UPDATE 1-ESI, Zygo terminate merger agreement

* ESI, Zygo terminate deal agreed in October

* ESI gets $5.4 mln break-up fee

April 2 (Reuters) - Zygo Corp (ZIGO.O) ended its agreement to be acquired by Electro Scientific Industries Inc (ESIO.O) and paid a break-up fee of $5.4 million.

Electro Scientific Industries had agreed to acquire metrology components and optical systems maker Zygo in a stock deal valued at $173.5 million last October. However, in January, Zygo's board withdrew its recommendation for the merger.

Zygo might have to pay ESI, a photonic and laser systems supplier, an additional $1.2 million if its board approves an alternative transaction for the sale of its business within the next six months.

Shares of ESI closed at $6.71 and those of Zygo at $5.05, Thursday on Nasdaq. (Reporting by Deepti Govind in Bangalore; Editing by Ratul Ray Chaudhuri)