SHARE-BASED COMPENSATION PLANS

12 Months Ended

Jun. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 13: SHARE-BASED COMPENSATION PLANS

Share-Based Compensation Plans
The Zygo Corporation 2012 Equity Incentive Plan (“2012 Plan”) permits the granting of stock options to purchase shares of common stock and the granting of restricted stock units. The Board of Directors may also amend the 2012 Plan to authorize the grant of other types of equity-based awards, without further action by our stockholders. We have 1,650,000 shares authorized for issuance under the 2012 Plan, of which 1,573,074 remain available for grant at June 30, 2012. The exercise price per share of common stock covered by an option may not be less than the fair market value per share on the date of grant. Options and grants of restricted stock units generally vest over a four year period at a rate of 25% each year. Restricted stock awards granted prior to January 1, 2011 under the Zygo Corporation 2002 Equity Incentive Plan (“2002 Plan”), as amended in 2006, vest 50% after three years and 50% after four years. The 2002 Plan permitted the granting of stock options to purchase shares of common stock and the granting of restricted stock units. The 2002 Plan expired on August 27, 2012, and no further stock options or restricted stock units may be granted after that date.

As part of a director’s compensation for services to the company, non-employee directors are granted 5,000 restricted shares, and a non-employee chairman of the board is granted 7,500 restricted shares, which vest on an annual basis after one year and each new non-employee director is granted options to purchase 16,000 shares of common stock on his or her first day of service, at the market value per share on the date of grant. These options vest over a four year period at a rate of 25% each year. We use the Black-Scholes option-pricing model to calculate the fair value of stock option awards. The key assumptions for this valuation method include the expected term of the option, stock price volatility, risk-free interest rate, dividend yield, and exercise price. Under the assumptions indicated below, the weighted-average fair value of stock option grants for fiscal 2012, 2011 and 2010 were $7.21, $5.68 and $4.45, respectively.

Share-based compensation expense for the fiscal year ended June 30, 2012 was $4,128, with a related tax benefit of $1,486. This increased cost of goods sold by $790, selling, general and administrative expenses by $2,708 and research, development and engineering expenses by $630. Share-based compensation expense for the fiscal year ended June 30, 2011 was $3,965, with a related tax benefit of $1,427. This increased cost of goods sold by $650, selling, general and administrative expenses by $2,416 and research, development and engineering expenses by $899. Share-based compensation expense for the fiscal year ended June 30, 2010 was $2,492, with a related tax benefit of $897. This increased cost of goods sold by $316, selling, general and administrative expenses by $1,770 and research, development and engineering expenses by $406. Restricted stock awards generally allow recipients to sell a portion of the stock award back to us, in order to cover tax liabilities resulting from the vesting of the award.

The table below indicates the key assumptions used in the option valuation calculations for options granted in fiscal 2012, 2011 and 2010, and a discussion of our methodology for developing each of the assumptions used in the valuation model:

	Fiscal Year Ended June 30,
		2011			2010
	2012	Minimum	Maximum		Minimum	Maximum
Term	6.6	4.1	5.1		4.1	5.1
Volatility	59.5%	45.7%	57.1%		45.7%	60.9%
Dividend yield	0.0%			0.0%			0.0%
Risk-free interest rate	1.5%	1.1%	2.6%		2.0%	2.5%

Term – This is the period of time over which the options granted are expected to remain outstanding. Options granted generally have a maximum term of ten years. An increase in the expected term would increase compensation expense.

Volatility – This is a measure of the amount by which a price has fluctuated or is expected to fluctuate. Volatilities are based on implied volatilities from traded options of Zygo’s shares and historical volatility of Zygo’s shares. An increase in the expected volatility would increase compensation expense.

Risk-Free Interest Rate – This is the U.S. Treasury rate at the time of the grant having a term equal to the expected term of the option. An increase in the risk-free interest rate would increase compensation expense.

Dividend Yield – We did not make any dividend payments during the last five fiscal years and we have no plans to pay dividends in the foreseeable future. An increase in the dividend yield would decrease compensation expense.

Stock Options

The following table summarizes information about our stock options granted under our share-based compensation plans for fiscal 2012, 2011 and 2010. Included in the information below are outstanding options from the Zygo Corporation Amended and Restated Non-Qualified Stock Option Plan which expired in fiscal 2003 and the 2002 Plan which expired in August 2012, in both instances, to the extent the options remain exercisable.

	June 30, 2012					June 30, 2011					June 30, 2010
	Shares Covered by Options			Weighted Average Exercise Price		Shares Covered by Options			Weighted Average Exercise Price		Shares Covered by Options			Weighted Average Exercise Price
Options - Outstanding at beginning of year		1,436,240		$	10.57		1,976,892		$	20.14		1,908,572		$	22.72
Granted		229,562		$	12.47		100,000		$	12.13		515,000		$	9.75
Exercised		(365,642	)	$	9.79		(166,852	)	$	10.05		(57,300	)	$	8.39
Expired or cancelled		(55,263	)	$	12.87		(473,800	)	$	51.07		(389,380	)	$	29.60
Options - Outstanding at end of year		1,244,897		$	11.03		1,436,240		$	10.57		1,976,892		$	20.14
Options vested or expected to vest		548,144		$	11.20		1,402,221		$	10.56		1,878,816		$	20.68
Options - Exercisable at end of year		681,185		$	10.87		925,990		$	10.70		1,297,492		$	25.46

Outstanding options at June 30, 2012, had an intrinsic value of $8,506 with a weighted average remaining contractual life of 6.4 years. Exercisable options at the end of the year had an intrinsic value of $4,763 with a weighted average remaining contractual life of 4.8 years.

The following table summarizes information about our stock options granted under our share-based compensation plans as of June 30, 2012.

Range of Exercise Prices		Options Outstanding						Options Exercisable
Minimum	Maximum	Number Outstanding as of June 30, 2012		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable as of June 30, 2012		Weighted Average Exercise Price
$5.09	$8.80		191,275		6.7	$	6.86		95,775	$	6.51
$9.01	$12.51		839,868		6.7	$	11.02		417,656	$	10.46
$12.53	$14.74		120,600		3.1	$	13.65		120,600	$	13.65
$14.90	$20.09		93,154		7.0	$	16.38		47,154	$	16.24
$5.09	$20.09		1,244,897		6.4	$	11.03		681,185	$	10.87

As of June 30, 2012, there was $1,475 of total unrecognized compensation cost related to stock options. These costs are expected to be recognized over a weighted average period of 1.8 years.

The total intrinsic value of stock options exercised was $2,823, $449 and $109 and the total fair value of stock awards vested was $803, $959 and $478 during the fiscal years ended June 30, 2012, 2011 and 2010, respectively.

Cash received from stock option exercises and the associated tax benefit for the fiscal years ended June 30, 2012, 2011 and 2010 was $2,629, $1,834 and $520, respectively.

Restricted Stock
The following table summarizes information about restricted stock units granted under share-based compensation plans for the fiscal years ended June 30, 2012, 2011, and 2010:

	June 30, 2012					June 30, 2011					June 30, 2010
	Shares			Weighted Average Fair Value		Shares			Weighted Average Fair Value		Shares			Weighted Average Fair Value
Non vested balance at beginning of year		713,975		$	8.00		588,093		$	9.04		551,650		$	11.46
Granted		176,812		$	13.78		362,500		$	8.28		309,000		$	6.06
Vested		(148,500	)	$	11.39		(172,865	)	$	8.89		(205,194	)	$	11.28
Forfeited		(7,955	)	$	6.43		(63,753	)	$	9.06		(67,363	)	$	8.71
Non vested balance at end of year		734,332		$	9.92		713,975		$	8.00		588,093		$	9.04

As of June 30, 2012, there was $3,290 of total unrecognized compensation costs related to restricted stock awards. These costs are expected to be recognized over a weighted average period of 1.8 years.

At June 30, 2012, an aggregate of 1,838,623 shares remained available for future grants under our share-based compensation plans, which cover stock awards and stock options. We issue shares to satisfy stock option exercises and restricted stock awards, as applicable.