NEWPORT CORPORATION

COMPENSATION COMMITTEE CHARTER

(revised and adopted February 2004)

 I.   Organizational Matters

A.    Formation; Purpose.  The members of the Compensation Committee of the Board of Directors (the “Board”) of Newport Corporation (the “Company”) shall be appointed by the Board, and will serve at the discretion of the Board.  The Compensation Committee shall discharge the Board’s responsibilities relating to compensation of the Company's executive officers.  The Compensation Committee shall have overall responsibility for approving and evaluating the executive officer compensation plans, policies and programs of the Company.  In addition, the Compensation Committee shall have responsibility for supervising the administration of the Company’s stock incentive plans and programs.

B.    Membership Qualifications.

1.  The Compensation Committee shall be comprised of at least three (3) members of the Company’s Board of Directors.

2.   No member of the Compensation Committee shall have a relationship that may interfere with his independence from management and the Company or with the exercise of his duties as a committee member.

3.   Each member shall meet the independence standards of (a) Rule 4200(a)(15) of the Nasdaq Marketplace Rules (during such time as the Company’s Common Stock is quoted on the Nasdaq Stock Market), or of the exchange on which the Company’s securities are listed, (b) the non-employee director definition of Rule 16b-3 promulgated under Section 16 of the Securities Exchange Act of 1934, as amended, (c) the outside director definition of Section 162(m) of the Internal Revenue Code of 1986, as amended, and (d) any other law or regulation applicable to the Company.

C.    Powers of the Committee.

1. The Compensation Committee shall have the authority to retain consultants to advise the Committee.

2.  The Compensation Committee shall have the sole authority to retain and terminate any compensation consultant to be used by the Company to assist in the evaluation of the Chief Executive Officer and other executive officer compensation and shall have sole authority to approve the consultant’s fees and other retention terms.

3.  The Compensation Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditors to attend a meeting of the Compensation Committee or to meet with any members of, or consultants to, the Compensation Committee.

4.  The Compensation Committee may form and delegate authority to subcommittees when appropriate.

D.    Review of Charter.  The Compensation Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.

E.     Meetings.  The Compensation Committee shall hold at least two (2) regular meetings during each calendar year.

II.    Responsibilities

The following shall be the principal recurring processes of the Compensation Committee in carrying out its responsibilities.  The processes are set forth as a guide with the understanding that the Compensation Committee may supplement them as appropriate.

A.    Executive Compensation.

1.   Develop guidelines for and annually review and approve (a) the annual base salary, (b) the annual incentive bonus, including the specific goals and amount, and (c) equity compensation, for the Chief Executive Officer and the other executive officers of the Company.

2.  Review and approve (a) employment agreements, severance arrangements, and change in control agreements/provisions, and (b) any other benefits, compensation or arrangements, for the Chief Executive Officer and the other executive officers of the Company.

3.   Prepare an annual report regarding executive compensation for inclusion in the Company’s proxy statement pursuant to the rules and regulations of the Securities and Exchange Commission.

4.   In consultation with outside consultants, evaluate and recommend the form and amount of director compensation and make recommendations to the Board.

B.     Company Incentive and Benefit Plans.

1.   Provide independent oversight of and consult with Company management regarding the Company’s compensation, bonus, pension, and other benefit plans, policies and practices applicable to the Company’s executive management.

2.   Administer the Company’s stock incentive plans, employee stock purchase plans, and other similar incentive plans, and interpret and adopt rules for the operation thereof.

3.   Establish guidelines for and approve the granting of stock options to key employees, officers, directors and consultants of the Company, including determination of the number of shares to be covered by each option, whether the option will be an incentive stock option or a non-qualified stock option, and the vesting schedule for each option.


 

C.    General Responsibilities.

1.   Report to the Board on matters discussed at each Compensation Committee meeting.

2.   Investigate any matter brought to its attention within the scope of its duties.

3.   Annually evaluate its own performance.

4.   Perform other functions as requested by the Board.