Usually you would get this error with your Web Deployment Project if there have multiple classes with same name.

To fix this issue you need to rename the conflicting classes.

To find out the conflicting classes follow these steps:

- From Visual Studio Tools Menu Click Options.
- Expand Projects and Solutions
- Click on Build and Run
- From the dropdown “MSBuild Project Build Output Verbosity” select Diagnostic
- Click on OK to save
- Now build your project using the Web Deployment Project
- Now wait for the project build to fail.
- From the Visual Studio View Menu click on Output You will see where the duplicates on output when it fails to build. Fix the duplicates.
- Build again.

From Webcosmo Webmaster Forum http://www.webcosmoforums.com/asp/21401-aspnet_merge-exe-exited-code-1-a.html