diff --git a/src/compiler/commandLineParser.ts b/src/compiler/commandLineParser.ts
index a41038c5e4..779db74048 100644
--- a/src/compiler/commandLineParser.ts
+++ b/src/compiler/commandLineParser.ts
@@ -527,14 +527,14 @@ namespace ts {
                 const filesSeen: Map<boolean> = {};
 
                 let exclude: string[] = [];
-                if(json["exclude"] instanceof Array){
+                if (json["exclude"] instanceof Array) {
                     exclude = json["exclude"];
                 }
                 else {
                     // by default exclude node_modules, and any specificied output directory
-                    exclude = ["node_modules"]
-                    let outDir = json["compilerOptions"] && json["compilerOptions"]["outDir"];
-                    if(outDir) {
+                    exclude = ["node_modules"];
+                    const outDir = json["compilerOptions"] && json["compilerOptions"]["outDir"];
+                    if (outDir) {
                         exclude.push(outDir);
                     }
                 }
diff --git a/src/compiler/program.ts b/src/compiler/program.ts
index 75de3ed525..47b6d44ccb 100644
--- a/src/compiler/program.ts
+++ b/src/compiler/program.ts
@@ -1288,7 +1288,6 @@ namespace ts {
             const languageVersion = options.target || ScriptTarget.ES3;
             const outFile = options.outFile || options.out;
 
-            const firstExternalModuleSourceFile = forEach(files, f => isExternalModule(f) ? f : undefined);
             if (options.isolatedModules) {
                 const firstNonExternalModuleSourceFile = forEach(files, f => !isExternalModule(f) && !isDeclarationFile(f) ? f : undefined);
                 if (firstNonExternalModuleSourceFile) {
diff --git a/tests/cases/unittests/cachingInServerLSHost.ts b/tests/cases/unittests/cachingInServerLSHost.ts
index 88b44a693b..2b6e24e577 100644
--- a/tests/cases/unittests/cachingInServerLSHost.ts
+++ b/tests/cases/unittests/cachingInServerLSHost.ts
@@ -7,6 +7,16 @@ module ts {
     }
 
     function createDefaultServerHost(fileMap: Map<File>): server.ServerHost  {
+        let existingDirectories: Map<boolean> = {};
+        forEachValue(fileMap, v => {
+            let dir = getDirectoryPath(v.name);
+            let previous: string;
+            do {
+                existingDirectories[dir] = true;
+                previous = dir;
+                dir = getDirectoryPath(dir);
+            } while (dir !== previous);
+        });
         return {
             args: <string[]>[],
             newLine: "\r\n",
@@ -26,7 +36,7 @@ module ts {
                 return hasProperty(fileMap, path);
             },
             directoryExists: (path: string): boolean => {
-                throw new Error("NYI");
+                return hasProperty(existingDirectories, path);
             },
             createDirectory: (path: string) => {
             },