The Company currently has one 401(k) profit-sharing plan that allows participation by U.S. employees who have completed six months of service, as defined, and are 21 years of age or older. Participants may defer up to 75% of their gross pay, up to a maximum limit determined by U.S. federal law. Participants are also eligible for a matching contribution. The Company may from time to time, at its discretion, make a “matching contribution” based on the amount and rate of the elective deferrals. The Company determines how much, if any, it will contribute for each dollar of elective deferrals. Participants vest in matching contributions over a three-year period. Company matching contributions to the 401(k) plan(s) totaled $3.0 million, $1.9 million and $2.2 million for the years ended December 31, 2012, 2011 and 2010, respectively.

In February 1999, the Company adopted the TeleTech Holdings, Inc. 1999 Stock Option and Incentive Plan (the “1999 Plan”). The purpose of the 1999 Plan was to enable the Company to continue to (a) attract and retain high quality directors, officers, employees, consultants and independent contractors; (b) motivate such persons to promote the long-term success of the Company and its subsidiaries; and (c) induce employees of companies that are acquired by TeleTech to accept employment with TeleTech following such an acquisition. The 1999 Plan supplemented the 1995 Option Plan. An aggregate of 7.0 million shares of common stock were reserved under the 1995 Option Plan and 14.0 million shares of common stock were reserved for issuance under the 1999 Plan, which permitted the award of incentive stock options, non-qualified stock options, stock appreciation rights, shares of restricted common stock and restricted stock units (“RSUs”). The 1999 Plan also provided for annual equity-based compensation grants to members of the Company's Board of Directors. Options granted to employees generally vested over four to five years and had a contractual life of ten years. Options issued to Directors vested immediately and had a contractual life of ten years. In May of 2009, the Company adopted a policy to issue RSUs to Directors, which generally vest over one year.

In May 2010, the Company adopted the 2010 Equity Incentive Plan (the “2010 Plan”). Upon adoption of the 2010 Plan, all authorized and unissued equity in both the 1995 Option Plan and the 1999 Plan was cancelled. An aggregate of 4.0 million shares of common stock has been reserved for issuance under the 2010 Plan, which permits the award of incentive stock options, non-qualified stock options, stock appreciation rights, shares of restricted common stock and RSUs. As of December 31, 2012, a total of 4.0 million shares were authorized and 2.3 million shares were available for issuance under the 2010 Plan.

For the years ended December 31, 2012, 2011, and 2010, the Company recorded total equity-based compensation expense under all equity-based arrangements (stock options and RSUs) of $13.4 million, $15.9 million and $13.4 million, respectively. For 2012, of the total compensation expense, $1.9 million was recognized in Cost of services and $11.5 million was recognized in Selling, general and administrative in the Consolidated Statements of Comprehensive Income. For 2011 and 2010, the Company recognized the total compensation expense in Selling, general and administrative in the Consolidated Statements of Comprehensive Income. For the years ended December 31, 2012, 2011, and 2010, the Company recognized a tax benefit under all equity-based arrangements (stock options and RSUs) of $5.7 million, $11.6 million and $5.2 million, respectively.

2010, 2011 and 2012 RSU Awards: The Company granted RSUs in 2010, 2011 and 2012 to new and existing employees that vest over four or five years. The Company also granted RSUs in 2010, 2011 and 2012 to members of the Board of Directors that vest over one year. In 2011 the Company granted 43,500 performance-based RSUs to eLoyalty employees that vest in equal installments over four years based on eLoyalty achieving specified revenue and operating income performance targets. The Company also granted 100,000 performance-based RSUs to a key employee in 2011 that vests based on the Company achieving specified revenue and operating income performance in 2014. There were no performance-based RSUs issued in 2010 and 2012. All RSUs vested during the year ended December 31, 2012 were issued out of treasury stock.

Summary of RSUs: Settlement of the RSUs shall be made in shares of the Company's common stock by delivery of one share of common stock for each RSU then being settled. The Company calculates the fair value for RSUs based on the closing price of the Company's stock on the date of grant and records compensation expense over the vesting period using a straight-line method. The Company factors an estimated forfeiture rate in calculating compensation expense on RSUs and adjusts for actual forfeitures upon the vesting of each tranche of RSUs.

The weighted average grant-date fair value of RSUs, including performance-based RSUs, granted during the years ended December 31, 2012, 2011, and 2010 was $15.91, $19.49, and $17.82. The total intrinsic value and fair value of RSUs vested during the years ended December 31, 2012, 2011, and 2010 was $15.5 million, $13.9 million, and $10.6 million.

A summary of the status of the Company's non-vested RSUs and performance-based RSUs and activity for the year ended December 31, 2012 is as follows:

		Shares	Weighted Average Grant Date Fair Value

Unvested as of December 31, 2011		2,546,872	$	18.48
	Granted	704,262	$	15.91
	Vested	(862,247)	$	18.02
	Cancellations/expirations	(303,375)	$	15.44
Unvested as of December 31, 2012		2,085,512	$	19.04

As of December 31, 2012, there was approximately $26.5 million of total unrecognized compensation expense and approximately $37.1 million in total intrinsic value related to non-vested RSU grants. The unrecognized compensation expense will be recognized over the remaining weighted-average vesting period of 1.6 years using the straight-line method.

During the year ended December 31, 2011, the Company granted 150,000 stock options to a key employee. The stock option award is made up of four separate tranches. Each tranche will vest based on certain stock price targets (market conditions). The grant date fair values of each tranche were calculated using a Monte Carlo simulation model in addition to a time-based binomial lattice model. The following table provides the assumptions used in the time-based binomial lattice model for each tranche granted:

	Year Ended December 31,
	2011
Risk-free interest rate	2.1%
Expected life in years	1.3 - 2.7
Expected volatility	54.4%
Dividend yield	0.0%
Weighted-average volatility	54.4%

The Company estimated the expected term based on historical averages of option exercises and expirations. The calculation of expected volatility is based on the historical volatility of the Company's common stock over the expected term. The risk-free interest rate is based on the yield on the grant measurement date of a traded zero-coupon U.S. Treasury bond, as reported by the U.S. Federal Reserve, with a term equal to the expected term of the stock option granted. The Company factored an estimated forfeiture rate and adjusted for actual forfeitures upon the vesting of each tranche of options.

A summary of stock option activity for the year ended December 31, 2012 is as follows:

		Shares	Weighted Average Exercise Price		Weighted Average Remaining Contract Term in Years	Aggregate Intrinsic Value (000's)

Outstanding as of December 31, 2011		1,462,508	$	12.98
	Exercises	(121,109)	$	11.33
	Post-vest cancellations/expirations	(30,700)	$	11.84
Outstanding as of December 31, 2012		1,310,699	$	13.16	3.7	$	6,674

Vested and exercisable as of
	December 31, 2012	1,160,699	$	12.62	3.0	$	6,533

The weighted-average grant-date fair value of options granted during the years ended December 31, 2012, 2011 and 2010 was $0, $8.68 and $0 per share, respectively. The total intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010 was $0.6 million, $12.6 million and $2.3 million, respectively. The total fair value of shares vested during the years ended December 31, 2012, 2011 and 2010 was $0, $0.1 million and $0.7 million, respectively.

As of December 31, 2012, there was approximately $0.6 million of unrecognized compensation expense related to non-vested stock options. The unrecognized compensation expense will be recognized over the remaining weighted-average derived service period of 1.5 years using the straight-line method.

Cash received from option exercises under the Plans for the years ended December 31, 2012, 2011 and 2010 was $1.4 million, $14.8 million and $2.8 million, respectively. The recognized tax benefit from option exercises for the years ended December 31, 2012, 2011 and 2010 was $0.2 million, $5.0 million and $1.0 million, respectively. Shares issued for options exercised during the year ended December 31, 2012 were issued out of treasury stock.