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stock through an exercise of his options and directed Primus to
issue the stock to him by placing the stock in his Piper Jaffray
account. Petitioner also directed Piper Jaffray to hold the
stock and to purchase the stock on margin to generate any funds
necessary to pay for the purchase. The fact that the notice did
not state specifically that Primus was also instructed to forward
to Primus any withholding obligation connected to the exercise of
the options does not necessarily mean that Primus as of that date
was not obligated to do so. Given petitioner’s instructions to
Piper Jaffray and his PJ account agreement with Piper Jaffray,
Piper Jaffray was required to pay promptly to Primus all costs
related to petitioner’s exercise of his options in purchase of
the Primus stock, and such costs would have included the prompt
depositing of the withholding taxes if and when required. In
this regard, section 7.5(iii) of the 1995 Plan did not require
that the option exercise price or any withholding obligation be
tendered with the exercise notice in order to make the notice
effective; it simply stated that the optionee must instruct the
brokerage firm to deliver the option exercise price and any
withholding tax obligations “promptly”. Nor do the stock option
letters require that petitioner actually pay the withholding tax,
just that he “make such arrangements as the Company may require
for the satisfaction” of any withholding obligations connected to
the exercise.
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