeting fees paid to non-employee directors in fiscal 2015.

Retainers for service on the Board or as a Chair or Lead Independent Director are prorated where service is for less than a full year. Non-employee directors are reimbursed for travel and other reasonable out-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.

Equity Compensation

Initial Grant. Upon initial appointment or election to the Board, a non-employee director receives a grant of restricted stock units with respect to a number of shares of Applied common stock with a fair market value on the date of grant equal to $200,000 (rounded down to the nearest whole share), pro-

rated based on the period starting on the day of initial appointment or election and ending on the day of the next scheduled annual meeting of stockholders.

Annual Grant. Each non-employee director elected at an annual meeting receives on that date a non-discretionary grant of restricted stock units with respect to a number of shares of Applied common stock with a fair market value on the date of grant equal to $200,000 (rounded down to the nearest whole share). A non-employee director who is initially appointed or elected to the Board on the day of an annual meeting of stockholders receives only an annual grant. Each of our non-employee directors re-elected at the 2015 annual meeting received a grant of 8,980 restricted stock units on that date.

Vesting. Grants made to our non-employee directors vest in full on the earlier of March 1 of the year following the date of grant or the next annual meeting, provided the non-employee director remains on the Board through the scheduled vesting date. Vesting of these grants will be accelerated in full upon a non-employee director’s earlier termination of service on the Board due to disability or death, or upon a change of control of Applied if the director ceases to be a non-employee director (and does not become a member of the board of directors of any successor corporation or its parent). Non-employee directors may elect in advance to defer receipt of vested shares until their termination of service on the Board.

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.

Pursuant to Section 14A of the Securities Exchange Act of 1934, we are asking stockholders to approve, on a non-binding, advisory basis, the compensation of our NEOs, as described in this Proxy Statement. We seek this approval each year, and our “say-on-pay” proposals have been supported by over 85% of votes cast in each of the previous five consecutive years.

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 at-risk compensation tied to the achievement of performance objectives and the creation of stockholder 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.

Pay Aligned with Performance. There is strong alignment between key financial metrics and company performance metrics used to determine and inform our compensation decisions (Applied’s adjusted EPS and TSR) 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 19 for charts illustrating this alignment.

Over 90% of CEO Pay Tied to Performance. Performance-based incentive compensation (cash and long-term incentive awards) represented 93% of our CEO’s annual total direct

compensation (base salary, annual incentive bonus and annual long-term incentive award) in fiscal 2015, and 87% of total direct compensation for our other NEOs who are current executive officers. Performance objectives include adjusted operating profit margin, operating profit and earnings per share.

Please see the “Compensation Discussion and Analysis” section for further discussion of our executive compensation program and the fiscal 2015 compensation of our NEOs.

We are asking our stockholders to approve the compensation of our NEOs as described in this Proxy Statement by voting in favor of the following resolution:

“RESOLVED, that the stockholders approve, on a non-binding, advisory basis, the compensation paid to the Company’s named executive officers as disclosed in the Company’s Proxy Statement for the 2016 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis section, the Summary Compensation Table, other compensation tables, narrative discussion and related disclosure.”

Even though this say-on-pay vote is advisory and therefore will not be binding on the Company, the Human Resources and Compensation Committee and the Board value the opinions of our stockholders, and will consider the results of the vote when making future compensation decisions for our NEOs.

This Compensation Discussion and Analysis describes the principles and material elements of our executive compensation program, how we applied those principles in determining the material elements of our NEOs’ compensation for fiscal 2015 and how we use our compensation program to drive performance. We believe that our actions in fiscal 2015 and in prior years have effectively linked pay to performance.

Our NEOs for fiscal 2015 include:

Our NEOs for fiscal 2015 also include Michael R. Splinter, former President, Chief Executive Officer and Executive Chairman of the Board, and Randhir Thakur, former Executive Vice President, General Manager, Silicon Systems Group.

In fiscal 2015, we achieved solid growth and financial performance, made significant progress towards our long-term strategic and financial goals, and delivered attractive cash returns to our stockholders.

Key Financial Performance Highlights

In fiscal 2015, we delivered another strong year of growth in revenues and profitability. Our revenue for the fiscal year was $9.7 billion, an increase of 6% year-over-year. We delivered non-GAAP adjusted operating profit of $1.9 billion, our highest in four years. We also achieved our highest non-GAAP adjusted earnings per share (“EPS”) in four years of $1.19. These key highlights of our financial performance are shown below (see the Appendix for a reconciliation of non-GAAP adjusted measures).

Our other key financial highlights included the following:

Strategic and Operational Highlights

Applied’s strategy is built upon our leadership in materials engineering. We drove 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. Below are fiscal 2015 highlights of our businesses.

In fiscal 2015, we also made Applied more agile and efficient by optimizing the organization and product portfolios. These changes allowed us to fuel our growth programs while controlling our operating expenses. The investments we have made are resulting in share gains and a strong pipeline of new products aimed at key market inflections.

Business Combination. In September 2013, we announced our agreement with Tokyo Electron Limited to effect a strategic combination of our respective businesses (the “Business Combination”). Following the announcement and throughout the first half of fiscal 2015, our executive officers, as well as employees, dedicated significant efforts to prepare to close the Business Combination and to integrate the two companies post-closing. As part of these efforts, we requested Mr. Dickerson to relocate full-time to Japan to continue leading critical efforts toward the completion of the Business Combination, to prepare for the critical post-closing integration period and to ensure a smooth transition. See “Relocation Program” on page 30 for additional information.

However, in April 2015, we and Tokyo Electron terminated the Business Combination due to regulatory concerns. While the Business Combination was pending and following its termination, we continued to drive our growth strategy and financial goals and achieved strong financial performance in fiscal 2015.

Stock Price Performance

The following graph shows the TSR between October 29, 2012 and December 31, 2015 for our common stock as compared to the TSR for the NASDAQ Composite, the S&P 500 and the PHLX Semiconductor Sector indices. While our stock price performance in fiscal 2015 was significantly impacted by the termination of the Business Combination, our business and financial performance remained strong throughout the year.

3-Year Total Shareholder Return

Key Executive Compensation Highlights

Our fiscal 2015 compensation program was designed to recognize, motivate and retain a unified senior management team in an extremely competitive marketplace and to ensure that executive pay appropriately reflects performance.

Several decisions by our Human Resources and Compensation Committee (the “Committee”) during the year reflected an intent to incentivize and retain our leadership team during the critical period prior to the then-anticipated closing of the Business Combination, while continuing to effectively operate our business and stay focused on longer-term goals.

Key compensation decisions for fiscal 2015 included:

Lower Total Direct Compensation. Annual total direct compensation, consisting of base salary, annual incentive bonus and annual long-term incentive award, for all of our NEOs who were executive officers during all of fiscal 2014 and fiscal 2015, was lower in fiscal 2015 than in fiscal 2014, except for a single NEO to reflect increased responsibilities.

Paid Bonuses Below Calculated Funding Multiplier. As a result of our strong non-GAAP adjusted EPS in fiscal 2015, the bonus pool was funded at a multiple of 1.14x target. Based on actual performance against fiscal 2015 corporate scorecard goals, however, the Committee paid bonuses to NEOs at an average of 1.01x of target, below the funding multiplier, due in large part to TSR performance below targeted levels.

Returned to Equity-Based Compensation. After granting cash-based long-term incentive awards in fiscal 2014, the

Committee decided to return to an equity-based long-term incentive program for fiscal 2015 to further align the interests of our executive officers with those of our stockholders.

Decreased Long-Term Incentive Grant Levels. The Committee decreased fiscal 2015 grant levels from 2014 levels for all NEOs, except for an increase for a single NEO to reflect increased responsibilities. All fiscal 2015 long-term incentive awards continued to be 100% performance-based, with metrics consisting of operating profit margin and relative TSR.

Delayed Payment of Retention Bonuses. In light of the critical need to retain our executives through the closing or termination of the Business Combination, the Committee delayed the payment of retention bonuses that were awarded in September 2013 and that were scheduled to be paid in March 2015, until the first quarter of fiscal 2016.

In fiscal 2015, we continued our strong commitment to pay for performance by aligning a significant portion of executive compensation with demonstrated performance. As shown by the charts below, the performance-based incentives for our

CEO constituted 93%, and for our other NEOs who are current executive officers, 87%, of annual total direct compensation (base salary, annual incentive bonus and annual long-term incentive award):

The following charts demonstrate the alignment between key metrics used to determine and inform our compensation decisions (our non-GAAP adjusted EPS and TSR) and the total direct compensation and annual incentive bonus paid to our CEO during the last five fiscal years (see the Appendix for a reconciliation of non-GAAP adjusted measures). Our program also considers other objective financial and operational performance metrics in determining final bonus payouts for our CEO and other NEOs.

In fiscal 2015, TSR decreased following the termination of the Business Combination. CEO pay also decreased from $15.9 million to $13.9 million, primarily reflecting a lower long-term incentive award for fiscal 2015. Also, while non-GAAP adjusted EPS was up year-over-year, the CEO’s annual incentive bonus decreased.

The primary elements of our compensation program consist of base salary, annual incentive bonuses and annual long-term performance-based incentive awards. These primary elements were chosen after considering a number of factors, including our desire to drive a long-term strategy and continuous improvement in financial and operational performance, as well as the competitive pay practices of our peer

group. Each primary element is intended to support one or more of 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.

We are committed to executive compensation practices that drive performance and mitigate risk and that align the interests of our leadership team with the interests of our stockholders. 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 stockholders.

Overview of Compensation Program Philosophy and Governance Framework

Our executive compensation program has three principal objectives:

We seek to achieve these objectives by

The Committee uses these principles to determine base salaries, annual incentive bonuses and long-term incentive awards. The Committee also considers Applied’s business objectives, the skills and experience of the executive, competitive practices and trends and corporate considerations,

including the compensation level of an executive officer relative to other Applied officers and affordability of the compensation program. The Committee further considers the results of the annual advisory “say-on-pay” vote and stockholder feedback.

At our 2015 Annual Meeting, a strong majority (85% of the votes cast) of our stockholders approved the NEO compensation program described in our 2015 proxy statement. The Committee considered this strong stockholder support in implementing the fiscal 2015 executive compensation program.

Fiscal 2015 Peer Group Companies

The Committee compares our executive compensation program with compensation paid 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.

For the composition of the fiscal 2015 peer group, we considered companies that met the following criteria: (1) technology companies with manufacturing operations, (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 us for key talent and (5) companies that devote significant resources to research and development as a percentage of revenue. Each of the companies below met most, if not all, of these criteria; 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. Management and the Committee use this survey data to assess the compensation levels paid by our peer group and the levels paid within the targeted percentile range discussed below. Deferred compensation plans and other benefits generally are not considered, as they are not a material element of an NEO’s overall compensation package. The peer group data is gathered from the sources described in “Role of Compensation Consultant” and “Role of Executive Officers and Management in Compensation Decisions” below. The tables below set forth our fiscal 2015 peer group and related information.

Role and Authority of the Human Resources and Compensation Committee

The Committee has a written charter approved by the Board that specifies the Committee’s duties and responsibilities, which is available on our website at: http://www. appliedmaterials.com/investor-relations/corporate- governance. In accordance with its charter, the Committee oversees our programs that foster executive and employee development and retention, with emphasis on leadership

development, management capabilities and succession plans. The Committee also determines executive and director compensation, and oversees significant employee benefits programs, policies and plans.

Each member of the Committee has been determined to be independent under Nasdaq, SEC and Internal Revenue Code (“Code”) rules. The Committee may delegate any of its responsibilities to subcommittees. See “Board Meetings and Committees” for more information about the Committee.

Role of Compensation Consultant

The Committee has the authority to engage independent advisors to assist it in carrying out its responsibilities. For fiscal 2015, the Committee engaged Semler Brossy Consulting Group (“Semler Brossy”) as its independent executive 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 of Semler Brossy pursuant to SEC rules and concluded that the work of Semler Brossy for the Committee 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 as follows:

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.

Role of Executive Officers and Management in Compensation Decisions

For fiscal 2015, the Committee invited Mr. Dickerson (as CEO) and other executives, including the heads of Global Human Resources and Global Rewards, to attend its meetings. The Committee also regularly held executive sessions without management present. The CEO, together with the Committee, 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, in addition to considering input from Semler Brossy. The Committee discusses the CEO’s proposed compensation and makes final decisions regarding the CEO’s compensation when he is not present.

In formulating its compensation recommendations for fiscal 2015, 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.

Determining Annual Total Direct Compensation

At the beginning of fiscal 2015, the Committee evaluated each NEO’s annual total direct compensation – annual base salary, annual incentive bonus and annual long-term incentive award. In determining the NEOs’ targeted annual total direct compensation, the Committee considered, among other factors, each element of compensation, the compensation package as a whole and compensation levels at our peer companies for comparable positions. The Committee targeted a range within the 50^th to the 75^th percentile of Applied’s peer group, but not a particular point within the range, for each NEO. The Committee believes that targeting overall compensation within this range allows the Committee to meet the objectives of our executive compensation program, including attracting and retaining talented executives in a highly competitive market, while retaining flexibility to tailor compensation based on individual circumstances.

Each individual element of compensation varies and is not necessarily targeted to a percentile range. The Committee may vary from the targeted range, depending on 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, as well as the compensation level of an executive officer relative to other Applied officers, the need to attract and retain talent, and business conditions. Actual pay results may be outside of the targeted range due to the performance of the NEO or of the Company, as the largest part of our compensation program is performance-based.

Mr. Halliday’s and Mr. Larkins’ targeted total direct compensation at the beginning of fiscal 2015 was slightly above the 50^th to 75^th percentile targeted range. The Committee believed Mr. Halliday’s targeted total direct compensation was appropriate because of his demonstrated leadership as our CFO and of our Mergers and Acquisitions and Global Information

Systems groups, his critical role in preparing to close the anticipated Business Combination and planning for post-closing integration, as well as his expected future contributions to our business. For Mr. Larkins, the Committee considered the additional responsibilities assumed by him during a year of tremendous change, including managing all legal aspects of the Business Combination, while partnering with the business units and other functions to effectively meet Applied’s objectives, as well as his expected future contributions to our business. The targeted total direct compensation of all of our other NEOs, including the CEO, at the beginning of fiscal 2015 was within the targeted 50^th to 75^th percentile range.

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 Committee 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 2015, the Committee increased Mr. Dickerson’s salary from $980,000 to $1,000,000 and Mr. Halliday’s from $575,000 to $625,000 in recognition of their strong performance and based on the data provided by Semler Brossy regarding market positioning of the executives’ overall targeted total direct compensation. The Committee also increased Dr. Addiego’s salary from $450,000 to

$460,000 to reflect his additional responsibilities for Applied’s operations and engineering functions. The Committee did not change base salaries for the other NEOs in fiscal 2015. The Committee, in consultation with management, decided that continuing base salary amounts from fiscal 2014 met the goal of sufficiently recognizing executives for their time and service, 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 2015, all of our NEOs participated in the Senior Executive Bonus Plan (the “Bonus Plan”). The Bonus Plan is a stockholder-approved annual 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 linked to Applied’s performance in achieving strategic and financial objectives, and to individual performance. Company and individual objectives are designed to incentivize management to drive strong operating performance, invest in innovation to drive future growth and create stockholder value. Bonuses under this plan are intended to qualify as “performance-based” compensation under Section 162(m) of the Code. There is no minimum level of guaranteed bonus.

The process we use for annual incentives is as follows:

Determining Target Bonus Amounts. Target bonus amounts for each of the NEOs are expressed as a percentage of base salary. The Committee sets 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 2015, Mr. Dickerson recommended that, for each NEO other than Dr. Addiego, the target bonus amounts remain unchanged from fiscal 2014. Mr. Dickerson recommended, and the Committee approved, increasing Dr. Addiego’s target bonus from 100% to 110% of his base salary. 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 individual performance, current and anticipated contributions, and overall economic and business conditions. The Committee considered these same factors to determine Mr. Dickerson’s target bonus and increased it from 175% to 200% of his base salary. 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 and the continued demands of running our business.

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 2015, the Committee chose the achievement of adjusted operating profit as the initial performance goal under the Bonus Plan. If Applied does not achieve positive adjusted operating profit for the fiscal year, then no bonus is payable. If positive adjusted operating profit is achieved, the maximum bonus that becomes payable for each NEO is the lowest of: (a) $5 million, (b) 3x the target bonus, as a percentage of base salary and (c) 0.4% of adjusted operating profit for each NEO other than Mr. Dickerson and Mr. Splinter, for both of whom this maximum is 0.8% of adjusted operating profit.

In fiscal 2015, Applied’s adjusted operating profit was $1.9 billion, resulting in achievement of the initial performance goal under the Bonus Plan. Adjusted operating profit is a non-GAAP measure that excludes certain items from operating profit determined in accordance with GAAP, such as acquis-

ition, integration and deal costs associated with prior transactions, as well as the Business Combination, gain on derivatives associated with the Business Combination, restructuring, inventory and asset impairment charges, and foreign exchange loss.

Funding of Bonus Plan. If the initial performance goal is achieved, the Committee then reviews the level of Applied’s adjusted EPS 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 upon achievement of the initial performance goal. The EPS goal is expected to reduce the bonus amount from the maximum available.

To determine the funding of the Bonus Plan, 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 2015 within a range of $1.07 to $1.28, and an adjusted EPS above or below this range would have increased or decreased the multiplier. The Committee certified the achievement of non-GAAP adjusted EPS of $1.19 for fiscal 2015, which resulted in a funding multiplier of 1.14x.

Our fiscal 2015 EPS target range, actual non-GAAP adjusted EPS result and overall funding level are below:

		Target Range		Actual
Fiscal 2015 Non-GAAP EPS		$1.07 - $1.28		$1.19
Bonus Funding Multiplier		1.00x - 1.24x

Adjusted EPS is a non-GAAP measure that excludes certain items from EPS determined in accordance with GAAP, such as acquisition and deal costs associated with prior transactions, as well as the Business Combination, gain on derivatives associated with the Business Combination, restructuring, inventory and asset impairment charges, the reinstatement of federal R&D tax credit, the resolution of audits of prior years’ income tax filings and other tax items, and foreign exchange loss.

Corporate Scorecard Goals. If the initial performance goal is met and the bonus pool is funded, the Committee then reviews the achievement of corporate scorecard goals by each NEO. The corporate scorecard goals create additional incentive for our NEOs since at least a portion of the goals must be achieved in order for any bonus to be paid. 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.

For fiscal 2015, in developing the corporate scorecard goals and their weightings that were recommended to the Committee, management considered the importance of shared goals for all the NEOs, and analyzed the relative importance of each goal to Applied’s business strategy and the anticipated difficulty of achieving the goals in the aggregate. The fiscal 2015 corporate scorecard included goals related to customer satisfaction, product development and growth, employee engagement and development, operational execution and financial performance. These goals and their weightings were the same for all NEOs, except for Dr. Addiego. Dr. Addiego’s weightings differed slightly from those of the other NEOs’ to focus him on achieving objectives in critical areas for his function and Applied’s business overall – enhancing product development and quality, and improving operational execution, while reducing costs. The Committee considered and provided input on goals and weightings initially proposed by management, which was incorporated into the final goals and weightings that subsequently were approved by the Committee.

At the end of fiscal 2015, the Committee reviewed actual performance against the corporate scorecard goals and the respective weightings for each goal, as to each NEO who was an executive officer at the end of fiscal 2015. The achievement of the corporate scorecard goals was, on average, 0.93x of target for these NEOs due in large part to TSR performance below targeted levels.

The following table shows fiscal 2015 corporate scorecard goals, their relative weightings for each NEO and levels of achievement.

Individual Performance Factor. The Committee also considered the individual performance of each NEO as indicated by that NEO’s individual performance factor (“IPF”). The IPF applies only if the Bonus Plan is funded and at least some of the corporate scorecard goals are achieved. The IPF

modifies the initial bonus amount as determined based on achievement against the corporate scorecard goals. The IPF modifier may range from 0% to 200%. However, the aggregate bonuses paid under the Bonus Plan cannot exceed the overall bonus pool funding.

While the corporate scorecard goals are shared by all NEOs, the IPF for each NEO other than Mr. Dickerson is based on performance against personal objectives established at the beginning of the year, as well as the NEO’s current and expected contributions to the business. NEO personal objectives included business unit or functional group objectives, as well as objectives related to special initiatives and personal development. The IPF for Mr. Dickerson is based on the Committee’s year-end assessment of his overall performance during the year.

At the end of fiscal 2015, Mr. Dickerson recommended, and the Committee approved, the IPF ratings for the other NEOs,

which ranged from 95% to 120%. The Committee reviewed Mr. Dickerson’s leadership and contributions in driving the strong fiscal 2015 financial results, as well as overall business performance, and assigned him an IPF of 110%.

Actual Bonus Payouts. The NEOs’ performance against corporate scorecard goals and IPF ratings resulted in an average bonus payout of 101%, which was below the bonus pool funding multiplier. The diagram below shows the results for each of the four key steps in determining the NEOs’ fiscal 2015 annual incentive bonuses.

Fiscal 2015 Annual Incentive Bonus

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 stockholders’ interests to maximize long-term stockholder value.

Timing of Awards. The Committee grants equity and other long-term incentive awards to NEOs under our stockholder-approved Employee Stock Incentive Plan (the “Stock Plan”). The Committee 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 Types of Awards. In considering whether to grant performance shares, restricted stock units, stock options, other types of awards, or a combination of awards during any fiscal year, 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 make changes to our long-term incentive program to help us meet the objectives of our executive compensation program. The CEO makes recommendations with respect to the 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 NEO’s performance and contributions to Applied’s success, skill set, prior experience, time in his position and internal equity.

Fiscal 2015 Performance-Based Equity Awards

After granting cash-based long-term incentive awards in fiscal 2014 due to excise tax considerations related to the Business Combination, the Committee decided to return to an equity-based long-term incentive program in fiscal 2015. The Committee granted performance shares for fiscal 2015 that require the achievement of an adjusted operating profit margin goal and provide an incentive tied to the achievement of a relative TSR goal. The return to granting equity awards continues to strongly align our executives’ interests with those of our stockholders and motivates our NEOs to create long-term stockholder value.

For fiscal 2015, the Committee granted target number of performance shares listed in the following table to our NEOs, except Mr. Splinter. The Committee did not grant Mr. Splinter

a long-term incentive award for fiscal 2015, as the Committee believed that the terms of his retention agreement already provided sufficient incentive and retention value until his expected retirement at the end of March 2015.

Size of Performance-Based Equity Awards. In determining the size of the awards, the Committee considered each NEO’s award as a component of his total direct compensation. The Committee reduced the size of fiscal 2015 awards, as compared to the size of the NEOs’ fiscal 2014 long-term incentive awards. At the time the fiscal 2015 performance shares were granted in December 2014, the Business Combination was still pending. While it was of paramount importance to retain the NEOs at that time, the Committee, in consultation with management, determined that the fiscal 2015 target grant sizes provided sufficient performance-based equity incentives to align compensation with the long-term interests of our stockholders, were in line with market norms for the NEOs’ respective roles and were sufficient to provide retention incentive for them.

Annual Adjusted Operating Profit Margin Goal. The fiscal 2015 performance shares are subject to the achievement of a non-GAAP adjusted operating profit margin of at least 16% in any one of fiscal years 2015 through 2018. If this performance goal is met, then 100% of the target performance shares will be eligible for time-based vesting over four years. We believe these goals are appropriate in light of the cyclical nature of the industries in which we operate.

In fiscal 2015, Applied achieved a non-GAAP adjusted operating profit margin of 19.6%. As a result, 100% of the target performance shares became eligible for time-based vesting over four years.

Fiscal 2015 Adjusted Operating

Profit Margin Target and

Actual Result

Adjusted operating profit margin is a non-GAAP measure that excludes certain items from operating profit margin determined in accordance with GAAP, such as acquisition, integration and deal costs associated with prior transactions, as well as the Business Combination, gain on derivatives associated with the Business Combination, restructuring, inventory and asset impairment charges, and foreign exchange loss.

Relative TSR Incentive. In order to focus the NEOs even more intently on creating long-term stockholder value, the fiscal 2015 performance shares include an additional incentive tied to targeted levels of relative TSR, measured against a peer group comprised of companies in the S&P 500 Information Technology Index. The TSR incentive requires, as a threshold, that Applied satisfy the annual adjusted operating profit margin goal. In this way, NEOs will be rewarded for achieving strong operating results, as well as for creating meaningful additional stockholder value.

If the annual adjusted operating profit margin goal is achieved and Applied’s relative TSR for the two-year period ending on the last day of fiscal 2016 is at least the 60^th percentile of the S&P 500 Information Technology Index, then additional shares above the target amount will become eligible for time-based vesting, as set forth below.

Depending on the level of achievement of both the operating profit margin and TSR goals, the total number of shares that may become eligible to vest under the time-based schedule ranges from 0% to 150% of the target number. In order for the maximum number of shares to become eligible to vest, annual adjusted operating profit margin must be greater than 16% in any one of the four years and TSR must be at the 75^th percentile or higher within the S&P 500 Information Technology Index over the first two years.

In addition, the NEO must remain an employee of Applied through December 19, 2018 in order for all amounts to vest. The four-year vesting schedule is intended to retain and reward our NEOs for achieving operational and financial goals, while also promoting a long-term focus on sustained performance and total shareholder return. 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.

Deferred Compensation Plan

We amended our deferred compensation plan in fiscal 2015. The amended plan, the 2016 Deferred Compensation Plan (the “2016 Plan”), effective in October 2015, allows our NEOs and other eligible employees to voluntarily defer on a pre-tax basis a portion of their eligible earnings. We do not provide matching or other employer contributions under this plan. Deferrals made prior to October 2015 continue to be credited with deemed interest and are subject to the distribution rules in place prior to the plan amendment. Beginning in fiscal 2016, participants are permitted to notionally invest new deferrals in certain investment options newly available under the plan. Additionally, for new deferrals, the 2016 Plan provides new distribution rules for in-service distributions and upon a qualifying separation from service, disability and

change in control. See “Nonqualified Deferred Compensation” below for more information about the 2016 Plan.

Retirement Benefits under the 401(k) Plan and Generally Available Benefits Programs

During fiscal 2015, substantially all U.S. employees, including the NEOs, were eligible to participate in Applied’s 401(k) plan, a tax-qualified retirement plan. Eligible Applied 401(k) plan participants receive matching contributions from Applied. Other 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 as required in certain countries outside the U.S. for legal or competitive reasons.

Applied offers a number of other benefits programs to a broad base of eligible employees, including a tax-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, educational assistance, employee assistance program and certain other country-specific benefits.

Applied annually benchmarks its overall benefits programs against our peers, including the 401(k) plan, but excluding the 2016 Plan. Applied generally targets its overall broad-based benefits programs, excluding the 2016 Plan, at approximately the market median, which the Committee 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.

The benefits provided under the programs discussed above are not considered by the Committee in determining an individual NEO’s total compensation.

Relocation Program

Applied maintains a relocation program available to all employees, under which it 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 an after-tax basis for housing and transportation allowances and living and travel expense reimbursements, as well as tax equalization that is intended to put employees who relocate in service to Applied in the same position, from a tax-liability perspective, that they would be in if they were still located in the United States.

In 2014, we requested Mr. Dickerson to relocate full-time to Japan to continue leading critical efforts toward the then-anticipated completion of the Business Combination, to prepare for the critical post-closing integration period and to ensure a smooth transition. Mr. Dickerson agreed to relocate, along with his family, to Japan in August 2014. The Committee approved the relocation benefits, which are reported in the Summary Compensation Table. These benefits included housing, transportation and moving expenses, a cost of living adjustment, education expense reimbursements, relocation allowance, amounts for taxes incurred in connection with the relocation, as well as tax equalization for increased tax-liability resulting from his relocation to Japan in service of Applied, which did not have a compensatory purpose.

Employment, Retention and Separation Agreements

Employment 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. These agreements were not amended in fiscal 2015. Mr. Splinter retired as an executive officer in March 2015. See “Employment, Retention and Separation Agreements” on page 36 for additional information.

Amended Retention Agreements. In connection with the Business Combination, the Committee approved retention agreements for our NEOs in September and December 2013, except for Dr. Addiego who joined Applied in March 2014. In December 2014, the Committee amended these retention agreements (except for Mr. Splinter’s) to provide that vesting of certain awards that were otherwise scheduled to vest in calendar year 2015 would accelerate to three trading days prior to the expected closing of the Business Combination. This vesting acceleration would be conditioned upon the closing of the Business Combination and would apply only if the NEO was expected to be a “disqualified individual” and subject to a 15% excise tax under Section 4985 of the Code in respect of such equity awards. This partial acceleration of vesting would have helped to mitigate some, but not all, of the 15% excise tax impact on our NEOs. The excise tax would have still applied 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 six months after the closing or termination of the Business Combination and (2) December 11, 2015, subject to the NEO’s continued employment through the applicable date. The Committee approved this delay in light of the critical need to retain the executives through the period following closing or termination of the Business Combination.

Also in December 2014, the Committee approved payment by Applied of the 15% excise tax and related taxes on such payment, that would have been imposed on the fiscal 2015 equity awards granted to the NEOs (except for Mr. Splinter, who did not receive a fiscal 2015 equity award) upon the closing of the Business Combination. To preserve the long-term incentive and retention value of these awards, the Committee did not provide for acceleration of vesting.

With the termination of the Business Combination, the NEOs did not receive the vesting acceleration or the tax assistance related to their fiscal 2015 equity awards.

Separation Agreement. In August 2015, we entered into a separation agreement with Dr. Thakur in connection with his departure from the Company on October 30, 2015. Under

the agreement, Applied agreed to pay Dr. Thakur three cash payments of $1,000,000 each within 45 days following his departure from the Company, on March 15, 2016 and within 45 days following the one-year anniversary of his departure. Applied also agreed to accelerate vesting of a total of 168,750 performance shares and $1,293,750 of cash-settled performance units, all of which otherwise would have vested in December 2015. Dr. Thakur’s right to receive or retain the cash payments payable on March 15, 2016 and on the one-year anniversary of his departure will end if, prior to the applicable payment date, he engages in a disqualifying activity (as defined in the agreement), or otherwise breaches certain non-solicitation, confidentiality, non-disparagement or other obligations under the agreement, unless waived by Applied. The Committee believed that the separation package provided to Dr. Thakur was appropriate to encourage compliance with his post-employment obligations.

Stock Ownership Guidelines

We have stock ownership guidelines to help align the interests of our directors and NEOs with those of our stockholders. The guidelines provide that directors and NEOs should meet the following ownership levels in Applied stock within five years from the individual’s initial election or appointment:

At the end of fiscal 2015, all of the NEOs whose five-year ownership deadline had passed had met the stock ownership guidelines.

Applied has an insider trading policy that, among other things, discourages hedging and speculation by prohibiting insiders from short sales and trading in publicly listed options for

Applied shares. During fiscal 2015, none of the shares of Applied stock held by our executive officers or directors were pledged as collateral.

Clawback Policy

We have a “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 Applied’s financial results. The compensation that may be recovered is the after-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 provided under applicable laws, including the Sarbanes-Oxley Act and the Dodd-Frank Act.

Tax Deductibility