Document:

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                                                                    Exhibit 10.3
Bank of America [LOGO]

                            BUSINESS LOAN AGREEMENT

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Borrower: Newport Corporation       Lender: Bank of America, N.A.
          1791 Deere Avenue                 CLSC-Commercial Banking (LA)
          Irvine, CA 92606                  CA9-703-11-11
                                            333 South Beaudry Avenue, 11th Floor
                                            Los Angeles, CA 90017-1486
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THIS BUSINESS LOAN AGREEMENT dated September 25, 2002, is made and executed
between Newport Corporation ("Borrower") and Bank of America, N.A. ("Lender") on
the following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans or other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement ("Loan"). Borrower understands and agrees
that: (A) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements as set forth in this
Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all
times shall be subject to Lender's sole judgment and discretion; and (C) all
such Loans shall be and remain subject to the terms and conditions of this
Agreement.

TERM. This Agreement shall be effective as of September 25, 2002, and shall
continue in full force and effect until such time as all of Borrower's Loans in
favor of Lender have been paid in full, including principal, interest, costs,
expenses, attorneys' fees, and other fees and charges, or until such time as the
parties may agree in writing to terminate this Agreement.

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender's satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.

     Loan Documents. Borrower shall provide to Lender the following documents
     for the Loan: (1) the Note; (2) Security Agreements granting to Lender
     security interests in the Collateral; (3) financing statements and all
     other documents perfecting Lender's Security Interests; (4) evidence of
     insurance as required below; (5) together with all such Related Documents
     as Lender may require for the Loan; all in form and substance satisfactory
     to Lender and Lender's counsel.

     Borrower's Authorization. Borrower shall have provided in form and
     substance satisfactory to Lender properly certified resolutions, duly
     authorizing the execution and delivery of this Agreement, the Note and the
     Related Documents. In addition, Borrower shall have provided such other
     resolutions, authorizations, documents and instruments as Lender or its
     counsel, may require.

     Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
     charges, and other expenses which are then due and payable as specified in
     this Agreement or any Related Document.

     Representations and Warranties. The representations and warranties set
     forth in this Agreement, in the Related Documents, and in any document or
     certificate delivered to Lender under this Agreement are true and correct.

     No Event of Default. There shall not exist at the time of any Advance a
     condition which would constitute an Event of Default under this Agreement
     or under any Related Document.

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:

     Organization. Borrower is a corporation for profit which is, and at all
     times shall be, duly organized, validly existing, and in good standing
     under and by virtue of the laws of the State of Nevada. Borrower is duly
     authorized to transact business in all other states in which Borrower is
     doing business, having obtained all necessary filings, governmental
     licenses and approvals for each state in which Borrower is doing business.
     Specifically, Borrower is, and at all times shall be, duly qualified as a
     foreign corporation in all states in which the failure to so qualify would
     have a material adverse effect on its business or financial condition.
     Borrower has the full power and authority to own its properties and to
     transact the business in which it is presently engaged or presently
     proposed to engage. Borrower maintains an office at 1791 Deere Avenue,
     Irvine, CA 92606. Unless Borrower has designated otherwise in writing, the
     principal office is the office at which Borrower keeps its books and
     records including its records concerning the Collateral. Borrower will
     notify Lender prior to any change in the location of Borrower's state of
     organization or any change in Borrower's name. Borrower shall do all things
     necessary to preserve and to keep in full force and effect its existence,
     rights and privileges, and shall comply with all regulations, rules,
     ordinances, statutes, orders and decrees of any governmental or
     quasi-governmental authority or court applicable to Borrower and Borrower's
     business activities.

     Assumed Business Names. Borrower has filed or recorded all documents or
     filings required by law relating to all assumed business names used by
     Borrower. Excluding the name of Borrower, the following is a complete list
     of all assumed business names under which Borrower does business: None.

     Authorization. Borrower's execution, delivery, and performance of this
     Agreement and all the Related Documents have been duly authorized by all
     necessary action by Borrower and do not conflict with, result in a
     violation of, or constitute a default under (1) any provision of Borrower's
     articles of incorporation or organization, or bylaws, or any agreement or
     other instrument binding upon Borrower or (2) any law, governmental
     regulation, court decree, or order applicable to Borrower or to Borrower's
     properties.

     Financial Information. Each of Borrower's financial statements supplied to
     Lender truly and completely disclosed Borrower's financial condition as of
     the date of the statement, and there has been no material adverse change in
     Borrower's financial condition subsequent to the date of the most recent
     financial statement supplied to Lender. Borrower has no material contingent
     obligations except as disclosed in such financial statements.

     Legal Effect. This Agreement constitutes, and any instrument or agreement
     Borrower is required to give under this Agreement when delivered will
     constitute legal, valid, and binding obligations of Borrower enforceable
     against Borrower in accordance with their respective terms.

     Properties. Except as contemplated by this Agreement or as previously
     disclosed in Borrower's financial statements or in writing to Lender and as
     accepted by Lender, and except for property tax liens for taxes not
     presently due and payable, Borrower owns and has good title to all of
     Borrower's properties free and clear of all Security Interests, and has not
     executed any security documents or financing statements relating to such
     properties. All of Borrower's properties are titled in Borrower's legal
     name, and Borrower has not used or filed a financing statement
     under any other name for at least the last five (5) years.

     Hazardous Substances. Except as disclosed to and acknowledged by Lender in
     writing, Borrower represents and warrants that: (1) During the period of
     Borrower's ownership of Borrower's Collateral, there has been no use,
     generation, manufacture, storage, treatment, disposal, release or
     threatened release of any Hazardous Substance by any person on, under,
     about or from any of the Collateral. (2) Borrower has no knowledge of,

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                            BUSINESS LOAN AGREEMENT
                                  (Continued)                             Page 2
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     or reason to believe that there has been (a) any breach or violation of any
     Environmental Laws; (b) any use, generation, manufacture, storage,
     treatment, disposal, release or threatened release of any Hazardous
     Substance on, under, about or from the Collateral by any prior owners or
     occupants of any of the Collateral; or (c) any actual or threatened
     litigation or claims of any kind by any person relating to such matters.
     (3) Neither Borrower nor any tenant, contractor, agent or other authorized
     user of any of the Collateral shall use, generate, manufacture, store,
     treat, dispose of or release any Hazardous Substance on, under, about or
     from any of the Collateral; and any such activity should be conducted in
     compliance with all applicable federal, state, and local laws, regulations,
     and ordinances, including without limitation all Environmental Laws.
     Borrower authorizes Lender and its agents to enter upon the Collateral to
     make such inspections and tests as Lender may deem appropriate to determine
     compliance of the Collateral with this section of the Agreement. Any
     inspections or tests made by Lender shall be at Borrower's expense and for
     Lender's purposes only and shall not be construed to create any
     responsibility or liability on the part of Lender to Borrower or to any
     other person. The representations and warranties contained herein are based
     on Borrower's due diligence in investigating the Collateral for hazardous
     waste and Hazardous Substances. Borrower hereby (1) releases and waives any
     future claims against Lender for indemnity or contribution in the event
     Borrower becomes liable for cleanup or other costs under any such laws, and
     (2) agrees to indemnify and hold harmless Lender against any and all
     claims, losses, liabilities, damages, penalties, and expenses which Lender
     may directly or indirectly sustain or suffer resulting from a breach of
     this section of the Agreement or a consequence of any use, generation,
     manufacture, storage, disposal, release or threatened release of a
     hazardous waste or substance on the Collateral. The provisions of this
     section of the Agreement, including the obligation to indemnify, shall
     survive the payment of the Indebtedness and the termination, expiration or
     satisfaction of this Agreement and shall not be affected by Lender's
     acquisition of any interest in any of the Collateral, whether by
     foreclosure or otherwise.

     Litigation and Claims. No litigation, claim, investigation, administrative
     proceeding or similar action (including those for unpaid taxes) against
     Borrower is pending or threatened, and no other event has occurred which
     may materially adversely affect Borrower's financial condition or
     properties, other than litigation, claims, or other events, if any, that
     have been disclosed to and acknowledged by Lender in writing.

     Taxes. To the best of Borrower's knowledge, all of Borrower's tax returns
     and reports that are or were required to be filed, have been filed, and
     all taxes, assessments and other governmental charges have been paid in
     full, except those presently being or to be contested by Borrower in good
     faith in the ordinary course of business and for which adequate reserves
     have been provided.

     Lien Priority. Unless otherwise previously disclosed to Lender in writing,
     Borrower has not entered into or granted any Security Agreements, or
     permitted the filing or attachment of any Security Interests on or
     affecting any of the Collateral directly or indirectly securing repayment
     of Borrower's Loan and Note, that would be prior or that may in any way be
     superior to Lender's Security Interests and rights in and to such
     Collateral.

     Binding Effect. This Agreement, the Note, all Security Agreements (if
     any), and all Related Documents are binding upon the signers thereof, as
     well as upon their successors, representatives and assigns, and are legally
     enforceable in accordance with their respective terms.

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:

     Notices of Claims and Litigation. Promptly inform Lender in writing of (1)
     all material adverse changes in Borrower's financial condition, and (2) all
     existing and all threatened litigation, claims, investigations,
     administrative proceedings or similar actions affecting Borrower or any
     Guarantor which could materially affect the financial condition of Borrower
     or the financial condition of any Guarantor.

     Financial Records. Maintain its books and records in accordance with GAAP,
     applied on a consistent basis, and permit Lender to examine and audit
     Borrower's books and records at all reasonable times.

     Financial Statements. Furnish Lender with the following:

          Annual Statements. As soon as available, but in no event later than
          one-hundred-twenty (120) days after the end of each fiscal year,
          Borrower's balance sheet and income statement for the year ended,
          audited by a certified public accountant satisfactory to Lender.

          Interim Statements. As soon as available, but in no event later than
          45 days after the end of each fiscal quarter, Borrower's balance sheet
          and profit and loss statement for the period ended, prepared by
          Borrower.

          Additional Requirements.

          Compliance Certificates-Revised Schedule. In lieu of the provisions
          of the Affirmative Covenant paragraph entitled "Compliance
          Certificates", the following provision in substituted to replace it in
          its entirety:

          Compliance certificates are not required.

     All financial reports required to be provided under this Agreement shall be
     prepared in accordance with GAAP, applied on a consistent basis, and
     certified by Borrower as being true and correct.

     Additional Information. Furnish such additional information and statements,
     as Lender may request from time to time.

     Insurance. Maintain fire and other risk insurance, public liability
     insurance, and such other insurance as Lender may require with respect to
     Borrower's properties and operations, in form, amounts, coverages and with
     insurance companies acceptable to Lender. Borrower, upon request of Lender,
     will deliver to Lender from time to time the policies or certificates of
     insurance in form satisfactory to Lender, including stipulations that
     coverages will not be cancelled or diminished without at least thirty (30)
     days prior written notice to Lender. Each insurance policy also shall
     include an endorsement providing that coverage in favor of Lender will not
     be impaired in any way by any act, omission or default of Borrower or any
     other person. In connection with all policies covering assets in which
     Lender holds or is offered a security interest for the Loans, Borrower
     will provide Lender with such lender's loss payable or other endorsements
     as Lender may require.

     Insurance Reports. Furnish to Lender, upon request of Lender, reports on
     each existing insurance policy showing such information as Lender may
     reasonably request, including without limitation the following: (1) the
     name of the insurer; (2) the risks insured; (3) the amount of the policy;
     (4) the properties insured; (5) the then current property values on the
     basis of which insurance has been obtained; and the manner of determining
     those values; and (6) the expiration date of the policy. In addition, upon
     request of Lender (however not more often than annually), Borrower will
     have an independent appraiser satisfactory to Lender determine, as
     applicable, the actual cash value or replacement cost of any Collateral.
     The cost of such appraisal shall be paid by Borrower.

     Other Agreements. Comply with all terms and conditions of all other
     agreements, whether now or hereafter existing, between Borrower and any
     other party and notify Lender immediately in writing of any default in
     connection with any other such agreements.

     Loan Proceeds. Use all Loan proceeds solely for Borrower's business
     operations, unless specifically consented to the contrary by Lender in
     writing.

     Taxes, Charges and Liens. Pay and discharge when due all of its
     indebtedness and obligations, including without limitation all assessments,
     taxes, governmental charges, levies and liens, of every kind and nature,
     imposed upon Borrower or its properties, income, or profits, prior to the
     date on which penalties would attach, and all lawful claims that, if
     unpaid, might become a lien or charge upon any of Borrower's properties,
     income, or profits.

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                            BUSINESS LOAN AGREEMENT
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     Performance. Perform and comply, in a timely manner, with all terms,
     conditions, and provisions set forth in this Agreement, in the Related
     Documents, and in all other instruments and agreements between Borrower and
     Lender. Borrower shall notify Lender immediately in writing of any default
     in connection with any agreement.

     Operations. Maintain executive and management personnel with substantially
     the same qualifications and experience as the present executive and
     management personnel; provide written notice to Lender of any change in
     executive and management personnel; conduct its business affairs in a
     reasonable and prudent manner.

     Environmental Studies. Promptly conduct and complete, at Borrower's
     expense, all such investigations, studies, samplings and testings as may be
     requested by Lender or any governmental authority relative to any
     substance, or any waste or by-product of any substance defined as toxic or
     a hazardous substance under applicable federal, state, or local law, rule,
     regulation, order or directive, at or affecting any property or any
     facility owned, leased or used by Borrower.

     Compliance with Governmental Requirements. Comply with all laws,
     ordinances, and regulations, now or hereafter in effect, of all
     governmental authorities applicable to the conduct of Borrower's
     properties, businesses and operations, and to the use or occupancy of the
     Collateral, including without limitation, the Americans With Disabilities
     Act. Borrower may contest in good faith any such law, ordinance, or
     regulation and withhold compliance during any proceeding, including
     appropriate appeals, so long as Borrower has notified Lender in writing
     prior to doing so and so long as, in Lender's sole opinion, Lender's
     interests in the Collateral are not jeopardized. Lender may require
     Borrower to post adequate security or a surety bond, reasonably
     satisfactory to Lender, to protect Lender's interest.

     Inspection. Permit employees or agents of Lender at any reasonable time to
     inspect any and all Collateral for the Loan or Loans and Borrower's other
     properties and to examine or audit Borrower's books, accounts, and records
     and to make copies and memoranda of Borrower's books, accounts, and
     records. If Borrower now or at any time hereafter maintains any records
     (including without limitation computer generated records and computer
     software programs for the generation of such records) in the possession of
     a third party, Borrower, upon request of Lender, shall notify such party to
     permit Lender free access to such records at all reasonable times and to
     provide Lender with copies of any records it may request, all at Borrower's
     expense.

     Compliance Certificates. Unless waived in writing by Lender, provide Lender
     at least annually, with a certificate executed by Borrower's chief
     financial officer, or other officer or person acceptable to Lender,
     certifying that the representations and warranties set forth in this
     Agreement are true and correct as of the date of the Certificate and
     further certifying that, as of the date of the certificate, no Event of
     Default exists under this Agreement.

     Environmental Compliance and Reports. Borrower shall comply in all respects
     with any and all Environmental Laws; not cause or permit to exist, as a
     result of an intentional or unintentional action or omission on Borrower's
     part or on the part of any third party, on property owned and/or occupied
     by Borrower, any environmental activity where damage may result to the
     environment, unless such environmental activity is pursuant to and in
     compliance with the conditions of a permit issued by the appropriate
     federal, state or local governmental authorities; shall furnish to Lender
     promptly and in any event within thirty (30) days after receipt thereof a
     copy of any notice, summons, lien, citation, directive, letter or other
     communication from any governmental agency or instrumentality concerning
     any intentional or unintentional action or omission on Borrower's part in
     connection with any environmental activity whether or not there is damage
     to the environment and/or other natural resources.

     Additional Assurances. Make, execute and deliver to Lender such promissory
     notes, mortgages, deeds of trust, security agreements, assignments,
     financing statements, instruments, documents and other agreements as Lender
     or its attorneys may reasonably request to evidence and secure the Loans
     and to perfect all Security Interests.

RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except federal, state or local income or franchise taxes
imposed on Lender), reserve requirements, capital adequacy requirements or other
obligations which would (A) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (B) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(C) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower's failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Borrower. All such expenses will become a
part of the Indebtedness and, at Lender's option, will (A) be payable in demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity.

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:

     Indebtedness and Liens. (1) Except for trade debt incurred in the normal
     course of business and indebtedness to Lender contemplated by this
     Agreement, create, incur or assume indebtedness for borrowed money,
     including capital leases, (2) sell, transfer, mortgage, assign, pledge,
     lease, grant a security interest in, or encumber any of Borrower's assets
     (except as allowed as Permitted Liens), or (3) sell with recourse any of
     Borrower's accounts, except to Lender.

     Continuity of Operations. (1) Engage in any business activities
     substantially different than those in which Borrower is presently engaged,
     (2) cease operations, liquidate, merge, transfer, acquire or consolidate
     with any other entity, change its name, dissolve or transfer or sell
     Collateral out of the ordinary course of business, or (3) pay any dividends
     on Borrower's stock (other than dividends payable in its stock), provided,
     however that notwithstanding the foregoing, but only so long as no Event of
     Default has occurred and is continuing or would result from the payment of
     dividends, if Borrower is a "Subchapter S Corporation" (as defined in the
     Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends
     on its stock to its shareholders from time to time in amounts necessary to
     enable the shareholders to pay income taxes and make estimated income tax
     payments to satisfy their liabilities under federal and state law which
     arise solely from their status as Shareholders of a Subchapter S
     Corporation because of their ownership of shares of Borrower's stock, or
     purchase or retire any of Borrower's outstanding shares or alter or amend
     Borrower's capital structure.

     Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or
     assets, (2) purchase, create or acquire any interest in any other
     enterprise or entity, or (3) incur any obligation as surety or guarantor
     other than in the ordinary course of business.

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                            BUSINESS LOAN AGREEMENT
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    CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
    Borrower, whether under this Agreement or under any other agreement, Lender
    shall have no obligation to make Loan Advances or to disburse Loan proceeds
    if: (A) Borrower or any Guarantor is in default under the terms of this
    Agreement or any of the Related Documents or any other agreement that
    Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor
    dies, becomes incompetent or becomes insolvent, files a petition in
    bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there
    occurs a material adverse change in Borrower's financial condition, in the
    financial condition of any Guarantor, or in the value of any Collateral
    securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts
    to limit, modify or revoke such Guarantor's guaranty of the Loan or any
    other loan with Lender.

    RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves
    a right of setoff in all Borrower's accounts with Lender (whether checking,
    savings, or some other account). This includes all accounts Borrower holds
    jointly with someone else and all accounts Borrower may open in the future.
    However, this does not include an IRA or Keogh accounts, or any trust
    accounts for which setoff would be prohibited by law. Borrower authorizes
    Lender, to the extent permitted by applicable law, to charge or setoff all
    sums owing on the Indebtedness against any all such accounts.

    DEFAULT. Each of the following shall constitute an Event of Default under
    this Agreement:

         Payment Default. Borrower fails to make any payment when due under the
         Loan.

         Other Defaults. Borrower fails to comply with or to perform any other
         term, obligation, covenant or condition contained in this Agreement or
         in any of the Related Documents or to comply with or to perform any
         term, obligation, covenant or condition contained in any other
         agreement between Lender and Borrower.

         Default in Favor of Third Parties. Borrower or any Grantor defaults
         under any loan, extension of credit, security agreement, purchase or
         sales agreement, or any other agreement, in favor of any other creditor
         or person that may materially affect any of Borrower's or any
         Grantor's property or Borrower's or any Grantor's ability to repay the
         Loans or perform their respective obligations under this Agreement or
         any of the Related Documents.

         False Statements. Any warranty, representation or statement made or
         furnished to Lender by Borrower or on Borrower's behalf under this
         Agreement or the Related Documents is false or misleading in any
         material respect, either now or at the time made or furnished or
         becomes false or misleading at any time thereafter.

         Insolvency. The dissolution or termination of Borrower's existence as a
         going business, the insolvency of Borrower, the appointment of a
         receiver for any part of Borrower's property, any assignment for the
         benefit of creditors, any type of creditor workout, or the commencement
         of any proceeding under any bankruptcy or insolvency laws by or against
         Borrower.

         Defective Collateralization. This Agreement or any of the Related
         Documents ceases to be in full force and effect (including failure of
         any collateral document to create a valid and perfected security
         interest or lien) at any time for any reason.

         Creditor or Forfeiture Proceedings. Commencement of foreclosure or
         forfeiture proceedings, whether by judicial proceeding, self-help,
         repossession or any other method, by any creditor of Borrower or by any
         governmental agency against any collateral securing the Loan. This
         includes a garnishment of any of Borrower's accounts, including deposit
         accounts, with Lender. However, this Event of Default shall not apply
         if there is a good faith dispute by Borrower as to the validity or
         reasonableness of the claim which is the basis of the creditor or
         forfeiture proceeding and if Borrower gives Lender written notice of
         the creditor or forfeiture proceeding and deposits with Lender monies
         or a surety bond for the creditor or forfeiture proceeding, in an
         amount determined by Lender, in its sole discretion, as being an
         adequate reserve or bond for the dispute.

         Events Affecting Guarantor. Any of the preceding events occurs with
         respect to any Guarantor of any of the Indebtedness or any Guarantor
         dies or becomes incompetent, or revokes or disputes the validity of, or
         liability under, any Guaranty of the Indebtedness.

         Change in Ownership. Any change in ownership of twenty-five percent
         (25%) or more of the common stock of Borrower.

         Adverse Change. A material adverse change occurs in Borrower's
         financial condition, or Lender believes the prospect of payment or
         performance of the Loan is impaired.

    EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
    where otherwise provided in this Agreement or the Related Documents, all
    commitments and obligations of Lender under this Agreement or the Related
    Documents or any other agreement immediately will terminate (including any
    obligation to make further Loan Advances or disbursements), and, at Lender's
    option, all Indebtedness immediately will become due and payable, all
    without notice of any kind to Borrower, except that in the case of an Event
    of Default of the type described in the "Insolvency" subsection above, such
    acceleration shall be automatic and not optional. In addition, Lender shall
    have all the rights and remedies provided in the Related Documents or
    available at law, in equity, or otherwise. Except as may be prohibited by
    applicable law, all of Lender's rights and remedies shall be cumulative and
    may be exercised singularly or concurrently. Election by Lender to pursue
    any remedy shall not exclude pursuit of any other remedy, and an election to
    make expenditures or to take action to perform an obligation of Borrower or
    of any Grantor shall not affect Lender's right to declare a default and to
    exercise its rights and remedies.

    ARBITRATION. (a) This paragraph concerns the resolution of any controversies
    or claims between the parties, whether arising in contract, tort or by
    statute, including but not limited to controversies or claims that arise out
    of or relate to: (i) this agreement (including any renewals, extensions or
    modifications); or (ii) any document related to this agreement;
    (collectively a "Claim").

    (b) At the request of any party to this agreement, any Claim shall be
    resolved by binding arbitration in accordance with the Federal Arbitration
    Act (Title 9, U.S. Code) (the "Act"). The Act will apply even though this
    agreement provides that it is governed by the law of a specified state.

    (c) Arbitration proceedings will be determined in accordance with the Act,
    the applicable rules and procedures for the arbitration of disputes of JAMS
    or any successor thereof ("JAMS"), and the terms of this paragraph. In the
    event of any inconsistency, the terms of this paragraph shall control.

    (d) The arbitration shall be administered by JAMS and conducted, unless
    otherwise required by law, in any U. S. state where real or tangible
    personal property collateral for this credit is located or if there is no
    such collateral, in the state specified in the governing law section of this
    agreement. All Claims shall be determined by one arbitrator; however, if
    Claims exceed $5,000,000, upon the request of any party, the Claims shall be
    decided by three arbitrators. All arbitration hearings shall commence within
    90 days of the demand for arbitration and close within 90 days of
    commencement and the award of the arbitrator(s) shall be issued within 30
    days of the close of the hearing. However, the arbitrator(s), upon a showing
    of good cause, may extend the commencement of the hearing for up to an
    addition 60 days. The arbitrator(s) shall provide a concise written
    statement of reasons for the award. The arbitration award may be submitted
    to any court having jurisdiction to be confirmed and enforced.

    (e) The arbitrator(s) will have the authority to decide whether any Claim is
    barred by the statute of limitations and, if so, to dismiss the arbitration
    on that basis. For purposes of the application of the statute of
    limitations, the service on JAMS under applicable JAMS rules of a notice of
    Claim is the equivalent of the filing of a lawsuit. Any dispute concerning
    this arbitration provision or whether a Claim is arbitratable shall be
    determined by the arbitrator(s). The arbitrator(s) shall have the power to
    award legal fees pursuant to the terms of this agreement.

    (f) This paragraph does not limit the right of any party to: (i) exercise
    self-help remedies, such as but not limited to, setoff; (ii) initiate
    judicial or

<PAGE>

                            BUSINESS LOAN AGREEMENT
                                  (Continued)                             Page 5
================================================================================

     nonjudicial foreclosure against any real or personal property collateral;
     (iii) exercise any judicial or power of sale rights, or (iv) act in a court
     of law to obtain an interim remedy, such as but not limited to, injunctive
     relief, writ of possession or appointment of a receiver, or additional or
     supplementary remedies.

     (g) The filing of a court action is not intended to constitute a waiver of
     the right of any party, including the suing party, thereafter to require
     submittal of the Claim to arbitration.

     (h) all obligations, debts and liabilities, including any swap, option or
     forward obligations, plus interest thereon, of Borrower to Lender, or any
     one or more of them, as well as all claims by Lender against Borrower or
     any other party to this Agreement or any one or more of them, whether now
     existing or hereafter arising, whether related or unrelated to the purpose
     of the Note, whether voluntary or otherwise, whether due or not due, direct
     or indirect, absolute or contingent, liquidated or unliquidated and whether
     Borrower or any other party to this Agreement may be liable individually or
     jointly with others, whether obligated as guarantor, surety, accommodation
     party or otherwise, and whether recovery upon such amounts may be or
     hereafter may become barred by any statute of limitations, and whether the
     obligation to repay such amounts may be or hereafter may become otherwise
     unenforceable. Unless the Borrower and any other party to this Agreement
     shall have otherwise agreed in writing or received written notice thereof,
     this Agreement shall not secure any obligation owing to Lender which
     constitutes "consumer credit" subject to the disclosure requirements of the
     Federal Truth in Lending Act and any regulations promulgated thereunder.

     ADDITIONAL DEFAULTS. Each of the following shall constitute an event of
     default ("Event of Default") under this Agreement:

     Event of Default Under Related Documents. A default or event of default
     occurs under the terms of any Related Document executed by Borrower or any
     guarantor, pledgor, accommodation party or other obligor.

     Revocation of Termination of Trust. If any Borrower, grantor, guarantor,
     pledgor, accommodation party or other obligor on the indebtedness secured
     hereunder or any of the related documents is a trust or the trustee(s) of a
     trust, such trust is revoked or otherwise terminated or all or a
     substantial part of such trust's assets are distributed or otherwise
     disposed of, or in the case of a revocable trust, the grantor of such trust
     dies.

     Default by Affiliates. Any affiliate of Borrower default under any loan,
     extension or credit, security agreement, purchase or sales agreement, or
     any other agreement, in favor of Lender or any other creditor.

     COUNTERPART SIGNATURES. This Agreement may be executed in any number of
     counterparts, each of which when so executed shall be deemed to be an
     original and all of which taken together shall constitute one and the same
     agreement.

     ADDRESS FOR NOTICES. Notwithstanding anything to the contrary herein, all
     notices and communications to the Lender shall be directed to the following
     address:

                Bank of America, N.A.
                Los Angeles CLSC, Attn: Notice Desk
                333 South Beaudry Avenue, 11th Floor
                Los Angeles, CA 90017-1486.

     EXHIBIT TO BUSINESS LOAN AGREEMENT. An exhibit, titled "EXHIBIT TO BUSINESS
     LOAN AGREEMENT," is attached to this Agreement and by this reference is
     made a part of this Agreement just as if all the provisions, terms and
     conditions of the Exhibit had been fully set forth in this Agreement.

     MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
     of this Agreement:

          Amendments. This Agreement, together with any Related Documents,
          constitutes the entire understanding and agreement of the parties as
          to the matters set forth in this Agreement. No alteration of or
          amendment to this Agreement shall be effective unless given in writing
          and signed by the party or parties sought to be charged or bound by
          the alteration or amendment.

          Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of
          Lender's costs and expenses, including Lender's attorneys' fees and
          Lender's legal expenses, incurred in connection with the enforcement
          of this Agreement. Lender may hire or pay someone else to help enforce
          this Agreement, and Borrower shall pay the costs and expenses of such
          enforcement. Costs and expenses include Lender's attorneys' fees and
          legal expenses whether or not there is a lawsuit, including attorney's
          fees and legal expenses for bankruptcy proceedings (including efforts
          to modify or vacate any automatic stay or injunction), appeals, and
          any anticipated post-judgement collection services. Borrower also
          shall pay all court costs and such additional fees as may be directed
          by the court.

          Caption Headings. Caption headings in this Agreement are for
          convenience purposes only and are not to be used to interpret or
          define the provisions of this Agreement.

          Consent to Loan Participation. Borrower agrees and consents to
          Lender's sale or transfer, whether now or later, of one or more
          participation interests in the Loan to one or more purchasers, whether
          related or unrelated to Lender. Lender may provide, without any
          limitation whatsoever, to any one or more purchasers, or potential
          purchasers any information or knowledge Lender may have about Borrower
          or about any other matter relating to the Loan, and Borrower hereby
          waives any rights to privacy Borrower may have with respect to such
          matters. Borrower additionally waives any and all notices of sale of
          participation interests, as well as all notice of any repurchase of
          such participation interests. Borrower also agrees that the purchasers
          of any such participation interests will be considered as the absolute
          owners of such interests in the Loan and will have all the rights
          granted under the participation agreement or agreements governing the
          sale of such participation interests. Borrower further waives all
          rights of offset or counterclaim that it may have now or later
          against Lender or against any purchaser of such a participation
          interest and unconditionally agrees that either Lender or such
          purchaser may enforce Borrower's obligation under the Loan
          irrespective of the failure or insolvency of any holder of any
          interest in the Loan. Borrower further agrees that the purchaser of
          any such participation interests may enforce its interests
          irrespective of any personal claims or defenses that Borrower may have
          against Lender.

          Governing Law. This Agreement will be governed by, construed and
          enforced in accordance with federal law and the laws of the State of
          California. This Agreement has been accepted by Lender in the State of
          California.

          Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender's
          request to submit to the jurisdiction of the courts of any County,
          State of California.

          No Waiver by Lender. Lender shall not be deemed to have waived any
          rights under this Agreement unless such waiver is given in writing and
          signed by Lender. No delay or omission on the part of Lender in
          exercising any right shall operate as a waiver of such right or any
          other right. A waiver by Lender of a provision of this Agreement shall
          not prejudice or constitute a waiver of Lender's right otherwise to
          demand strict compliance with that provision or any other provision of
          this Agreement. No prior waiver by Lender, nor any course of dealing
          between Lender and Borrower, or between Lender and any Grantor, shall
          constitute a waiver of any of Lender's rights or of any of Borrower's
          or any Grantor's obligations as to any future transactions. Whenever
          the consent of Lender is required under this Agreement, the granting
          of such consent by Lender in any instance shall not constitute
          continuing consent to subsequent instances where such consent is
          required and in all cases such consent may be granted or withheld in
          the sole discretion of Lender.

          Notices. Any notice required to be given under this Agreement shall be
          given in writing, and shall be effective when actually delivered, when
          actually received by telefacsimile (unless otherwise required by law),
          when deposited with a nationally recognized overnight courier, or, if
          mailed,

<PAGE>

                            BUSINESS LOAN AGREEMENT
                                  (Continued)                             Page 6
================================================================================

     when deposited in the United States mail, as first class, certified or
     registered mail postage prepaid, directed to the addresses shown near the
     beginning of this Agreement. Any party may change its address for notices
     under this Agreement by giving formal written notice to the other parties,
     specifying that the purposes of the notice is to change the party's
     address. For notice purposes, Borrower agrees to keep Lender informed at
     all times of Borrower's current address. Unless otherwise provided or
     required by law, if there is more than one Borrower, any notice given by
     Lender to any Borrower is deemed to be notice given to all Borrowers.

     Severability. If a court of competent jurisdiction finds any provision of
     this Agreement to be illegal, invalid, or unenforceable as to any
     circumstance, that finding shall not make the offending provision illegal,
     invalid, or unenforceable as to any other circumstance. If feasible, the
     offending provision shall be considered modified so that it becomes legal,
     valid and enforceable. If the offending provision cannot be so modified, it
     shall be considered deleted from this Agreement. Unless otherwise required
     by law, the illegality, invalidity, or unenforceability of any provision of
     this Agreement shall not affect the legality, validity or enforceability of
     any other provision of this Agreement.

     Subsidiaries and Affiliates of Borrower. To the extent the context of any
     provisions of this Agreement makes it appropriate, including without
     limitation any representation, warranty or covenant, the word "Borrower" as
     used in this Agreement shall include all of Borrower's subsidiaries and
     affiliates. Notwithstanding the foregoing however, under no circumstances
     shall this Agreement be construed to require Lender to make any Loan or
     other financial accommodation to any of Borrower's subsidiaries or
     affiliates.

     Successors and Assigns. All covenants and agreements contained by or on
     behalf of Borrower shall bind Borrower's successors and assigns and shall
     inure to the benefit of Lender and its successors and assigns. Borrower
     shall not, however, have the right to assign Borrower's rights under this
     Agreement or any interest therein, without the prior written consent of
     Lender.

     Survival of Representations and Warranties. Borrower understands and agrees
     that in extending Loan Advances, Lender is relying on all representations,
     warranties, and covenants made by Borrower in this Agreement or in any
     certificate or other instrument delivered by Borrower to Lender under this
     Agreement or the Related Documents. Borrower further agrees that regardless
     of any investigation made by Lender, all such representations, warranties
     and covenants will survive the extension of Loan Advances and delivery to
     Lender of the Related Documents, shall be continuing in nature, shall be
     deemed made and redated by Borrower at the time each Loan Advance is made,
     and shall remain in full force and effect until such time as Borrower's
     Indebtedness shall be paid in full, or until this Agreement shall be
     terminated in the manner provided above, whichever is the last to occur.

     Time is of the Essence. Time is of the essence in the performance of this
     Agreement.

     Waive Jury. All parties to this Agreement hereby waive the right to any
     jury trial in any action, proceeding, or counterclaim brought by any party
     against any other party.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specificially stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:

     Advance. The word "Advance" means a disbursement of Loan funds made, or to
     be made, to Borrower or on Borrower's behalf on a line of credit or
     multiple advance basis under the terms and conditions of this Agreement.

     Agreement. The word "Agreement" means the Business Loan Agreement, as this
     Business Loan Agreement may be amended or modified from time to time,
     together with all exhibits and schedules attached to this Business Loan
     Agreement from time to time.

     Borrower. The word "Borrower" means Newport Corporation, and all other
     persons and entities signing the Note in whatever capacity.

     Collateral. The word "Collateral" means all property and assets granted as
     collateral security for a Loan, whether real or personal property, whether
     granted directly or indirectly, whether granted now or in the future, and
     whether granted in the form of a security interest, mortgage, collateral
     mortgage, deed or trust, assignment, pledge, crop pledge, chattel mortgage,
     collateral chattel mortgage, chattel trust, factor's lien, equipment trust,
     conditional sale, trust receipt, lien, charge, lien or title retention
     contract, lease or consignment intended as a security device, or any other
     security or lien interest whatsoever, whether created by law, contract, or
     otherwise.

     Environmental Laws. The words "Environmental Laws" mean any and all state,
     federal and local statutes, regulations and ordinances relating to the
     protection of human health or the environment, including without limitation
     the Comprehensive Environmental Response, Compensation, and Liability Act
     of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the
     Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
     ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section
     1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
     Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the
     California Health and Safety Code, Section 25100, et seq., or other
     applicable state or federal laws, rules, or regulations adopted pursuant
     thereto.

     Event of Default. The words "Event of Default" mean any of the events of
     default set forth in this Agreement in the default section of this
     Agreement.

     GAAP. The word "GAAP" means generally accepted accounting principles.

     Grantor. The word "Grantor" means each and all of the persons or entities
     granting a Security Interest in any Collateral for the Loan, including
     without limitation all Borrowers granting such a Security Interest.

     Guarantor. The word "Guarantor" means any guarantor, surety, or
     accomodation party of any or all of the Loan.

     Guaranty. The word "Guaranty" means the guaranty from Guarantor to Lender,
     including without limitation a guaranty of all or part of the Note.

     Hazardous Substances. The words "Hazardous Substances" mean materials that,
     because of their quantity, concentration or physical, chemical or
     infectious characteristics, may cause or pose a present or potential
     hazard to human health or the environment when improperly used, treated,
     stored, disposed of, generated, manufactured, transported or otherwise
     handled. The words "Hazardous Substances" are used in their very
     broadest sense and include without limitation any and all hazardous or
     toxic substances, materials or waste as defined by or listed under the
     Environmental Laws. The term "Hazardous Substances" also includes, without
     limitation, petroleum and petroleum by-products or any fraction thereof and
     asbestos.

     Indebtedness. The word "Indebtedness" means the indebtedness evidenced by
     the Note or Related Documents, including all principal and interest
     together with all other indebtedness an costs and expenses for which
     Borrower or Grantor or any other borrower, guarantor, pledgor, obligor or
     accommodation party is responsible under this Agreement or under any of the
     Related Documents, including any swap, option or forward obligations.

     Lender. The word "Lender" means Bank of America, N.A., its successors and
     assigns.

     Loan. The word "Loan" means any and all loans and financial accommodations
     from Lender to Borrower whether now or hereafter existing and

<PAGE>

                             BUSINESS LOAN AGREEMENT
                                  (Continued)                             Page 7
================================================================================

     however evidenced, including without limitation those loans and financial
     accommodations described herein or described on any exhibit or schedule
     attached to this Agreement from time to time.

     Note. The word "Note" means (i) the Note executed by Borrower in the
     principal amount of $5,000,000 dated September 25, 2002, (ii) any other
     promissory note, credit agreement or letter of credit agreement now or
     hereafter executed by Borrower in favor of Lender with respect to the
     Indebtedness, including without limitation those promissory notes, credit
     agreements and letter of credit agreements described on any schedule or
     exhibit attached to this Agreement from time to time, and (iii) any
     renewals of, extensions of, modifications of, refinancings of,
     consolidations of, and substitutions for any of the foregoing.

     Permitted Liens. The words "Permitted Liens" mean (1) liens and security
     interests securing Indebtedness owed by Borrower to Lender; (2) liens for
     taxes, assessments, or similar charges either not yet due or being
     contested in good faith; (3) liens of materialmen, mechanics, warehousemen,
     or carriers, or other like liens arising in the ordinary course of business
     and securing obligations which are not yet delinquent; (4) purchase money
     liens or purchase money security interests upon or in any property acquired
     or held by Borrower in the ordinary course of business to secure
     indebtedness outstanding on the date of this Agreement or permitted to be
     incurred under the paragraph of this Agreement titled "Indebtedness and
     Liens"; (5) liens and security interests which, as of the date of this
     Agreement, have been disclosed to and approved by the Lender in writing;
     and (6) those liens and security interests which in the aggregate
     constitute an immaterial and insignificant monetary amount with respect to
     the net value of Borrower's assets.

     Related Documents. The words "Related Documents" mean all promissory notes,
     credit agreements, loan agreements, environmental agreements, guaranties,
     security agreements, mortgages, deeds of trust, security deeds, collateral
     mortgages, and all other instruments, agreements and documents, whether now
     or hereafter existing, executed in connection with the Loan.

     Security Agreement. The words "Security Agreement" mean and include without
     limitation any agreements, promises, covenants, arrangements,
     understandings or other agreements, whether created by law, contract, or
     otherwise, evidencing, governing, representing, or creating a Security
     Interest.

     Security Interest. The words "Security Interest" mean, without limitation,
     any and all types of collateral security, present and future, whether in
     the form of a lien, charge, encumbrance, mortgage, deed of trust, security
     deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel
     mortgage, chattel trust, factor's lien, equipment trust, conditional sale,
     trust receipt, lien or title retention contract, lease or consignment
     intended as a security device, or any other security or lien interest
     whatsoever whether created by law, contract, or otherwise.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS
DATED SEPTEMBER 25, 2002.

BORROWER:

NEWPORT CORPORATION

By: /s/ William R. Abbott                  By: /s/ Jeffrey B. Coyne
   ---------------------------------      -----------------------------------
   William R. Abbott, VP of Finance       Jeffrey B. Coyne, VP & General Counsel
   & Treasurer of Newport Corporation     of Newport Corporation

LENDER:

BANK OF AMERICA, N.A.

By: /s/ C K Goodfellow
   ---------------------------------
   Authorized Signer

<PAGE>

                       EXHIBIT TO BUSINESS LOAN AGREEMENT

================================================================================

   Borrower: Newport Corporation    Lender: Bank of America, N.A.
             1791 Deere Avenue              CLSC-Commercial Banking (LA)
             Irvine, CA 92606               CA9-703-11-11
                                            333 South Beaudry Avenue, 11th Floor
                                            Los Angeles, CA 90017-1486

================================================================================

  This EXHIBIT TO BUSINESS LOAN AGREEMENT is attached to and by this reference
  is made a part of the Business Loan Agreement, dated September 25, 2002, and
  executed in connection with a loan or other financial accommodations between
  BANK OF AMERICA, N.A. and Newport Corporation.

  This schedule summarizes the loans and other financial accommodations that are
  subject to this Loan Agreement. Reference is made to the applicable Note(s)
  and Related Documents for a full description of the terms and conditions of
  each Loan. Except with respect to the credit facilities specifically listed
  below, this Loan Agreement does not supersede the requirements of any other
  loan agreement or credit agreement between Lender and Borrower.

  1.1   Revolving Line of Credit Facility.

  (a)   Note Description.

  (i)   Date: September 25, 2002.

  (ii)  Original Principal Amount: Five Million Dollars ($5,000,000).

  (b)   Revolving Line of Credit Amount. During the availability period
  described below, Lender will provide a line of credit as described in the
  Note. The amount of the line of credit (the "Commitment") is Five Million
  Dollars ($5,000,000).

  This is a revolving line of credit providing for cash advances and letters of
  credit. During the availability period, Borrower may repay principal amounts
  and reborrow them.

  Borrower agrees not to permit the outstanding principal balance of cash
  advances under the line of credit plus the outstanding amounts of any letters
  of credit, including amounts drawn on letters of credit and not yet
  reimbursed, to exceed the Commitment.

  (c)   Availability Period. The line of credit is available between September
  25, 2002 and September 1, 2003, or such earlier or later date as the
  availability may terminate as provided in the Loan Agreement, the Note or any
  Related Documents (the "Expiration Date").

  (d)   Letters of Credit. This line of credit may be used for financing:

  (i)   commercial letters of credit with a maximum maturity of 90 days but not
  to extend more than 90 days beyond the Expiration Date. Each commercial letter
  of credit will require drafts payable at sight.

  (ii)  standby letters of credit with a maximum maturity of 365 days but not to
  extend more than 180 days beyond the Expiration Date.

  (iii) The amount of the letters of credit outstanding at any one time
  (including amounts drawn on the letters of credit and not yet reimbursed) may
  not exceed Five Million Dollars ($5,000,000). If any letter of credit is
  issued in a foreign currency, for purposes of calculating outstandings the
  amount thereof shall be converted into an equivalent amount in U.S. Dollars,
  as provided in the related application and agreement for letter of credit
  referenced in subparagraph (D) below.

  (iv)  Borrower agrees:

  (A)   any sum drawn under a letter of credit may, at the option of Lender, be
  added to the principal amount outstanding under the Loan Agreement. The amount
  will bear interest and be due as described elsewhere in the Loan Agreement.

  (B)   if there is a default under the Loan Agreement or any Related Document,
  to immediately prepay and make Lender whole for any outstanding letters of
  credit.

  (C)   the issuance of any letter of credit and any amendment to a letter of
  credit is subject to Lender's written approval and must be in form and content
  satisfactory to Lender and in favor of a beneficiary acceptable to Lender.

  (D)   to sign Lender's form Application and Agreement for Commercial Letter of
  Credit or Application and Agreement for Standby Letter of Credit, as
  applicable.

  (E)   to pay any issuance and/or other fees that Lender notifies Borrower will
  be charged for issuing and processing letters of credit for Borrower.

  (F)   to allow Lender to automatically charge its checking account for
  applicable fees, discounts, and other charges.

  (G)   to pay Lender a non-refundable fee equal to 1.50% per annum of the
  outstanding undrawn amount of each standby letter of credit, payable annually
  in advance, calculated on the basis of the face amount outstanding on the day
  the fee is calculated.

  1.2   Exceptions to Negative Covenants.

        (a) The paragraph entitled "Indebtedness and Liens" under NEGATIVE
  COVENANTS, is intentionally deleted.

        (b) The paragraph entitled "Continuity of Operations" under NEGATIVE
  COVENANTS, is replaced in its entirety by the following:

        "Continuity of Operations. (i) Engage in any business activities
  substantially different than those in which Borrower is presently engaged; or
  (ii) Cease operations or suspend its business for more than 7 days in any 30
  day period, liquidate, merge, transfer, acquire or consolidate with any other
  entity, change its name, dissolve or transfer or sell Collateral out of the
  ordinary course of business."

        (c) The paragraph entitled "Loans, Acquisitions and Guaranties" under
  NEGATIVE COVENANTS, is intentionally deleted.

  1.3   Exceptions to Conditions Precedent to Each Advance.

            (a) The paragraph entitled "Representations and Warranties" under
  CONDITIONS PRECEDENT TO EACH ADVANCE, is amended to read as follows:

                "Representations and Warranties. The representations and
  warranties set forth in this Agreement, in the Related Documents, and in any
  document or certificate delivered to Lender under this Agreement are true and
  correct, except for matters that would not have a material adverse effect on
  Borrower's business or financial condition."

  1.4   Exceptions to Representations and Warranties.

        (a) The paragraph entitled "Financial Information" under REPRESENTATIONS
  AND WARRANTIES, is amended to read as follows:

            "Financial Information. Each of Borrower's financial statements
  supplied to Lender truly and completely disclosed Borrower's financial

<PAGE>

                       EXHIBIT TO BUSINESS LOAN AGREEMENT
                                  (Continued)                             Page 2
================================================================================

     condition as of the date of the statement, and there has been no material
     adverse change in Borrower's financial condition subsequent to the date of
     the most recent financial statement supplied to Lender. Borrower has no
     material contingent obligations that would be required to be disclosed on
     Borrower's financial statements in accordance with GAAP, except as
     disclosed in such financial statements."

          (b)  The paragraph entitled "Hazardous Substances" under
     REPRESENTATIONS AND WARRANTIES, is intentionally deleted.

     1.5  Litigation Exceptions.

          (a)  The paragraph entitled "Litigation and Claims" under
     REPRESENTATIONS AND WARRANTIES, is amended in its entirety to read as
     follows:

          "Litigation and Claims. No litigation, claim, investigation,
     administrative proceeding or similar action (including those for unpaid
     taxes) against Borrower is pending or threatened, and no other event has
     occurred which may materially adversely affect Borrower's financial
     condition or properties, other than (i) litigation, claims, or other
     events, if any, that have been disclosed to and acknowledged by Lender in
     writing, and (ii) litigation, claims, and other events that involve claims
     that, if lost, would not exceed One Million Dollars ($1,000,000) in the
     aggregate."

          (b)  The paragraph entitled "Notices of Claims and Litigation" under
     AFFIRMATIVE COVENANTS, is amended in its entirety to read as follows:

          "Notice of Claims and Litigation. Promptly advise Lender in writing of
     (i) any condition, event or act which comes to its attention that would or
     might materially adversely affect Borrower's financial condition or
     operations or Lender's rights under the Loan Documents, (ii) any existing
     or threatened litigation, arbitration, claims, investigations,
     administrative proceedings or similar actions filed by or against Borrower
     or any Guarantor or any Collateral affecting Borrower or any Guarantor or
     any Collateral that involve claims that, if lost, would be in excess of
     One Million Dollars ($1,000,000) in the aggregate."

     1.6  Exceptions to Affirmative Covenants.

          (a)  The paragraph entitled "Financial Records" under AFFIRMATIVE
     COVENANTS, is amended in its entirety to read as follows:

          "Financial Records. Maintain its books and records in accordance with
     GAAP, applied on a consistent basis."

          (b)  The paragraph entitled "Insurance" under AFFIRMATIVE COVENANTS,
     is amended in its entirety to read as follows:

          "Insurance. Maintain fire and other risk insurance, public liability
     insurance, and such other insurance with respect to Borrower's properties
     and operations, in form, amounts, coverages and with insurance companies
     acceptable to Lender. Borrower, upon request of Lender, will deliver to
     Lender from time to time the policies or certificates of insurance in form
     satisfactory to Lender, including stipulations that coverages will not be
     cancelled or diminished without a least thirty (30) days prior written
     notice to Lender. Each insurance policy also shall include an endorsement
     providing that coverage in favor of Lender will not be impaired in any way
     by act, omission or default of Borrower or any other person. In connection
     with all policies covering assets in which Lender holds or is offered a
     security interest for the Loans, Borrower will provide Lender with such
     lender's loss payable or other endorsements as Lender may require."

          (c)  The paragraph entitled "Insurance Reports" under AFFIRMATIVE
     COVENANTS, is amended to read as follows:

          "Insurance Reports. Furnish to Lender, upon request of Lender, reports
     on each existing insurance policy showing such information as Lender may
     reasonably request, including without limitation the following: (1) the
     name of the insurer; (2) the risks insured; (3) the amount of the policy;
     (4) the properties insured; (5) the then current property values on the
     basis of which insurance has been obtained, and the manner of determining
     those values; and (6) the expiration date of the policy."

          (d)  The paragraph entitled "Operations" under AFFIRMATIVE COVENANTS,
     is amended to read as follows:

          "Operations. Maintain executive personnel with substantially the
     same qualifications and experience as the present executive personnel;
     provide written notice to Lender of any changes in executive personnel;
     conduct its business affairs in a reasonable and prudent manner."

          (e)  The paragraph entitled "Environmental Studies" under AFFIRMATIVE
     COVENANTS, is intentionally deleted.

          (f)  The paragraph entitled "Inspection" under AFFIRMATIVE COVENANTS,
     is intentionally deleted.

          (g)  The paragraph entitled "Environmental Compliance and Reports"
     under AFFIRMATIVE COVENANTS, is intentionally deleted.

     1.7 Exceptions to Default.

          (a)  The paragraph entitled "Payment Default" under DEFAULT, is
     amended to read as follows:

          "Payment Default. Borrower fails to make any payment due under the
     Loan within five (5) business days of the date due."

          (b)  The paragraph entitled "Other Defaults" under DEFAULT, is
     amended to read as follows:

          "Other Defaults. Borrower fails to comply with or to perform any
     other term, obligation, covenant or condition contained in this Agreement
     or in any of the Related Documents or to comply with or to perform any
     term, obligation, covenant or condition contained in any other agreement
     between Lender and Borrower, and does not cure such failure with thirty
     (30) days following notice from Lender of such failure."

          (c)  The paragraph entitled "Default in Favor of Third Parties" under
     DEFAULT, is amended to read as follows:

          "Default in Favor of Third Parties. Borrower of any Grantor defaults
     under any loan extension of credit, security agreement, purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect any of Borrower's or any Grantor's property or
     Borrower's or any Grantor's ability to repay the Loans or perform their
     respective obligations under this Agreement or any of the Related
     Documents, and does not cure such failure within thirty (30) days following
     receipt of notice of such default."

          (d)  The paragraph entitled "Credit or Forfeiture Proceedings" under
     DEFAULT, is amended to read as follows:

          "Creditor or Forfeiture Proceedings. Commencement of foreclosure or
     forfeiture proceedings in connection with claims in excess of One Million
     Dollars ($1,000,000) in each case whether by judicial proceeding,
     self-help, repossession or any other method, by any creditor of Borrower or
     by any governmental agency against any collateral securing the Loan. This
     includes a garnishment of any of Borrower's accounts, including deposit
     accounts, with lender. However, this Event of Default shall not apply if
     there is a good faith dispute by Borrower as to validity or reasonableness
     of the claim which is the basis of the creditor or forfeiture proceeding
     and if Borrower gives Lender written notice of the creditor or forfeiture
     proceeding and deposits with Lender monies or a surety bond for the
     creditor or forfeiture proceeding, in an amount determined by Lender, in
     its sole discretion, as being adequate reserve or bond for the dispute."

          (e)  The paragraph entitled "Change in Ownership" under DEFAULT, is
     intentionally deleted.

     1.8 Exceptions to Arbitration.

          (a)  Subparagraph (d) of the paragraph entitled "Arbitration", is
     amended to read as follows:

               (d)  The arbitration shall be administered by JAMS and conducted,
     unless otherwise required by law, in Orange County, California. All Claims

<PAGE>

                       EXHIBIT TO BUSINESS LOAN AGREEMENT
                                   (Continued)                            Page 3

================================================================================

shall be determined by one arbitrator; however, if Claims exceed $5,000,000,
upon the request of any party, the Claims shall be decided by three arbitrators.
All arbitration hearings shall commence within 90 days of the demand for
arbitration and close within 90 days of commencement and the award of the
arbitrator(s) shall be issued within 30 days of the close of the hearing.
However, the arbitrator(s), upon a showing of good cause, may extend the
commencement of the hearing for up to an additional 60 days. The arbitrator(s)
shall provide a concise written statement of reasons for the award. The
arbitration award may be submitted to any court having jurisdiction to be
confirmed and enforced."

1.9  Exceptions to Exhibit to Business Loan Agreement.

     (a) The paragraph entitled "EXHIBIT TO BUSINESS LOAN AGREEMENT", is amended
to read as follows:

     "EXHIBIT TO BUSINESS LOAN AGREEMENT. An exhibit, titled 'EXHIBIT TO
BUSINESS LOAN AGREEMENT', is attached to this Agreement and by this reference is
made part of this Agreement just as if all the provisions, terms and conditions
of the Exhibit had been fully set forth in this Agreement. In the event of any
conflict between this Agreement and such exhibit, the terms of such exhibit
shall control."

1.10 Exceptions to Miscellaneous Provisions.

     (a) The paragraph entitled "Choice of Venue" under MISCELLANEOUS
PROVISIONS, is amended to read as follows:

     "Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of Orange County, State of
California."

     (b) The paragraph entitled "Subsidiaries and Affiliates of Borrower" under
MISCELLANEOUS PROVISIONS, is intentionally deleted.

THIS EXHIBIT TO BUSINESS LOAN AGREEMENT IS EXECUTED ON SEPTEMBER 25, 2002.

BORROWER:

NEWPORT CORPORATION

By:  /s/ William R. Abbott
    ----------------------------------------------------
     William R. Abbott, VP of Finance & Treasurer of
     Newport Corporation

By:  /s/ Jeffrey B. Coyne
     ---------------------------------------------------
     Jeffrey B. Coyne VP & General Counsel of Newport
     Corporation

LENDER:

BANK OF AMERICA, N.A.

By:  /s/ C K Goodfellow
     ---------------------------------------------------
     Authorized Signer

================================================================================<PAGE>

                                                                    Exhibit 10.4

Bank of America [LOGO]

                                PROMISSORY NOTE

================================================================================

Borrower: Newport Corporation           Lender:  Bank of America, N.A.
          1791 Deere Avenue                      CLSC-Commercial Banking (LA)
          Irvine, CA 92606                       CA9-703-11-11
                                                 333 South Beaudry Avenue, 11th
                                                 Floor
                                                 Los Angeles, CA 90017-1486

================================================================================

Principal Amount: $5,000,000.00                 Date of Note: September 25, 2002

PROMISE TO PAY. Newport Corporation ("Borrower") promises to pay to Bank of
America, N.A. ("Lender"), or order, in lawful money of the United States of
America, the principal amount of Five Million & 00/100 Dollars ($5,000,000.00)
or so much as may be outstanding, together with interest on the unpaid
outstanding principal balance of each advance. Interest shall be calculated from
the date of each advance until repayment of each advance.

PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on September 1, 2003. In addition, Borrower
will pay regular monthly payments of all accrued unpaid interest due as of each
payment date, beginning October 1, 2002, with all subsequent interest payments
to be due on the same day of each month after that. Unless otherwise agreed or
required by applicable law, payments will be applied first to any unpaid
collection costs and any late charges, then to any unpaid interest, and any
remaining amount to principal. The annual interest rate for this Note is
computed on a 365/360 basis; that is, by applying the ratio of the annual
interest rate over a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay Lender's address shown above or at such other
place as Lender may designate in writing.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the rate of interest
publicly announced from time to time by the Lender as its Prime Rate. The Prime
Rate is set by the Lender based on various factors, including the Lender's costs
and desired return, general economic conditions and other factors, and is used
as a reference point for pricing some loans. The Lender may price loans to its
customers at above, or below the Prime Rate. Any change in the Prime Rate shall
take effect at the opening of business on the day specified in the public
announcement of a change in the Lender's Prime Rate (the "Index"). The Index is
not necessarily the lowest rate charged by Lender on its loans and is set by
Lender in its sole discretion. If the Index becomes unavailable during the term
of this loan, Lender may designate a substitute index after notifying Borrower.
Lender will tell Borrower the current Index rate upon Borrowers request. The
interest rate change will not occur more often than each date of such change in
the index. Borrower understands that Lender may make loans based on other rates
as well. The interest rate to be applied to the unpaid principal balance of this
Note will be at a rate equal to the Index. NOTICE: Under no circumstances will
the interest rate on this Note be more than the maximum rate allowed by
applicable law.

PREPAYMENT FEE. Upon prepayment of this Note, Lender is entitled to the
following prepayment fee: Prepayments may be made in whole or in part at any
time on any loan or advance outstanding under this Note for which the Rate is
based on the Prime Rate or any other fluctuating Rate or Index which may change
daily. No prepayment of any loan or advance outstanding hereunder bearing
Interest at any other Rate shall be permitted without the prior written consent
of Lender. Notwithstanding such prohibition, if there is a prepayment of any
such loan or advance hereunder, whether by consent of Lender, or because of
acceleration or otherwise, Borrower shall, within 15 days of any request by
Lender, pay to Lender any loss or expense, including any loss of anticipated
profits, which Lender may incur or sustain as a result of such prepayment. For
the purposes of calculating the amounts owed only, it shall be assumed that
Lender actually funded or committed to fund the loan or advance through the
purchase of an underlying deposit in an amount and for a term comparable to the
loan or advance. Any such determination by Lender shall be conclusive, absent a
manifest error in computation. All prepayments of principal shall be applied in
the inverse order of maturity, or in such other order as Lender shall determine
in its sole discretion. Except for the foregoing, Borrower may pay all or a
portion of the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation
to continue to make payments of accrued unpaid interest. Rather, early payments
will reduce the principal balance due. Borrower agrees not to send Lender
payments marked "paid in full", "without recourse", or similar language. If
Borrower sends such a payment, Lender may accept it without losing any of
Lender's rights under this Note, and Borrower will remain obligated to pay any
further amount owed to Lender. All written communications concerning disputed
amounts, including any check or other payment instrument that indicates that the
payment constitutes "payment in full" of the amount owed or that is tendered
with other conditions or limitations or as full satisfaction of a disputed
amount must be mailed or delivered to: Bank of America, N.A., CA9-703-11-11,333
South Beaudry Avenue, 11th Floor Los Angeles, CA 90017-1486.

LATE CHARGE: If a payment is 15 days or more late, Borrower will be charged
4.000% of the unpaid portion of the regularly scheduled payment.

INTEREST AFTER DEFAULT. Upon Borrower's failure to pay all amounts declared due
pursuant to this section, including failure to pay upon final maturity, Lender,
as its option may, if permitted under applicable law, increase the variable
interest rate on this Note to 6.000 percentage points over the Index.

DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:

   Payment Default. Borrower fails to make any payment when due under this Note:

   Other Defaults. Borrower fails to comply with or to perform any other term,
   obligation, covenant or condition contained in this Note or in any of the
   related documents or to comply with or to perform any term, obligation,
   covenant or condition contained in any other agreement between Lender and
   Borrower.

   Default in Favor of Third Parties. Borrower or any Grantor defaults under any
   loan, extension of credit, security agreement, purchase or sales agreement,
   or any other agreement, in favor of any other creditor or person that may
   materially affect any of Borrower's property or Borrower's ability to repay
   this Note or perform Borrower's obligations under this Note or any of the
   related documents.

   False Statements. Any warranty, representation or statement made or furnished
   to Lender by Borrower or on Borrower's behalf under this Note or the related
   documents is false or misleading in any material respect, either now or at
   the time made or furnished or becomes false or misleading at any time
   thereafter.

   Insolvency. The dissolution or termination of Borrower's existence as a going
   business, the insolvency of Borrower, the appointment of a receiver for any
   part of Borrower's property, any assignment for the benefit of creditors, any
   type of creditor workout, or the commencement of any proceeding under any
   bankruptcy or insolvency laws by or against Borrower.

   Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
   proceedings, whether by judicial proceeding, self-help, repossession or any
   other method, by any creditor or Borrower or by any governmental agency
   against any collateral securing the loan. This includes a garnishment of any
   of Borrower's accounts, including deposit accounts, with Lender. However,
   this Event of Default shall not apply if there is a good faith dispute by
   Borrower as to the validity or reasonableness of the claim which is the basis
   of the creditor or forfeiture proceeding

<PAGE>

                                PROMISSORY NOTE
                                  (Continued)                             Page 2
================================================================================

     and if Borrower gives Lender written notice of the creditor or forfeiture
     proceeding and deposits with Lender monies or a surety bond for the
     creditor or forfeiture proceeding, in an amount determined by Lender, in
     its sole discretion, as being an adequate reserve or bond for the dispute.

     Events Affecting Guarantor. Any of the preceding events occurs with respect
     to any guarantor, endorser, surety, or accommodation party of any of the
     indebtedness or any guarantor, endorser, surety, or accommodation party
     dies or becomes incompetent, or revokes or disputes the validity of, or
     liability under, any guaranty of the indebtedness evidenced by this Note.

     Change In Ownership. Any change in ownership of twenty-five percent (25%)
     or more of the common stock of Borrower.

     Adverse Change. A material adverse change occurs in Borrower's financial
     condition, or Lender believes the prospect of payment or performance of
     this Note is impaired.

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.

ATTORNEY'S FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. Borrower also
will pay any court costs, in addition to all other sums provided by law.

JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other.

GOVERNING LAW. This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of California. This Note
has been accepted by Lender in the State of California.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of any County, State of California.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts.

LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note, as well as directions for payment from Borrower's accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing.
Borrower agrees to be liable for all either: (A) advanced in accordance with the
instructions of an authorized person or (B) credited to any of Borrower's
accounts with Lender. The unpaid principal balance owing on this Note at any
time may be evidenced by endorsements on this note or by Lender's internal
records, including daily computer print-outs. Lender will have no obligation to
advance funds under this Note if: (A) Borrower or any guarantor is in default
under the terms of this Note or any agreement that Borrower or any guarantor has
with Lender, including any agreement made in connection with the signing of this
Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C)
any guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such guarantor's guarantee of this Note or any other loan with Lender; or (D)
Borrower has applied funds provided pursuant to this Note for purposes other
than those authorized by Lender.

ARBITRATION. (a) This paragraph concerns the resolution of any controversies or
claims between the parties, whether arising in contract, tort or by statute,
including but not limited to controversies or claims that arise out of or relate
to: (i) this agreement (including any renewals, extensions or modifications); or
(ii) any document related to this agreement; (collectively a "Claim").

(b) At the request of any party to this agreement, any Claim shall be resolved
by binding arbitration in accordance with the Federal Arbitration Act (Title 9,
U.S. Code) (the "Act"). The Act will apply even though this agreement provides
that it is governed by the law of a specified state.

(c) Arbitration proceedings will be determined in accordance with the Act, the
applicable rules and procedures for the arbitration of disputes of JAMS or any
successor thereof ("JAMS"), and the terms of this paragraph. In the event of any
inconsistency, the terms of this paragraph shall control.

(d) The arbitration shall be administered by JAMS and conducted, unless
otherwise required by law, in any U.S. state where real or tangible personal
property collateral for this credit is located or if there is no such
collateral, in the state specified in the governing law section of this
agreement. All Claims shall be determined by one arbitrator; however, if Claims
exceed $5,000,000, upon the request of any party, the Claims shall be decided by
three arbitrators. All arbitration hearings shall commence within 90 days of the
demand for arbitration and close within 90 days of commencement and the award of
the arbitrator(s) shall be issued within 30 days of the close of the hearing.
However, the arbitrator(s), upon a showing of good cause, may extend the
commencement of the hearing for up to an additional 60 days. The arbitrator(s)
shall provide a concise written statement of reasons for the award. The
arbitration award may be submitted to any court having jurisdiction to be
confirmed and enforced.

(e) The arbitrator(s) will have the authority to decide whether any Claim is
barred by the statute of limitations and, if so, to dismiss the arbitration on
that basis. For purposes of the application of the statute of limitations, the
service on JAMS under applicable JAMS rules of a notice of Claim is the
equivalent of the filing of a lawsuit. Any dispute concerning this arbitration
provision or whether a Claim is arbitratable shall be determined by the
arbitrator(s). The arbitrator(s) shall have the power to award legal fees
pursuant to the terms of this agreement.

(f) This paragraph does not limit the right of any party to: (i) exercise
self-help remedies, such as but not limited to, setoff; (ii) initiate judicial
or nonjudicial foreclosure against any real or personal property collateral;
(iii) exercise any judicial or power of sale rights, or (iv) act in a court of
law to obtain an interim remedy, such as but not limited to, injunctive relief,
writ of possession or appointment of a receiver, or additional or supplementary
remedies.

(g) The filing of a court action is not intended to constitute a waiver of the
right of any party, including the suing party, thereafter to require submittal
of the Claim to arbitration.

(h) all obligations, debts and liabilities, including any swap, option or
forward obligations, plus interest thereon, of Borrower to Lender, or any one or
more of them, as well as all claims by Lender against Borrower or any other
party to this Agreement or any one or more of them, whether now existing or
hereafter arising, whether related to the purpose of the Note, whether voluntary
or otherwise, whether due or not due, direct or indirect, absolute or
contingent, liquidated or unliquidated and whether Borrower or any other party
to this Agreement may be liable individually or jointly with others, whether
obligated as guarantor, surety, accommodation party or otherwise, and whether
recovery upon such amounts may be or hereafter may become barred by any statute
of limitations, and whether the obligation to repay such amounts may be or
hereafter may become otherwise unenforceable. Unless the Borrower and any other
party to this Agreement shall have otherwise agreed in writing or received
written notice thereof, this Agreement shall not secure any obligation owing to
Lender which constitutes "consumer credit" subject to the disclosure
requirements of the Federal Truth in Lending Act and any regulations promulgated
thereunder.

ADDITIONAL DEFAULTS.

<PAGE>

                                PROMISSORY NOTE
                                  (Continued)                             Page 3
================================================================================

Each of the following shall constitute an event of default ("Event of Default")
under this Note:

Event of Default Under Related Documents. A default or event of default occurs
under the terms of any promissory note, guaranty, pledge agreement, security
agreement or other agreement or instrument executed by Borrower or any
guarantor, pledgor, accommodation party or other obligor in connection with or
relating to this Note.

Judgment. The entry of a judgment against any Borrower or guarantor, pledgor,
accommodation party or other obligor which Lender deems to be of a material
nature, in Lender's sole discretion.

Default by Affiliates. Any affiliate of Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of Lender or any other creditor.

Adverse Government Action. Any governmental authority (including, without
limitation, any nation, state or other political subdivision thereof, any
central bank, and any entity exercising executive, legislative, judicial,
regulatory or administrative functions, and any corporation or other entity
owned or controlled by any of the foregoing) takes or institutes action, which,
in the opinion of Lender, will adversely affect Borrower's financial condition
or ability to pay or perform Borrower's obligations under this Note or any
instrument or agreement required under, or executed in connection with, this
Note.

SALE OF NOTE. Assignment. Lender may sell or offer to sell this Note, together
with any and all documents guaranteeing, securing or executed in connection with
this Note, to one or more assignees without notice to or consent of Borrower.
Lender is hereby authorized to share any information it has pertaining to the
loan evidenced by this Note, including without limitation credit information on
the undersigned, any of its principals, or any guarantors of this Note, to any
such assignee or prospective assignee.

COUNTERPART SIGNATURES. This Note may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.

TERMINATION OF AUTOMATIC PAYMENTS. In the event that Borrower terminates the
Automatic Payment arrangement with Lender, Borrower agrees that the interest
rate under the Note will increase, at the discretion of the Lender, by one-half
percentage point (0.50%) per annum over the rate of interest stated in the Note,
and the amount of each interest installment will be increased accordingly. The
effective rate of interest under the Note shall not in any event exceed the
maximum rate permitted by law.

ADDITIONAL INTEREST AFTER DEFAULT. Upon any event of Default under this Note,
Lender, at its option, may, if permitted under applicable law, increase the
interest rate on this Note to the interest rate specified in the paragraph above
entitled "Interest After Default".

UNUSED COMMITMENT FEE. Borrower agrees to pay a fee on any difference between
the maximum principal amount available under this Note and the amount of credit
it actually uses, determined by the weighted average credit outstanding during
the specified period. The fee will be calculated at .25% per year. The
calculation of credit outstanding shall include the undrawn amount of letters of
credit. This fee is due on December 31, 2002 and on the last day of each
following quarter until the expiration of the availability of advances under
this Note.

AUTOMATIC PAYMENTS. Borrower hereby authorizes Lender automatically to deduct
from Borrower's account numbered 14592-06005 the amount of any loan payment. If
the funds in the account are insufficient to cover any payment, Lender shall not
be obligated to advance funds to cover the payment. At any time and for any
reason, Borrower or Lender may voluntarily terminate Automatic Payments.

PRE BILLING. If the Borrower and Lender elect to use pre-billing calculation,
for each payment date (the "Due Date") the amount of each payment debit will be
determined as follows: On the "Billing Date" Lender will prepare and mail to
Borrower an invoice of the amounts that will be due on that Due Date ("Billed
Amount"). (The "Billing Date" will be a date that is a specified number of
calendar days prior to the Due Date, which number of days will be mutually
agreed from time to time by Lender and Borrower.) The calculation of the Billed
Amount will be made on the assumption that no new extensions of credit or
payments will be made between the Billing Date and the Due Date, and that there
will be no changes in the applicable interest rate. On the Due Date Lender will
debit the Designated Account for the Billed Amount, regardless of the actual
amount due on that date ("Accrued Amount"). If the Due Date does not fall on a
Business Day, Lender shall debit the Designated Account on the first Business
Day following the Due Date. For purposes of this Agreement, "Business Day" means
a day other than Saturday, Sunday or other day on which commercial banks are
authorized to close or are in fact closed in the state where the Lender's
lending office is located. If the Billed Amount debited to the Designated
Account differs from the Accrued Amount, the difference will be treated as
follows: If the Billed Amount is less than the Accrued Amount, the Billed Amount
for the following Due Date will be increased by the amount of the underpayment.
Borrower will not be in default by reason of any such underpayment. If the
Billed Amount is more than the Accrued Amount, the Billed Amount for the
following Due Date will be decreased by the amount of the overpayment.
Regardless of any such difference, interest will continue to accrue based on the
actual amount of principal outstanding without compounding. Lender will not pay
interest on any overpayment.

AUTOMATIC PAYMENT. Borrower has elected to authorize Lender to effect payment of
sums due under this Note by means of debiting Borrower's account number
14592-06005. This authorization shall not affect the obligation of Borrower to
pay such sums when due, without notice, if there are insufficient funds in such
account to make such payment in full on the due date thereof, or if Lender fails
to debit the account.

CLOSING FEE. Borrower agrees to pay to Lender a loan fee in the amount of
$7,500. This fee is due at closing.

EXHIBIT TO NOTE. An exhibit, titled "EXHIBIT TO NOTE," is attached to this Note
and by this reference is made a part of this Note just as if all the provisions,
terms and conditions of the Exhibit had been fully set forth in this Note.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.

GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations, presentment, demand for payment, and notice
of dishonor. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the party
with whom the modification is made. The obligations under this Note are joint
and several.

<PAGE>

                                PROMISSORY NOTE
                                  (Continued)                             Page 4
================================================================================

   PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
   OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
   AGREES TO THE TERMS OF THE NOTE.

   BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

   BORROWER:

   NEWPORT CORPORATION

   By:  /s/ William R. Abbott                By:  /s/ Jeffrey B. Coyne
      -----------------------------------       --------------------------------
      William R. Abbott, VP of Finance          Jeffrey B. Coyne, VP & General
      & Treasurer of Newport Corporation        Counsel of Newport Corporation

================================================================================

<PAGE>

                                 EXHIBIT TO NOTE

================================================================================

  Borrower: Newport Corporation     Lender: Bank of America, N.A.
            1791 Deere Avenue               CLSC-Commercial Banking (LA)
            Irvine, CA 92606                CA9-703-11-11
                                            333 South Beaudry Avenue, 11th Floor
                                            Los Angeles, CA 90017-1486

================================================================================

     This EXHIBIT TO NOTE is attached to and by this reference is made a part of
     the Promissory Note, dated September 25, 2002, and executed in connection
     with a loan or other financial accommodations between BANK OF AMERICA, N.A.
     and Newport Corporation.

     1. OPTIONAL INTEREST RATES

          1.1 Optional Rates. In addition to the interest rate specified in the
     Note, on the terms and subject to the conditions set forth below, Borrower
     will be able to select, from one of the following optional rates, an
     interest rate which will be applicable to a particular dollar increment of
     amounts outstanding, or to be disbursed, under the Note, during interest
     periods agreed to by Lender and Borrower. Any principal amount bearing
     interest at an optional rate is referred to as a "Portion":

          (a) the LIBOR Rate plus 1.50 percentage points.

          1.2 Rate Terms. Each optional interest rate is a rate per year.
     Interest will be paid on the last day of each interest period, and on the
     first day of each month during the interest period. No Portion will be
     converted to a different interest rate during the applicable interest
     period. If any principal amount bearing interest at an optional interest
     rate is repaid during an interest period (other than a scheduled principal
     payment), such repayment will be considered a prepayment subject to any
     prepayment fee as described in the Note. Upon the occurrence of an event of
     default under the Note or any other loan document, Lender may terminate the
     availability of optional interest rates for interest periods commencing
     after the default occurs. No interest period may extend beyond the maturity
     date of the Note. At the end of any interest period, the interest rate will
     revert to the rate specified in the Note, unless Borrower has designated
     another optional interest rate for the Portion.

          1.3 LIBOR Rate. The election of LIBOR Rates shall be subject to the
     following terms and requirements:

          (a) The interest period during which the LIBOR Rate will be in effect
     will be one, two or three months. The first day of the interest period must
     be a day other than a Saturday, or a Sunday on which Lender is open for
     business in New York and London and dealing in offshore dollars (a "LIBOR
     Banking Day"). The last day of the interest period and the actual number of
     days during the interest period will be determined by Lender using the
     practices of the London inter-bank market.

          (b) Each LIBOR Rate Portion will be for an amount not less than One
     Hundred Thousand Dollars ($100,000).

          (c) The "LIBOR Rate" means the interest rate determined by the
     following formula, rounded upward to the nearest 1/100 of one percent. (All
     amounts in the calculation will be determined by Lender as of the first day
     of the interest period.)

                   LIBOR Rate =   London Inter-Bank Offered Rate
                                (1.00 - Reserve Percentage)

          Where,

          (i)  "London Inter-Bank Offered Rate" means the average per annum
     interest rate at which U.S. dollar deposits would be offered for the
     applicable interest period by major banks in the London inter-bank market,
     as shown on the Telerate Page 3750 (or any successor page) at approximately
     11:00 a.m. London time two (2) London Banking Days before the commencement
     of the interest period. If such rate does not appear on the Telerate Page
     3750 (or any successor page), the rate for that interest period will be
     determined by such alternate method as reasonably selected by Lender. A
     "London Banking Day" is a day on which Lender's London Banking Center is
     open for business and dealing in offshore dollars.

          (ii) "Reserve Percentage" means the total of the maximum reserve
     percentages for determining the reserves to be maintained by member banks
     of the Federal Reserve System for Eurocurrency Liabilities, as defined in
     Federal Reserve Board Regulation D, rounded upward to the nearest 1/100 of
     one percent. The percentage will be expressed as a decimal, and will
     include, but not be limited to, marginal, emergency, supplemental, special,
     and other reserve percentages.

          (d) Borrower shall irrevocably request a LIBOR Rate Portion no later
     than 12:00 noon time in the LIBOR Banking Day preceding the day on which
     the London Inter-Bank Offered Rate will be set, as specified above. For
     example, if there are no intervening holidays or weekend days in any of the
     relevant locations, the request must be made at least three days before the
     LIBOR Rate takes effect.

          (e) Lender will have no obligation to accept an election for a LIBOR
     Rate Portion if any of the following described events has occurred and is
     continuing:

          (i)  Dollar deposits in the principal amount, and for periods equal to
     the interest period, of a LIBOR Rate Portion are not available in the
     London inter-bank market; or

          (ii) the LIBOR Rate does not accurately reflect the cost of a LIBOR
     Rate Portion.

     1.4  Notices; Authority to Act. Lender may accept requests by Borrower for
     optional interest rates made by telephone. Borrower acknowledges and agrees
     that the agreement of Lender herein to receive certain notices by telephone
     is solely for the convenience of Borrower. Lender shall be entitled to rely
     on the authority of the person purporting to be a person authorized by
     Borrower to give such notice, and Lender shall have no liability to
     Borrower on account of any action taken by Lender in reliance upon such
     telephonic notice. The obligation of Borrower to repay all sums owing under
     the Note shall not be affected in any way or to any extent by any failure
     by Lender to receive written confirmation of any telephonic notice or the
     receipt by Lender of a confirmation which is at variance with the terms
     understood by Lender to be contained in the telephonic notice.

     1.5  Exceptions to Default.

          (a) The paragraph entitled "Payment Default", under DEFAULT, is
     amended to read as follows;

          "Payment Default. Borrower fails to make any payment when due under
     this Note within five (5) business days of the date due."

          (b) The paragraph entitled "Other Defaults", under DEFAULT, is amended
     to read as follows:

          "Other Defaults. Borrower fails to comply with or to perform any other
     term, obligation, covenant or condition contained in this Note or in any of
     the related documents or to comply with or to perform any term, obligation,
     covenant or condition contained in any other agreement between Lender and
     Borrower, and does not cure such failure within thirty (30) days following
     notice from Lender of such failure."

          (c) The paragraph entitled "Default in Favor of Third Parties", under
     DEFAULT, is amended to read as follows:

          "Default in Favor of Third Parties. Borrower or any Grantor defaults
     under any loan, extension of credit, security agreement, purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect Borrower's ability to repay this Note or perform

<PAGE>

                                EXHIBIT TO NOTE
                                  (Continued)                             Page 2
================================================================================

     Borrower's obligations under this Note or any of the related documents, and
     does not cure such failure within thirty (30) days following receipt of
     notice of such default."

          (d) The paragraph entitled "Change in Ownership", under DEFAULT, is
     intentionally deleted.

     1.6  Exceptions to Choice of Venue.

          (a) The paragraph entitled "Choice of Venue" is amended to read as
     follows:

          "CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's
     request to submit to the jurisdiction of the courts of Orange County, State
     of California."

     1.7  Exceptions to Arbitration.

          (a) Subparagraph (d) of the paragraph entitled "Arbitration" is
     amended to read as follows:

          "(d) The arbitration shall be administered by JAMS and conducted,
     unless otherwise required by law, in Orange County, California. All claims
     shall be determined by one arbitrator; however, if Claims exceed
     $5,000,000, upon the request of any party, the Claims shall be decided by
     three arbitrators. All arbitration hearings shall commence within 90 days
     of the demand for arbitration and close within 90 days of commencement and
     the award of the arbitrator(s) shall be issued within 30 days of the close
     of the hearing. However, the arbitrator(s), upon a showing of good cause,
     may extend the commencement of the hearing for up to an additional 60 days.
     The arbitrator(s) shall provide a concise written statement of reasons for
     the award. The arbitration award may be submitted to any court having
     jurisdiction to be confirmed and enforced".

     THIS EXHIBIT TO NOTE IS EXECUTED ON SEPTEMBER 25, 2002.

     BORROWER:

     NEWPORT CORPORATION

     By: /s/ William R. Abbott
        --------------------------------------------------
        William R. Abbott, VP of Finance & Treasurer of
        Newport Corporation

     By: /s/ Jeffrey B. Coyne
        --------------------------------------------------
        Jeffrey B. Coyne, VP & General Counsel of Newport
        Corporation

================================================================================

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