Advanced Medical Optics (EYE)

Restricted Stock Units

Restricted stock units (“RSUs”) are rights to receive shares of common stock at a future date or over a vesting period. RSUs are granted at a price equal to the fair market value of the underlying common stock on the date of grant, subject to forfeiture if employment terminates prior to vesting. Prior to vesting, ownership of the units cannot be transferred. RSUs carry no cash dividend or voting rights and the underlying shares are not considered issued and outstanding until when, and if, the RSUs vest. The cost of the awards, determined to be the fair market value of the RSUs on the date of grant, is expensed ratably over the period of vesting.

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The following table summarizes the restricted stock award (restricted stock and restricted stock units) activity for the year ended December 31, 2008 (in thousands, except per share amounts):

Restricted Stock Units

Restricted Stock Units

Restricted Stock Units

Restricted stock units are rights to receive Shares at a future date or over a vesting period. Restricted stock units are granted at a price equal to the fair market value of the underlying common stock on the date of grant, subject to forfeiture if employment terminates prior to vesting. Prior to vesting, ownership of units cannot be transferred. Restricted stock units carry no cash dividend or voting rights, and the underlying Shares are not considered issued and outstanding until when and if the restricted stock units vest. The cost of awards, determined to be the fair market value of the restricted stock units on the date of grant, is expensed ratably over the period of vesting.

Stock awards in 2008 were composed of 6,740 restricted stock units that were awarded to each non-employee director on May 29, 2008, the date of our 2008 annual meeting of stockholders, plus such number of units, if any, that were awarded to such directors in lieu of payment in cash of their annual retainers. The grant date fair values for these awards were $216,599 for Mr. Rollans; $209,442 for each of Dr. Link and Mr. Mussallem; $202,308 for each of Mr. Chavez, Mr. Heinrich and Ms. Neff; $159,387 for Mr. Palmisano, and $154,616 for each of Mr. Morfit and Ms. Dávila.

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The following are the elements of the Company’s director compensation:

With the exceptions of Ms. Dávila and Mr. Palmisano, as discussed in the table above, the Company does not provide any perquisites or benefits to its non-employee directors. The Company does reimburse directors for their reasonable expenses associated with board of directors service, such as travel expenses and telephone charges.

As previously reported, in May 2006, the board of directors determined that it would not establish fixed compensation for its presiding director but would, instead, determine the amount of compensation warranted periodically. At its May 29, 2008 meeting, the board of directors approved $20,000 in compensation to Mr. Rollans for his service as presiding director over the prior 12 months, after considering the time required to be devoted to the duties of the position. Additionally, as previously reported, on December 19, 2008, the board of directors approved the payment of $50,000 in compensation to Mr. Rollans.

The Company’s non-employee directors may forego some of their entire annual cash retainer in exchange for restricted stock units issued under the Company’s incentive compensation plans, with a face value equal to the amount of the annual cash retainer foregone. Non-employee directors have the ability to make this election each year.

All restricted stock units granted in 2008 will vest on the date of our 2011 annual meeting of stockholders, with the exception of units granted in lieu of cash retainers, which vest on the date of our 2009 annual meeting. At the Acceptance Time (as defined in the Merger Agreement), each unvested restricted stock unit awarded under any of the Company incentive compensation plans will vest in full and be settled for Shares of the Company’s common stock in accordance with the terms of the applicable incentive compensation plan of the Company.

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The organization, compensation and corporate governance committee reviews director compensation periodically and recommends changes, if any, to the board of directors for approval. The board of directors last adjusted director compensation in May 2007. As one factor in determining the aggregate amount and individual components of such compensation, the committee solicits, reviews and considers analyses and recommendations from the compensation consultant retained by the committee who, among other things, presents peer group and published survey data and recommendations for the committee and the board of directors to consider. In determining the amounts, the board of directors seeks to adequately compensate directors for their time committed to board of directors activity and to align the directors, through grants of restricted stock units, with the long-term interests of the Company’s stockholders. From 2002-2004, board of directors members received annual stock option awards pursuant to a pre-set formula set forth in the Company’s 2002 incentive compensation plan, which was approved by the Company’s stockholders. In 2005, the Company discontinued this program in favor of a restricted stock program because the Company believes that the primary focus of the directors should be to protect and grow stockholder value and that restricted stock best achieves alignment with this objective and reduces stockholder dilution as compared to stock options. In 2007, we switched from restricted shares to restricted stock units, consistent with our grant methodology and administrative procedures for employees. In 2007, we also replaced meeting fees with higher annual retainers for ease of administration and better alignment with industry practices.

RESTRICTED STOCK AND RESTRICTED STOCK UNITS

The Committee may grant awards of Restricted Stock and/or Restricted Stock Units to Employees, Consultants and Independent Directors. The Committee shall determine the number of shares of Restricted Stock or Restricted Stock Units awarded, Purchase Price (if any), the terms of payment of the Purchase Price, the restrictions upon the Restricted Stock and/or Restricted Stock Units, and when and under what circumstances such restrictions shall lapse. The terms and conditions of the Restricted Stock and/or Restricted Stock Units shall be set forth in the statement evidencing the grant of such award of Restricted Stock and/or Restricted Stock Units.

All shares of Restricted Stock and Restricted Stock Units granted or sold, pursuant to the Plan will be subject to the following conditions:

(a) The Restricted Stock and Restricted Stock Units may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, alienated or encumbered until the restrictions are removed or expire;

(b) The Committee may require that the certificates representing Restricted Stock granted or sold to a Participant pursuant to the Plan remain in the physical custody of an escrow holder or AMO until all restrictions are removed or expire;

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(c) Each certificate representing Restricted Stock granted or sold to a Participant pursuant to the Plan will bear such legend or legends making reference to the restrictions imposed upon such Restricted Stock as the Committee in its discretion deems necessary or appropriate to enforce such restrictions; and

(d) The Committee may impose such other conditions on Restricted Stock and Restricted Stock Units as the Committee may deem advisable including, without limitation, restrictions under the Securities Act, under the Exchange Act, under the requirements of any stock exchange upon which shares of the same class are then listed and under any blue sky or other securities laws applicable to such shares.

The restrictions imposed upon Restricted Stock and Restricted Stock Units pursuant to Section 6.2 above will lapse in accordance with such schedule or other conditions as are determined by the Committee and set forth in the statement evidencing the grant or sale.

Subject to the provisions of Section 6.2 or restrictions imposed pursuant to Section 6.2, and to the payment of the full Purchase Price, if any, the Participant will have all rights of a stockholder with respect to the Restricted Stock granted or sold to such Participant under the Plan, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto; provided, however, that in the discretion of the Committee, any non-cash distributions with respect to the Common Stock shall be subject to the restrictions set forth in Section 6.2. Holders of Restricted Stock Units will have no rights of a stockholder until shares of Common Stock are issued upon vesting of the units.

Upon a Participant’s termination of employment or, if applicable, termination of consultancy or directorship, for death or Total Disability, all of the restrictions imposed on the Participant’s Restricted Stock shall lapse, and all of the Participant’s Restricted Stock Units will become vested and payable, as of the Participant’s last date of employment or, if applicable, consultancy or directorship. In all other cases (other than a Job Elimination), unless the Committee in its discretion determines otherwise, upon a Participant’s termination of employment or, if applicable, termination of consultancy or directorship, for any reason, (i) all of the Participant’s Restricted Stock that are unvested at that time shall be repurchased by AMO at the Purchase Price (if any) and (ii) all of the Participant’s Restricted Stock Units that are unvested at that time shall expire.

Upon an Employee’s termination of employment due to Job Elimination, the terminating Employee shall have the restrictions lapse on each grant of Restricted Stock in an amount equal to the difference between (i) the total number of shares of Restricted

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Stock granted multiplied by a fraction, the numerator of which is the number of full calendar months from the date of grant until the Employee’s last day of employment and the denominator of which is the total number of months of the vesting schedule pursuant to the original award and (ii) any shares of Restricted Stock that vested prior to the date of termination of employment, and any remaining shares of unvested Restricted Stock shall be repurchased by AMO at the Purchase Price (if any). With respect to Restricted Stock Units, upon an Employee’s termination of employment due to Job Elimination, the terminating Employee shall become vested in each award of Restricted Stock Units in an amount equal to the difference between (y) the number of units awarded multiplied by a fraction, the numerator of which is the number of full calendar months from the date of grant until the Employee’s last day of employment and the denominator of which is the total number of months of the vesting schedule pursuant to the original award and (z) any Restricted Stock Units that vested prior to the date of termination of employment, and any remaining unvested Restricted Stock Units shall expire.

Following the end of the vesting period for a Restricted Stock Unit (or at such other time as the applicable Restricted Stock Unit Agreement may provide), the holder of a Restricted Stock Unit shall be entitled to receive one share of Common Stock for each Restricted Stock Unit, unless the Participant has elected otherwise, provided however, any such election is valid in accordance with Code Section 409A or any successor regulation.

RESTRICTED STOCK AND RESTRICTED STOCK UNITS

The Committee may grant awards of Restricted Stock and/or Restricted Stock Units to Employees, Consultants and Independent Directors. The Committee shall determine the number of shares of Restricted Stock or Restricted Stock Units awarded, Purchase Price (if any), the terms of payment of the Purchase Price, the restrictions upon the Restricted Stock and/or Restricted Stock Units, and when and under what circumstances such restrictions shall lapse. The terms and conditions of the Restricted Stock and/or Restricted Stock Units shall be set forth in the statement evidencing the grant of such award of Restricted Stock and/or Restricted Stock Units.

All shares of Restricted Stock and Restricted Stock Units granted or sold, pursuant to the Plan will be subject to the following conditions:

The restrictions imposed upon Restricted Stock and Restricted Stock Units pursuant to Section 6.2 above will lapse in accordance with such schedule or other conditions as are determined by the Committee and set forth in the statement evidencing the grant or sale.

Subject to the provisions of Section 6.2 or restrictions imposed pursuant to Section 6.2, and to the payment of the full Purchase Price, if any, the Participant will have all rights of a stockholder with respect to the Restricted Stock granted or sold to such Participant under the Plan, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto; provided, however, that in the discretion of the Committee, any non-cash distributions with respect to the Common Stock shall be subject to the restrictions set forth in Section 6.2. Holders of Restricted Stock Units will have no rights of a stockholder until shares of Common Stock are issued upon vesting of the units.

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Upon a Participant’s termination of employment or, if applicable, termination of consultancy or directorship, for death or Total Disability, all of the restrictions imposed on the Participant’s Restricted Stock shall lapse, and all of the Participant’s Restricted Stock Units will become vested and payable, as of the Participant’s last date of employment or, if applicable, consultancy or directorship. In all other cases (other than a Job Elimination), unless the Committee in its discretion determines otherwise, upon a Participant’s termination of employment or, if applicable, termination of consultancy or directorship, for any reason, (i) all of the Participant’s Restricted Stock that are unvested at that time shall be repurchased by AMO at the Purchase Price (if any) and (ii) all of the Participant’s Restricted Stock Units that are unvested at that time shall expire.

Upon an Employee’s termination of employment due to Job Elimination, the terminating Employee shall have the restrictions lapse on each grant of Restricted Stock in an amount equal to the difference between (i) the total number of shares of Restricted Stock granted multiplied by a fraction, the numerator of which is the number of full calendar months from the date of grant until the Employee’s last day of employment and the denominator of which is the total number of months of the vesting schedule pursuant to the original award and (ii) any shares of Restricted Stock that vested prior to the date of termination of employment, and any remaining shares of unvested Restricted Stock shall be repurchased by AMO at the Purchase Price (if any). With respect to Restricted Stock Units, upon an Employee’s termination of employment due to Job Elimination, the terminating Employee shall become vested in each award of Restricted Stock Units in an amount equal to the difference between (y) the number of units awarded multiplied by a fraction, the numerator of which is the number of full calendar months from the date of grant until the Employee’s last day of employment and the denominator of which is the total number of months of the vesting schedule pursuant to the original award and (z) any Restricted Stock Units that vested prior to the date of termination of employment, and any remaining unvested Restricted Stock Units shall expire.

Following the end of the vesting period for a Restricted Stock Unit (or at such other time as the applicable Restricted Stock Unit Agreement may provide), the holder of a Restricted Stock Unit shall be entitled to receive one share of Common Stock for each Restricted Stock Unit, unless the Participant has elected otherwise, provided however, any such election is valid in accordance with Code Section 409A or any successor regulation.

Restricted Stock Units

Restricted stock units (RSUs) are rights to receive shares of common stock at a future date or over a vesting period. RSUs are granted at a price equal to the fair market value of the underlying common stock on the date of grant, subject to forfeiture if employment terminates prior to vesting. Prior to vesting, ownership of the units cannot be transferred. RSUs

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carry no cash dividend or voting rights, and the underlying shares are not considered issued and outstanding until when and if the RSUs vest. The cost of the awards, determined to be the fair market value of the RSUs on the date of grant, is expensed ratably over the period of vesting.

The following table summarizes the restricted stock award (restricted stock and restricted stock units) activity for the year ended December 31, 2007 (in thousands, except per share amounts):

Restricted Stock Units

FACE="Times New Roman" SIZE="2">Restricted stock units (RSUs) are rights to receive shares of common stock at a future date or over a vesting period. RSUs are granted at a price equal to the fair market value of the underlying common stock on the
date of grant, subject to forfeiture if employment terminates prior to vesting. Prior to vesting, ownership of the units cannot be transferred. RSUs

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carry no cash dividend or voting rights, and the underlying shares are not considered issued and outstanding until when and if the RSUs vest. The cost of the
awards, determined to be the fair market value of the RSUs on the date of grant, is expensed ratably over the period of vesting.

The
following table summarizes the restricted stock award (restricted stock and restricted stock units) activity for the year ended December 31, 2007 (in thousands, except per share amounts):