PHOTON DYNAMICS INC
EXHIBIT 10.43
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<TYPE>EX-10.43
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<DESCRIPTION>EXHIBIT 10.43
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;10.43</B>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-variant: SMALL-CAPS"><B>Photon Dynamics, Inc.</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS"><B>2005 Equity Incentive Plan</B></FONT>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-variant: SMALL-CAPS"><B>Stock Option Agreement</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS"><B>(Incentive Stock Option or Nonstatutory Stock Option)</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to your Stock Option Grant Notice (&#147;Grant Notice&#148;) and this Stock Option Agreement,
Photon Dynamics, Inc. (the &#147;Company&#148;) has granted you an option under its 2005 Equity Incentive
Plan (the &#147;Plan&#148;) to purchase the number of shares of the Company&#146;s Common Stock indicated in your
Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as
in the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The details of your option are as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.&nbsp;</B><FONT style="font-variant: SMALL-CAPS"><B>Vesting.</B></FONT> Subject to the limitations contained herein, your option will vest as
provided in your Grant Notice, provided that vesting will cease upon the termination of your
Continuous Service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.&nbsp;</B><FONT style="font-variant: SMALL-CAPS"><B>Number of Shares and Exercise Price.</B></FONT> The number of shares of Common Stock subject
to your option and your exercise price per share referenced in your Grant Notice may be adjusted
from time to time for Capitalization Adjustments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.&nbsp;</B><FONT style="font-variant: SMALL-CAPS"><B>Exercise prior to Vesting (&#147;Early Exercise&#148;).</B></FONT> If permitted in your Grant Notice
(i.e., the &#147;Exercise Schedule&#148; indicates that &#147;Early Exercise&#148; of your option is permitted) and
subject to the provisions of your option, you may elect at any time that is both (i)&nbsp;during the
period of your Continuous Service and (ii)&nbsp;during the term of your option, to exercise all or part
of your option, including the nonvested portion of your option; <I>provided, however, </I>that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(a)&nbsp;</B>a partial exercise of your option shall be deemed to cover first vested shares of Common
Stock and then the earliest vesting installment of unvested shares of Common Stock;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)&nbsp;</B>any shares of Common Stock so purchased from installments that have not vested as of the
date of exercise shall be subject to the purchase option in favor of the Company as described in
the Company&#146;s form of Early Exercise Stock Purchase Agreement;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(c)&nbsp;</B>you shall enter into the Company&#146;s form of Early Exercise Stock Purchase Agreement with a
vesting schedule that will result in the same vesting as if no early exercise had occurred; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(d)&nbsp;</B>if your option is an Incentive Stock Option, then, to the extent that the aggregate Fair
Market Value (determined at the time of grant) of the shares of Common Stock with respect to which
your option plus all other Incentive Stock Options you hold are exercisable for the first time by
you during any calendar year (under all plans of the Company and its Affiliates) exceeds one
hundred thousand dollars ($100,000), your option(s) or portions thereof
</DIV>

<P align="center" style="font-size: 10pt">1.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">that exceed such limit
(according to the order in which they were granted) shall be treated as Nonstatutory Stock Options.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.&nbsp;</B><FONT style="font-variant: SMALL-CAPS"><B>Method of Payment.</B></FONT> Payment of the exercise price is due in full upon exercise of
all or any part of your option. You may elect to make payment of the exercise price in cash or by
check or in any other manner <B><I>permitted by your Grant Notice, </I></B>which may include one or more of the
following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(a) </B>In the Company&#146;s sole discretion at the time your option is exercised and provided that at
the time of exercise the Common Stock is publicly traded and quoted regularly in <I>The Wall Street
Journal</I>, pursuant to a program developed under Regulation&nbsp;T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b) </B>Provided that at the time of exercise the Common Stock is publicly traded and quoted
regularly in <I>The Wall Street Journal</I>, by delivery of already-owned shares of Common Stock either
that you have held for the period required to avoid a charge to the Company&#146;s reported earnings
(generally six (6)&nbsp;months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security interests, and that
are valued at Fair Market Value on the date of exercise. &#147;Delivery&#148; for these purposes, in the
sole discretion of the Company at the time you exercise your option, shall include delivery to the
Company of your attestation of ownership of such shares of Common Stock in a form approved by the
Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company
of Common Stock to the extent such tender would violate the provisions of any law, regulation or
agreement restricting the redemption of the Company&#146;s stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.&nbsp;</B><FONT style="font-variant: SMALL-CAPS"><B>Whole Shares.</B></FONT> You may exercise your option only for whole shares of Common Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.&nbsp;</B><FONT style="font-variant: SMALL-CAPS"><B>Securities Law Compliance.</B></FONT> Notwithstanding anything to the contrary contained
herein, you may not exercise your option unless the shares of Common Stock issuable upon such
exercise are then registered under the Securities Act or, if such shares of Common Stock are not
then so registered, the Company has determined that such exercise and issuance would be exempt from
the registration requirements of the Securities Act. The exercise of your option also must comply
with other applicable laws and regulations governing your option, and you may not exercise your
option if the Company determines that such exercise would not be in material compliance with such
laws and regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.&nbsp;</B><FONT style="font-variant: SMALL-CAPS"><B>Term.</B></FONT> You may not exercise your option before the commencement or after the
expiration of its term. The term of your option commences on the Date of Grant and expires upon
the earliest of the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(a)&nbsp;</B>immediately upon the termination of your Continuous Service for Cause;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)&nbsp;</B>three (3)&nbsp;months after the termination of your Continuous Service for any reason other
than Cause, Disability or death, provided that if during any part of such three (3)
</DIV>

<P align="center" style="font-size: 10pt">2.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">month period
you may not exercise your option solely because of the condition set forth in the preceding
paragraph relating to &#147;Securities Law Compliance,&#148; your option shall not expire until the earlier
of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3)
months after the termination of your Continuous Service;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(c) </B>twelve (12)&nbsp;months after the termination of your Continuous Service due to your
Disability;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(d) </B>eighteen (18)&nbsp;months after your death if you die either during your Continuous Service or
within three (3)&nbsp;months after your Continuous Service terminates for any reason other than Cause;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(e) </B>the Expiration Date indicated in your Grant Notice; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(f) </B>the day before the seventh (7th) anniversary of the Date of Grant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If your option is an Incentive Stock Option, note that to obtain the federal income tax
advantages associated with an Incentive Stock Option, the Code requires that at all times beginning
on the date of grant of your option and ending on the day three (3)&nbsp;months before the date of your
option&#146;s exercise, you must be an employee of the Company or an Affiliate, except in the event of
your death or your permanent and total disability, as defined in Section 22(e) of the Code. (The
definition of disability in Section 22(e) of the Code is different from the definition of the
Disability under the Plan). The Company has provided for extended
exercisability of your option under certain circumstances for your benefit but cannot
guarantee that your option will necessarily be treated as an Incentive Stock Option if you continue
to provide services to the Company or an Affiliate as a Consultant or Director after your
employment terminates or if you otherwise exercise your option more than three (3)&nbsp;months after the
date your employment with the Company or an Affiliate terminates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.&nbsp;</B><FONT style="font-variant: SMALL-CAPS"><B>Exercise.</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(a) </B>You may exercise the vested portion of your option (and the unvested portion of your
option if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a
form designated by the Company) together with the exercise price to the Secretary of the Company,
or to such other person as the Company may designate, during regular business hours, together with
such additional documents as the Company may then require.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b) </B>By exercising your option you agree that, as a condition to any exercise of your option,
the Company may require you to enter into an arrangement providing for the payment by you to the
Company of any tax withholding obligation of the Company arising by reason of (1)&nbsp;the exercise of
your option, (2)&nbsp;the lapse of any substantial risk of forfeiture to which the shares of Common
Stock are subject at the time of exercise, or (3)&nbsp;the disposition of shares of Common Stock
acquired upon such exercise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(c) </B>If your option is an Incentive Stock Option, by exercising your option you agree that you
will notify the Company in writing within fifteen (15)&nbsp;days after the date of any disposition of
any of the shares of the Common Stock issued upon exercise of your option that
</DIV>



<P align="center" style="font-size: 10pt">3.
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">occurs within two
(2)&nbsp;years after the date of your option grant or within one (1)&nbsp;year after such shares of Common
Stock are transferred upon exercise of your option.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.&nbsp;</B><FONT style="font-variant: SMALL-CAPS"><B>Transferability.</B></FONT> Your option is not transferable, except by will or by the laws
of descent and distribution, and is exercisable during your life only by you. Notwithstanding the
foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you
may designate a third party who, in the event of your death, shall thereafter be entitled to
exercise your option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.&nbsp;</B><FONT style="font-variant: SMALL-CAPS"><B>Option not a Service Contract.</B></FONT> Your option is not an employment or service
contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation
on your part to continue in the employ of the Company or an Affiliate, or of the Company or an
Affiliate to continue your employment. In addition, nothing in your option shall obligate the
Company or an Affiliate, their respective stockholders, Boards of Directors, Officers
or Employees to continue any relationship that you might have as a Director or Consultant for
the Company or an Affiliate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.&nbsp;</B><FONT style="font-variant: SMALL-CAPS"><B>Withholding Obligations.</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(a) </B>At the time you exercise your option, in whole or in part, or at any time thereafter as
requested by the Company, you hereby authorize withholding from payroll and any other amounts
payable to you, and otherwise agree to make adequate provision for (including by means of a
&#147;cashless exercise&#148; pursuant to a program developed under Regulation&nbsp;T as promulgated by the
Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if
any, which arise in connection with the exercise of your option.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b) </B>Upon your request and subject to approval by the Company, in its sole discretion, and
compliance with any applicable legal conditions or restrictions, the Company may withhold from
fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a
number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of
the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or
such lower amount as may be necessary to avoid variable award accounting). If the date of
determination of any tax withholding obligation is deferred to a date later than the date of
exercise of your option, share withholding pursuant to the preceding sentence shall not be
permitted unless you make a proper and timely election under Section 83(b) of the Code, covering
the aggregate number of shares of Common Stock acquired upon such exercise with respect to which
such determination is otherwise deferred, to accelerate the determination of such tax withholding
obligation to the date of exercise of your option. Notwithstanding the filing of such election,
shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined
as of the date of exercise of your option that are otherwise issuable to you upon such exercise.
Any adverse consequences to you arising in connection with such share withholding procedure shall
be your sole responsibility.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(c) </B>You may not exercise your option unless the tax withholding obligations of the Company
and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when
desired even though your option is vested, and the Company shall have no
</DIV>


<P align="center" style="font-size: 10pt">4.
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">obligation to issue a
certificate for such shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein unless such obligations are satisfied.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.&nbsp;</B><FONT style="font-variant: SMALL-CAPS"><B>Notices.</B></FONT> Any notices provided for in your option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by
mail by the Company to you, five (5)&nbsp;days after deposit in the United States mail, postage
prepaid, addressed to you at the last address you provided to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.&nbsp;</B><FONT style="font-variant: SMALL-CAPS"><B>Governing Plan Document.</B></FONT> Your option is subject to all the provisions of the
Plan, the provisions of which are hereby made a part of your option, and is further subject to all
interpretations, amendments, rules and regulations, which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the provisions of your option
and those of the Plan, the provisions of the Plan shall control.
</DIV>


<P align="center" style="font-size: 10pt">5.
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