Stock OptionStock Option Exercise Strategies Exercise Strategies

• RSU Review & AnalysisRSU Review & Analysis

© 2004 Asset Planning Services, Ltd.

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…

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

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

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