**Exhibit 10.9****Change in Control Agreement**This agreement is entered into as of this 14th day of December 2005 by and betweenPhoton Dynamics, Inc., a California Corporation (the “Company”), and Jeffrey A. Hawthorne(“Executive”).**Recitals**Executive is employed by the Company and is a valued officer of the Company. As an inducementto Executive to remain in the employ of the Company, the Company wishes to provide for certainrights in favor of Executive to severance payments and other benefits in the event of a Change ofControl (as defined below) of the Company upon the terms herein provided.     NOW THEREFORE, in consideration of the foregoing and the mutual promises herein contained, theparties agree as follows:     1.1 Definition. For purposes of this Agreement, “Change in Control” means occurrence in asingle transaction or in a series of related transactions of any one or more of following events:   (a) any person (within the meaning of Section 13(d) or 14(d) of the Securities ExchangeAct of 1934, as amended) becomes the owner, directly or indirectly, of securities of theCompany representing more than fifty percent (50%) of the combined voting power of theCompany’s then outstanding securities other than by virtue of a merger, consolidation orsimilar transaction;   (b) there is consummated a merger, consolidation or similar transaction involving(directly or indirectly) the Company and, immediately after the consummation of such merger,consolidation or similar transaction, the stockholders of the Company immediately priorthereto do not own, directly or indirectly, outstanding voting securities representing morethan fifty percent (50%) of the combined outstanding voting power of the surviving entity insuch merger, consolidation or similar transaction or more than fifty percent (50%) of thecombined outstanding voting power of the parent of the surviving entity in such merger,consolidation or similar transaction; or   (c) there is consummated a sale, Iease, license or other disposition of all orsubstantially all of the consolidated assets of the Company and its subsidiaries, other thana sale, lease, license or other disposition of all or substantially all of the consolidatedassets of the Company and its subsidiaries to an entity, more than fifty percent (50%) ofthe combined voting power of the voting securities of which are owned by stockholders of theCompany in substantially the same proportions as their ownership of the Company immediatelyprior to such sale, lease, license or other disposition.     1.2 Termination After a Change in Control. In the event that within twelve (12) monthsfollowing a Change in Control, the Company terminates your employment without Cause (as definedbelow) or you resign for Good Reason (as defined below) (a Change in Control Termination), (a) theCompany will provide you with severance in the amount of one (1) year of your then-existing basesalary and on target bonus, less payroll deductions and all required withholdings, paid either (atthe Company’s discretion) in a lump sum or in regular payments at equal intervals over a period oftime not longer than one (1) year, and (b) all stock options held by you shall have their vestingaccelerated such that all
 

 
options are fully vested and exercisable as of the date of the Change in Control Termination(the “Acceleration”). As a precondition of receiving the Acceleration, you must first sign andallow to become effective a general release of claims in favor of the Company in a form acceptableto the Company.     1.3 Definition of “Cause.” For purposes of this Agreement, “Cause” shall mean the occurrenceof one 0r more of the following: (a) your indictment or conviction of any felony or crime involvingmoral turpitude or dishonesty; (b) your participation in any fraud against the Company or itssuccessor; (c) breach of your duties to the Company or its successor, including, withoutlimitation, persistent unsatisfactory performance of job duties; (d) intentional damage to anyproperty of the Company or its successor; (e) willful conduct that is demonstrably injurious to theCompany or its successor, monetarily or otherwise; (f) breach of any agreement with the Company orits successor, including your Proprietary Information and Inventions Agreement; or (g) conduct byyou that in the good faith and reasonable determination of the Company demonstrates gross unfitnessto serve. Physical or mental disability or death shall not constitute Cause hereunder.     1.4 Definition of “Good Reason.” For purposes of this Agreement, your voluntary termination ofemployment with the Company will be considered a termination for “Good Reason” if you resign youremployment because one of the following events occurs without your consent: (a) a reduction of yourthen-existing annual base salary by more than ten percent (‘10%), unless the then-existing basesalaries of other executive officers of the Company are accordingly reduced; (b) a materialreduction in the package of benefits and incentives, taken as a whole, provided to you (notincluding raising of employee contributions to the extent of any cost increases imposed by thirdparties), except to the extent that such benefits and incentives of other executive officers of theCompany are similarly reduced; (c) assignment to you of any duties 0r any limitation of yourresponsibilities substantially inconsistent with your position, duties, responsibilities and statuswith the Company immediately prior to the date of the Change in Control; or (d) relocation of theprincipal place of your employment to a location that is more than fifty (50) miles from yourprincipal place of employment immediately prior to the date of the Change in Control.     1.5 Limitation on Payments. lf any payment or benefit you would receive pursuant to a Changein Control from the Company or otherwise (“Payment”) would (i) constitute a “parachute payment”within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to theexcise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be equalto the Reduced Amount, The “Reduced Amount” shall be either (x) the largest portion of the Paymentthat would result in no portion of the Payment being subject to the Excise Tax or (y) the largestportion, up to and including the total, of the Payment, whichever amount, after taking into accountall applicable federal, state and local employment taxes, income taxes, and the Excise Tax (allcomputed at the highest applicable marginal rate), results in your receipt, on an after-tax basis,of the greater amount of the Payment notwithstanding that all or some portion of the Payment may besubject to the Excise Tax. lf a reduction in payments or benefits constituting “parachute payments”is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the followingorder unless you elect in writing a different order (provided, however, that such election shall besubject to Board approval if made on or after the effective date of the event that triggers thePayment): reduction of cash payments; cancellation of Acceleration; reduction of employee benefits.In the event that Acceleration is to be reduced, it shall be cancelled in the reverse order of thedate of grant of your Options (i.e., earliest granted Option cancelled last) unless you elect inwriting a different order for cancellation.The accounting firm engaged by the Company for general audit purposes as of the day prior to theeffective date of the Change in Control shall perform the foregoing calculations, lf the accountingfirm so engaged by the Company is serving as accountant or auditor for the individual, entity orgroup effecting the Change in Control, the Company shall appoint a nationally recognized accountingfirm to make the determinations required hereunder. The Company shall bear all expenses withrespect to the determinations by such accounting firm required to be made hereunder.The accounting firm engaged to make the determinations hereunder shall provide its calculations,together with detailed supporting documentation, to you and the Company within fifteen (15)calendar days after the date on which your right to a Payment is triggered (if requested at thattime by you or the
 

 
Company) or such other time as requested by you or the Company. lf the accounting firm determinesthat no Excise Tax is payable with respect to a Payment, either before or after the application oftheReduced Amount, it shall furnish you and the Company with an opinion reasonably acceptable to youthat no Excise Tax will be imposed with respect to such Payment. Any good faith determinations ofthe accounting firm made hereunder shall be final, binding and conclusive upon you and the Company.2. General Provisions.     2.1 Severability. Whenever possible, each provision of this Agreement will be interpreted insuch manner as to be effective and valid under applicable law, but if any provision of thisAgreement is held to be invalid, illegal or unenforceable in any respect under any applicable lawor rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect anyother provision or any other jurisdiction, but such invalid, illegal or unenforceable provisionwill be reformed, construed and enforced in such jurisdiction so as to render it valid, legal, andenforceable consistent with the intent of the parties insofar as Possible.     2.2 Entire Agreement. This Agreement, constitutes the entire and exclusive agreement betweenyou and the Company, and it supersedes any prior agreement, promise, representation, 0r statement,written or otherwise, between you and the Company with regard to this subject matter. lt is enteredinto without reliance 0n any promise, representation, statement or agreement other than thoseexpressly contained or incorporated herein, and it cannot be modified or amended except in awriting signed by you and a duly authorized officer of the Company.     2.3 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of andbe enforceable by you, the company and your and its respective successors, assigns, heirs,executors and administrators, except that you may not assign any of your duties hereunder and youmay not assign any of your rights hereunder without the written consent of the Company, which shallnot be withheld unreasonably.     2.4 Governing Law. All questions concerning the construction, validity and interpretation ofthis Agreement will be governed by the law of the State of California as applied to contracts madeand to be performed entirely within California.IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as of the date first abovewritten.Photon Dynamics, Inc.   By: /s/ MAUREEN L. LAMB   Accepted and agreed:   /s/ JEFFREY A. HAWTHORNE 12/13/2005     Date