Wait - you said Box 1 (Wages) and Box 2 (Federal tax withheld) are the same? How can that be? Was that a typo in your original post?

In this situation, I've usually seen a W-2 issued, so I don't think that's a big deal. Just report it as such.

He'll also get a 1099-B, so be sure to adjust his cost basis for the "spread" between the FMV on the date exercised/sold (I assume he sold the stock) and the option price.