exhibit 10. 35 march 18, 2004 mr. malcolm thompson c / o photon dynamics, inc. 5970 optical court san jose, ca 95138 dear malcolm : photon dynamics, inc. ( the “ company ” ) is pleased to offer to continue your consulting engagement with the company in the position of executive chairman of the company ’ s board of directors ( the “ board ” ) in this agreement ( the “ agreement ” ) on the following terms. 1. consulting period. you began consulting with the company on february 1, 2004 and the company will continue to engage you as a consultant from the date of this agreement until december 31, 2004 ( the “ consulting period ” ), unless the consulting period is extended by you and the company, or terminated earlier pursuant to paragraph 9 below. during the consulting period, you will make yourself available to perform consulting services for up to six ( 6 ) days per month as arranged and agreed between you and the company ’ s president and ceo. 2. consulting services. during the consulting period, you will provide advice and services to the company ’ s senior management staff with respect to company business matters ( the “ consulting services ” ). the manner and means by which you choose to perform your work are in your sole discretion and control, although you agree to exercise the highest degree of professionalism and utilize your expertise in performing these consulting services. 3. consulting fees. the company will pay you as consulting fees a lump sum amount of $ 54, 000, which will be paid to you within five ( 5 ) business days after you sign and return this agreement to the company ( the “ initial payment ” ). the company will pay you as additional consulting fees the amount of $ 12, 000 per month for consulting services rendered on and after february 1, 2004 ( the “ consulting payments, ” collectively with the initial payment, the “ consulting fees ” ) through the end of the consulting period. the company will pay you the consulting payments on a monthly basis. in addition, the company will reimburse you for all reasonable, documented business expenses incurred in performing services under this agreement. you will invoice the company for any expenses you incur in connection with the consulting services, and any expense of more than $ 1, 000 dollars will require prior written approval from the company ’ s chief financial officer. mr. malcolm thompson march 18, 2004 page 2 4. stock option. subject to approval of the board, the company shall grant you a non