<PAGE>

Exhibit 4.1


                          CERTIFICATE OF DETERMINATION
                                       OF
                            SERIES A PREFERRED STOCK
                                       OF
                              PHOTON DYNAMICS, INC.

                         (Pursuant to Section 401 of the
                        California General Corporation Law)


The undersigned, VINCENT F. SOLLITTO and RICHARD L. DISSLY hereby certify that:

     1. They are the duly elected and acting Chief Executive Officer and

President and Secretary, respectively, of Photon Dynamics, Inc. (the

"Corporation"). Pursuant to authority given by the Corporation's Articles of

Incorporation, the Board of Directors of the Corporation has duly adopted the

following resolutions at a meeting duly called and held on October 23, 2000:


          RESOLVED, that pursuant to the authority granted to and vested in the
          Board in accordance with the provisions of the Amended and Restated
          Articles of Incorporation of the Company, as amended (the "Articles of
          Incorporation"), the Board hereby creates from its authorized class of
          Preferred Stock a series designated as Series A1 Preferred Stock, no
          par value, of the Company;

          RESOLVED FURTHER, that the Board does hereby establish the Series A1
          Preferred Stock as follows:

          SECTION 1. DESIGNATION AND AMOUNT. One (1) share of Preferred Stock of
          the Company shall be designated as Series A1 Preferred Stock (the
          "Special Series A1 Voting Share").

          SECTION 2. DIVIDENDS AND DISTRIBUTIONS. Except as required by
          applicable law, neither the holder nor the owner, if different, of the
          Special Series A1 Voting Share shall be entitled to receive any
          dividends or distributions of the Company, whether payable in cash,
          property or in shares of capital stock.

          SECTION 3. LIQUIDATION. In the event of any liquidation, dissolution
          or winding up of the Company, the holder of the Special Series A1
          Voting Share shall not be entitled to receive any assets of the
          Company available for distribution to its shareholders.

          SECTION 4. VOTING RIGHTS. The Special Series A1 Voting Share shall
          have the following voting rights:

          (A)   with respect to all meetings of shareholders of the Company at
          which holders of the Company's common stock are entitled to vote (each
          a "Company Meeting") and with respect to any written consents, to the
          extent permitted by the Articles of Incorporation and the Company's
          By-laws, sought by the Company from its shareholders, including the
          holders of Company common stock (each a "Company Consent"), the
          Special Series A1 Voting Share shall vote together with the common
          stock of the Company as a single class and the Special Series A1
          Voting Share shall have the identical voting rights to those of the
          Company's common stock;

          (B)   the holder of the Special Series A1 Voting Share shall be
          entitled to a number of votes equal to the number of exchangeable
          shares of Image Processing Systems Inc. (the "Exchangeable Shares")
          outstanding on the record date for determining shareholders entitled
          to vote at the applicable Company Meeting or in connection with the
          applicable Company Consent, other than those held by the Company or
          its Affiliates (as defined in that certain Voting and Exchange Trust
          Agreement by and among the Company, Photon Dynamics Nova Scotia
          Company and Montreal Trust Company of Canada, to be dated and entered
          into on or before the date of issue of the Special Series A1 Voting
          Share, as such agreement may amended, modified or supplemented from
          time to time (the "Trust Agreement"));
<PAGE>

          (C)   except as set forth herein, or as otherwise provided by law, the
          registered holders from time to time of Exchangeable Shares shall have
          no special voting rights and their consent shall not be required for
          taking any corporate action; and

          (D)   the voting rights attached to the Special Series A1 Voting Share
          shall terminate pursuant to and in accordance with the Trust
          Agreement.

          SECTION 5. NO REDEMPTION. The Special Series A1 Voting Share shall not
          be redeemable, except that at such time as no Exchangeable Shares
          (other than the Exchangeable Shares owned by the Company and its
          Affiliates) shall be outstanding, the Special Series A1 Voting Share
          shall automatically be redeemed and canceled.

          SECTION 6. OTHER PROVISIONS. Pursuant to the terms of the Trust
          Agreement:

          (A)   during the term of the Trust Agreement, the Company will not
          issue any additional shares of the same series of such Series A1
          Preferred Stock without the consent of the holders at the relevant
          time of Exchangeable Shares;

          (B)   the votes attached to the Special Series A1 Voting Share shall
          be exercised by the Trustee (as defined in the Trust Agreement)
          pursuant to and in accordance with the Trust Agreement; and

          (C)   the powers, designations, preferences and relative,
          participating, optional and other special rights, and the
          qualifications, limitations and restrictions of the Special Series A1
          Voting Share shall be as otherwise provided in the Trust Agreement."


     2. The authorized number of shares of Preferred Stock of this corporation

is 5,000,000, and the number of shares of Preferred Stock constituting Series A1

Voting Preferred Stock, none of which has been issued, is 1.


<PAGE>


IN WITNESS WHEREOF, the undersigned have executed this certificate on December
12, 2000.

                                          /s/ Vincent F. Sollitto
                                          -----------------------
                                          VINCENT F. SOLLITTO
                                          Chief Executive Officer and President


                                          /s/ Richard L. Dissly
                                          -----------------------
                                          RICHARD L. DISSLY
                                          Chief Financial Officer and Secretary



                  The undersigned Vincent F. Sollitto, Chief Executive Officer
and President of Photon Dynamics, Inc., and Richard L. Dissly, Chief Financial
Officer and Secretary of said corporation, each certifies under penalty of
perjury that the matters set forth in the foregoing Certificate of Determination
are true of their own knowledge.

Executed in San Jose, California on December 12, 2000.

         /s/ Vincent F. Sollitto
         -----------------------
         VINCENT F. SOLLITTO
         Chief Executive Officer and President

Executed in San Jose, California on December 12, 2000.

         /s/ Richard L. Dissly
         -----------------------
         RICHARD L. DISSLY
         Chief Financial Officer and Secretary