SAVVIS (SVVS)

Stock Options

Executive officers are initially provided with an option grant when they join our company based upon their position with us and their relevant prior experience. In 2007, our compensation committee elected to shift to an annual equity review and grant in order to maintain a strong connection between stockholder interests and individual rewards and for executive officer retention purposes. Equity compensation is reviewed in light of market conditions, peer group practices, historical holdings and the executive’s impact on the performance of our company.

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Stock Options

Executive officers are initially provided with an option grant when they join our company based upon their position with us and their relevant prior experience. Historically, we have granted additional options to executives annually in order to retain our executives.

In 2006, our compensation committee re-evaluated the historical practice of granting stock options to executives. As part of this re-evaluation, the compensation committee reviewed the total number of options that had been granted in the past and the total number of unvested options that were held by executives. The compensation committee concluded after its review that many executives and certain key employees no longer held a substantial amount of unvested stock options and that our company may be unable to continue to retain these executives without a new grant of options. Based on this review, in July 2006, the compensation committee granted awards of stock options to all of our executives other than Messrs. Koen and Crane. The vesting for this grant provides that the options will vest over four years with half of the stock options vesting on the second anniversary of the grant date and the remaining options vesting in equal monthly installments over the last two years. The compensation committee extended the initial vesting until the second anniversary of the grant date for retention purposes. Messrs. Koen and Crane, who both joined us in March 2006, did not receive a grant in July 2006 because they were both granted stock options at the time they were hired. The value of Messrs. Koen’s and Crane’s options was based upon the market demand for these executives at the time they were hired.

Stock Options

We believe that equity ownership in our company is important to provide our executive officers with long-term incentives to build value for our stockholders. Executive officers are initially provided with an option grant when they join our company based upon their position with us and their relevant prior experience. These initial grants are generally awarded at the end of the month in which the executive was hired and are awarded at the public market closing price of our company’s common stock on the business day immediately prior to the date of the grant. Options generally vest equally over four years. We spread the vesting of our options over four years to compensate executives for their contribution over a period of time. Historically, we have granted additional options to executives annually in order to retain our executives and reduce the impact from the dilution caused by the accretion of our Series A Convertible Preferred Stock (Series A Preferred Stock). These grants generally occurred in the middle of the year following the annual stockholders meeting. In 2006, we exchanged all of our shares of Series A Preferred Stock for shares of our common stock. After the closing of the exchange, our compensation committee re-evaluated the historical practice of annually granting stock options to executives.

As part of this re-evaluation, the compensation committee reviewed the total number of options that had been granted in the past and the total number of unvested options that were currently held by executives. The compensation committee concluded after its review that many executives and certain key employees no longer held a substantial amount of unvested stock options and that our company may be unable to continue to retain these executives without a new grant of options. Based on this review, in July 2006, the compensation committee granted awards of stock options to all of our executives other than Messrs. Koen and Crane. The vesting for this grant provides that the options will vest over four years with half of the stock options vesting on the second anniversary of the grant date and the remaining options vesting in equal monthly installments over the last two years. The compensation committee extended the initial vesting until the second anniversary of the grant date for retention purposes. Messrs. Koen and Crane, who both joined us in March 2006, did not receive a grant in July 2006 because they were both granted stock options at the time they were hired. The value of Messrs. Koen’s and Crane’s options was based upon the market demand for these executives at the time they were hired. In addition, in May 2006, Mr. Crane was appointed as President and the compensation committee awarded him an additional option grant due to his increased responsibilities. Our compensation committee also granted Mr. Caulfield an additional option grant in 2006 when he was promoted to Senior Vice President—Operations.

We expect that our compensation committee will continue to assess the marketplace and determine the necessity for equity grants. We would expect the compensation committee to provide new executives with initial option grants in 2007 to provide these new employees with long-term compensation incentives and that our compensation committee will continue to grant options in 2007 to provide additional incentives for current executives, if necessary, in order to retain the executive.

Stock Options

During the year ended 2006, the Company granted 4.2 million stock options under the 2003 Plan, with total compensation expense of $78.0 million to be recognized over the vesting period, using the Black-Scholes option pricing model. Compensation expense associated with stock options was $9.4 million, $0.5 million, and $0.7 million in the years ended December 31, 2006, 2005, and 2004, respectively. The Company’s 2006 expense included $0.7 million associated with the modification of a term of a former executive’s stock option agreement in March 2006.

Stock Options

Compensation expense associated with stock options was $4.4 million and $5.5 million during the three and nine months ended September 30, 2006, respectively, including $0.7 million associated with the modification of a term of a former executive’s stock option agreement in March 2006. Compensation expense associated with stock options was $0.5 million and $0.8 million during the three and nine months ended September 30, 2005, respectively.

On July 6, 2006, the compensation committee of the Board of Directors authorized an increase in the number of common shares available for grants of options or other share-based instruments by 3.0 million, and concurrently approved the grant of 2.9 million stock options with an exercise price of $30.01. Total compensation expense, using the Black-Scholes option pricing model, was $61.1 million and will be recognized over the vesting period. On August 11, 2006, an additional grant of 0.5 million shares with an exercise price of $25.93 was approved, with a total compensation expense of $8.6 million to be recognized over the vesting period, using the Black-Scholes option pricing model. Both option grants vest 50% on the second anniversary of the grant date and then monthly thereafter through the fourth anniversary of the grant date. On August 31, 2006, a grant of 0.1 million shares was approved with an exercise price of $25.09, with a total compensation expense of $1.8 million to be recognized over the vesting period, using the Black-Scholes option pricing model. This grant has a vesting term of four years and will vest one-quarter every year on the anniversary of the grant date. All three of the above mentioned grants were issued under our 2003 plan.

Stock Options

Compensation expense associated with stock options was $1.4 million and $2.3 million during the three and six months ended June 30, 2006, respectively, including $0.7 million associated with the modification of a term of an executive’s stock option agreement in March 2006. Compensation expense associated with stock options was $0.1 million and $0.3 million during the three and six months ended June 30, 2005, respectively.

On July 6, 2006, the compensation committee of the Board of Directors authorized an increase in the number of common shares available for grants of options or other share-based instruments by 3.0 million, subject to stockholder approval of such increase, and concurrently approved the grant of 2.9 million stock options with an exercise price of $30.01 per share under the 2003 Plan. Total compensation expense, using the Black-Scholes option pricing model, is estimated to be $60 million and will be recognized over the vesting period. The options vest 50% on the second anniversary of the grant date and then monthly thereafter through the fourth anniversary of the grant date.

Stock Options

Compensation expense associated with stock options was $0.8 million during the three months ended March 31, 2006, including $0.7 million associated with the modification of a term of an executive’s stock option agreement.

Stock Options

Compensation expense associated with stock options was $0.8 million during the three months ended March 31, 2006, including $0.7 million associated with the modification of a term of an executive’s stock option agreement.

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Table of Contents

Stock Options

You will receive incentive stock options to purchase 225,000 shares of the Company’s common stock at the market price of the Company’s stock on a date that will be locked in within 72 hours of your acceptance of this offer. These options shall vest based on the following schedule.

All of the unvested options immediately vest upon a “Change of Control,” however such options will not vest so long as both Robert McCormick and Jack Finlayson remain employed by the Company in their current roles. If termination without cause occurs at any time or you resign with Good Reason an additional twelve (12) months of your options will vest immediately. In the event of your death or permanent disability, all unvested options shall immediately vest and you and/or your family will receive the equivalent of one year’s base salary and continuation of benefits for one (1) year, which shall include the housing allowance. In the event of your death or permanent disability during the first year of employment, you or your estate will receive the balance of the $450,000 bonus referred to under “Salary and Bonus” above.

Continuation of the right to exercise all vested options will continue for one year after termination of employment unless termination is for cause in which case such right will continue for 3 months. If you terminate your employment for any reason other than “Good Reason” during the first year of your employment the Company shall have the right to repurchase any exercised and unsold shares at the option strike price for a period of thirty days from the later of the exercise of such options and the date of your termination.