Advanced Medical Optics (EYE)

Investments

The Company has non-marketable equity investments in conjunction with its various collaboration arrangements. The non-marketable equity investments are recorded at cost and are evaluated periodically for other than temporary declines in fair value. The Company uses the following criteria to determine if such a decline should be considered other than temporary:

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If it is determined that a decline of any investment is other than temporary, then the carrying value would be written down to fair value, and the write-down would be included in earnings as a loss. There have been no such impairments in any period presented.

Investments

The Company has non-marketable equity investments in conjunction with its various collaboration arrangements. The non-marketable equity investments are recorded at cost and are evaluated periodically for other than temporary declines in fair value. The Company uses the following criteria to determine if such a decline should be considered other than temporary:

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If it is determined that a decline of any investment is other than temporary, then the carrying value would be written down to fair value, and the write-down would be included in earnings as a loss. There have been no such impairments in any period presented.

Investments

The Company has non-marketable equity investments in conjunction with its various collaboration arrangements. The non-marketable equity investments are recorded at cost and are evaluated periodically for other than temporary declines in fair value. The Company uses the following criteria to determine if such a decline should be considered other than temporary:

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If it is determined that a decline of any investment is other than temporary, then the carrying value would be written down to fair value, and the write-down would be included in earnings as a loss.

8.02 Investments.

Make or hold any Investments, except:

(a) Investments held by the Borrower or such Subsidiary in the form of Cash Equivalents;

(b) advances or loans to officers, directors and employees of the Borrower and Subsidiaries in an aggregate amount not to exceed $5,000,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes;

(c) other loans and advances to employees for the purchase of capital stock of the Borrower in an aggregate amount not to exceed $2,000,000 in any Fiscal Year and not to exceed $5,000,000 at any time outstanding;

(d) Investments by the Borrower or any Guarantor in the Borrower or any other Guarantor, Investments by any Subsidiary that is not a Guarantor in the Borrower or any Guarantor and Investments by any Subsidiary that is not a Guarantor in any other Subsidiary that is not a Guarantor;

(e) Investments, including intercompany loans, by the Borrower or any Guarantor in any Foreign Subsidiary; provided, however, that any such Investments, including intercompany loans, made after the Closing Date by the Borrower and the Guarantors shall not exceed $100,000,000 in the aggregate at any one time outstanding;

(f) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

(g) Contingent Obligations permitted by Section 8.03;

(h) Investments received in connection with the bankruptcy or reorganization of suppliers or customers and in settlement of delinquent obligations of, and other disputes with, customers arising in the ordinary course of business;

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(i) the purchase or other acquisition of all of the Equity Interests in, or all or substantially all of the assets of, any Person (including as result of a merger or consolidation) in an aggregate amount of Acquisition Consideration for all of such Investments not to exceed $400,000,000 (provided that such amount may be increased by the Additional Basket Amount); provided that with respect to Investments made under this clause (i): (1) immediately before and after giving effect thereto, no Default shall have occurred and be continuing or would result therefrom; (2) after giving pro forma effect to any such Investment, the Borrower will be in compliance with the Debt Ratio Conditions, (3) any company, business or assets acquired pursuant to this clause (i) shall be in substantially the same line of business as the business of the Borrower or any of its Subsidiaries; (4) immediately before and after giving effect to the acquisition of a company or business pursuant to this clause (i), the Borrower shall be in pro forma compliance with the covenants contained in Section 8.11 (to the extent such covenants are applicable), calculated based on the financial statements most recently delivered to the Lenders pursuant to Section 7.01 and as though such Investment had occurred at the beginning of the four-quarter period covered thereby, as evidenced by a certificate of a Responsible Officer of the Borrower delivered to the Lenders demonstrating such compliance; and (5) with respect to any such Investment that the Borrower has deemed, in its discretion, material enough to necessitate a filing on Form 8-K with the SEC, the Borrower shall have provided forecasts of the entity that is the subject of such Investment or the Borrower after giving effect to such Investment as may be reasonably requested by the Administrative Agent; provided further however that notwithstanding anything to the contrary in this Section 8.02(i), the aggregate amount of Acquisition Consideration for Investments permitted hereunder in assets that do not become Collateral or in entities that do not become Guarantors shall be subject to the limitations set forth in Section 8.02(e);

(j) other Investments in an aggregate amount invested not to exceed (i) if, at the time of such Investment and after giving pro forma effect thereto, the Consolidated Total Leverage Ratio is 3.50:1.00 or greater, $75,000,000, and (ii) if, at the time of such Investment and after giving pro forma effect thereto, the Consolidated Total Leverage Ratio is less than 3.50:1.00, $125,000,000; provided that (i) the amounts set forth in this Section 8.02(j) may be increased by the Additional Basket Amount and (ii) immediately before and after giving effect thereto, no Default shall have occurred and be continuing or would result therefrom;

(k) Investments existing on the date hereof and listed on Schedule 8.02;

(l) Investments in the form of an intercompany loan by a Foreign Subsidiary to the Borrower or another Loan Party, the proceeds of which intercompany loan are immediately used by the Borrower or such Loan Party to make an intercompany loan to a Foreign Subsidiary, which intercompany loan may later be forgiven by the Borrower or such Loan Party in exchange for Equity Interests in such Foreign Subsidiary;

(m) Investments by the Borrower in Swap Contracts permitted under Section 8.03;

(n) the IntraLase Acquisition;

(o) Investments in respect of the IntraLase IP Transaction; and

(p) Investments in a Securitization Subsidiary made in connection with a Permitted Securitization.

Investments

The Company has non-marketable equity investments in conjunction with its various collaboration arrangements. The non-marketable equity investments are recorded at cost and are evaluated periodically for other than temporary declines in fair value. The Company uses the following criteria to determine if such a decline should be considered other than temporary:

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•                     the duration and extent to which the market value has been less than cost;

•                     the financial condition and near-term prospects of the investee;

•                     the reasons for the decline in market value;

•                     the investee’s performance against product development milestones; and

•                     the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

If it is determined that a decline of any investment is other than temporary, then the carrying value would be written down to fair value, and the write-down would be included in earnings as a loss.

Investments

The Company has non-marketable equity investments in conjunction with its various collaboration arrangements. The non-marketable equity investments are recorded at cost and are evaluated periodically for other than temporary declines in fair value. The company uses the following criteria to determine if such a decline should be considered other than temporary:

If it is determined that a decline of any investment is other than temporary, then the carrying value would be written down to fair value, and the write-down would be included in earnings as a loss.

Investments

The Company has non-marketable equity investments in conjunction with its various collaboration arrangements. The non-marketable equity investments are recorded at cost and are evaluated periodically for other than temporary declines in fair value. The company uses the following criteria to determine if such a decline should be considered other than temporary:

•                   the duration and extent to which the market value has been less than cost;

•                   the financial condition and near-term prospects of the investee;

•                   the reasons for the decline in market value;

•                   the investee’s performance against product development milestones; and

•                   the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

If it is determined that a decline of any investment is other than temporary, then the carrying value would be written down to fair value, and the write-down would be included in earnings as a loss.

Investments

The Company has non-marketable equity investments in conjunction with its various collaboration arrangements. The non-marketable equity investments are recorded at cost and are evaluated periodically for other than temporary declines in fair value. The company uses the following criteria to determine if such a decline should be considered other than temporary:

If it is determined that a decline of any investment is other than temporary, then the carrying value would be written down to fair value, and the write-down would be included in earnings as a loss.

During 2002, the Company determined that the decline in fair value of two non-marketable equity investments was other than temporary. Accordingly, the Company recorded a loss of $3.9 million.