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Stock OptionStock Option Exercise Strategies Exercise Strategies
• RSU Review & AnalysisRSU Review & Analysis
© 2004 Asset Planning Services, Ltd.
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Long Term IncentiveLong Term Incentive
© 2004 Asset Planning Services, Ltd.
"Options Only" "Options and RSUs"
100% Stock Options 70% Stock Options + 30% RSUs (3:1 ratio)
"Options Only" "Options and RSUs"
1,000 Stock Options1,000 x 70% = 700 Stock Options
and 1,000 x 30% x 1/4 = 75 RSUs
For Example, If a Participant Would Have Been Granted 1,000 Stock Options…
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RSU Key PointsRSU Key Points
© 2004 Asset Planning Services, Ltd.
• Dividend “Equivalents”Dividend “Equivalents”
• Payout RulesPayout Rules
• Deferral Opportunity Deferral Opportunity
• Special Retiree RulesSpecial Retiree Rules
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NQSO / RSU AnalysisNQSO / RSU Analysis
© 2004 Asset Planning Services, Ltd.
15.00% Assumed Merck Growth Rate
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
1 2 3 4 5 6 7 8 9 10
Years
Solid LineNQSO / RSU
Combo
Dotted LineNQSO Only
Equ
ity (
afte
r ta
xes)
3-year Breakeven
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NQSO / RSU AnalysisNQSO / RSU Analysis
© 2004 Asset Planning Services, Ltd.
6.00% Assumed Merck Growth Rate
0.38
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
1 2 3 4 5 6 7 8 9 10
Years
Solid LineNQSO / RSU Combo
Dotted LineNQSO Only
Equ
ity (
afte
r ta
xes)
10-year Breakeven