10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-35215

HomeAway, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-0970381
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1011 W. Fifth Street, Suite 300

Austin, Texas 78703

(Address of principal executive offices, including zip code)

(512) 684-1100

(Registrant’s telephone number, including area code)

Indicate by check mark whether registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

Indicate the number of shares outstanding of each of the issuer’s classes of stock, as of the latest practicable date.

Class	Outstanding at July 23, 2013
Common Stock, $0.0001 par value per share	85,255,889

HomeAway, Inc.

Table of Contents

		Page No.
PART I: FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)		3
	Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012		3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June  30, 2013 and June 30, 2012		4
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June  30, 2013 and June 30, 2012		5
	Consolidated Statement of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2013		6
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and June  30, 2012		7
	Notes to Condensed Consolidated Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		42
Item 4.	Controls and Procedures		43
PART II: OTHER INFORMATION
Item 1.	Legal Proceedings		43
Item 1A.	Risk Factors		43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		57
Item 3.	Defaults Upon Senior Securities		58
Item 4.	Mine Safety Disclosures		58
Item 5.	Other Information		58
Item 6.	Exhibits		58
Signature			59
Exhibit Index			60
Certifications

2

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

HomeAway, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except for share and per share information)

(unaudited)

	June 30, 2013			December 31, 2012
Assets
Current assets:
Cash and cash equivalents	$	181,879		$	189,478
Short-term investments		154,417			80,330
Accounts receivable, net of allowance for doubtful accounts of $669 and $633 as of June 30, 2013 and December 31, 2012, respectively		18,549			16,343
Income tax receivable		1,702			775
Prepaid expenses and other current assets		7,137			7,312
Restricted cash		176			284
Deferred tax assets		5,364			5,425
Total current assets		369,224			299,947
Property and equipment, net		37,048			32,901
Goodwill		308,591			312,412
Intangible assets, net		53,605			59,727
Restricted cash		554			230
Deferred tax assets		1,633			1,807
Other non-current assets		18,778			15,651
Total assets	$	789,433		$	722,675
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	5,279		$	6,613
Income tax payable		593			11,137
Accrued expenses		33,550			33,856
Deferred revenue		154,988			126,351
Total current liabilities		194,410			177,957
Deferred revenue, less current portion		2,491			2,879
Deferred tax liabilities		15,754			17,615
Other non-current liabilities		8,522			7,191
Total liabilities		221,177			205,642
Commitments and contingencies (Note 5)
Stockholders’ equity
Common stock: $0.0001 par value; 350,000,000 shares authorized; 85,202,582 and 83,441,153 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively		9			8
Additional paid-in capital		664,497			618,700
Accumulated other comprehensive loss		(10,790	)		(5,450	)
Accumulated deficit		(85,460	)		(96,225	)
Total stockholders’ equity		568,256			517,033
Total liabilities and stockholders’ equity	$	789,433		$	722,675

The accompanying notes are an integral part of these financial statements.

3

HomeAway, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except for per share information)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Revenue:
Listing	$	73,264		$	60,241		$	140,095		$	114,209
Other		13,344			11,375			25,977			21,510
Total revenue		86,608			71,616			166,072			135,719
Costs and expenses:
Cost of revenue (exclusive of amortization shown separately below)		13,845			11,295			27,126			21,827
Product development		14,441			10,324			26,840			20,026
Sales and marketing		28,867			24,074			55,234			48,808
General and administrative		18,069			14,652			34,118			27,489
Amortization expense		2,995			3,282			6,175			5,730
Total costs and expenses		78,217			63,627			149,493			123,880
Operating income		8,391			7,989			16,579			11,839
Other income (expense):
Interest income		299			240			542			409
Other income (expense)		66			(1,582	)		(1,525	)		(2,310	)
Total other income (expense)		365			(1,342	)		(983	)		(1,901	)
Income before income taxes		8,756			6,647			15,596			9,938
Income tax expense		(3,286	)		(3,791	)		(4,831	)		(4,681	)
Net income	$	5,470		$	2,856		$	10,765		$	5,257
Net income per share:
Basic	$	0.06		$	0.03		$	0.13		$	0.06
Diluted	$	0.06		$	0.03		$	0.12		$	0.06
Weighted average number of shares outstanding:
Basic		84,920			82,262			84,482			81,816
Diluted		87,647			84,737			87,183			84,638

The accompanying notes are an integral part of these financial statements.

4

HomeAway, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net income	$	5,470		$	2,856		$	10,765		$	5,257
Other comprehensive income (loss):
Foreign currency translation adjustments (net of $0 tax)		(324	)		(3,900	)		(4,743	)		(2,224	)
Unrealized gain (loss) on short-term investments (net of $0 tax)		(495	)		(123	)		(597	)		139
Total other comprehensive income (loss)		(819	)		(4,023	)		(5,340	)		(2,085	)
Comprehensive income (loss)	$	4,651		$	(1,167	)	$	5,425		$	3,172

The accompanying notes are an integral part of these financial statements.

5

HomeAway, Inc.

Consolidated Statement of Changes in Stockholders’ Equity

(In thousands)

(unaudited)

	Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Loss			Deficit			Equity
Balance at December 31, 2012		83,441	$	8	$	618,700	$	(5,450	)	$	(96,225	)	$	517,033
Issuance of stock under Company plans, net of shares withheld for taxes		1,762		1		23,960		—			—			23,961
Stock-based compensation		—		—		17,592		—			—			17,592
Excess tax benefits related to employee stock options		—		—		4,245		—			—			4,245
Other comprehensive loss		—		—		—		(5,340	)		—			(5,340	)
Net income		—		—		—		—			10,765			10,765
Balance at June 30, 2013		85,203	$	9	$	664,497	$	(10,790	)	$	(85,460	)	$	568,256

The accompanying notes are an integral part of these financial statements.

6

HomeAway, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

	Six Months Ended June 30,
	2013			2012
Cash flows from operating activities
Net income	$	10,765		$	5,257
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		6,357			5,089
Amortization of intangible assets		6,175			5,730
Amortization of premiums on securities and other		1,897			1,149
Stock-based compensation		17,592			12,146
Excess tax benefit from stock-based compensation		(4,245	)		(2,530	)
Deferred income taxes		(1,695	)		(4,594	)
Net realized/unrealized foreign exchange loss		257			914
Realized loss on foreign currency forwards		765			705
Changes in operating assets and liabilities, net of assets and liabilities assumed in business combinations:
Accounts receivable		(2,529	)		(929	)
Income tax receivable		(1,212	)		(138	)
Prepaid expenses and other assets		2			(6,660	)
Accounts payable		(1,570	)		1,281
Accrued expenses		1,944			2,531
Income tax payable		(5,883	)		6,296
Deferred revenue		29,379			26,418
Other non-current liabilities		1,293			2,274
Net cash provided by operating activities		59,292			54,939
Cash flows from investing activities
Acquisition of businesses, net of cash acquired		(150	)		(16,207	)
Change in restricted cash		(246	)		758
Purchases of intangibles and other assets		(551	)		(155	)
Purchases of non-marketable equity investment		(3,667	)		(6,446	)
Purchases of short-term investments		(100,460	)		(41,460	)
Proceeds from maturities and redemptions of marketable securities		23,880			19,664
Net settlement of foreign currency forwards		(765	)		(705	)
Purchases of property and equipment		(11,006	)		(11,272	)
Net cash used in investing activities		(92,965	)		(55,823	)
Cash flows from financing activities
Proceeds from exercises of options to purchase common stock		23,960			15,772
Excess tax benefit from stock-based compensation		4,245			2,530
Net cash provided by financing activities		28,205			18,302
Effect of exchange rate changes on cash		(2,131	)		(925	)
Net (decrease) increase in cash and cash equivalents		(7,599	)		16,493
Cash and cash equivalents at beginning of period		189,478			118,208
Cash and cash equivalents at end of period	$	181,879		$	134,701
Cash paid for taxes	$	12,116		$	5,801

The accompanying notes are an integral part of these financial statements.

7

HomeAway, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Description of Business

HomeAway, Inc. (the “Company”) operates an online vacation rental property marketplace that enables property owners and managers to market properties available for rental to vacation travelers who rely on the Company’s websites to search for and find available properties. These property owners and managers pay the Company to publish detailed property listings, including photographs, descriptions, location, pricing, availability and contact information. The Company also sells, itself or through third parties, complementary products, including travel guarantees, insurance products and property management software and services. Travelers use the network of websites to search for vacation rentals that meet their desired criteria, including location, size and price. Travelers that find properties that meet their requirements through the Company’s marketplace are able to contact property owners and managers directly by phone or through form-based communication tools on the Company’s websites.

The Company is a Delaware corporation headquartered in Austin, Texas.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of HomeAway, Inc. and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission, or the SEC. All significant intercompany transactions and balances have been eliminated. In the opinion of the Company’s management, the accompanying interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal recurring adjustments and those items discussed in these Notes, necessary for a fair presentation of the Company’s financial position, as of June 30, 2013; results of operations for the three and six months ended June 30, 2013 and June 30, 2012; comprehensive income for the three and six months ended June 30, 2013 and June 30, 2012; cash flows for the six months ended June 30, 2013 and June 30, 2012; and stockholders’ equity for the six months ended June 30, 2013. Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012. Operating results for this interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, or for any other period.

Out of Period Adjustment

During the three months ended June 30, 2013, the Company identified a prior period accounting error related to certain foreign currency hedging instruments which resulted in the understatement of other current assets and other income (expense). This error was not material to any prior period results of operations. Therefore, the Company recorded the error correction in the same quarter it was identified, which increased other income and income before income taxes by approximately $820,000 ($486,000 after tax) during the three months ended June 30, 2013. The cumulative effect had no impact on the results of operations for the six months ended June 30, 2013. The adjustment had no impact on cash flows from operations or total cash flows for the prior or current period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These differences could have a material effect on the Company’s future results of operations and financial position. Significant items subject to estimates and assumptions include certain revenue, the allowance for doubtful accounts, the fair value of short-term investments, the carrying amounts of goodwill and other indefinite-lived intangible assets, depreciation and amortization, the valuation of stock options and deferred income taxes.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received during the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1: Valuations based on quoted prices for identical assets and liabilities in active markets.

8

Level 2:	Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3:	Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The following section describes the valuation methodologies used to measure certain financial assets and financial liabilities at fair value.

Money Market Funds and Short-Term Investments

The Company’s cash equivalents, restricted cash and short-term investments classified as Level 1 are valued using quoted prices generated by market transactions involving identical assets. Short-term investments classified as Level 2 are valued using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments in active markets; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. The Company did not hold any cash equivalents, restricted cash or short-term investments categorized as Level 3 as of June 30, 2013 or December 31, 2012.

Short-term investments include certificates of deposit, corporate bonds, U.S. government agency bonds and municipal bonds and are classified as available-for-sale and reported at fair value using the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a component of other comprehensive income (loss), net of related estimated tax provisions or benefits. Additionally, the Company periodically assesses whether an other than temporary impairment loss on investments has occurred due to declines in fair value or other market conditions. Declines in fair value considered other than temporary are recorded as an impairment in the consolidated statement of operations. The Company did not record an impairment of its investments for any of the periods presented.

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities and deferred revenue approximate fair value because of the relatively short maturity of these instruments.

The following table summarizes the basis used to measure certain financial assets and liabilities at fair value on a recurring basis in the Company’s consolidated balance sheets at June 30, 2013 (in thousands):

	Balance as of June 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
Money market funds	$	98,637	$	98,637	$	—	$	—
Total cash equivalents		98,637		98,637		—		—
Restricted cash
Money market funds		730		730		—		—
Total restricted cash		730		730		—		—
Short-term investments
Certificates of deposit		1,808		—		1,808		—
Corporate bonds		109,563		—		109,563		—
U.S. government agency bonds		1,008		—		1,008		—
Municipal bonds		42,038		—		42,038		—
Total short-term investments		154,417		—		154,417		—
Total financial assets	$	253,784	$	99,367	$	154,417	$	—

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The following table summarizes the basis used to measure certain financial assets and liabilities at fair value on a recurring basis in the Company’s consolidated balance sheets at December 31, 2012 (in thousands):

	Balance as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
Money market funds	$	136,314	$	136,314	$	—	$	—
Total cash equivalents		136,314		136,314		—		—
Restricted cash
Money market funds		514		514		—		—
Total restricted cash		514		514		—		—
Short-term investments
Certificates of deposit		502		—		502		—
Corporate bonds		66,989		—		66,989		—
U.S. government agency bonds		1,013		—		1,013		—
Municipal bonds		11,826		—		11,826		—
Total short-term investments		80,330		—		80,330		—
Total financial assets	$	217,158	$	136,828	$	80,330	$	—

Business Segment

The Company has one operating segment consisting of various products and services related to its online marketplace of accommodation rental listings. The Company’s chief operating decision maker is considered to be the Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance of the business and other activities at the single operating segment level.

Cash and Cash Equivalents

Cash and cash equivalents include investments in money market funds and certificates of deposit that are readily convertible into cash. Cash and cash equivalents are stated at cost, which approximates fair value. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consisted of the following at June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013		December 31, 2012
Demand deposit accounts	$	83,242	$	53,164
Money market funds		98,637		136,314
Total	$	181,879	$	189,478

Restricted Cash

Restricted cash of $730,000 and $514,000 at June 30, 2013 and December 31, 2012, respectively, was held in money market funds owned by the Company in conjunction with leased office space and to secure credit card availability and reimbursable direct debits due from the Company.

Short-term Investments

Short-term investments generally consist of marketable securities that have original maturities greater than ninety days as of the date of purchase. Investments in which the Company has the ability and intent, if necessary, to liquidate in order to support its current operations, including those with contractual maturities greater than one year from the date of purchase, are classified as short-term. The Company’s investment securities are classified as available-for-sale and are presented at estimated fair value with any unrealized gains and losses included in other comprehensive income (loss).

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Cash flows from purchases, sales and maturities of available-for-sale securities are classified as cash flows from investing activities and reported gross, including any related premiums or discounts. Premiums related to purchases of available-for-sale securities were $6,435,000 and $1,987,000 during the six months ended June 30, 2013 and 2012, respectively. Fair values are based on quoted market prices. Short-term investments consisted of the following at June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Certificates of deposit	$	1,811	$	—	$	(3	)	$	1,808
Corporate bonds		109,794		69		(300	)		109,563
U.S. government agency bonds		1,007		1		—			1,008
Municipal bonds		42,321		5		(288	)		42,038
Total short-term investments	$	154,933	$	75	$	(591	)	$	154,417

	December 31, 2012
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Certificates of deposit	$	502	$	—	$	—		$	502
Corporate bonds		66,918		116		(45	)		66,989
U.S. government agency bonds		1,011		2		—			1,013
Municipal bonds		11,817		9		—			11,826
Total short-term investments	$	80,248	$	127	$	(45	)	$	80,330

For fixed income securities that have unrealized losses as of June 30, 2013, the Company does not have the intent to sell any of these investments and it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. The Company has evaluated these fixed income securities and determined that no credit losses exist. Accordingly, the Company has determined that the unrealized losses on fixed income securities as of June 30, 2013 were temporary in nature.

The following table summarizes the contractual underlying maturities of the Company’s short-term investments at June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013
	Less than 1 Year		1 to 3 Years		Total
Certificates of deposit	$	—	$	1,808	$	1,808
Corporate bonds		56,634		52,929		109,563
U.S. government agency bonds		1,008		—		1,008
Municipal bonds		7,781		34,257		42,038
Total short-term investments	$	65,423	$	88,994	$	154,417

	December 31, 2012
	Less than 1 Year		1 to 3 Years		Total
Certificates of deposit	$	3	$	499	$	502
Corporate bonds		41,307		25,682		66,989
U.S. government agency bonds		—		1,013		1,013
Municipal bonds		8,249		3,577		11,826
Total short-term investments	$	49,559	$	30,771	$	80,330

Non-marketable Equity Investment

During the six months ended June 30, 2013, the Company invested $3,667,000 for a non-controlling equity interest in a privately-held company in China. As of June 30, 2013, the total carrying value of the Company’s investment in the privately-held company was $10,113,000. The Company’s investment in the privately-held company is reported using the cost method of accounting or marked down to fair value when an event or circumstance indicates an other-than-temporary decline in value has occurred. It was not practicable to estimate the fair value of this asset as of June 30, 2013. No event or circumstance indicating an other-than-temporary decline in value of the Company’s interest in the non-marketable equity investment was identified. This investment is recorded in other non-current assets on the consolidated balance sheets.

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Accounts Receivable

Accounts receivable are primarily generated from three sources. Amounts due from credit card merchants who process the Company’s credit card sales from property listings and remit the proceeds to the Company are the primary source of accounts receivable. Accounts receivable are also generated from Internet display advertising amounts due in the ordinary course of business as well as amounts due to the Company for property listings or other products purchased on account. Accounts receivable from Internet display advertising revenue and products purchased on account are recorded at the invoiced amount and are non-interest bearing. Accounts receivable outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts by estimating losses on receivables based on known troubled accounts and historical experiences of losses incurred.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Computer equipment and purchased software are generally depreciated over three years. Furniture and fixtures are generally depreciated over five to ten years. Leasehold improvements are depreciated on a straight-line basis over the shorter of the contractual lease period or their estimated useful life. Upon disposal, property and equipment and the related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in the statements of operations. Ordinary maintenance and repairs are charged to expense, while expenditures that extend the physical or economic life of the assets are capitalized.

The Company capitalizes certain internally developed software and website development costs. These capitalized costs were approximately $28,076,000 and $23,985,000 at June 30, 2013 and December 31, 2012, respectively, and are included in property and equipment, net, in the balance sheet. Internally developed software costs are generally depreciated over five years.

The Company recorded depreciation expense on internally developed software and website development costs as follows for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Depreciation expense on internally developed software and website development costs	$	1,020	$	558	$	1,752	$	1,385

Goodwill and Intangible Assets

Goodwill arises from business combinations and is measured as the excess of the purchase consideration over the sum of the acquisition-date fair values of tangible and identifiable intangible assets acquired, less any liabilities assumed.

Goodwill and intangible assets deemed to have indefinite useful lives, such as certain trade names, are not amortized. Tests for impairment of goodwill and indefinite-lived intangible assets are performed on an annual basis as of October 1, or when events or circumstances indicate that the carrying amount of these assets may not be recoverable.

Circumstances that could trigger an impairment test outside of the annual test include but are not limited to: a significant adverse change in the business climate or legal factors; adverse cash flow trends; an adverse action or assessment by a regulator; unanticipated competition; loss of key personnel; decline in stock price; and the results of tests for recoverability of a significant asset group. The Company determined that no triggering event occurred during any of the periods presented.

For goodwill and indefinite lived intangible assets, the Company completes what is referred to as the “Step 0” analysis, which involves evaluating qualitative factors, including macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance related to its goodwill and its indefinite lived intangible assets. If the Company’s “Step 0” analysis indicates that it is more likely than not that the fair value of a reporting unit or of an indefinite lived intangible asset is less than its carrying amount, the Company would perform a quantitative two-step impairment test. The quantitative analysis compares the fair value of the Company’s reporting unit or indefinite-lived intangible assets to its carrying amount, and an impairment loss is recognized equivalent to the excess of the carrying amount over fair value. If, after assessing the totality of events or circumstances, the Company determines that it is more likely than not that the fair value of a reporting unit or indefinite lived intangible asset exceeds its carrying amount, then the quantitative impairment tests are unnecessary.

The Company’s annual evaluation of goodwill and indefinite-lived intangible assets for impairment was as of October 1, 2012, and the Company determined that the quantitative tests were not necessary.

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The determination of whether or not goodwill or indefinite-lived intangible assets have become impaired involves a significant level of judgment. Changes in the Company’s strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of goodwill or intangible assets.

No impairment of goodwill or indefinite-lived intangible assets was identified in any of the periods presented.

Identifiable intangible assets consist of trade names, customer listings, technology, domain names and contractual non-compete agreements associated with acquired businesses. Intangible assets with finite lives are amortized over their estimated useful lives on a straight-line basis and reviewed for impairment whenever events or changes in circumstances indicate that an asset’s carrying value may not be recoverable (see Note 3). The straight-line method of amortization represents the Company’s best estimate of the distribution of the economic value of the identifiable intangible assets.

Impairment of Long-lived Assets

The Company evaluates long-lived assets held for use, such as property and equipment, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated future undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value in the period in which the determination is made. No impairments of long-lived assets have been recorded during any of the periods presented.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an agreement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured.

The Company generates a significant portion of its revenue from customers purchasing online advertising services related to the listing of their properties for rent, primarily on a subscription basis over a fixed-term. The Company also generates revenue based on the number of traveler inquiries and reservation bookings for property listings on the Company’s websites, local and national Internet display advertisers, license of property management software and ancillary products and services.

Payments for term-based subscriptions received in advance of services being rendered are recorded as deferred revenue and recognized on a straight-line basis over the listing period. Revenue for inquiry-based contracts are determined on a fixed fee-per-inquiry as stated in the arrangement and recognized when the service has been performed.

Internet display advertising revenue is generated primarily from advertisements appearing on the Company’s websites. There are several types of Internet advertisements, and the way in which advertising revenue is earned varies among them. Depending upon the terms, revenue might be earned each time an impression is delivered, each time a user clicks on an ad, each time a graphic ad is displayed, or each time a user clicks-through on the ad and takes a specified action on the destination site. The Company recognizes advertising revenue on a cost-per-thousand (CPM) impression basis whereby advertisers pay the Company based on the number of times their ads appear on the Company’s websites.

The Company sells gift cards with no expiration date to travelers and does not charge administrative fees on unused cards. There is a portion of the gift card obligation that, based on historical redemption patterns, will not be used by the Company’s customers and is not required to be remitted to relevant jurisdictions, or breakage. At the point of sale, the Company recognizes breakage as deferred revenue and amortizes it over 48 months based on historical redemption patterns. The Company also records commission revenue for each gift card sale over the same 48-month redemption period.

The Company earns commission revenue for reservations made online through its websites, which is calculated as a percentage of the value of the reservation. This revenue is earned as the customers’ refund privileges lapse and is included in other revenue in the consolidated statement of operations.

Through its professional software for bed and breakfasts and professional property managers, the Company makes selected, online bookable properties available to online travel agencies and channel partners. The Company receives a percentage of the transaction value or a fee from the property manager for making this inventory available, which is recognized when earned. This revenue is included in other revenue in the consolidated statement of operations.

The Company generates revenue from the licensing of software products, the sale of maintenance agreements and the sale of hosted software solutions. For software license sales, one year of maintenance is typically included as part of the initial purchase price of the bundled offering with annual renewals of the maintenance component of the agreement following in subsequent years.

The Company recognizes revenue from the sale of perpetual licenses upon delivery, which generally occurs upon electronic transfer of the license key that makes the product available to the purchaser.

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As software is usually sold with maintenance, the amount of revenue allocated to the software license is determined by estimating the fair value of the maintenance and subtracting it from the total invoice or contract amount. Vendor-specific objective evidence, or VSOE, of the fair value of maintenance services is determined by the standard published list pricing for maintenance renewals, as the Company generally charges list prices for maintenance renewals. In determining VSOE, the Company requires that a substantial majority of the selling price for maintenance services fall within a reasonably narrow pricing range. Maintenance and support revenue is recognized ratably over the term of the agreement beginning on the activation date. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met.

Sales of hosted software solutions are generally for a one-year period. Revenue is recognized on a straight-line basis over the contract term. Certain implementation services related to the hosting services are essential to the customer’s use of the hosting services. For sales of these hosting services where the Company is responsible for implementation, the Company recognizes implementation revenue ratably over the estimated period of the hosting relationship, which the Company considers to be three years. Recognition starts once the product has been made available to the customer.

Training and consulting revenue is recognized upon delivery of the training or consulting services to the end customer.

The Company accounts for sales incentives to customers as a reduction of revenue at the time that the revenue is recognized from the related product sale. The Company also reports revenue net of any sales tax collected.

Stock-Based Compensation

The cost of stock-based compensation is recognized in the financial statements based upon the estimated grant date fair value of the awards measured using the Black–Scholes valuation model. The fair value of restricted stock awards and units is determined based on the number of shares granted and the fair value of the Company’s common stock as of the grant date. Fair value is generally recognized as an expense on a straight-line basis, net of estimated forfeitures, over the employee requisite service period. When estimating forfeitures, the Company considers voluntary termination behaviors as well as trends of actual option forfeitures.

The Company uses the “with and without” approach in determining the order in which tax attributes are utilized. As a result, the Company only recognizes a tax benefit from stock-based awards in additional paid-in capital if an incremental tax benefit is realized after all other tax attributes currently available to the Company have been utilized. When tax deductions from stock-based awards are less than the cumulative book compensation expense, the tax effect of the resulting difference (“shortfall”) is charged first to additional paid-in capital to the extent of the Company’s pool of windfall tax benefits with any remainder recognized in income tax expense. The Company has determined that it has a sufficient windfall pool available and therefore no amounts have been recognized in income tax expense. In addition, the Company accounts for the indirect effects of stock-based awards on other tax attributes through the consolidated statements of operations.

The benefits of tax deductions in excess of recognized compensation costs are reported as financing cash inflows, but only when such excess tax benefits are realized by a reduction to current taxes payable.

The following table summarizes the excess tax benefit that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Excess tax benefit from stock-based compensation	$	2,887	$	1,927	$	4,245	$	2,530

This tax benefit has been recorded as additional paid-in capital on the Company’s consolidated balance sheets as of June 30, 2013 and December 31, 2012.

Income Taxes

The Company recognizes income taxes using an asset and liability approach. This approach requires the recognition of deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. The measurement of deferred taxes is based on provisions of the enacted tax law and the effects of future changes in tax laws or rates are not anticipated. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Evaluating the need for an amount of a valuation allowance for deferred tax assets requires significant judgment and analysis of the positive and negative evidence available, including past operating results, estimates of future taxable income, reversals of existing taxable temporary differences and the feasibility of tax planning in order to determine whether all or some portion of the deferred tax assets will not be realized. Based on the available evidence and judgment, the Company has determined that it is more likely than not that certain loss carryforwards will not be realized; therefore, the Company has established a valuation allowance for such deferred tax assets to reduce the loss carryforward assets to amounts expected to be utilized.

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The Company may be subject to income tax audits by the respective tax authorities in any or all of the jurisdictions in which the Company operates. The Company is currently undergoing an audit at its subsidiary in Germany. Significant judgment is required in determining uncertain tax positions. The Company recognizes the benefit of uncertain income tax positions only if these positions are more likely than not to be sustained. Also, the recognized income tax benefit is measured at the largest amount that is more than 50% likely of being realized. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of an audit or the refinement of an estimate. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. The countries in which the Company may be subject to potential examination by tax authorities include the United States, Switzerland, the United Kingdom, Germany, France, Spain, the Netherlands, Brazil, Australia, Colombia, Italy and Thailand.

The calculation of the Company’s tax liabilities involves the inherent uncertainty associated with the application of complex tax laws. As a multinational corporation, the Company conducts its business in many countries and is subject to taxation in many jurisdictions. The taxation of the Company’s business is subject to the application of various and sometimes conflicting tax laws and regulations as well as multinational tax conventions. The Company’s effective tax rate is highly dependent upon the geographic distribution of its worldwide earnings or losses, the tax regulations and tax rates in each geographic region, the availability of tax credits and carryforwards, and the effectiveness of its tax planning strategies. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings. Consequently, taxing authorities may impose tax assessments or judgments against the Company that could materially impact its tax liability and/or its effective income tax rate. The Company believes it has adequately provided in its financial statements for additional taxes that it estimates may be assessed by the various taxing authorities. While the Company believes that it has adequately provided for all uncertain tax positions, amounts asserted by tax authorities could be greater or less than the Company’s accrued position. These tax liabilities, including the interest and penalties, are adjusted pursuant to a settlement with tax authorities, completion of audit, refinement of estimates or expiration of various statutes of limitation.

Foreign Currency Translation

The functional currency of the Company’s foreign subsidiaries is generally their respective local currency. The financial statements of the Company’s international operations are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities, the historical exchange rate for stockholders’ equity, and a weighted average exchange rate for each period for revenue, expenses, and gains and losses. Foreign currency translation adjustments are recorded as a separate component of stockholders’ equity. Gains and losses from foreign currency denominated transactions are recorded in other income (expense) in the Company’s consolidated statements of operations.

The following table summarizes the foreign currency transaction gain (loss) that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2013		2012			2013			2012
Foreign currency transaction gain (loss)	$	67	$	(1,541	)	$	(1,468	)	$	(2,292	)

Derivative Financial Instruments

As a result of the Company’s international operations, it is exposed to various market risks that may affect its consolidated results of operations, cash flows and financial position. These market risks include, but are not limited to, fluctuations in currency exchange rates. The Company’s primary foreign currency exposures are in Euros and British Pound Sterling. As a result, the Company faces exposure to adverse movements in currency exchange rates as the financial results of its operations are translated from local currency into U.S. dollars upon consolidation. Additionally, foreign exchange rate fluctuations on transactions denominated in currencies other than the functional currency result in gains and losses that are reflected in other income (expense) in the Company’s consolidated statements of operations.

The Company may enter into derivative instruments to hedge certain net exposures of nonfunctional currency denominated assets and liabilities, primarily related to intercompany loans, even though it does not elect to apply hedge accounting or hedge accounting does not apply. Gains and losses resulting from a change in fair value for these derivatives are reflected in the period in which the change occurs and are recognized on the consolidated statement of operations in other income (expense). Cash flows from these contracts are classified within net cash provided by operating activities on the consolidated statements of cash flows.

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The Company does not use financial instruments for trading or speculative purposes. The Company recognizes all derivative instruments on the balance sheet at fair value and its derivative instruments are generally short-term in duration. The Company is exposed to the risk that counterparties to derivative contracts may fail to meet their contractual obligations. Derivative contracts outstanding were not material as of June 30, 2013 or December 31, 2012.

Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted income per share is computed by dividing net income by the weighted average common shares outstanding plus potentially dilutive common shares.

Restricted stock awards provide the holder of unvested shares the right to participate in dividends declared on the Company’s common stock. Accordingly, these shares are included in the weighted average shares outstanding for the computation of basic earnings per share in periods of undistributed earnings. Restricted stock awards are excluded from the basic earnings per share in periods of undistributed losses as the holders are not contractually obligated to participate in the losses of the Company. Unvested restricted stock units do not provide the holder the right to participate in dividends declared on the Company’s common stock. Accordingly, these shares are excluded in the weighted average shares outstanding for the computation of basic earnings per share in periods of undistributed earnings or losses.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss), cumulative foreign currency translation adjustments, and unrealized gains and losses on available-for-sale securities.

Recent Accounting Pronouncements

In January 2013, the Financial Accounting Standards Board (“FASB”) issued amended guidance that enhances disclosure requirements about the nature of an entity’s right to offset and related arrangements associated with its derivative instruments, repurchase agreements, and securities lending transactions. This new guidance requires the disclosure of the gross amounts subject to rights of offset, amounts offset in accordance with the accounting standards followed, and the related net exposure. This new guidance is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. This guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows since it is an enhancement to current required disclosures.

In February 2013, the FASB issued new accounting guidance that improves the reporting of reclassifications out of accumulated other comprehensive income. This new guidance requires entities to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income when applicable or to cross-reference the reclassifications with other disclosures that provide additional detail about the reclassifications made when the reclassifications are not made to net income. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2012. This guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows since it is an enhancement to current required disclosures.

In July 2013, the FASB issued new accounting guidance that requires that unrecognized tax benefits be classified as an offset to deferred tax assets to the extent of any net operating loss carryforwards, similar tax loss carryforwards, or tax credit carryforwards available at the reporting date in the applicable tax jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. An exception would apply if the tax law of the tax jurisdiction does not require the Company to use, and it does not intend to use, the deferred tax asset for such purpose. This guidance will have no impact to the Company.

3. Goodwill and Other Intangible Assets

Goodwill

Changes in the Company’s goodwill balance for the year ended December 31, 2012 and the six months ended June 30, 2013 are summarized in the table below (in thousands):

Balance at December 31, 2011	$	301,015
Acquired in business combinations		11,190
Foreign currency translation adjustments		207
Balance at December 31, 2012		312,412
Foreign currency translation adjustments		(3,821	)
Balance at June 30, 2013	$	308,591

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Intangible Assets

The Company’s intangible assets, excluding goodwill, consist primarily of intangible assets acquired in business combinations and were recorded at their estimated fair values on the date of acquisition. The finite-lived intangible assets are summarized in the table below (in thousands):

			June 30, 2013							December 31, 2012
	Useful Life (Years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Trade names and trademarks		10	$	23,830	$	(3,680	)	$	20,150	$	24,000	$	(2,474	)	$	21,526
Developed technology		2-8		26,165		(22,050	)		4,115		26,435		(20,983	)		5,452
Customer relationships		5-13		60,096		(38,152	)		21,944		60,321		(35,124	)		25,197
Non-compete agreements and domain names		2-5		3,371		(3,004	)		367		3,376		(2,853	)		523
Total			$	113,462	$	(66,886	)	$	46,576	$	114,132	$	(61,434	)	$	52,698

Amortization of non-compete agreements is recorded over the term of the agreements.

The following table summarizes the amortization expense that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Amortization expense	$	2,995	$	3,282	$	6,175	$	5,730

The Company has the following indefinite-lived intangible assets recorded in its consolidated balance sheets as of June 30, 2013 and December 31, 2012, respectively (in thousands):

	June 30, 2013		December 31, 2012
Trademarks, trade names and other	$	7,029	$	7,029

4. Accrued Expenses

The Company’s accrued expenses are comprised of the following at June 30, 2013, and December 31, 2012 (in thousands):

	June 30, 2013		December 31, 2012
Compensation and related benefits	$	14,448	$	16,828
Gift cards		4,964		5,655
Taxes		3,234		3,362
Marketing		3,466		1,130
Other		7,438		6,881
Total	$	33,550	$	33,856

5. Commitments and Contingencies

Leases

The Company leases its facilities and certain office equipment under non-cancellable operating leases.

The following table summarizes the total rental expense that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Rental expense	$	1,262	$	1,123	$	2,494	$	2,127

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Guarantees

The Company offers two guarantee products to travelers: Basic Rental Guarantee and Carefree Rental Guarantee. The Basic Rental Guarantee is offered to travelers that book a vacation rental property listed on any one of the Company’s websites to protect 50% of their vacation rental payments up to $1,000 against Internet fraud. Travelers may also purchase additional protection to cover 100% of vacation rental payments up to $10,000 against Internet fraud, misrepresentation, wrongful denial of entry, wrongful deposit loss or, beginning in 2012, losses from phishing claims by the purchase of the Carefree Rental Guarantee. The Company does not maintain insurance from any third party for claims under these guarantees, and any amounts payable for claims made under these guarantees are payable by the Company. Amounts recorded for estimated future claims under the guarantees are based on historical experience and estimates of potential future claims are recorded either in cost of revenue or in general and administrative expense in the Company’s consolidated statement of operations depending on whether the expense is related to estimated claims under the Basic Rental Guarantee or to the Carefree Rental Guarantee.

Expected future claims for traveler guarantees, which are presented as a current liability in the Company’s consolidated balance sheets, and changes for the guarantees are as follows (in thousands):

Traveler guarantee liability at December 31, 2011	$	247
Costs accrued for new vacation rentals		986
Guarantee obligations honored		(667	)
Traveler guarantee liability at December 31, 2012		566
Costs accrued for new vacation rentals		1,094
Guarantee obligations honored		(701	)
Traveler guarantee liability at June 30, 2013	$	959

The Company maintains a guarantee of £5,000,000 (approximately $7,600,000 as of June 30, 2013) in favor of a bank in the United Kingdom for extending credit to the Company in connection with the wholly owned United Kingdom subsidiary’s business of collecting its subscription revenues in advance via credit card payments.

Legal

From time to time, the Company is involved in litigation relating to claims arising in the ordinary course of business. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using available information. Views on estimated losses are developed by management in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. After taking all of the above factors into account, the Company determines whether an estimated loss from a contingency related to litigation should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The Company further determines whether an estimated loss from a contingency related to litigation should be disclosed by assessing whether a material loss is deemed reasonably possible. Such disclosures will include an estimate of the additional loss or range of loss or will state that such an estimate cannot be made.

Management believes that there are no claims or actions pending or threatened against the Company, the ultimate disposition of which would have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

6. Stock-Based Compensation

During the three and six months ended June 30, 2013, the Company issued an aggregate of 830,402 and 1,339,501 restricted stock units, respectively, under its 2011 Equity Incentive Plan, or 2011 Plan, for an aggregate fair value of $26,014,000 and $38,880,000, respectively. Additionally, during the three and six months ended June 30, 2013, the Company issued an aggregate of 816,211 and 1,509,842 options, respectively, to purchase common stock under the 2011 Plan for an aggregate fair value of $11,631,000 and $20,861,000, respectively.

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The following table summarizes the total stock-based compensation expense that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Cost of revenue	$	827	$	495	$	1,672	$	911
Product development		2,501		1,204		4,228		2,435
Sales and marketing		2,278		2,039		3,886		3,309
General and administrative		4,530		3,210		7,806		5,491
Total	$	10,136	$	6,948	$	17,592	$	12,146

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7. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consists of the following at June 30, 2013 and December 31, 2012, respectively (in thousands):

	June 30, 2013			December 31, 2012
Foreign currency translation	$	(10,273	)	$	(5,530	)
Unrealized gains (losses) on short-term investments		(517	)		80
Total	$	(10,790	)	$	(5,450	)

8. Income Taxes

The following table summarizes the total income tax expense that the Company recorded, and the related effective tax rate, for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Income tax expense	$	3,286		$	3,791		$	4,831		$	4,681
Effective tax rate		37.5	%		57.0	%		31.0	%		47.1	%

At June 30, 2013, the Company’s effective tax rate estimate for the year ended December 31, 2013 differed from the statutory rate primarily due to non-deductible stock compensation charges, state taxes, amortization of tax charges on the intercompany sale of assets that were deferred in prior periods, which is partially offset by the benefit of disqualifying dispositions of incentive stock options, the effect of different statutory tax rates in foreign jurisdictions, and the federal research and experimentation tax credit. At June 30, 2012, the Company’s effective tax rate estimate for the year ended December 31, 2012 differed from the statutory rate primarily due to non-deductible stock compensation charges, state taxes, the effect of different statutory tax rates in foreign jurisdictions, and amortization of tax charges on the intercompany sale of assets that were deferred in prior periods, which is partially offset by the benefit of disqualifying dispositions of incentive stock options.

The federal research and experimentation tax credit was extended on January 2, 2013 by the signing of the American Taxpayer Relief Act of 2012, or the Act. The Act retroactively extended this tax credit from January 1, 2012 through December 31, 2013. Because the Act was enacted during 2013, an income tax benefit of $614,000 related to the 2012 research and experimentation tax credit is reflected as a discrete item in the Company’s results of operations for the quarter ended March 31, 2013.

The balance of unrecognized tax benefits as of June 30, 2013 is approximately $6,377,000. During the three and six months ended June 30, 2013, the balance increased by $340,000 and $573,000, respectively, for tax positions related to the prior year.

9. Net Income Per Share

The following table sets forth the computation of basic and diluted net income per share of common stock (in thousands, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Numerator
Net income	$	5,470	$	2,856	$	10,765	$	5,257
Denominator
Weighted average common shares outstanding-basic		84,920		82,262		84,482		81,816
Dilutive effect of stock options, warrants and restricted stock units		2,727		2,475		2,701		2,822
Weighted average common shares outstanding-diluted		87,647		84,737		87,183		84,638
Net income per share:
Basic	$	0.06	$	0.03	$	0.13	$	0.06
Diluted	$	0.06	$	0.03	$	0.12	$	0.06

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The following common equivalent shares were excluded from the calculation of net income per share as their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Stock options and warrants		3,525		5,402		3,368		4,762
Restricted stock awards		3		622		467		17
Total common equivalent shares excluded		3,528		6,024		3,835		4,779

10. Subsequent Events

In July 2013, the Company entered into a lease agreement (the “Lease”) for approximately 115,000 square feet of office space in Austin, Texas. The term of the Lease is eleven and one-half (11 ½) years and is scheduled to commence on September 1, 2014. The commencement date may be adjusted in the event the landlord does not complete construction of the building prior to such date. In the event the landlord does not commence construction by December 15, 2013, or deliver the building subject to the Lease to the Company by December 15, 2014, the Company has the option to terminate the Lease. Future minimum lease payments under the Lease will range from $108,000 per month to $269,000 per month.

In July 2013, the Company signed an agreement to acquire 100% of the outstanding stock of travelmob Pte. Ltd. (“travelmob”). The acquisition is expected to close in the third quarter of 2013. Travelmob features over 14,000 Asia Pacific short- term rental listings including luxury villas, urban apartments, houseboats, a private island and even some shared spaces. As part of the acquisition, the Company agreed to sell a non-controlling interest in travelmob back to certain sellers and will make a $7.0 million investment in the business, leaving the Company with a controlling interest in travelmob for total cash consideration paid by the Company of approximately $18.5 million. Under the terms of the acquisition agreement, the Company will loan the business up to $8.0 million over the next few years and has a call option to purchase the remaining non-controlling interest of travelmob in two installments for periods defined in the agreement beginning on December 31, 2015 and December 31, 2016, respectively, for amounts to be determined based on operating results of travelmob. In the event the Company does not exercise its call option to purchase the remaining shares of travelmob by such deadlines, the remaining travelmob shareholders have a put option to require the Company to repurchase their remaining interest in two installments for periods defined in the agreement beginning on January 31, 2016 and February 1, 2017, respectively, upon the expiration of the Company’s call option periods.

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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Safe Harbor Cautionary Statement

This quarterly report on Form 10-Q contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. The statements contained in this quarterly report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements may be signified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in other documents we file with the Securities and Exchange Commission. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this quarterly report on Form 10-Q. You should read this quarterly report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

The following discussion should be read in conjunction with our interim condensed consolidated financial statements contained elsewhere in this quarterly report on Form 10-Q and in our other Securities and Exchange Commission, or SEC, filings including our Annual Report on Form 10-K for the year ended December 31, 2012 and subsequent reports on Form 8-K, which discuss our business in greater detail.

Overview

We operate the world’s largest online marketplace for the vacation rental industry. Our marketplace brings together millions of travelers seeking vacation rentals online with hundreds of thousands of property owners and managers of vacation rental properties located in 171 countries around the world. Our portfolio includes leading vacation rental websites in the United States, the United Kingdom, Germany, France, Spain, Brazil and Australia. During the three and six months ended June 30, 2013, our websites attracted approximately 201 million and 408 million website visits, respectively, and as of June 30, 2013, our global marketplace included more than 775,000 paid listings.

In the second quarter of 2013, we continued to focus our efforts on providing the largest selection of properties to travelers and the most qualified inquiries to property owners and managers, as we added over 39,000 paid listings, net of non-renewals, to our network from June 30, 2012 to June 30, 2013.

We continued to improve monetization of our listing base from pricing and product changes through continued adoption of our tiered pricing structure and increase in purchases by property owners and managers of bundled listings products. This improved monetization can be seen in the increase of our average revenue per listing from $336 in the second quarter of 2012 to $386 in the second quarter of 2013. Tiered pricing is currently available to new and renewing property owners and managers on HomeAway.com and VRBO.com in the United States, HomeAway.co.uk in the United Kingdom, Abritel.fr in France, HomeAway.de in Germany and HomeAway.es in Spain. It allows owners and managers to improve their position in search results by purchasing a higher subscription level or tier. We believe property owners and managers increasingly will elect to purchase higher tiers, which would increase overall average revenue per listing in future periods. At the same time, by keeping base prices low, we believe the number of paid listings can continue to grow. Although we plan to launch tiered pricing on our other websites as well, we may use different strategies as we enter new markets and geographies or attempt to further penetrate the professional property manager market.

Enablement of e-commerce on our websites has been and will continue to be a focus for our Company. In the second quarter of 2013, we continued to see adoption of our online payments platform, called ReservationManager™, which is currently available on HomeAway.com and VRBO.com in the United States, HomeAway.co.uk in the United Kingdom, Abritel.fr in France, HomeAway.de in Germany and HomeAway.es. in Spain. ReservationManager enables property owners and managers to respond to and manage inquiries, prepare and send rental quotes and payment invoices; allows travelers to book online, including the ability to enter into rental agreements online; and process online payments via credit card or eCheck. Additionally in some countries, through ReservationManager, property owners and managers can make value-added products such as property damage protection available for purchase. We believe that adoption of this product over time will allow us to earn more revenue from ancillary products while providing a more secure payment mechanism for travelers. We plan to introduce new products and services for travelers, property owners and managers, which we believe will provide further opportunities to generate revenue through our marketplace, including a pay-for-booking product for our property owners and managers.

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We believe that bringing travelers to our online marketplace is necessary to attract and retain vacation rental owners and managers. It is also critical for us to increase the rates at which travelers inquire about renting and book vacation rentals with our property owners and managers. To meet these challenges, we are focused on a combination of marketing tactics, including pay-per-click advertising, search engine optimization, and display advertising, with a goal of driving visits to our websites as well as increasing the exposure of the vacation rental category. We are also investing in product enhancements to make it easier for travelers visiting our websites to search and find the right property, to inquire and to book their stay. Online booking functionality is currently available on HomeAway.com and VRBO.com in the United States, HomeAway.co.uk in the United Kingdom, Abritel.fr in France and HomeAway.de in Germany. Online booking enables travelers to reserve a vacation rental directly on any of our listing websites that utilize our ReservationManager payments platform, rather than requiring correspondence with a property owner or manager to reserve a vacation rental.

Key Financial Highlights

We have achieved significant growth since our commercial launch in 2005. Our revenue growth is attributable to our acquisitions of other online listings businesses, the organic growth in the number of listings that property owners and managers purchase from us, increases in the average revenue we receive per listing due to additional features and price increases, and the introduction of additional products and services related to our marketplace. We view our market opportunity as global and have historically generated strong cash flows. Additionally, we have had predictable financial results because of our advance payment, subscription-based model and our high annual listing renewal rates.

Key financial highlights for the three months ended June 30, 2013 include the following:

• Total revenue was $86.6 million compared to $71.6 million in the second quarter of 2012, or an increase of 20.9%;

• Percentage of total revenue from outside the United States was 39.2% in the second quarter, compared to 39.6% in the second quarter of 2012, and in the three months ended June 30, 2013 included 37.5% from Europe and 1.7% from Brazil and Australia;

• Listing revenue was $73.3 million compared to $60.2 million in the second quarter of 2012 and contributed 84.6% of total revenue compared to 84.1% in the second quarter of 2012;

• Net income was $5.5 million compared to $2.9 million in the second quarter of 2012, or an increase of 91.5%;

• Cash from operating activities was $21.8 million compared to $21.6 million in the second quarter of 2012, or an increase of 1.1%;

• Adjusted EBITDA was $24.8 million compared to $20.8 million in the second quarter of 2012, or an increase of 19.3%; as a percentage of revenue, Adjusted EBITDA was 28.7%, a decrease of approximately 40 basis points from 29.1% in the second quarter of 2012;

• Free cash flow was $19.2 million compared to $18.0 million in the second quarter of 2012, or an increase of 6.4%; on a trailing twelve month basis, free cash flow increased 21.0% to $91.6 million from $75.7 million in the comparable trailing twelve month period for the prior year;

• Non-GAAP net income was $14.0 million, or $0.16 per diluted share, compared to non-GAAP net income of $9.5 million, or $0.11 per diluted share, in the second quarter of 2012; and

• Cash, cash equivalents and short-term investments as of June 30, 2013 were $336.3 million.

For further discussion regarding Adjusted EBITDA, free cash flow and non-GAAP net income, along with reconciliations of such numbers to the most directly comparable financial measures calculated and presented in accordance with GAAP, please see the information under the caption “Discussion Regarding Adjusted EBITDA, Free Cash Flow and Non-GAAP Net Income and Reconciliation to GAAP” in Item 2 of this Quarterly Report on Form 10-Q.

Acquisitions

Since our inception, we have acquired 19 businesses as part of our growth strategy. Each of these acquisitions has been accounted for using the acquisition method of accounting. Accordingly, the financial statements for these businesses have been included in our consolidated financial results since the applicable acquisition dates. The most recent acquisition was in July 2013, subsequent to the results reported in this Quarterly Report on Form 10-Q (see Note 10 to the Notes to Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q), when we signed an agreement to acquire a controlling interest in travelmob Pte. Ltd. in Singapore. The acquisition is expected to close in the third quarter of 2013. This acquisition provides the Company the opportunity to address the growing market needs in Asia for the short-term vacation rental industry.

Our acquisitions have presented, and certain of them continue to present, significant integration challenges. They have required us to integrate new operations, offices and employees and to formulate and execute on marketing, product and technology strategies associated with the acquired businesses. In some cases, we continue to manage multiple brands and technology platforms of the acquired businesses, which has increased our cost of operations. Challenges of this nature are likely to arise if we acquire businesses in the future.

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Growth Opportunities and Trends

Our ability to continue to grow our revenue will depend largely on increasing the number of paid listings, increasing revenue per listing and increasing revenue from other products and services through our marketplace. This includes our ability to successfully enable e-commerce transactions on our websites, including allowing for online payments and online booking, and commission-based revenue streams for vacation rental listings through the launch of pay-per-booking listings. We continually assess opportunities for strategic acquisitions. We also use direct and indirect marketing as well as telesales to reach owners and professional property managers. We believe that the growing awareness of vacation rentals, as a favorable alternative to hotels, has and will continue to support growth of our business.

We continue to monitor the weakened economic environment in Europe and the corresponding impact on our business. Traffic growth and inquiry growth remain strong in Europe. We believe that our ability to deliver high quality inquiries to our customers in spite of the broader economic challenges in Europe will help mitigate any potential negative visit trends to our websites. Additionally, we continue to monitor foreign exchange rates in Europe as declining foreign exchange rates will negatively impact our results given that 37.5% of our revenue was generated in Europe in the second quarter of 2013.

We monitor foreign exchange rates for our internationally focused websites, as fluctuations in currency exchange rates may cause our revenue and operating results to differ from our expectations. In addition to the exchange rates in Europe, we are currently monitoring the economic environment in Brazil, as recent declines in the foreign exchange rates in Brazil will negatively impact our results. Revenues from Brazil and Australia represented 1.7% of our total revenue during the three months ended June 30, 2013.

Expenses

Our expenses are primarily composed of salaries and related expenses, marketing and professional fees. Our expenses from quarter to quarter and year to year may fluctuate due to timing of specific events or projects. We will continue to increase expenses across the organization on an annual basis to support our growth and expect our cost of revenue to grow in absolute dollars and remain flat as a percentage of revenue for the year ended December 31, 2013. We expect to incur higher expenses for product development as we record a full-year impact of personnel hired in 2012 and as we hire additional personnel to develop new features and products and expect product development expenses to increase as a percentage of revenue for the year ended December 31, 2013. We expect to incur higher expenses for sales and marketing as we continue to build our sales team to pursue professional property managers and continue to build brand and category awareness, but expect sales and marketing expenses to decline as a percentage of revenue for the year ended December 31, 2013. We expect to incur higher expenses for general and administrative expenses to support the growth of our business and the requirements of being a publicly traded company and expect general and administrative expenses to slightly increase as a percentage of revenue for the year ended December 31, 2013. We plan for additional capital investments for the year ended December 31, 2013 to support the growth of our business, but expect our investment in capital expenditures to remain consistent as a percentage of revenue as compared to the year ended December 31, 2012. We believe that reorganizing our global corporate structure will lower our tax expense over the longer term.

Key Business Metrics

In addition to common financial and operational metrics, we use the following business metrics to monitor and evaluate results:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Paid listings, end of period		775,232			735,921			775,232			735,921
Average revenue per listing	$	386		$	336		$	377		$	332
Renewal rate, end of period		72.4	%		75.3	%		72.4	%		75.3	%
Visits to websites (in millions)		201			159			408			319

Following the migration of VRBO.com to our global technology platform in 2012, property owners and managers that have listings on both HomeAway.com and VRBO.com are able to consolidate their listings into one listing that is displayed on both websites. Additionally, the platform consolidation allows property owners and managers to purchase bundled listings that include display on both HomeAway.com and VRBO.com. As a result, we now count these bundled listings as one listing. This impacts the comparability of our current period reported metrics to our previously reported historical metrics for paid listings, renewal rate and average revenue per listing.

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As a result of consolidated listings and bundled listings, our paid listing counts will be lower since these listings previously would have been counted as two paid listings had they been purchased on both websites. In the future, as property owners and managers that have listings on both HomeAway.com and VRBO.com renew their subscriptions into a bundled listing, we will count these as one listing. We anticipate more bundled listings and consolidations of listings in the future, which we expect will lower our paid listing growth as compared to historical levels. The lower paid listing counts from consolidations and bundles will in turn increase our average revenue per listing and lower our reported renewal rate. Additionally, our bundled listing products generally have a higher base price and will increase our average revenue per listing.

Adjusting for the impact of our customers’ ability to consolidate listings and to purchase network product bundles, we estimate our business metrics to be as follows:

	Three Months Ended June 30, 2013			Six Months Ended June 30, 2013
Paid listings, end of period		809,729			809,729
Average revenue per listing	$	372		$	365
Renewal rate, end of period		74.5	%		74.5	%

Paid Listings. In the three months ended June 30, 2013 and 2012, 84.6% and 84.1%, respectively, of our revenue was derived from paid listings. We regularly track paid listings as a key revenue growth indicator and to identify trends in our business and industry. From June 30, 2012 to June 30, 2013, paid listings increased by 5.3%, contributing to listing revenue growth of 21.6%. The growth in paid listings continued to be due to our marketing and selling new and additional subscription listings to professional property managers, as well as organic growth from property owners and managers who become aware of our websites and choose to market their properties. Growth in paid listings is also impacted by listings acquired in business combinations. Growth in new listings is partially offset by loss of listings through attrition.

Adjusting for the impact of consolidated listings and new bundled listings, we estimate that our paid listing growth would have been approximately 10.0% at June 30, 2013. We do not expect these changes to have any negative impact on the number of unique properties on our websites.

As the number of paid listings increases, we believe that we will generate additional revenue while also expanding the value of the marketplace to travelers, thus increasing the likelihood that travelers will find a property that is suitable to their needs. We define a paid listing as a fee to list a property advertisement on one or more websites in our marketplace. A paid listing allows a property owner or manager to include a description of the property, along with location, pricing, availability, a specified number of photos and contact information. We also provide tools to enable them to manage their listings and rental business. Most listings are sold on a subscription basis, and some listing packages may include listings on more than one of our websites. We also sell listings on a pay-for-performance basis to property managers. When purchased at the same time in one bundle, we count this as one paid listing.

It is possible that a specific property may be listed on more than one of our websites without indicating that the multiple listings refer to the same property. We have used various technologies to estimate the number of unique properties and are implementing systems and processes to identify the number of unique properties that comprise our paid listings, which we estimate was approximately 704,000 as of June 30, 2013, as compared to approximately 639,000 as of June 30, 2012.

Average Revenue per Listing. We believe that trends in revenue per listing, over an extended period, are important to understanding the value we bring to property owners and managers, and the overall health of our marketplace. We use trends in revenue per listing, as well as trends in paid listings, in order to formulate financial projections and make strategic business decisions. At a consolidated level, increases in revenue per listing may increase our earnings or may be leveraged for future investment. The average revenue per listing may fluctuate based on the timing and nature of acquisitions, changes in our pricing, uptake of listing enhancements, changes in the pricing of enhancements, changes in brand and listing type mix, and the impact of foreign exchange rates on our listing revenue outside of the United States.

For the three and six months ended June 30, 2013, average revenue per listing was $386 and $377, respectively, an increase of 14.9% and 13.6% compared to the three and six months ended June 30, 2012, respectively. Foreign exchange rates did not materially impact the average revenue per listing growth rate from June 30, 2012 to June 30, 2013. For the three and six months ended June 30, 2013, average revenue per listing for subscriptions only, excluding the impact of foreign exchange rates and lower revenue per listing for pay-for-performance listings, grew 13.7% and 14.3% as compared to the three and six months ended June 30, 2012, respectively.

Adjusting for the impact of consolidated listings and new bundled listings on the number of paid listings, our average revenue per listing would have been $372 and $365 in the three and six months ended June 30, 2013, respectively, or an increase of 10.7% and 9.9%. Excluding the impact of foreign exchange rates and lower revenue per listing for pay-for-performance listings, and adjusting for the impact of consolidated listings and new bundled listings, our average revenue per subscription listing only would have been $400 and $402 in three and six months ended June 30, 2013, respectively, or an increase of 9.3% and 12.6% as compared to the three and six months ended June 30, 2012, respectively.

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We compute average revenue per listing as annualized listing revenue divided by the average of paid listings at the beginning and end of the period. Our paid listings include both subscription listings and pay-for-performance listings to professional property managers. Average revenue per listing may be impacted by changes in mix between listing types, with pay-for-performance listings generally having a dilutive effect on average revenue per listing. The price of listings varies by website and can include various additional fees associated with listing enhancements.

We have traditionally relied on increases in base pricing to increase revenue per listing but are now focused on tiered pricing alternatives as well as bundled listings for our property owners and managers which may or may not include increases in our base price. We began offering tiered pricing on HomeAway.com in the United States in 2011, which allows our property owners and managers to purchase a higher subscription level to increase the position of their listings in search results. In 2012, we migrated VRBO.com in the United States to the same tiered pricing structure. Also in 2012, we launched tiered pricing on HomeAway.com.uk in the United Kingdom, Abritel.fr in France and HomeAway.de in Germany. In the second quarter of 2013, we launched tiered pricing on HomeAway.es Spain. As we continue to implement tiered pricing on other websites, or change the prices or structure of tiered pricing, we may see an impact to listing sales in the current period with the impact on revenue seen over the length of the subscription period.

Renewal Rate. Renewal of paid subscription listings is a key driver of revenue for our business. Also, we track renewal rate in order to understand and improve upon the satisfaction of our property owners and managers and to help us more accurately estimate our future revenue and cash flows. While our overall renewal rate decreased from 75.3% as of June 30, 2012 to 72.4% as of June 30, 2013, renewal rates vary among our websites and can fluctuate due to a variety of factors, including customer satisfaction, changes in our processes associated with renewal activity, such as the introduction of automatic renewal, and general market conditions.

Our renewal rate decreased from 75.3% at June 30, 2012 to 72.4% at June 30, 2013. This decline of 2.9% is primarily due to the impact of consolidated listings in the United States. After adjusting for consolidated listings, our renewal rate as of June 30, 2013 was estimated to be 74.5%. The adjusted decrease from June 30, 2012 of 0.7% and slight sequential decrease from our renewal rates as of March 31, 2012 of 74.9% is due to decreases in renewal rates in our French and German websites, offset partially by improvements in our websites in Brazil and Australia.

We expect continued product improvements, demand generation for property owners and managers and the resulting increases in customer satisfaction to result in long-term improvements to renewal rates. Our renewal rate will continue to be impacted by our property owners’ and managers’ ability to consolidate their listings in the U.S. and their ability to purchase geographic bundled listings and by use of promotional activities to attract new subscribers at a lower price who many renew at lower rates.

The renewal rate for our subscription listings at the end of any period is defined as the percentage of those paid listings that were active at the end of the period ended twelve months prior that are still active as of the end of the reported period. We include most brands in our calculation of renewal rate. However, subscriptions to BedandBreakfast.com and Toprural.com remain excluded until we can further develop our database system. However, based on our review of other internal renewal rate data, we do not believe that the exclusion of these brands from the renewal rate calculation materially impacts the result. Property owners’ and managers’ satisfaction with our solutions is the primary driver of our renewal rate. We believe that property owners and managers measure their satisfaction with our websites based largely on the number of inquiries and rental bookings that they receive from travelers. When the underlying vacation properties are sold or taken off the market, the owner or manager has no further need for the listings, and this attrition is a natural and ongoing component of non-renewal of listings. We exclude pay-for-performance listings from our renewal rate analysis since they are not sold on a subscription basis.

Visits to Websites. We view visits to websites as a key indicator of growth in our brand awareness among users and our ability to provide our property owners and managers with inquiries from travelers. Growth in visits to websites will be driven by our marketing strategies and has an indirect impact on our financial performance. We use a variety of tools to measure visits to our websites. These tools include solutions from third parties such as Omniture and Google Analytics. We also review third-party published reports to measure our results against comparable companies; however, these reports are not consistent with our internal measurements.

Visits to websites increased by 26.4% in the second quarter of 2013 as compared to the second quarter of 2012 and we continue to see increases in traffic from mobile devices. During the fourth quarter of 2012, we began using a different tool for the measurement of visits to certain of our websites. On a comparable basis, we estimate that visits to websites would have increased by 18.9% for the second quarter of 2013 as compared to the second quarter of 2012 if we had been using the same tools during both reporting periods.

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Key Components of Our Results of Operations

Revenue

We derive most of our revenue from paid listings from our property owners and managers. Our customers generally pay for their listings at the beginning of the listing term, and revenue is recognized monthly over the term of the listing, which is generally one year. We offer pay-for-performance listings to professional managers, which represented 1.0% and 1.1% of our revenue in the three and six months ended June 30, 2013, respectively. This offering is generally taken when a property manager has a marketing budget that is allocated over many managed properties. They can elect to list more properties and pay us each month for the number of inquiries that are generated.

A major source of new property listings has been our inside sales organization, which targets larger professional managers. We also generate new listings from search engines such as Google, where property owners and managers search to find vacation rental listings websites. In addition, word-of-mouth referrals, primarily from existing property owners and managers that have been successful in renting their vacation rentals or travelers who have been successful in finding a property to rent using our websites, are another source for new listings.

We believe that in order to grow our revenue in the future, it will be important to introduce new features and functionality for our property owners and managers, allowing us to keep prices low while offering expanded distribution and search placement for additional fees. It will also be important for us to continually improve the functionality of our websites to attract a large audience of travelers to help ensure our property owners and managers receive sufficient inquiries and bookings.

Deferred revenue consists of payments received from sales of listings in excess of the revenue that we have recognized from the same listings, sales from software solutions in excess of revenue recognized and sales of gift cards for which revenue is recognized over a period commensurate with the use of the gift card. Deferred revenue increases as a result of new listings and decreases as a result of the recognition each month of the pro-rata share of revenue from cash collected in previous periods. We expect an increase in deferred revenue on an annual basis as we grow our core listing business, but may experience seasonal decreases in deferred revenue in quarters with fewer new listings and renewals, as is discussed in more detail in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Seasonality and Quarterly Results” section of this Quarterly Report on Form 10-Q. As with other balance sheet line items, deferred revenue is reflected at the current month-end exchange rate, and the change in deferred revenue may therefore be impacted by movements in foreign currency.

We earn revenue from the sales of Internet display-based advertising on our websites, property management software licenses and related maintenance, gift cards and commissions for online reservations. We also offer other services to property owners, managers and travelers that result in revenue and royalties.

Costs and Expenses

A large component of our costs and expenses consists of personnel costs. Personnel costs include salaries, benefits, bonuses and related expenses, including stock-based compensation. We grew from 1,116 employees at June 30, 2012 to 1,408 at June 30, 2013. We expect that personnel costs will be higher in absolute dollars in 2013 than in 2012 based on an expected increase in the number of employees in 2013.

Cost of Revenue. Cost of revenue consists of customer service personnel and web-hosting personnel costs, merchant fees charged by credit card processors, costs associated with the hosting of our websites, costs associated with payments and reserves under our Carefree Rental Guarantee, allocated facility expenses and depreciation costs. Personnel costs include salaries, benefits, bonuses and related expenses, including stock-based compensation. To the extent that the number of paid listings on our marketplace grows and as we add more features to our websites, we intend to invest additional resources in customer service systems and personnel. Our customer service personnel help our property owners and managers use our websites to list their properties, answer their questions, and perform listing reviews and other processes as a part of our efforts to ensure quality, trust and security. Our customer service personnel also help travelers use our websites to book their travel and answer their questions. Our merchant fees are based on a contractual rate per transaction and will increase in absolute dollars as sales of listings increase, but for 2013 we expect our merchant fees to remain commensurate with 2012 levels, as a percentage of revenue. In general, as we add more features and functionality to our websites and anticipate an increase in the number of travelers accessing our websites, we will increase our spending on hardware and software required for hosting. We expect these additional costs to cause our cost of revenue to increase in absolute dollars and remain flat as a percentage of revenue in 2013 as compared to 2012.

We view the operation of our websites as a foundation upon which different revenue streams are generated. Cost of revenue, as described above, which includes the cost of customer service personnel, web hosting and merchant fees, directly supports our listing revenue, which was 84.6% and 84.1% of total revenue in the three months ended June 30, 2013 and 2012, respectively, and 84.4% and 84.2% of total revenue in the six months ended June 30, 2013 and 2012, respectively. These same expenses support the overall operation of our websites and therefore our other revenue. There are no other material distinct costs of revenue for any period presented. The reporting of cost of revenue as one category in our consolidated financial statements is consistent with the manner in which we manage our business.

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Product Development. Product development expenses consist primarily of personnel costs, third-party contracting and consulting fees associated with our research and development of new services, expenses associated with improvements to, and maintenance of, existing services, allocated facility expenses and depreciation. We have historically focused our product development efforts on increasing the functionality and enhancing the ease of use of our websites, both for property owners and managers and for travelers. We intend to increase our technology and product resources by hiring additional personnel in future periods as we anticipate an increase in the number of listings and to develop new features and products. We expect these additional investments to cause our product development expenses to increase both in absolute dollars and as a percentage of revenue in 2013 as compared to 2012.

Sales and Marketing. Sales and marketing expenses consist primarily of amounts paid for pay-per-click, or PPC, online display advertising, broad reach advertising, personnel costs for our marketing, search engine optimization, or SEO, sales staff, and consulting and other services firms fees, expenses associated with email marketing programs, public relations expenses, allocated facility expenses and depreciation. We utilize PPC advertising primarily to increase the number of travelers to our websites who are seeking properties in specific geographical areas in order to increase the number of inquiries regarding vacation rentals. Our sales and marketing team also focuses on increasing the placement of our websites in search rankings on Google, Bing and other search engines, which results in owner, manager and traveler acquisition at relatively little incremental expense. We intend to increase our sales expense to drive additional listing sales to professional property managers and increase marketing efforts to support our new products, increase the traffic to our websites and increase overall brand awareness. We expect our sales and marketing expenses to increase in absolute dollars, but decline as a percentage of revenue in 2013 as compared to 2012.

General and Administrative. General and administrative expenses consist of personnel costs for our executive, finance and accounting, and management information systems personnel, professional fees for legal, audit, and other consulting services, allocated facility expenses, depreciation and other corporate overhead expenses. We expect to increase headcount to support our anticipated growth, which will increase other expenses, such as facilities, office and travel. We also expect increased costs associated with operating as a global public company, including increases in our finance, accounting and legal personnel, additional consulting, legal and audit fees, insurance costs, board of directors’ compensation, and costs associated with compliance with the Sarbanes-Oxley Act and other regulatory requirements. As a result, we expect our general and administrative expenses to increase in absolute dollars and to increase slightly as a percentage of revenue in 2013 as compared to 2012.

Depreciation

Property and equipment, office tenant improvements and software licenses are recorded at cost and are depreciated using the straight-line method over their estimated useful lives. Equipment and computer hardware are generally depreciated over three years and furniture and fixtures over five to ten years. Leasehold improvements are recorded at cost and depreciated over the shorter of the contractual lease period or their estimated useful life. We allocate depreciation to expense categories based on the relative number of employees in each category. Based on our current estimated level of capital expenditures, we expect our depreciation expense to increase in absolute dollars but to remain relatively stable as a percentage of revenue in 2013 as compared to 2012.

Amortization

Due to our historical acquisitions, we have recorded identifiable intangible assets, which are being amortized over their estimated useful lives. As a result, our amortization expense has grown as we have made acquisitions. We perform annual impairment testing of goodwill and indefinite-lived intangible assets, or when events or circumstances indicate that impairment may have occurred. We expect our amortization expenses to decrease in absolute dollars in 2013 as compared to 2012, as well as decrease as a percentage of revenue in 2013. Amortization expense will depend on our future acquisition activity.

Other Income (Expense)

Other income (expense) includes interest earned on our excess cash, which is invested in short-term instruments, net of interest expense. At June 30, 2013, we had operations in the United States, the United Kingdom, Germany, France, Spain, Brazil, Australia, Switzerland, Thailand and Colombia. As a result of operating in multiple countries, we incur gains and losses on foreign currency transactions, primarily related to the valuation of intercompany loans and short-term advances.

Income Taxes

We accrue federal, state, and foreign income taxes at the applicable statutory rates adjusted for certain items, including non-deductible expenses, the most significant of which is stock-based compensation, and changes in our reserves for uncertain tax positions and deferred tax asset valuation allowance.

Significant judgment is required in evaluating any uncertain tax positions and determining our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate due to additional information. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which the determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as any related net interest and penalties.

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Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income, reversals of existing taxable temporary differences and the feasibility of tax planning. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which the determination is made.

Historically, we have generated most of our current taxable income outside of the United States due to net operating loss carryforwards available for utilization in the United States. However, in 2013 we expect to utilize most of our available U.S. NOL carryforward. In the remainder of 2013, we expect to pay corporate income taxes associated with our operations in the United Kingdom, France, Germany, Spain and Brazil, as well as certain states within the United States. We will continue to expand our business outside of the United States, in which case, we will become subject to further taxation based on foreign statutory tax rates in those jurisdictions where we operate, and our effective tax rate may fluctuate as a result.

During 2011, we began implementing a global corporate restructuring plan involving our European headquarters in Geneva, Switzerland to integrate our acquired businesses, streamline our European operations, and improve our internal controls. Our Swiss and U.S. subsidiaries also entered into an agreement to share the costs of website development going forward. As expected, the full impact of this restructuring plan is occurring over several quarters and results in volatility in both our provision for income taxes and our effective tax rate.

Critical Accounting Policies and Estimates

Our consolidated financial statements include the accounts of our U.S.-based operations and our U.K., France, Germany, Brazil, Colombia, Netherlands, Spain, Italy, Australia and Switzerland-based subsidiaries. Our consolidated results are prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. To the extent there are material differences between these estimates and our actual results, our consolidated financial statements will be affected.

Our significant accounting policies are described in Note 2 to the accompanying condensed consolidated financial statements included, and, of those policies, we believe that the accounting policies listed below involve the greatest degree of complexity and exercise of judgment by our management. The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results of operations particularly in the areas of business combination and taxes. Accordingly, we believe the policies listed below are the most critical for understanding and evaluating our financial condition and results of operations. These critical accounting policies are:

• Revenue recognition;

• Business combinations;

• Stock-based compensation; and

• Income taxes.

A description of our critical accounting policies that involve significant management judgments appears in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2013 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.”

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Results of Operations

The following table presents our operating results and our operating results as a percentage of revenue for the periods indicated:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(in thousands, except per share data)
Consolidated Statements of Operations Data:
Revenue:
Listing	$	73,264		$	60,241		$	140,095		$	114,209
Other		13,344			11,375			25,977			21,510
Total revenue		86,608			71,616			166,072			135,719
Costs and expenses:
Cost of revenue (exclusive of amortization shown separately below)		13,845			11,295			27,126			21,827
Product development		14,441			10,324			26,840			20,026
Sales and marketing		28,867			24,074			55,234			48,808
General and administrative		18,069			14,652			34,118			27,489
Amortization expense		2,995			3,282			6,175			5,730
Total costs and expenses		78,217			63,627			149,493			123,880
Operating income		8,391			7,989			16,579			11,839
Other income (expense):
Interest income		299			240			542			409
Other income (expense)		66			(1,582	)		(1,525	)		(2,310	)
Total other income (expense)		365			(1,342	)		(983	)		(1,901	)
Income before income taxes		8,756			6,647			15,596			9,938
Income tax expense		(3,286	)		(3,791	)		(4,831	)		(4,681	)
Net income	$	5,470		$	2,856		$	10,765		$	5,257
Net income per share:
Basic	$	0.06		$	0.03		$	0.13		$	0.06
Diluted	$	0.06		$	0.03		$	0.12		$	0.06
Weighted average number of shares outstanding
Basic		84,920			82,262			84,482			81,816
Diluted		87,647			84,737			87,183			84,638

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	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Consolidated Statements of Operations as a Percentage of Revenue:
Revenue:
Listing		84.6	%		84.1	%		84.4	%		84.2	%
Other		15.4			15.9			15.6			15.8
Total revenue		100.0			100.0			100.0			100.0
Costs and expenses:
Cost of revenue (exclusive of amortization shown separately below)		16.0			15.8			16.3			16.1
Product development		16.7			14.4			16.2			14.8
Sales and marketing		33.3			33.6			33.3			36.0
General and administrative		20.9			20.5			20.5			20.3
Amortization expense		3.5			4.6			3.7			4.2
Total costs and expenses		90.3			88.8			90.0			91.3
Operating income		9.7			11.2			10.0			8.7
Other income (expense):
Interest income		0.3			0.3			0.3			0.3
Other income (expense)		0.1			(2.2	)		(0.9	)		(1.7	)
Total other income (expense)		0.4			(1.9	)		(0.6	)		(1.4	)
Income before income taxes		10.1			9.3			9.4			7.3
Income tax expense		(3.8	)		(5.3	)		(2.9	)		(3.4	)
Net income		6.3	%		4.0	%		6.5	%		3.9	%

Comparison of the Three Months and Six Months Ended June 30, 2013 and 2012

Revenue

	Three Months Ended June 30,
	2013					2012					Change
Revenue	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Listings	$	73,264		84.6	%	$	60,241		84.1	%	$	13,023		21.6	%
Other		13,344		15.4			11,375		15.9			1,969		17.3
Total	$	86,608		100.0	%	$	71,616		100.0	%	$	14,992		20.9	%

	Three Months Ended June 30,
	2013					2012					Change
Revenue	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
United States	$	52,619		60.8	%	$	43,261		60.4	%	$	9,358		21.6	%
International		33,989		39.2			28,355		39.6			5,634		19.9
Total	$	86,608		100.0	%	$	71,616		100.0	%	$	14,992		20.9	%

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	Six Months Ended June 30,
	2013					2012					Change
Revenue	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Listings	$	140,095		84.4	%	$	114,209		84.2	%	$	25,886		22.7	%
Other		25,977		15.6			21,510		15.8			4,467		20.8
Total	$	166,072		100.0	%	$	135,719		100.0	%	$	30,353		22.4	%

	Six Months Ended June 30,
	2013					2012					Change
Revenue	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
United States	$	102,183		61.5	%	$	83,427		61.5	%	$	18,756		22.5	%
International		63,889		38.5			52,292		38.5			11,597		22.2
Total	$	166,072		100.0	%	$	135,719		100.0	%	$	30,353		22.4	%

For the Three Months Ended June 30, 2013

Revenue was $86.6 million in the three months ended June 30, 2013, compared to $71.6 million in the three months ended June 30, 2012, an increase of $15.0 million, or 20.9%. Our U.S. revenue was $52.6 million, or 60.8% of our total revenue, during the second quarter of 2013, compared to $43.3 million, or 60.4% of our total revenue, in the same quarter during 2012.

Our overall revenue growth rate for the three months ended June 30, 2013 was 20.9% and our organic revenue growth rate was 21.1%. Beginning in May 2013, revenues from Toprural were included in our organic revenue growth rate. We consider growth to be organic if generated from businesses that we have owned for at least 12 months.

Listing Revenue

Our core listing business revenue increased by $13.0 million, or 21.6%, in the three months ended June 30, 2013 as compared to the three months ended June 30, 2012, due to an increased number of new listings and an increase in revenue per listing. Paid listings increased from 735,921 at June 30, 2012 to 775,232 at June 30, 2013, an increase of 5.3%. Paid listings increased as more owners became aware of our marketplace and as we increased our efforts to increase listings from professional property managers. Our average revenue per listing was $386 in the three months ended June 30, 2013 compared to $336 in the three months ended June 30, 2012, an increase of $50, or 14.9%. The increase was due to base price increases made for certain brands as well as the impact of tiered pricing and geographic bundles.

Other Revenue

Other revenue increased by $2.0 million, or 17.3%, in the three months ended June 30, 2013 compared to the three months ended June 30, 2012. Revenue from products focused on travelers, such as property damage protection and trip insurance and the Carefree Rental Guarantee, generated increased revenue of $1.3 million in the three months ended June 30, 2013 compared to the three months ended June 30, 2012. Revenue from our owner reservation tool and the related merchant bank credit card royalties increased by $274,000 in the three months ended June 30, 2013 compared to the three months ended June 30, 2012. Revenue from our software products, including related maintenance and training revenues, increased by $217,000 in the three months ended June 30, 2013 as compared to the three months ended June 30, 2012, while revenue from internet display advertising decreased by $213,000 in the same comparative period.

Revenue Growth in Constant Currency

We invoice and collect payments in the Euro, the British Pound, the Brazilian Reis and the Australian Dollar in their respective regions. As a result, our total revenue is affected by changes in the value of the U.S. Dollar relative to these other currencies. In order to provide a comparable framework for assessing how our business performed excluding the effect of foreign currency fluctuations, management analyzes year-over-year revenue growth on a constant currency basis. Since we operate with the U.S. Dollar as our functional currency, we calculate constant currency on revenue recognized during the current period that was originally booked in currencies other than the U.S. Dollar by comparing the exchange rates used to recognize revenue in the current period against the exchange rates used to recognize revenue in the comparable prior period.

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In the three months ended June 30, 2013, the year-over-year growth in listing revenue measured on a constant currency basis was equal to the reported growth of 21.6%. The year-over-year growth in total revenue in the three months ended June 30, 2013 measured on a constant currency basis was equal to the reported growth of 20.9%.

For the Six Months Ended June 30, 2013

Revenue was $166.1 million in the six months ended June 30, 2013, compared to $135.7 million in the six months ended June 30, 2012, an increase of $30.4 million, or 22.4%. Our U.S. revenue was $102.2 million, or 61.5% of our total revenue, during the second quarter of 2013, compared to $83.4 million, or 61.5% of our total revenue, in the same quarter during 2012.

Our overall revenue growth rate for the six months ended June 30, 2013 was 22.4%, and our organic revenue growth rate was 21.4% for the same period. We consider growth to be organic if generated from businesses that we have owned for at least 12 months.

Listing Revenue

Our core listing business revenue increased by $25.9 million, or 22.7%, in the six months ended June 30, 2013 as compared to the six months ended June 30, 2012, due to an increased number of new listings and an increase in revenue per listing. Our average revenue per listing was $377 in the six months ended June 30, 2013 compared to $332 in the six months ended June 30, 2012, an increase of $45, or 13.6%. The increase was due to base price increases made for certain brands as well as the impact of tiered pricing and geographic bundles.

Other Revenue

Other revenue increased by $4.5 million, or 20.8%, in the six months ended June 30, 2013 compared to the six months ended June 30, 2012. Revenue from products focused on travelers, such as property damage protection and trip insurance and the Carefree Rental Guarantee, generated increased revenue of $2.6 million in the six months ended June 30, 2013 compared to the six months ended June 30, 2012. Revenue from our owner reservation tool and the related merchant bank credit card royalties increased by $796,000 in the six months ended June 30, 2013 compared to the six months ended June 30, 2012. Revenue from our software products, including related maintenance and training revenues, increased by $349,000 in the six months ended June 30, 2013 as compared to the six months ended June 30, 2012, while revenue from internet display advertising decreased by $215,000 in the same comparative period.

Revenue Growth in Constant Currency

In the six months ended June 30, 2013, the year-over-year growth in listing revenue measured on a constant currency basis was 22.8%, compared with 22.7% as reported. The year-over-year growth in total revenue in the six months ended June 30, 2013 measured on a constant currency basis was equal to the reported growth of 22.4%.

Cost of Revenue

	Three Months Ended June 30,
	2013					2012					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Cost of revenue	$	13,845		16.0	%	$	11,295		15.8	%	$	2,550		22.6	%

	Six Months Ended June 30,
	2013					2012					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Cost of revenue	$	27,126		16.3	%	$	21,827		16.1	%	$	5,299		24.3	%

For the Three Months Ended June 30, 2013

Cost of revenue was $13.8 million in the three months ended June 30, 2013, compared to $11.3 million in the three months ended June 30, 2012, an increase of $2.6 million, or 22.6%. A large part of the increase was due to a $1.8 million increase in salaries, benefits, bonuses and related expenses, including non-cash stock-based compensation, for our customer service and web-hosting personnel. At June 30, 2013, we had 83 additional customer support personnel and one additional personnel to support our web-hosting operations compared to the number of our customer service and web-hosting personnel at June 30, 2012. With increased customer service employees as well as increased investment in hosting equipment, we incurred a higher expense for depreciation of

33

computer equipment, furniture and facility leasehold improvements, which increased $331,000, or 19.1%, for the three months ended June 30, 2013 compared to the three months ended June 30, 2012. Other increases included $176,000 in increases in software licenses and maintenance for our corporate systems, $77,000 in increases from web hosting expenses and $146,000 in increases from contracting, consulting and professional fees.

For the Six Months Ended June 30, 2013

Cost of revenue was $27.1 million in the six months ended June 30, 2013, compared to $21.8 million in the six months ended June 30, 2012, an increase of $5.3 million, or 24.3%. A large part of the increase was due to a $3.6 million increase in salaries, benefits, bonuses and related expenses, including non-cash stock-based compensation, for our customer service and web-hosting personnel. With increased customer service employees as well as increased investment in hosting equipment, we incurred a higher expense for depreciation of computer equipment, furniture and facility leasehold improvements, which increased $706,000, or 21.4%, for the six months ended June 30, 2013 compared to the six months ended June 30, 2012. Other increases included $675,000 in increases in software licenses and maintenance for our corporate systems, $229,000 in increases from web hosting expenses and $220,000 in increases from contracting, consulting and professional fees.

Product Development

	Three Months Ended June 30,
	2013					2012					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Product development	$	14,441		16.7	%	$	10,324		14.4	%	$	4,117		39.9	%
Capitalized software development costs		2,235		2.6			1,564		2.2			671		42.9
Total product and technology costs expensed and capitalized	$	16,676		19.3	%	$	11,888		16.6	%	$	4,788		40.3	%
	Six Months Ended June 30,
	2013					2012					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Product development	$	26,840		16.2	%	$	20,026		14.8	%	$	6,814		34.0	%
Capitalized software development costs		4,259		2.6			2,824		2.1			1,435		50.8
Total product and technology costs expensed and capitalized	$	31,099		18.7	%	$	22,850		16.8	%	$	8,249		36.1	%

For the Three Months Ended June 30, 2013

Product development expense was $14.4 million in the three months ended June 30, 2013, compared to $10.3 million in the three months ended June 30, 2012, an increase of $4.1 million, or 39.9%. A large part of the increase was due to a $4.5 million increase in salaries, benefits, bonuses and related expenses, including non-cash stock-based compensation, offset by an increase in capitalized software costs of $671,000. At June 30, 2013, we had 85 additional employees in product development compared to June 30, 2012. Overall increases in headcount also drove higher facilities and depreciation expense of $321,000 in the three months ended June 30, 2013.

For the Six Months Ended June 30, 2013

Product development expense was $26.8 million in the six months ended June 30, 2013, compared to $20.0 million in the six months ended June 30, 2012, an increase of $6.8 million, or 34.0%. A large part of the increase was due to a $7.8 million increase in salaries, benefits, bonuses and related expenses, including non-cash stock-based compensation, offset by an increase in capitalized software costs of $1.4 million. Overall increases in headcount also drove higher facilities and depreciation expense of $569,000 in the six months ended June 30, 2013.

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Sales and Marketing

	Three Months Ended June 30,
	2013					2012					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Sales and marketing	$	28,867		33.3	%	$	24,074		33.6	%	$	4,793		19.9	%
	Six Months Ended June 30,
	2013					2012					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Sales and marketing	$	55,234		33.3	%	$	48,808		36.0	%	$	6,426		13.2	%

For the Three Months Ended June 30, 2013

Sales and marketing expense was $28.9 million in the three months ended June 30, 2013, compared to $24.1 million in the three months ended June 30, 2012, an increase of $4.8 million, or 19.9%. Salaries, benefits, bonuses and related expenses, including non-cash stock-based compensation, increased $3.1 million due primarily to an increase in the number of our employees. At June 30, 2013, we had 86 additional employees in sales and marketing compared to June 30, 2012. Overall increases in headcount also drove higher facilities and depreciation expense of $346,000. Other increases included $340,000 from contracting and travel expenses. In addition, direct marketing expenses increased by $805,000 in the three months ended June 30, 2013 due to higher expenses associated with online display marketing, affiliate marketing and pay-per-click advertising.

For the Six Months Ended June 30, 2013

Sales and marketing expense was $55.2 million in the six months ended June 30, 2013, compared to $48.8 million in the six months ended June 30, 2012, an increase of $6.4 million, or 13.2%. Salaries, benefits, bonuses and related expenses, including non-cash stock-based compensation, increased $5.6 million due primarily to an increase in the number of our employees. Overall increases in headcount also drove higher facilities and depreciation expense of $671,000. Other increases included $810,000 from contracting and travel expenses. In addition, direct marketing expenses decreased by $803,000 in the six months ended June 30, 2013 due to the shift from television advertising to pay-per-click and online display advertising.

General and Administrative

	Three Months Ended June 30,
	2013					2012					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
General and administrative	$	18,069		20.9	%	$	14,652		20.5	%	$	3,417		23.3	%
	Six Months Ended June 30,
	2013					2012					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
General and administrative	$	34,118		20.5	%	$	27,489		20.3	%	$	6,629		24.1	%

For the Three Months Ended June 30, 2013

General and administrative expense was $18.1 million in the three months ended June 30, 2013, compared to $14.7 million in the three months ended June 30, 2012, an increase of $3.4 million, or 23.3%. A large part of the increase was due to a $2.0 million increase in salaries, benefits, bonuses and related expenses, including non-cash stock-based compensation. At June 30, 2013, we had 37 additional employees and executives in operations, finance, human resources, legal and various information technology areas compared to the number of operations, finance, human resources, legal and various IT personnel at June 30, 2012. Consulting, contracting and other legal expenses increased by $812,000 in the three months ended June 30, 2013. Other increases included $285,000 of expense related to estimated claims under the Basic Rental Guarantee offered to travelers and $186,000 in equipment expense.

35

For the Six Months Ended June 30, 2013

General and administrative expense was $34.1 million in the six months ended June 30, 2013, compared to $27.5 million in the six months ended June 30, 2012, an increase of $6.6 million, or 24.1%. A large part of the increase was due to a $4.1 million increase in salaries, benefits, bonuses and related expenses, including non-cash stock-based compensation. Consulting, contracting and other legal expenses increased by $931,000 in the six months ended June 30, 2013. Other increases included $682,000 of expense related to estimated claims under the Basic Rental Guarantee offered to travelers and $717,000 in equipment expense.

Amortization

	Three Months Ended June 30,
	2013					2012					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			Percent
	(dollars in thousands)
Amortization expense	$	2,995		3.5	%	$	3,282		4.6	%	$	(287	)		(8.7	)%
	Six Months Ended June 30,
	2013					2012					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			Percent
	(dollars in thousands)
Amortization expense	$	6,175		3.7	%	$	5,730		4.2	%	$	445			7.8	%

For the Three Months Ended June 30, 2013

Amortization expense was $3.0 million in the three months ended June 30, 2013, compared to $3.3 million in the three months ended June 30, 2012, a decrease of $287,000, or 8.7%. The decrease in amortization expense in the three months ended June 30, 2013 compared to the three months ended June 30, 2012 included $495,000 as a result of certain intangible assets from prior acquisitions becoming fully amortized. This decrease was partially offset by an increase of $128,000 from the addition of identifiable intangible assets from our acquisition of Toprural in 2012 and $80,000 due to foreign exchange rate impacts.

For the Six Months Ended June 30, 2013

Amortization expense was $6.2 million in the six months ended June 30, 2013, compared to $5.7 million in the six months ended June 30, 2012, an increase of $445,000, or 7.8%. Increases in amortization expense in the six months ended June 30, 2013 compared to the six months ended June 30, 2012 included $576,000 as a result of amortizing certain previously indefinite-lived intangible assets, $518,000 due to the addition of identifiable intangible assets from our acquisition of Toprural in 2012 and $173,000 due to foreign exchange rate impacts. These increases were partially offset by a decrease of $822,000 in our amortization expense resulting from certain intangible assets from prior acquisitions becoming fully amortized.

Other Income (Expense)

	Three Months Ended June 30,
	2013						2012						Change
	Amount			Percentage of Revenue			Amount			Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Other income (expense)	$	365			0.4	%	$	(1,342	)		(1.9	)%	$	1,707		127.2	%
	Six Months Ended June 30,
	2013						2012						Change
	Amount			Percentage of Revenue			Amount			Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Other income (expense)	$	(983	)		(0.6	)%	$	(1,901	)		(1.4	)%	$	918		48.3	%

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For the Three Months Ended June 30, 2013

Other income (expense) includes approximately $66,000 in gains from foreign currency related transactions in the three months ended June 30, 2013, compared to losses of $1.5 million in the three months ended June 30, 2012. These gains and losses consist primarily of the re-measurement of intercompany loans and other assets and liabilities denominated in foreign currencies, including gains/losses recognized on forward contracts. During the three months ended June 30, 2013, we identified a prior period accounting error related to certain foreign currency hedging instruments which resulted in the understatement of other income (expense). This error was not material to any prior period and the cumulative amount is not material to the estimated results of operations for the year ending December 31, 2013. Therefore, we recorded the error correction in the same quarter it was identified, which increased other income by approximately $820,000 during the three months ended June 30, 2013. In addition, other income (expense) includes interest income of $299,000 in the three months ended June 30, 2013, compared to $240,000 in in the three months ended June 30, 2012.

For the Six Months Ended June 30, 2013

Other income (expense) includes approximately $1.5 million in losses from foreign currency related transactions in the six months ended June 30, 2013, compared to losses of $2.3 million in the six months ended June 30, 2012. These losses consist primarily of the re-measurement of intercompany loans and other assets and liabilities denominated in foreign currencies, including gains/losses recognized on forward contracts. These losses were partially offset by interest income of $542,000 in the six months ended June 30, 2013, compared to $409,000 in in the six months ended June 30, 2012.

Income Taxes

	Three Months Ended June 30,
	2013						2012						Change
	Amount			Percentage of Revenue			Amount			Percentage of Revenue			Amount			Percent
	(dollars in thousands)
Income tax expense	$	(3,286	)		(3.8	)%	$	(3,791	)		(5.3	)%	$	505			(13.3	)%
	Six Months Ended June 30,
	2013						2012						Change
	Amount			Percentage of Revenue			Amount			Percentage of Revenue			Amount			Percent
	(dollars in thousands)
Income tax expense	$	(4,831	)		(2.9	)%	$	(4,681	)		(3.4	)%	$	(150	)		3.2	%

For the Three Months Ended June 30, 2013

Our income tax expense was $3.3 million for the three months ended June 30, 2013, compared to $3.8 million for the three months ended June 30, 2012. The expense in the three months ended June 30, 2013 is primarily due to tax expense of $3.3 million determined using our estimated annual effective tax rate of 39.7% offset by certain items booked discretely in the three months ended June 30, 2013, including a benefit of $268,000 due to disqualifying dispositions of incentive stock options and $427,000 of expense related to the amortization of tax charges on the intercompany sale of assets that were deferred in prior periods. The estimated annual effective tax rate at June 30, 2013 differed from the statutory rate primarily due to non-deductible stock compensation charges, state taxes, and the amortization of tax charges on the intercompany sale of assets that were deferred in prior periods, which is partially offset by the benefit of disqualifying dispositions of incentive stock options, the effect of different statutory tax rates in foreign jurisdictions, and the federal research and experimentation tax credit.

The expense in the three months ended June 30, 2012 is primarily due to tax expense of $3.8 million determined using our estimated annual effective tax rate of 60% offset by a benefit of $311,000 due to disqualifying dispositions of incentive stock options booked discretely in the three months ended June 30, 2012 and $438,000 of expense related to a prior period that was deferred and recognized in the current period. The estimated annual effective tax rate at June 30, 2012 differed from the statutory rate primarily due to non-deductible stock-based compensation charges, state taxes, the effect of different statutory tax rates in foreign jurisdictions, and the amortization of tax charges on the intercompany sale of assets that were deferred in prior periods, which is partially offset by the benefit of disqualifying dispositions of incentive stock options.

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For the Six Months Ended June 30, 2013

Our income tax expense was $4.8 million for the six months ended June 30, 2013, compared to $4.7 million for the six months ended June 30, 2012. The expense in the six months ended June 30, 2013 is primarily due to tax expense of $6.2 million determined using our estimated annual effective tax rate of 39.7% offset by certain items booked discretely in the six months ended June 30, 2013, including a benefit of $1.6 million due to disqualifying dispositions of incentive stock options, a benefit of $614,000 related to the retroactive extension of the federal research and experimentation tax credit through December 31, 2013 and $879,000 of expense related to a prior period that was deferred and recognized in the current period. The estimated annual effective tax rate at June 30, 2013 differed from the statutory rate primarily due to non-deductible stock compensation charges, state taxes, and the amortization of tax charges on the intercompany sale of assets that were deferred in prior periods, which is partially offset by the benefit of disqualifying dispositions of incentive stock options, the effect of different statutory tax rates in foreign jurisdictions, and the federal research and experimentation tax credit.

The expense in the six months ended June 30, 2012 is primarily due to tax expense of $6.0 million determined using our estimated annual effective tax rate of 60.0% offset by a benefit of $1.2 million due to disqualifying dispositions of incentive stock options booked discretely in the six months ended June 30, 2012 and $643,000 of expense related to a prior period that was deferred and recognized in the current period. The estimated annual effective tax rate at June 30, 2012 differed from the statutory rate primarily due to non-deductible stock-based compensation charges, state taxes, the effect of different statutory tax rates in foreign jurisdictions, and the amortization of tax charges on the intercompany sale of assets that were deferred in prior periods, which is partially offset by the benefit of disqualifying dispositions of incentive stock options.

The federal research and experimentation tax credit was extended on January 2, 2013 by the signing of the American Taxpayer Relief Act of 2012, or the ‘Act’. The Act retroactively extended this tax credit from January 1, 2012 through December 31, 2013. Because the Act was enacted during 2013, an income tax benefit of $0.6 million related to the 2012 research and experimentation tax credit is reflected as a discrete item in our results of operations for the six months ended June 30, 2013.

Seasonality and Quarterly Results

Our operating results may fluctuate for a variety of reasons, including seasonal factors and economic cycles that influence the vacation travel market. Property owners and managers tend to buy listings at times when travelers are most likely to make vacation plans. The timing primarily depends on whether travelers are taking a winter or summer vacation and tends to vary by country. Historically, we have experienced the highest level of new and renewed listings in the first quarter of the year, which is typically when travelers are making plans for summer vacations in the United States and Europe. The lowest level of new listings and renewals has occurred in the third quarter. By the fourth quarter, we typically see property owners and managers of winter vacation destinations list and renew in time to meet the needs of travelers planning those trips. Other vacation areas outside of the United States and Europe, such as Brazil and Australia, also have seasonality, but the seasonality may not be reflected in the same quarters.

This cyclicality may not be seen as prominently in our revenue due to the ratable recognition of listing revenue. However, the seasonality results in higher cash flows during the first quarter as most listings are annual and fully paid at the time the listing is purchased. As we introduce new products for property owners, managers and travelers, the seasonality of those transactions may vary from the seasonality of our subscription listing sales. We also experience seasonality in the number of visitors to our websites, with the first quarter having the highest number of visitors. This is reflected in our quarterly financial results when we add customer service staff and hosting capabilities to support the increase.

Our operating results may fluctuate due to a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful and historical results may not be indicative of future performance.

Discussion Regarding Adjusted EBITDA, Free Cash Flow and Non-GAAP Net Income and Reconciliation to GAAP

We define Adjusted EBITDA as net income (loss) plus depreciation, amortization of intangible assets; interest expense, net; income tax expense (benefit); stock-based compensation expense, all net of any foreign exchange income or expense.

The following table presents a reconciliation of net income to Adjusted EBITDA (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net income	$	5,470		$	2,856		$	10,765		$	5,257
Add:
Depreciation and amortization		6,308			5,916			12,532			10,819
Stock-based compensation		10,136			6,948			17,592			12,146
Interest expense		—			—			—			—
Interest income		(299	)		(240	)		(542	)		(409	)
Foreign exchange (income) expense		(67	)		1,541			1,468			2,292
Income tax expense (benefit)		3,286			3,791			4,831			4,681
Adjusted EBITDA	$	24,834		$	20,812		$	46,646		$	34,786

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We define free cash flow as our cash provided by operating activities, adjusted for cash interest expense and excess tax benefit (shortfall) from stock-based compensation, and subtracting capital expenditures. For the purpose of calculating free cash flow, we consider purchases of property, equipment, leasehold improvements for our offices, and software licenses, including costs associated with internally developed software, as capital expenditures.

The following table presents a summary of cash flows and a reconciliation of cash flows from operating activities to free cash flows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Cash provided by operating activities	$	21,811		$	21,579		$	59,292		$	54,939
Excess tax benefit from stock-based compensation		2,887			1,927			4,245			2,530
Capital expenditures		(5,501	)		(5,463	)		(11,006	)		(11,272	)
Free cash flow	$	19,197		$	18,043		$	52,531		$	46,197

We define non-GAAP net income as our net income (loss) plus the after-tax effect of stock-based compensation expense and amortization of intangible assets, utilizing an effective tax rate of 35%. The income tax effect of adjustments to non-GAAP net income assists investors in understanding the tax provision related to those adjustments and the effective tax rate of 35% related to ongoing operations.

The following table presents a reconciliation of net income to non-GAAP net income (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net income	$	5,470		$	2,856		$	10,765		$	5,257
Add:
Stock-based compensation		10,136			6,948			17,592			12,146
Amortization expense		2,995			3,282			6,175			5,730
Related tax effect		(4,595	)		(3,581	)		(8,318	)		(6,257	)
Non-GAAP net income	$	14,006		$	9,505		$	26,214		$	16,876

Adjusted EBITDA, free cash flow and non-GAAP net income are financial measures that are not calculated in accordance with accounting principles generally accepted in the United States, or GAAP. However, we believe that the use of Adjusted EBITDA, free cash flow and non-GAAP net income are useful to investors in evaluating our operating performance for the following reasons:

• our management uses Adjusted EBITDA, free cash flow and non-GAAP net income in conjunction with GAAP financial measures as part of our assessment of our business and in communications with our board of directors concerning our financial performance;

• Adjusted EBITDA, free cash flow and non-GAAP net income provide consistency and comparability with our past financial performance, facilitate period-to-period comparisons of operations, and also facilitate comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results;

• securities analysts use Adjusted EBITDA, free cash flow and non-GAAP net income as supplemental measures to evaluate the overall operating performance of companies; and

• Adjusted EBITDA and non-GAAP net income exclude non-cash charges, such as depreciation, amortization and stock-based compensation, because such non-cash expenses in any specific period may not directly correlate to the underlying performance of our business operations and can vary significantly between periods.

Adjusted EBITDA, free cash flow and non-GAAP net income should not be reviewed in isolation. You should consider them in addition to, and not as substitutes for, measures of our financial performance reported in accordance with GAAP. Our Adjusted EBITDA, free cash flow or non-GAAP net income may not be comparable to similarly titled measures of other companies and because other companies may not calculate such measures in the same manner as we do. Adjusted EBITDA, free cash flow and non-GAAP

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net income have limitations as analytical tools. As an example, although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often need to be replaced in the future, and Adjusted EBITDA, free cash flow and non-GAAP net income do not reflect any cash requirements for these replacements. In addition, none of these measures reflect future requirements for contractual obligations.

Further limitations of Adjusted EBITDA include:

• this measure does not reflect changes in working capital;

• this measure does not reflect interest income or interest expense; and

• this measure does not reflect cash requirements for income taxes.

Supplemental Financial Information

The following tables present stock-based compensation and depreciation included in the respective line items in our Consolidated Statements of Operations (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Stock-based compensation:
Cost of revenue	$	827	$	495	$	1,672	$	911
Product development		2,501		1,204		4,228		2,435
Sales and marketing		2,278		2,039		3,886		3,309
General and administrative		4,530		3,210		7,806		5,491
Total	$	10,136	$	6,948	$	17,592	$	12,146
Depreciation:
Cost of revenue	$	1,088	$	887	$	2,111	$	1,706
Product development		759		571		1,443		1,120
Sales and marketing		1,033		825		1,977		1,591
General and administrative		433		351		826		672
Total	$	3,313	$	2,634	$	6,357	$	5,089

Liquidity and Capital Resources

From our incorporation in 2004 until June 30, 2013, we financed our operations and acquisitions primarily through private placements of our capital stock and bank borrowings, which have been fully repaid, our initial public offering in July 2011, which generated net proceeds of approximately $146.2 million, after deducting underwriting discounts and other expenses incurred for the sale of our common stock, and from cash flows from operations. As of June 30, 2013, our cash, cash equivalents and short-term investments totaled $336.3 million, compared to $269.8 million at December 31, 2012. At June 30, 2013, this amount included assets held in certain of our foreign operations totaling approximately $71.4 million. If these assets were distributed to the U.S., we may be subject to additional U.S. taxes in certain circumstances (subject to an adjustment for foreign tax credits) and foreign withholding taxes. We actively monitor the third-party depository institutions and money market funds that hold these assets, primarily focusing on the safety of principal and secondarily maximizing yield on these assets. We diversify our cash and cash equivalents and investments among various financial institutions and money market funds in order to reduce our exposure should any one of these financial institutions or money market funds fail or encounter difficulties. To date, we have not experienced any material loss or lack of access to our invested cash, cash equivalents or short-term investments; however, we can provide no assurances that access to our invested cash, cash equivalents or short-term investments will not be impacted by adverse conditions in the financial markets. We have funds in our operating accounts that are deposited with third party financial institutions. These balances in the U.S. may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits. While we monitor the cash balances in our operating accounts, these cash balances could be adversely impacted if the underlying financial institutions fail and could be subject to other adverse conditions in the financial markets.

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The following table summarizes our cash flows for the periods indicated:

	Six Months Ended June 30,
	2013			2012
	(in thousands)
Consolidated Statements of Cash Flow Data:
Net cash provided by operating activities	$	59,292		$	54,939
Net cash used in investing activities		(92,965	)		(55,823	)
Net cash provided by financing activities		28,205			18,302
Effect of exchange rate changes on cash		(2,131	)		(925	)
Net increase in cash and cash equivalents		(7,599	)		16,493
Cash and cash equivalents at beginning of period		189,478			118,208
Cash and cash equivalents at end of period	$	181,879		$	134,701

Net Cash Provided by Operating Activities

Net cash provided by operating activities was $59.3 million in the six months ended June 30, 2012 compared to $54.9 million in the comparable prior year period, representing an increase of $4.4 million, or 7.9%.

A key driver of our cash from operations is the upfront collection of fees for new and renewed listing subscriptions. In the six months ended June 30, 2013, cash was generated primarily through an increase in new and renewed listing subscriptions, resulting in higher upfront collection of listing fees and increased deferred revenue of $29.4 million. During the six months ended June 30, 2013, we generated net income of $10.8 million. Included in our net income was depreciation expense of $6.4 million, amortization expense of $6.2 million, non-cash stock-based compensation of $17.6 million and a decrease in non-cash deferred income taxes of $1.7 million. Net income, excluding these non-cash reductions, contributed $39.3 million to cash provided by operating activities.

In the six months ended June 30, 2012, cash was generated primarily through an increase in new and renewed listing subscriptions, resulting in higher upfront collection of listing fees and increased deferred revenue of $26.4 million. During the six months ended June 30, 2012, we generated net income of $5.3 million. Included in our net income was depreciation expense of $5.1 million, amortization expense of $5.7 million, non-cash stock-based compensation of $12.1 million, and a decrease in non-cash deferred income taxes of $4.6 million. Net income, excluding these non-cash reductions, contributed $23.6 million to cash provided by operating activities.

The growth in our number of paid listings, the impact of other revenue and expenses, the timing and amount of future working capital changes and tax payments will affect the future amount of cash used in or provided by operating activities.

Net Cash Used in Investing Activities

Net cash used in investing activities was $93.0 million in the six months ended June 30, 2013 compared to $55.8 million in the comparable period in the prior year, representing an increase of $37.2 million. Our investing activities reflect acquisitions we have made as well as capital expenditures and changes in our short-term investments. We may have acquisitions in the future that could have a material impact on our cash flows and operations.

During the six months ended June 30, 2013, capital expenditures were $11.0 million and included $4.3 million in capitalized software development costs. Purchases of short-term investments, net of proceeds received from the sale and maturities of short-term investments, were $76.6 million and cash outflows related to the net settlement of foreign currency forwards were $765,000. We also increased our minority stake in a privately held company in China for $3.7 million.

During the six months ended June 30, 2012, we invested $16.1 million, net of cash acquired, for the acquisition of TopRural S.L. in Spain. Additionally, we invested $6.4 million for a non-controlling equity investment in a private company. Capital expenditures were $11.3 million and included $2.8 million in capitalized software development costs. Purchases of short-term investments, net of proceeds received from the sale of short-term investments, were $21.8 million and cash outflows related to the net settlement of foreign currency forwards were $705,000.

As our business expands, we expect to continue to invest in new computers and software for employees, for product development and to support the hosting of our websites. As we expand our facilities, we intend to purchase furniture and fixtures and invest in leasehold improvements. Our planned capital expenditures are not expected to exceed $21.0 million in 2013.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $28.2 million in the six months ended June 30, 2013 compared to $18.3 million in the comparable prior year period, representing an increase of $9.9 million.

Cash provided by financing activities in each of the six months ended June 30, 2013 and 2012 was primarily comprised of proceeds from the exercise of stock options to purchase common stock. Additionally, in the six-month periods ended June 30, 2013 and 2012, approximately $4.2 million and $2.5 million of cash provided was related to excess tax benefits from stock-based compensation, respectively.

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Capital Resources

Based on past performance and current expectations, we believe that our existing cash, cash equivalents, short-term investments and cash generated from operations, both globally and in the U.S., will be sufficient to satisfy our currently anticipated cash requirements through at least the next 12 months.

Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our marketing and sales activities, the timing and extent of spending to support product development efforts, the timing of introductions of new products and services and enhancements to existing products and services, potential acquisitions and the continuing market acceptance of our products and services. We may need to raise additional capital through future debt or equity financing to the extent necessary to fund such activities. Additional financing may not be available at all or on terms favorable to us. We may enter into arrangements in the future with respect to investments in, or acquisitions of, complementary businesses, products, services or technologies, which could also require us to seek additional equity or debt financing.

Contractual Obligations and Commitments

The majority of our property owners and managers pay for their listings by credit card because it simplifies and expedites the payment process and is a relatively secure form of payment. We have multiple agreements with credit card companies to support these activities. Most of our property owners and managers purchase an annual listing, for which payment is made at the beginning of the listing. There is a risk that we may fail to fully perform our obligations under the listing, which could result in an obligation of the credit card companies to reimburse their customers for a portion or the entire listing fee. We would be obligated to reimburse the credit card companies for all such amounts they make pursuant to our agreements with them.

As of June 30, 2013, we have 135,000 Euros in restricted deposits to protect the bank from default on credit cards used in our operations, and 200,000 Swiss francs in restricted deposits to collateralize a bank guarantee related to our European headquarters lease in Geneva, Switzerland. As we enter into new leases, and as we make changes to our credit card merchants and acquiring banks, we may have increases to restricted cash and deposits.

As of June 30, 2013, we have reserved $6.6 million for uncertain tax positions, including interest and penalties. We are unable to make a reasonably reliable estimate as to when or if a cash settlement with taxing authorities will occur. For additional information regarding uncertain tax positions, see Note 11 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of our Annual Report on Form 10-K.

On July 3, 2013, we entered into a lease agreement (the “Lease”) for approximately 114,665 square feet of office space. The term of the Lease is eleven and one-half (11  ¹⁄₂) years and is scheduled to commence on September 1, 2014. The commencement date may be adjusted in the event the landlord does not complete construction of the building prior to such date. In the event the landlord does not commence construction by December 15, 2013, or deliver the building subject to the Lease to us by December 15, 2014, we have the option to terminate the Lease. Future minimum lease payments under the Lease will range from $108,000 per month to $269,000 per month.

Off-Balance Sheet Arrangements

During the six months ended June 30, 2013, we did not, and we do not currently, have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

Recent Accounting Pronouncements

See Note 2 in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for a full description of recent accounting pronouncements which is incorporated herein by reference.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

Foreign currency exchange risk. We have subsidiaries in the United Kingdom, France, Germany, Switzerland, The Netherlands, Spain, Australia, Brazil, Colombia, Thailand and Italy. Our subsidiaries generally use the local currency as their functional currency, which we translate into U.S. dollars for consolidation.

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates involving the Euro, the British pound, the Brazilian Reais, the Swiss Franc and the Australian dollar. We currently enter into forward contracts

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to hedge fluctuations in the value of certain intercompany debt denominated in foreign currencies but do not enter into any derivative financial instruments for trading or speculative purposes. Fluctuations in currency exchange rates could harm our business in the future. Because we conduct a significant and growing portion of our business outside the United States but report our results in U.S. dollars, we face exposure to adverse movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations. In addition, the results of operations of many of our internationally focused websites are exposed to foreign exchange rate fluctuations as the financial results of the applicable subsidiaries are translated from the local currency into U.S. dollars upon consolidation. A decline in the U.S. dollar relative to foreign currencies would increase our non-U.S. revenue and improve our operating results. Conversely, if the U.S. dollar strengthens relative to foreign currencies, our revenue and operating results would be adversely affected. The effect of an immediate 10% adverse change in exchange rates on foreign denominated cash and receivables as of June 30, 2013, would result in a loss of approximately $500,000 and a reduction in value on the balance sheet of approximately $7.9 million.

Investments and Interest Rate Sensitivity. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest in short-term, high-quality, interest-bearing securities. To minimize our exposure to an adverse shift in interest rates, we invest in short-term securities and maintain an average maturity of two years or less.

We have a non-controlling equity investment in a privately-held company in China. Since our ownership interest is less than 20% and we do not have the ability to exert significant influence, we account for this non-marketable equity investment using the cost method of accounting. As of June 30, 2013, the carrying value of this investment was $10.1 million.

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2013. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2013, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in litigation related to claims arising from the ordinary course of our business. We believe that there are no claims or actions pending or threatened against us, the ultimate disposition of which would have a material adverse effect on us.

Item 1A. Risk Factors.

Risks Related to Our Business

If we are unable to attract and maintain a critical mass of vacation rental listings and travelers, whether due to competition or other factors, our marketplace will become less valuable to property owners and managers and to travelers, and our revenue and net income could decrease materially.

Most of our revenue is generated when owners or managers of vacation rentals pay us listing fees to list and market vacation rentals to travelers who visit the websites comprising our marketplace. While we generate a small amount of revenue from other products and services on our websites targeted at property owners, managers and travelers, our success primarily depends on our ability to attract owners, managers, travelers and advertisers to our marketplace. If property owners and managers choose not to

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market their vacation rentals through our websites, or elect to list them with a competitor instead of listing with us, we may be unable to offer a sufficient supply and variety of vacation properties to attract travelers to our websites. If we are unable to attract travelers to our websites, advertisers may not purchase display advertising on our websites. Similarly, our volume of new listings and listing renewals may suffer if we are unable to attract travelers to our websites. The perceived usefulness of our online marketplace is likely to decline, and our revenue and net income could decrease materially as a result of any of these events.

Our business depends substantially on property owners and managers renewing their listings. Because we recognize listing revenue over the term of the applicable agreement, the lack of listing renewals may not immediately be reflected in our operating results.

Our business depends substantially on property owners and managers renewing their listings. Any decline in our listing renewals would harm our future operating results. Property owners and managers generally market their vacation rentals on our websites pursuant to annual listings with no obligation to renew them. We may be unable to predict future listing renewal rates accurately, and our renewal rates may decline materially or fluctuate as a result of a number of factors, including owners’ decisions to sell or cease renting their properties or to utilize the services of our competitors, or dissatisfaction with our pricing, products, services or websites. Property owners and managers may not establish or renew listings if we cannot generate visits from large numbers of travelers seeking and inquiring about vacation rentals.

In addition, from time to time we make changes that impact our customers, including changes to the features of listings available for purchase, the operation of website tools used by property owners and managers in the operation of their rental property and the pricing for the listings and features of our listings. While such changes may be intended to result in customer satisfaction, there can be no guarantee that the changes will perform as expected or that property owners and managers will react positively to the changes and they may choose not to renew their listings. For example, we offer different subscription levels on many of our websites and property owners and managers may not be satisfied with the subscription level they purchase. If property owners and managers do not renew their listings at all or at the same level or if we are forced to accept renewals on less favorable terms, our revenue may decline and our business will suffer. Moreover, some of our property owners and managers may live in states or countries that give subscribers the right to cancel their subscription agreements prior to the expiration of the terms of their agreements and receive refunds for the unused portions of their subscriptions, which can adversely affect our cash flows.

We recognize listing revenue ratably over the term of the applicable listing agreement, and the majority of our quarterly revenue represents revenue attributable to listings entered into during previous quarters. As a result, the effect of significant downturns in new listings or renewals of listings in a particular quarter may not be fully reflected in our results of operations until future periods. Our business model also makes it difficult for any rapid increase in new or renewed listings to increase our revenue in any one period because revenue from new and renewed listings must be recognized over the applicable listing term.

We are an early-stage company with a limited operating history and we operate in a rapidly changing industry, which make it difficult to evaluate our current business and future prospects and may increase the risk of your investment.

We began our operations in February 2005. Our limited operating history may make it difficult to evaluate our current business and our future prospects. We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, including challenges in accurate financial planning and forecasting. You should consider our business and prospects in light of the risks and difficulties we may encounter as an early-stage company.

Our quarterly financial results are subject to fluctuations. As a result, we could fail to meet or exceed our projections or the expectations of analysts or investors, which could cause our stock price to decline.

Our revenue, expenses, operating results and cash flows have fluctuated from quarter to quarter in the past and are likely to continue to do so in the future. These fluctuations are due to, or may result from, many factors, some of which are outside of our control and many of which are difficult to predict, including:

• the quantity of vacation rental listings on our websites;

• changes in cash flow due to the seasonal nature of our listing renewals and new listing acquisition;

• changes by major online search engine companies in their search algorithms, our ability to adapt to these changes and the increased costs of adapting to these changes, which could cause us to spend more on marketing or cause our websites to cease appearing in natural search results completely;

• advertising costs for paid search keywords that we deem relevant to our business and the success and costs of our broad reach and online advertising and marketing initiatives;

• costs related to acquisitions or licensing of, or investments in, products, services, technologies or other businesses and our ability to successfully integrate and manage these acquisitions;

• the amount and timing of operating expenses and capital expenditures related to the expansion of our operations and infrastructure;

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• the timing of revenue and expenses related to the development or acquisition and integration of technologies, products or businesses;

• the timing and success of changes in our pricing or services;

• the introduction and performance of new products or services;

• the introduction of new products or services by our competitors;

• our ability to keep our websites operating without technical difficulties or service interruptions;

• development of or increases in fraud impacting our property owners and managers and travelers attempting to rent from them, including theft of our property owners’ or managers’ online identities through phishing or other security breaches of the email or other systems of ours or our customers;

• declines or disruptions in the travel industry, particularly in regions where we generate substantial revenue;

• economic instability abroad and fluctuations in exchange rates;

• changes in the timing of holidays or other vacation events;

• litigation and settlement costs, including unforeseen attorneys’ fees and costs;

• new accounting pronouncements and changes in accounting standards or practices, particularly any affecting the recognition of listing revenue or accounting for mergers and acquisitions; and

• new laws or regulations, or interpretations of existing laws or regulations, that harm our business models or restrict the Internet, e-commerce, online payments, or online communications.

Fluctuations in our quarterly operating results may, particularly if unforeseen, cause us to miss any projections we may have provided or may lead analysts or investors to change their long-term models for valuing our common stock. In addition, such fluctuations may cause us to face short-term liquidity issues, impact our ability to retain or attract key personnel or cause other unanticipated issues. Any of these effects could cause our stock price to decline. As a result of the potential variations in our quarterly revenue and operating results, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be meaningful and the results of any one quarter should not be relied upon as an indication of future performance.

The online vacation rental market is rapidly evolving. If we fail to predict the manner in which our market develops, our business and prospects may suffer materially.

The market for online vacation rentals is relatively new and unproven with little data or research available regarding the market and industry in many of the geographies we serve. It is uncertain whether this market will continue to develop or if our services will achieve and sustain a level of demand and market acceptance sufficient for us to generate revenue, net income and free cash flow growth. Our success will depend to a substantial extent on the willingness of property owners and managers to use commercial online rental property listing services. Some property managers have developed and use their own proprietary online listing services and, therefore, may be reluctant or unwilling to use our websites to market their properties. Furthermore, some travelers and property owners and managers may be reluctant or unwilling to use online listing services because of concerns regarding the security of data, the potential for fraudulent activity, including phishing, or the integrity of the online marketplace. If property owners and managers do not perceive the benefits of marketing their properties online, then our market may not develop as we expect, or it may develop more slowly than we expect, either of which would significantly harm our business and operating results. Moreover, our success will depend on travelers’ use of our online marketplace to search, locate and rent vacation rentals, which will depend on their willingness to use the Internet and their belief in the integrity of our websites. In addition, since we operate in unproven and unstudied markets, we have limited insight into trends that may develop in those markets and may affect our business. We may make errors in predicting and reacting to other relevant business trends, which could harm our business.

If the businesses we have acquired or invested in do not perform as expected or we are unable to effectively integrate acquired businesses, our operating results and prospects could be harmed.

We have acquired 19 businesses and made one equity investment in a company since our inception. The businesses we have acquired or invested in may not perform as well as we expect. Failure to manage and successfully integrate recently acquired businesses and technologies could harm our operating results and our prospects. If the company we invested in does not perform well, our investment could become impaired and our financial results could be negatively impacted.

Our mergers and acquisitions involve numerous risks, including the following:

• difficulties in integrating and managing the combined operations, technologies, technology platforms and products of the acquired companies and realizing the anticipated economic, operational and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical or financial problems;

• failure of the acquired company to achieve anticipated revenue, earnings or cash flow;

• diversion of management’s attention or other resources from our existing business;

• our inability to maintain the key customers and business relationships and the reputations of acquired businesses;

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• uncertainty of entry into markets in which we have limited or no prior experience or in which competitors have stronger market positions;

• our dependence on unfamiliar affiliates and partners of acquired businesses;

• unanticipated costs associated with pursuing acquisitions;

• responsibility for the liabilities of acquired businesses, including those that were not disclosed to us or exceed our estimates, as well as, without limitation, liabilities arising out of their failure to maintain effective data protection and privacy controls and comply with applicable regulations;

• difficulties in assigning or transferring intellectual property licensed by acquired companies from third parties to us or our subsidiaries;

• inability to maintain our internal standards, controls, procedures and policies;

• potential loss of key employees of the acquired companies;

• difficulties in complying with antitrust and other government regulations;

• challenges in integrating and auditing the financial statements of acquired companies that have not historically prepared financial statements in accordance with U.S. generally accepted accounting principles;

• difficulties in integrating acquired companies’ systems controls, policies and procedures to comply with the internal control over financial reporting requirements of the Sarbanes-Oxley Act of 2002; and

• potential accounting charges to the extent intangibles recorded in connection with an acquisition, such as goodwill, trademarks, customer relationships or intellectual property, are later determined to be impaired and written down in value.

Moreover, we rely heavily on the representations and warranties provided to us by the sellers of acquired companies, including as they relate to creation, ownership and rights in intellectual property, existence of open source and compliance with laws and contractual requirements. If any of these representations and warranties are inaccurate or breached, such inaccuracy or breach could result in costly litigation and assessment of liability for which there may not be adequate recourse against such sellers, in part due to contractual time limitations and limitations of liability.

If we are unable to continue to drive visitors to our websites from search engines, then traffic to our websites could decrease, which could negatively impact property and manager satisfaction with our websites and therefore cause our revenue to decrease.

Many visitors find our websites by searching for vacation rental information through Internet search engines. A critical factor in attracting visitors to our websites is how prominently we are displayed in response to search queries. Accordingly, we utilize search engine marketing as a means to provide a significant portion of our visitor acquisition. Search engine marketing includes both paid visitor acquisition on a cost-per-click basis and visitor acquisition on an unpaid basis, often referred to as organic search.

One method we employ to acquire visitors via organic search is commonly known as search engine optimization, or SEO. SEO involves developing our websites in a way that enables the websites to rank highly for search queries for which our websites’ content may be relevant.

The various search engine providers, such as Google and Bing, employ proprietary algorithms and other methods for determining which websites are displayed for a given search query and how highly websites rank. Search engine providers may also launch new features to enhance search results, which may negatively affect the number of visitors to our websites. Search engine algorithms and other methods that determine the display and ranking of results may change from time to time, generally without public announcement or detailed explanation. Therefore, the success of our SEO strategy depends, in part, on our ability to anticipate and respond to such changes in a timely and effective manner through website and content development.

In addition, websites must comply with search engine guidelines and policies. These guidelines and policies are complex and may change at any time. If we fail to follow such guidelines and policies properly, the search engine may cause our content to rank low in search results or could remove the content altogether from its index. If we fail to understand and comply with these guidelines and policies and ensure our websites’ compliance, our SEO strategy may not be successful.

If we are listed less prominently or fail to appear in search result listings for any reason, including as a result of our failure to successfully execute our SEO strategy, it is likely that we will acquire fewer visitors to our websites, which could adversely impact property owner and manager satisfaction with our websites and, therefore, adversely impact our revenue. We may not be able to replace this traffic with the same volume of visitors or in the same cost-effective manner from other channels, such as cost-per-click search engine marketing or display or other advertising, or at all. An attempt to replace this traffic through other channels may require us to increase our sales and marketing expenditures, which may not be offset by additional revenue, adversely affecting our operating results.

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Our long-term success depends, in part, on our ability to expand our owner, manager and traveler bases outside of the United States and, as a result, our business is susceptible to risks associated with international operations.

As our operations have expanded, we have acquired businesses or established offices around the world. As of June 30, 2013, we maintained offices in the United States, France, the United Kingdom, Germany, Brazil, Switzerland, Spain, Australia, Colombia and Thailand and operate websites in several additional countries. We have limited operating and e-commerce experience in many foreign jurisdictions and are making significant investments to build our international operations. We plan to continue our efforts to expand globally, including the acquisition of international businesses and establishment of foreign offices in jurisdictions where we do not currently operate. Managing a global organization is difficult, time consuming and expensive and any international expansion efforts that we may undertake may not be successful. In addition, conducting international operations subjects us to risks that we generally do not face in the United States. These risks include:

• the cost and resources required to localize our services, which requires the translation of our websites into foreign languages and adaptation for local practices and regulatory requirements;

• being subject to laws and regulations, including those laws governing Internet activities, email messaging, collection and use of personal information, ownership of intellectual property, taxation and other activities important to our online business practices, which are less developed and less predictable and which may restrict our business or ability to generate profits;

• competition with companies that understand the local market better than we do or who have pre-existing relationships with potential owners, managers and travelers in those markets;

• legal uncertainty regarding our liability for the listings and other content provided by property owners and managers, including uncertainty resulting from unique local laws or a lack of clear precedent of applicable law;

• lack of familiarity with and the burden of complying with a wide variety of other foreign laws, legal standards and foreign regulatory, financial reporting and tax compliance requirements, which are subject to unexpected changes;

• laws and business practices that favor local competitors or prohibit or limit foreign ownership of certain businesses;

• challenges associated with joint venture relationships and minority investments, including dependence on our joint venture partners;

• adapting to variations in payment forms from property owners, managers and travelers;

• difficulties in managing and staffing international operations and establishing or maintaining operational efficiencies; difficulties in establishing and maintaining internal controls and adequate security over our data and systems;

• fluctuations in currency exchange rates;

• potentially adverse tax consequences, which may be difficult to predict, including the complexities of foreign value added tax systems and restrictions on the repatriation of earnings;

• increased financial accounting and reporting burdens and complexities and difficulties in implementing and maintaining adequate internal controls;

• political, social and economic instability abroad, terrorist attacks and security concerns in general;

• the potential failure of financial institutions internationally;

• reduced or varied protection for intellectual property rights in some countries; and

• higher telecommunications and Internet service provider costs.

Operating in international markets also requires significant management attention and financial resources. We cannot assure you that our international expansion efforts will be successful, and the investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability.

If we are unable to introduce new or upgraded services or features that travelers or property owners and managers recognize as valuable, we may fail to drive additional travelers to our websites or retain existing and attract new property owners and managers. Our efforts to develop new and upgraded services and products could require us to incur significant costs.

In order to continue to attract travelers to our online marketplace and retain existing and attract new property owners and managers, we will need to continue to invest in the development of new products, services and features that add value for travelers, property owners and managers, and that differentiate us from our competitors. The success of new products, services and features depends on several factors, including the timely completion, introduction and market acceptance of the product, service or feature. If travelers, property owners or managers do not recognize the value of our new services or features, they may choose not to utilize or list on our online marketplace.

Developing and delivering these new or upgraded products, services or features may increase our expenses, as this process is costly, and we may experience difficulties in developing and delivering these new or upgraded products, services or features. Moreover, we cannot assure that new or upgraded products, services or features will work as intended or provide value to travelers, property owners and managers. In addition, some new or upgraded products, services or features may be complex and challenging for us to market to customers and may also involve new pricing. We cannot guarantee that our property owners and managers will respond favorably.

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In addition, successfully launching and selling a new product, service or feature will require the use of our marketing, sales or customer service resources. Efforts to enhance and improve the ease of use, responsiveness, functionality and features of our existing websites have inherent risks, and we may not be able to manage these product developments and enhancements successfully. We may choose to license or otherwise integrate applications, content and data from third parties. The introduction of these improvements imposes costs on our business and requires the use of our resources. We may be unable to continue to access these technologies and content on commercially reasonable terms, or at all.

We may be unable to effectively manage our growth.

Since our inception, we have experienced rapid growth. As our operations have expanded, we have grown from 87 employees at December 31, 2005 to 1,408 employees at June 30, 2013, of whom 533 were located outside the United States. Our business is becoming increasingly complex, especially in light of the continued rapid evolution of our industry and e-commerce, our relatively limited operating history and our reliance on multiple websites throughout the world. This complexity and our rapid growth have demanded, and will continue to demand, substantial resources and attention from our management. We expect to continue to increase headcount and to hire more specialized personnel in the future as we grow our business. We will need to continue to hire, train and manage additional qualified website developers, software engineers, client and account services personnel, and sales and marketing staff and improve and maintain our technology to properly manage our growth. If our new hires perform poorly, if we are unsuccessful in hiring, training, managing and integrating these new employees or if we are not successful in retaining our existing employees, our business may be harmed.

Further, to accommodate our expected growth we must add new hardware and software and improve and maintain our technology, systems and network infrastructure. Failure to effectively upgrade our technology or network infrastructure to support the expected increased listing and traveler traffic volume could result in unanticipated system disruptions, slow response times or poor experiences for owners, managers or travelers. To manage the expected growth of our operations and personnel and to support our public company financial reporting and internal control requirements, we will need to continue to improve our transaction processing and reporting, operational and financial systems, procedures and controls. These improvements will be particularly challenging if we acquire new operations with different systems. Our current and planned personnel, systems, procedures and controls may not be adequate to support our future operations. If we are unable to expand our operations and hire additional qualified personnel in an efficient manner, it could adversely affect owner, manager or traveler satisfaction and cause our expenses to grow disproportionately relative to our revenue.

Changes in our effective tax rate could harm our future operating results.

We are subject to federal and state income taxes in the United States and in various foreign jurisdictions. Our provision for income taxes and our effective tax rate are subject to volatility and could be adversely affected by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; effects of certain non-tax deductible expenses, including those arising from the requirement to expense stock options; changes in the valuation of our deferred tax assets and liabilities; expiration of or lapses in the research and development tax credit laws; transfer pricing adjustments, including the effect of acquisitions on our intercompany research and development cost sharing arrangement and legal structure; adverse outcomes resulting from any tax audit; our ability to utilize our net operating losses and other deferred tax assets; changes in accounting principles or changes in tax laws and regulations, or the application of the tax laws and regulations, including possible U.S. changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, or the foreign tax credit rules. Significant judgment is required to determine the recognition and measurement attributes prescribed in the accounting guidance for uncertainty in income taxes. The accounting guidance for uncertainty in income taxes applies to all income tax positions, including the potential recovery of previously paid taxes, which if settled unfavorably could adversely impact our provision for income taxes.

We are exposed to fluctuations in currency exchange rates.

Because we conduct a significant portion of our business outside the United States but report our results in U.S. dollars, we face exposure to adverse movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations. In addition, the results of operations of many of our internationally focused websites are exposed to foreign exchange rate fluctuations as the financial results of the applicable subsidiaries are translated from the local currency into U.S. dollars upon consolidation. A decline in the U.S. dollar relative to foreign currencies would increase our non-U.S. revenue, when translated into U.S. dollars. Conversely, if the U.S. dollar strengthens relative to foreign currencies, our revenue would be adversely affected. Our operating results could be negatively impacted depending on the amount of expense denominated in foreign currencies. Revenue in the three months ended June 30, 2013 was positively impacted by foreign currency translation of approximately $24,000, while revenue in the six months ended June 30, 2013 was negatively impacted by foreign currency translation of approximately $99,000. Revenue in the three and six months ended June 30, 2012 was negatively impacted by foreign currency translation of approximately

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$2.5 million and $3.4 million, respectively. As exchange rates vary, revenue, cost of revenue, operating expenses and other operating results, when translated, may differ materially from expectations. In addition, our revenue and operating results are subject to fluctuation if our mix of U.S. and foreign currency denominated transactions and expenses changes in the future. In addition, we maintain intercompany loans and payables which are subject to translation losses due to foreign exchange fluctuation. We may enter into hedging arrangements in order to manage foreign currency exposure but such activity may not completely eliminate fluctuations in our operating results.

Unfavorable changes in, or interpretations of, government regulations or taxation of the evolving vacation rental, Internet and e-commerce industries could harm our operating results.

We operate in markets throughout the world, in jurisdictions which have various regulatory and taxation requirements that can affect our operations or regulate the rental activity of property owners and managers. Since we began our operations in 2005, there have been, and continue to be, regulatory developments that affect the vacation rental industry and the ability of companies like us to list those vacation rentals online. For example, some municipalities have adopted ordinances that limit the ability of property owners to rent certain properties for fewer than 30 consecutive days and other cities have introduced or may introduce similar regulations. Some cities also have fair housing or other laws governing the way properties may be rented, which they assert apply to vacation rentals. Many homeowners, condominium and neighborhood associations have adopted rules that prohibit or restrict short-term vacation rentals. These and other similar developments could reduce the number of listings on our websites, which could harm our business and operating results.

From time to time, we may become involved in challenges by or disputes with government agencies regarding these regulations. For example, some government agencies have asked us directly to comply with their regulations and provide owner and manager data to assist them in their enforcement and audit efforts. Also, each region in which we operate has different regulations with respect to licensing and other requirements for the listing of vacation rentals. If a governmental entity sought to apply applicable regulations in a manner that would limit or curtail our ability or willingness to list properties in that particular region, there can be no assurance that we would be successful in defending against the application of these laws and regulations. Further, if we were required to comply with regulations and government requests that negatively impact our relations with property owners, managers and travelers, our business, operations and financial results could be adversely impacted.

Compliance with laws and regulations of different jurisdictions imposing different standards and requirements is very burdensome for businesses like ours. Our online marketplace is accessed by owners, managers and travelers in multiple states and foreign jurisdictions. Our business efficiencies and economies of scale depend on generally uniform treatment of owners, managers and travelers across all jurisdictions in which we operate. Compliance requirements that vary significantly from jurisdiction to jurisdiction impose an added cost to our business and increased liability for compliance deficiencies. In addition, laws or regulations that could harm our business could be adopted, or reinterpreted in a manner that affects our activities, by the U.S. government, state governments, and regulatory agencies or by foreign governments or agencies, including but not limited to the regulation of personal and consumer information and real estate licensing requirements. Violations or new interpretations of these laws or regulations may result in penalties, negatively impact our operations and damage our reputation and business.

Additionally, new, changed, modified or newly interpreted or applied tax laws, statutes, rules, regulations or ordinances could increase our property owners’ and managers’ and our compliance, operating and other costs, which could deter owners from renting their vacation properties, negatively affect our new subscription listings and renewals, or increase our cost of doing business. Any or all of these events could adversely impact our business and financial performance.

The market in which we participate is highly competitive, and we may be unable to compete successfully with our current or future competitors.

The market to provide listing, search and marketing services for the vacation rental industry is very competitive and highly fragmented. All of the services that we provide to property owners, managers and travelers, including listing and search, are provided separately or in combination to our current or potential customers by other companies that compete with us. Our current or new competitors may adopt aspects of our business model, which could reduce our ability to differentiate our services. Furthermore, listings in the vacation rental industry are not typically marketed exclusively through any single channel, and our listing agreements are not exclusive. Accordingly, our competitors could aggregate a set of listings similar to ours. Increased competition could result in a reduction in our revenue or the rate of our new listing acquisition, or the loss of existing listings or market share.

There are thousands of vacation rental listing websites in the United States and Europe that compete directly with us for listings, travelers, or both, such as AirBnB, @Leisure, InterHome, James Villas, TripAdvisor and Wyndham Worldwide. Many of these competitors offer free or heavily discounted listings or focus on a particular geographic location or a specific type of rental property. Some of them also aggregate property listings obtained through various sources, including the websites of property managers some of whom also market their properties on our websites.

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Some websites operated by competitors address the wider fragmented travel lodging market, such as AirBnB, (worldwide) and HouseTrip (United Kingdom), by listing both rooms or the owner’s primary home for short term rental. The properties offered by these individuals increase both the number of rental opportunities available to travelers and the competition for the attention of the traveler which could affect the number of people who use our websites. Some vacation rental property owners also list on these websites, and consequently these companies compete with us to some extent today and could become more significant competitors in the future.

We also compete with online travel websites, such as Expedia, Hotels.com, Kayak, Priceline, Booking.com, Orbitz and Travelocity, which have traditionally provided comprehensive travel services and some of whom are now expanding into the vacation rental category. We also compete with large Internet companies, such as craigslist, eBay, Google, MSN.com and Yahoo!, which provide listing or advertising services in addition to a wide variety of other products or services.

Some of our current or potential competitors are larger and have more resources than we do. Many of our current and potential competitors enjoy substantial competitive advantages, such as greater name recognition in their markets, longer operating histories and larger marketing budgets, as well as substantially greater financial, technical and other resources. In addition, our current or potential competitors may have access to larger property owner, manager or traveler bases. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or owner, manager or traveler requirements. Furthermore, because of these advantages, existing and potential owners, managers and travelers might accept our competitors’ offerings, even if they may be inferior to ours. For all of these reasons, we may not be able to compete successfully against our current and future competitors.

In addition, competitors such as Perfect Places, Inc. and VacationRoost, Inc. serve the professional management marketplace for vacation rentals exclusively, and therefore have the capability of creating more targeted products and features for property manager constituents.

We believe we compete primarily on the basis of the quantity and quality of our listings, the quality of the direct relationships we have with property owners and managers, the volume of travelers who visit our websites, the number of inquiries provided to our property owners and managers, the global diversity of the vacation rentals available on our websites, the quality of our websites, customer service, brand identity, the success of our marketing programs, and price. If current or potential property owners, managers or travelers choose to use any of these competitive offerings in lieu of ours, our revenue could decrease and we could be required to make additional expenditures to compete more effectively. Any of these events or results would harm our business, operating results and financial condition.

Our business depends on retaining and attracting capable management and operating personnel.

Our success depends in large part on our ability to attract and retain high-quality management and operating personnel. For example, Brian H. Sharples, our Chief Executive Officer, and Carl G. Shepherd, our Chief Strategy and Development Officer, founded our company and have been instrumental in devising and implementing our strategies for growth as well as identifying and securing acquisition targets. Their in-depth knowledge of and deep relationships with the participants in our industry are extremely valuable to us. Our business also requires skilled technical and marketing personnel, who are in high demand and are often subject to competing offers. Competition for qualified employees is intense in our industry, and the loss of even a few qualified employees, or an inability to attract, retain and motivate additional highly skilled employees required for the planned expansion of our business could harm our operating results and impair our ability to grow. To attract and retain key personnel, we use various measures, including an equity incentive program and incentive bonuses for key executive officers and other employees. However, some employees have been granted stock options with an exercise price that is or may become less than the market price, which reduces the incentive value of these grants. While we attempt to provide additional or different incentive compensation tools to mitigate this impact, the measures we employ to attract and maintain key personnel may not be effect enough to enable us to attract and retain the personnel we require to operate our business effectively.

If we fail to protect confidential information against security breaches, or if property owners and managers or travelers are reluctant to use our online marketplace because of privacy or security concerns, we might face additional costs, and activity on our websites could decline.

We collect and use personally identifiable information, such as email addresses (but not passwords) and phone numbers of property owners, managers and travelers, in the operation of our business, such as when customers register to list their properties on our websites or to subscribe to our newsletters. Our servers may be vulnerable to computer viruses or physical or electronic break-ins that our security measures may not detect. In addition, third parties may target users of our websites directly with attempts to breach the security of their email accounts or management systems, such as phishing attacks, which are fraudulent identity theft schemes designed to appear as legitimate emails from us or from our property owners and managers. Criminals may also employ new or different schemes aimed at defrauding our property owners, managers or travelers in ways that we may not anticipate or be able to adequately guard against. Although phishing attacks and other fraud schemes are generally not on our systems, victims may nevertheless seek recovery from us of funds they lost. As a result, we may be required to defend ourselves in costly litigation and may suffer harm to our reputation, brand and business.

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We also may suffer harm from breaches of our own technology systems. Anyone that is able to circumvent our security measures could misappropriate confidential or proprietary information, cause interruption in our operations, damage our computers or those of our users, or otherwise damage our reputation and business. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches. Security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability under various laws and regulations. In addition, industry-wide incidents or incidents with respect to our websites, including misappropriation of third-party information or security breaches, could deter people from using the Internet or our online marketplace to conduct transactions. Concern among prospective owners, managers and travelers regarding our use of personal information collected on our websites could keep prospective owners, managers and travelers from using our online marketplace. Concern among property owners and managers who are customers could cause them to cancel or fail to renew their listings.

There are risks of security breaches both on and off our systems as we increase the types of technology we use to operate our marketplace, such as mobile applications. Such technology systems and platforms may be new and evolving and may involve security risks that are difficult to predict and adequately guard against. Our owners, managers and travelers may be harmed by such breaches and we may in turn be subject to costly litigation, harm to our reputation and brand and owners, managers and travelers may cease using our marketplace.

The laws of some states and countries require businesses that maintain personal information about their residents in electronic databases to implement reasonable measures to keep that information secure. Our practice is to encrypt all personal information, but we do not know whether our current practice will be deemed sufficient under these laws. In addition, under certain of these laws, if there is a breach of our computer systems and we know or suspect that unencrypted personal data has been stolen, we are required to inform any user whose data was stolen, which could harm our reputation and business. Complying with the applicable notice requirements in the event of a security breach could result in significant costs. We may also be subject to claims of breach of contract for such disclosure, investigation and penalties by regulatory authorities, and potential claims by persons whose information was disclosed.

Other states and countries have enacted different and often contradictory requirements for protecting personal information collected and maintained electronically. Compliance with numerous and contradictory requirements of the different states and countries is particularly difficult for an online business such as ours, which collects personal information from users in multiple jurisdictions. While we intend to comply fully with these laws, failure on our part to comply with such laws could result in legal liability, cause us to suffer adverse publicity and lose business, traffic and revenue, which could jeopardize our success. If we were required to pay any significant amount of money in satisfaction of claims under these laws, or any similar laws enacted by another jurisdiction, or if we were forced to cease our business operations for any length of time as a result of our inability to comply fully with any such laws, our business, operating results and financial condition could be adversely affected.

In addition, third parties that process credit card transactions between us and property owners and managers maintain personal information collected from these property owners and managers, including credit card numbers. Such information could be compromised or accessed as a result of misappropriation or security breaches, and we could be subject to liability as a result. Further, property owners and managers may develop a lack of confidence in these third parties or in their ability to securely conduct credit card transactions on our websites or the Internet in general, which would adversely impact our business, revenue and operating results.

We may be subject to liability for the activities of our property owners and managers, which could harm our reputation and increase our operating costs.

We periodically receive complaints related to certain activities on our websites, including disputes over the authenticity of the vacation rental listing, unauthorized use of credit card and bank account information and identity theft, phishing attacks, potential breaches of system security, libel and infringement of third-party copyrights, trademarks or other intellectual property rights. We have also experienced fraud by purported owners or managers listing properties which either do not exist or are significantly not as described in the listing. The methods used by perpetrators of fraud constantly evolve and are complex, and our trust and security measures may not detect all fraudulent activity. Consequently, we expect to continue to receive complaints from travelers and requests for reimbursement of their rental fees, as well as actual or threatened legal action against us if no reimbursement is made.

We may further be subject to claims of liability based on events that occur during travelers’ stays at the vacation rentals of our property owners and managers, such as for robbery, accidental injury or death or other similar incidents. These risks to us may increase as we provide additional e-commerce tools to allow our property owners and managers and travelers to conduct all or more of the rental transaction online. Although the transaction is between the owner and manager on the one side and the traveler on the other side, as our websites become more integral to the rental transaction, the likelihood that a party to the transaction will seek to include us in any dispute could increase. Such disputes or incidents may subject us to liability, which would increase our operating costs and adversely affect our business and results of operations. Even if these claims do not result in liability to us, we could incur significant costs in investigating and defending against them. Although the terms and conditions of use of our websites, which are available on all

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of our websites, state that we are not a party to any rental transaction and specifically exempt us from any liability to travelers in the event of a fraudulent listing, a property not being significantly as described or any other claim by travelers relating to their vacation rental, the enforceability of these terms varies from jurisdiction to jurisdiction, and the laws in this area are consistently evolving. If we are subject to liability or claims of liability relating to the acts of our property owners or managers, or due to fraudulent listings, we may be subject to negative publicity, incur additional expenses and be subject to liability, which could harm our business and our operating results.

If we are unable to adapt to changes in technology, our business could be harmed.

Because owners, managers and travelers can access our websites on a variety of network hardware and software platforms using a standard browser or a mobile application, we will need to continuously modify and enhance our service to keep pace with changes in Internet and mobile-related hardware, software, communication, browser and database technologies. We may not be successful in developing required modifications and enhancements or in developing ones that work well and that our website users will adopt. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our research and development expenses more than we have currently planned. Any failure of our online marketplace to operate effectively with future network platforms and technologies could result in dissatisfaction from travelers, property owners, managers and advertisers and harm our business.

Loss or material modification of our credit card acceptance privileges would have a material adverse effect on our business and operating results.

A significant percentage of our property owners and managers pay for their listings by credit card because it simplifies and expedites the payment process and is typically a secure form of payment. The loss of our credit card acceptance privileges would significantly limit our ability to renew listings with these property owners and managers or secure new property owners and managers.

Most of our property owners and managers purchase an annual listing, for which payment is made at the beginning of the listing term. In addition, many of our listing renewals are paid by auto-renewal, charging the renewal listing fee to the property owner’s or manager’s credit card. There is a risk that, if we fail to fully perform our obligations under the listing terms or the property owner or manager objects to the auto-renewal payment made by credit card, the credit card companies could be obligated to reimburse these property owners and managers for all or a portion of the listing fee. We would be obligated to pay all such amounts under our agreements under which we have obtained our credit card acceptance privileges. As a result of this risk, credit card companies may require us to set aside additional cash reserves, may not renew our acceptance privileges or may increase the transaction fees they charge us for these privileges.

The card networks, such as Visa, MasterCard and American Express, have adopted rules and regulations that apply to all merchants who process and accept credit cards and include the Payment Card Industry Data Security Standards, or the PCI DSS. Under the PCI DSS, we are required to adopt and implement internal controls over the use, storage and security of card data to help prevent credit card fraud. We assess our compliance with the PCI DSS on a periodic basis and make necessary improvements to our internal controls. If we fail to comply with the rules and regulations adopted by the card networks, including the PCI DSS, we would be in breach of our contractual obligations to payment processors and merchant banks. Such failure to comply may subject us to fines, penalties, damages and civil liability and could eventually prevent us from processing or accepting credit cards. Further, there is no guarantee that, even if we comply with the rules and regulations adopted by the card networks, we will be able to maintain our compliance. We also cannot guarantee that such compliance will prevent illegal or improper use of our payments systems or the theft, loss or misuse of the credit card data of customers or participants.

The loss of, or the significant modification of, the terms under which we obtain credit card acceptance privileges would have a material adverse effect on our business, revenue and operating results.

If we are not able to identify and successfully acquire suitable businesses, our operating results and prospects could be harmed.

We have faced limited competition within our industry for acquisitions of businesses, technologies and assets, but, in the future, such competition may become intense. As such, even if we are able to identify an acquisition that we would like to consummate, we may not be able to complete the acquisition on commercially reasonable terms because the target is acquired by another company. We may expend significant cash or incur substantial debt to finance such acquisitions, which indebtedness could result in restrictions on our business and significant use of available cash to make payments of interest and principal. In addition, we may finance or otherwise complete acquisitions by issuing equity or convertible debt securities, which could result in further dilution of our existing stockholders. We may enter into negotiations for acquisitions that are not ultimately consummated. Those negotiations could result in diversion of management time and significant out-of-pocket costs. If we fail to evaluate and execute acquisitions successfully, we may not be able to realize the benefits of these acquisitions, and our operating results could be harmed. If we are unable to successfully address any of these risks, our business, financial condition or operating results could be harmed.

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Our revenue, expenses and operating results could be affected by changes in travel, real estate and vacation rental markets, as well as general economic conditions.

Our business is particularly sensitive to trends in the travel, real estate and vacation rental markets, which are unpredictable, as well as trends in the general economy. Therefore, our operating results, to the extent they reflect changes in the broader travel, real estate and vacation rental industries, may be subject to significant fluctuations.

For example, changes in the travel industry, such as disruptions caused by war, terrorist attacks or natural disasters, could significantly reduce the willingness of potential travelers to plan vacation and other travel. Such disruptions which harm or destroy vacation homes could cause the property owners and managers of such homes to cancel or fail to renew their listings. Downturns in real estate markets may result in decreased new building rates and increases in foreclosures, which could result in fewer vacation rentals available for listing on our websites. Also, since vacation travel is generally dependent on discretionary spending, negative general economic conditions could significantly reduce the overall amount that travelers spend on, and the frequency of, leisure travel, including vacation rentals. Additionally, property owners may choose or be forced to sell their vacation rentals during periods of economic slowdown or recession. Any or all of these factors could reduce the demand for vacation rentals and our services, reducing our revenue and could increase our need to make significant expenditures to continue to attract property owners, managers and travelers to our websites.

Vacation rentals are often located in popular vacation destinations around the world and utilized on a seasonal basis. Factors influencing the desirability of vacation rentals in a particular region or season could adversely affect our ability to obtain new listings and retain existing listings.

Vacation rentals are often located in popular vacation destinations and utilized on a seasonal basis. As a result, our listings involve properties that are often concentrated in particular regions, and our revenue is dependent upon our ability or willingness to list properties in those regions. Each region has its own commercial and regulatory requirements related to the listing of vacation rentals. If we became unable or unwilling to list properties in a particular region, our listings in the region could decline or cease to grow, and revenue and results of operations could be adversely impacted.

In addition, factors influencing the desirability of vacation rentals in a particular region or during a specific season could adversely affect our ability to obtain new listings and retain existing listings. For example, a significant number of the vacation rentals listed on our websites are located in Florida. Following the oil spill in April 2010 along the Gulf Coast, some of our property owners and managers with vacation rentals in the Gulf Coast area reported to us that their bookings declined. While we are uncertain of the impact of the oil spill on the decisions of our property owners and managers to renew their listings on our websites, the occurrence of this type of event or a significant natural disaster, political turmoil or other regional disturbance could reduce the number of available vacation rentals in that area, reducing our listing base and our revenue. In addition, if we do not have sufficient property listings in a newly popular vacation destination, we could fail to attract travelers to our websites and property owners and managers may opt to list their properties with a competitor having a greater presence in that area.

We could face liability for information on or accessible through our online marketplace.

A significant portion of the information available through our online marketplace, including listing data and photographs, is submitted by property owners and managers and third parties. We also allow third parties to advertise their products and services on our websites and include links to third-party websites. We could be exposed to liability with respect to this information. Property owners and managers could assert that information concerning them on our websites contains errors or omissions and third parties could seek damages from us for losses incurred if they rely upon incorrect information provided by our property owners and managers or advertisers. We could also be subject to claims that the persons posting information on our websites do not have the right to post such information or are infringing the rights of third parties, such as copyrights in photographs and privacy and publicity rights. Among other things, we might be subject to claims that by directly or indirectly providing links to websites operated by third parties, we are liable for wrongful actions by the third parties operating those websites. Even if these claims do not result in liability to us, we could incur significant costs in investigating and defending against these claims.

In addition, our services feature a property review platform, which allows travelers to post property reviews and other information about properties, property owners and managers. Although this feedback is generated by users and not by us, claims of defamation or other injury have been made against other Internet service providers offering similar forums and may be made against us for content posted in this forum. Our potential liability for information on our websites or distributed by us to others and for the activities of our owners, managers or travelers could require us to implement additional measures to reduce our exposure to such liability, which may require us to expend substantial resources and limit the attractiveness of our online marketplace to users. Our general liability insurance may not cover all potential claims to which we are exposed and may not be adequate to indemnify us for all liability that may be imposed.

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Property owner, manager or traveler complaints or negative publicity about our company, our services or our business activities could diminish use of our online marketplace.

Property owner, manager or traveler complaints or negative publicity about our company, our services or our business activities could severely diminish consumer confidence in and use of our online marketplace. Measures we sometimes take to combat risks of fraud and breaches of privacy and security, such as removing suspected fraudulent listings or listings repeatedly reported by travelers to be significantly not as described, can damage relations with our property owners and managers. These measures heighten the need for prompt and accurate customer service to resolve irregularities and disputes. Effective customer service requires significant personnel expense, and this expense, if not managed properly, could significantly impact our profitability. Failure to manage or train our customer service representatives properly could compromise our ability to handle owner, manager and traveler complaints effectively. If we do not handle these complaints effectively, our reputation may suffer, and we may lose the confidence of our owners, managers and travelers. We may also be the subject of blog or forum postings that include inaccurate statements and create negative publicity. As a result of these complaints or negative publicity, property owners and managers of vacation rentals may discontinue their listing with us or travelers may discontinue their use of our websites, and our business and results of operations could be adversely impacted.

Our failure to achieve and maintain effective internal controls could adversely affect our financial position and lower our stock price.

We are a newly publicly traded company. Since our initial public offering closed on July 5, 2011, we have been subject to reporting and other obligations under the Securities Exchange Act of 1934, including the requirements of Section 404 of Sarbanes-Oxley, and starting for our fiscal year ending December 31, 2012, these provisions require annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing our assessments. We also operate in a complex environment and expect that these obligations, together with our rapid growth and expansion through acquisitions, place significant demands on our management and administrative resources, including accounting and tax resources. Although we have expanded the size and depth of the finance and accounting staff in our U.S. and European headquarters, we may need to hire additional personnel. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to attest that our management’s report is fairly stated or they are unable to express an opinion on our management’s assessment or on the effectiveness of our internal control over financial reporting, our investors could lose confidence in the accuracy and completeness of our financial reports.

If we do not adequately protect our intellectual property, our ability to compete could be impaired.

Our intellectual property includes the content of our websites, our registered domain names, our registered and unregistered trademarks and our patents and patent applications. We believe that our intellectual property is an essential asset of our business and that our HomeAway.com, VRBO.com, VacationRentals.com, Homelidays.com, HomeAway.co.uk, Abritel.fr, Fewo-Direkt.de, AlugueTemporada.com.br, Toprural.com, BedandBreakfast.com, Escapia.com, InstantSoftware.com and other domain names and our technology infrastructure currently give us a competitive advantage in the online market for vacation rental listings. If we do not adequately protect our intellectual property, our brand and reputation could be harmed, property owners, managers and travelers could devalue the content of the websites comprising our online marketplace, and our ability to compete effectively would be impaired.

To protect our intellectual property we rely on a combination of copyright, trademark, patent and trade secret laws, contractual provisions and our user policy and restrictions on disclosure. Upon discovery of potential infringement of our intellectual property, we promptly take action we deem appropriate to protect our rights. We regularly deliver cease and desist letters to parties who misappropriate our trademarks or content, such as aggregators of vacation rental listing content who use automated technology to download content from our online marketplace and display it on their websites without our permission. We also enter into confidentiality agreements with our employees and consultants and seek to control access to and distribution of our proprietary information in a commercially prudent manner. The efforts we have taken to protect our intellectual property may not be sufficient or effective, and, despite these precautions, it may be possible for other parties to copy or otherwise obtain and use the content of our websites without authorization. We may be unable to prevent competitors from acquiring domain names or trademarks that are similar to, infringe upon or diminish the value of our domain names, service marks and our other proprietary rights. Even if we do detect violations and decide to enforce our intellectual property rights, litigation may be necessary to enforce our rights, and any enforcement efforts we undertake could be time-consuming and expensive, could divert our management’s attention and may result in a court determining that our intellectual property rights are unenforceable. A failure to protect our intellectual property in a cost-effective and meaningful manner could have a material adverse effect on our ability to compete.

As of June 30, 2013, we had six patent applications and no issued patents. Any future patents issued to us may be challenged, invalidated or circumvented, may not provide sufficiently broad protection or may not prove to be enforceable in actions against alleged infringers. Furthermore, effective patent, trademark, copyright and trade secret protection may not be available in every country in which our products are available over the Internet. In addition, the legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain and still evolving.

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We may be subject to claims that we violated intellectual property rights of others, which are extremely costly to defend and could require us to pay significant damages and limit our ability to operate.

Companies in the Internet and technology industries, and other patent and trademark holders seeking to profit from royalties in connection with grants of licenses, own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. We have received in the past and may in the future receive notices that claim we have misappropriated or misused other parties’ intellectual property rights. There may be intellectual property rights held by others, including issued or pending patents and trademarks, that cover significant aspects of our technologies, content, branding or business methods. Any intellectual property claim against us, regardless of merit, could be time-consuming and expensive to settle or litigate and could divert our management’s attention and other resources. These claims also could subject us to significant liability for damages and could result in our having to stop using technology, content, branding or business methods found to be in violation of another party’s rights. We might be required or may opt to seek a license for rights to intellectual property held by others, which may not be available on commercially reasonable terms, or at all. Even if a license is available, we could be required to pay significant royalties, which would increase our operating expenses. We may also be required to develop alternative non-infringing technology, content, branding or business methods, which could require significant effort and expense and make us less competitive in the online vacation rental market. If we cannot license or develop technology, content, branding or business methods for any allegedly infringing aspect of our business, we may be unable to compete effectively. Any of these results could harm our operating results.

If we are not able to maintain and enhance our HomeAway brand and the brands associated with each of our websites, our reputation and business may suffer.

Maintaining and enhancing our HomeAway brand identity and the brand identities we maintain through our other websites are critical to our ability to attract new property owners, managers and travelers to our marketplace, generate advertising revenue and successfully introduce new services and products. We may not be able to successfully build our HomeAway brand identity in the United States and overseas without losing some or all of the value associated with, or decreasing the effectiveness of, our other brand identities. We expect that the promotion of our brands will require us to make substantial investments, and, as our market becomes more competitive, these branding initiatives may become increasingly difficult and expensive. The successful promotion of our brands will depend largely on our marketing and public relations efforts. If we do not successfully maintain and enhance our brands, we could lose traveler traffic, which could, in turn, cause property owners and managers of vacation rentals to terminate or elect not to renew their listings with us. Our brand promotion activities may not be successful or may not yield revenue sufficient to offset their cost, which could adversely affect our reputation and business.

We currently rely on a small number of third-party service providers to host and deliver a significant portion of our services, and any interruptions or delays in services from these third parties could impair the delivery of our services and harm our business.

We use a combination of third-party data centers located in the United States and the United Kingdom and a third-party co-location hosting center located in the United States to host our websites and core services. We do not control the operation of any of the third-party data center facilities we use. These facilities, including our co-location hosting center, may be subject to break-ins, computer viruses, denial-of-service attacks, sabotage, acts of vandalism and other misconduct. They are also vulnerable to damage or interruption from power loss, telecommunications failures, fires, floods, earthquakes, hurricanes, tornadoes and similar events. We currently do not have a comprehensive disaster recovery plan in place nor do our systems provide complete redundancy of data storage or processing. As a result, the occurrence of any of these events, a decision by our third-party service providers to close their data center facilities without adequate notice or other unanticipated problems could result in loss of data as well as a significant interruption in our services and harm to our reputation and brand. Additionally, our third-party data center facility agreements are of limited durations, and our third-party data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew our agreements with these facilities on commercially reasonable terms, we may experience delays in the provisioning of our services until an agreement with another data center facility can be arranged. This shift to alternate data centers could take more than 24 hours depending on the nature of the event.

Furthermore, we depend on continuous and uninterrupted access to the Internet through third-party bandwidth providers to operate our business. If we lose the services of one or more of our bandwidth providers for any reason or if their services are disrupted, for example due to viruses or “denial-of-service” or other attacks on their systems, we could experience disruption in our services or we could be required to retain the services of a replacement bandwidth provider, which could harm our business and reputation.

Our operations are dependent on the availability of electricity, which also comes from third-party providers. If we or the third-party data center facilities that we use to deliver our services were to experience a major power outage, it could result in disruption of our services and harm to our business.

Any errors, defects, disruptions or other performance problems with our services could harm our reputation and may damage our property owners’ and managers’ vacation rental businesses. Interruptions in our services would likely reduce our revenue, require us to issue credits to our property owners and managers, could cause property owners and managers to terminate their listings with us and could adversely affect our renewal rates. Our business and results of operations would be harmed if our current and potential property owners and managers believe our services are unreliable.

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We may incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could harm our operating results.

As a public company, we have incurred and will incur significant legal, accounting, investor relations and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with current corporate governance requirements, including requirements under Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the Securities and Exchange Commission, or SEC, and The Nasdaq Global Select Market, or NASDAQ. We expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We expect that, as a public company, it will continue to be more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantially higher costs to obtain coverage or to accept reduced policy limits and coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.

We might require additional capital to support business growth, and this capital might not be available.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new products or services or enhance our existing products or services, enhance our operating infrastructure and acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited.

Risks Related to the Ownership of our Common Stock

Our stock price may be volatile.

The market price of our common stock is likely to be volatile and could be subject to wide fluctuations in response to, among other things, the risk factors described in this section of this Annual Report on Form 10-K, and other factors beyond our control. Factors affecting the trading price of our common stock could include:

• variations in our operating results;

• variations in operating results of similar companies;

• changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock;

• changes in our outlook for future operating results which are communicated to investors and analysts;

• announcements of technological innovations, new products, services or service enhancements, strategic alliances or agreements by us or by our competitors;

• marketing and advertising initiatives by us or our competitors;

• the gain or loss of listings and advertising;

• threatened or actual litigation;

• major changes in our management;

• recruitment or departures of key personnel;

• market conditions in our industry, the travel industry and the economy as a whole;

• the overall performance of the equity markets;

• sales of shares of our common stock by existing stockholders;

• the reports of industry research analysts who cover our competitors and us;

• stock-based compensation expense under applicable accounting standards; and

• adoption or modification of regulations, policies, procedures or programs applicable to our business.

Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations and general economic, political and market

56

conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock regardless of our actual operating performance. Each of these factors, among others, could harm the value of our common stock.

In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us, regardless of the merits or outcome, could result in substantial costs and divert our management’s attention from other business concerns, which could materially harm our business.

If securities analysts do not continue to publish research or publish negative research about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes negative research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the market for our stock and demand for our stock could decrease, which could cause our stock price or trading volume to decline.

The concentration of our capital stock ownership with insiders will likely limit your ability to influence corporate matters.

As of June 30, 2013, our executive officers, directors, current five percent or greater stockholders and affiliated entities together beneficially own approximately 31.3% of our common stock outstanding. As a result, these stockholders, acting together, may be able to control our management and affairs and matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership could limit other stockholders’ ability to influence corporate matters and may have the effect of delaying or preventing a change of control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if such a change of control would benefit our other stockholders. This significant concentration of share ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders.

We do not anticipate paying any dividends on our common stock.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future. If we do not pay cash dividends, our stockholders could receive a return on their investment in our common stock only if the market price of our common stock has increased when they sell their shares.

Our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.

Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:

• creating a classified board of directors whose members serve staggered three-year terms;

• not providing for cumulative voting in the election of directors;

• authorizing our board of directors to issue, without stockholder approval, preferred stock with rights senior to those of our common stock;

• prohibiting stockholder action by written consent; and

• requiring advance notification of stockholder nominations and proposals.

Certain provisions under Delaware law, the provisions listed above, and other provisions included in our amended and restated certificate of incorporation and our amended and restated bylaws could discourage potential takeover attempts, reduce the price that investors might be willing to pay in the future for shares of our common stock and result in the market price of our common stock being lower than it would be without these provisions.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Sales of Unregistered Securities

None.

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(b) Use of Proceeds from Initial Public Offering of Common Stock

On July 5, 2011, the Company completed its initial public offering (“IPO”) of 9,200,000 shares of common stock, at $27.00 per share, before underwriting discounts and commissions. The Company sold 5,931,335 shares and existing stockholders sold an aggregate of 3,268,665 shares, including 1,200,000 shares as a result of the underwriters’ exercise of their over-allotment option to purchase additional shares. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-172783), which was declared effective by the SEC on June 28, 2011. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries, or as a result of sales of shares of common stock by selling stockholders in the offering or as a result of accrued dividends paid at the time of the conversion of the Company’s outstanding shares of Series A and Series B preferred stock.

There have been no material changes in the planned use of proceeds from the Company’s IPO from that described in the final prospectus filed with the SEC pursuant to Rule 424(b) on June 28, 2011. With the proceeds of the offering, the Company redeemed its outstanding shares of Series A and B preferred stock for $65.1 million, as well as paid in full all accrued but unpaid dividends on its outstanding shares of Series C preferred stock, which totaled $32.9 million. In addition, during the year ended December 31, 2012, the Company invested $16.1 million, net of cash acquired, for the acquisition of Top Rural S.L. in Spain and $6.4 million for a non-controlling equity investment in a private company in China. During the six months ended June 30, 2013, the Company invested an additional $3.7 million for a further non-controlling equity investment in the same private company in China.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

See the Exhibit Index immediately following the signature page of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

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HomeAway, Inc.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HOMEAWAY, INC.
Dated: July 31, 2013	By:	/s/ Lynn Atchison
		Lynn Atchison
		Chief Financial Officer and Secretary

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EXHIBIT INDEX

Exhibit Number		Incorporated by Reference
	Exhibit Description	Form		File No.		Exhibit		Filing Date
3.1	Amended and Restated Certificate of Incorporation, as currently in effect		S-1		333-172178		3.2		March 11, 2011
3.2	Amended and Restated Bylaws, as currently in effect		S-1		333-172178		3.4		March 11, 2011
10.1*	Lease Agreement between Domain Junction 2 LLC, Landlord, and the Registrant, Tenant, dated July 3, 2013
31.1*	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

* Furnished herewith.

** XBRL information is furnished and not filed or part of any registration statement or prospectus to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections.

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EX-10.1

Exhibit 10.1

LEASE

Domain Junction 2 LLC,

Landlord,

and

HomeAway, Inc.,

Tenant

TABLE OF CONTENTS

	Page
1. USE AND RESTRICTIONS ON USE		1
2. TERM		2
3. RENT		4
4. RENT ADJUSTMENTS		5
5. SECURITY DEPOSIT		12
6. ALTERATIONS		13
7. REPAIR		14
8. LIENS		14
9. ASSIGNMENT AND SUBLETTING		14
10. [INTENTIONALLY DELETED]		16
11. INSURANCE		16
12. WAIVER OF SUBROGATION		17
13. SERVICES AND UTILITIES		17
14. HOLDING OVER		19
15. SUBORDINATION		19
16. RULES AND REGULATIONS		19
17. REENTRY BY LANDLORD		20
18. DEFAULT		20
19. REMEDIES		21
20. TENANT’S BANKRUPTCY OR INSOLVENCY		23
21. QUIET ENJOYMENT		24
22. CASUALTY		24
23. EMINENT DOMAIN		25
24. SALE BY LANDLORD		25
25. ESTOPPEL CERTIFICATES		25
26. SURRENDER OF PREMISES		25
27. NOTICES		26
28. [INTENTIONALLY DELETED]		26
29. [INTENTIONALLY DELETED]		26
30. PARKING		26
31. DEFINED TERMS AND HEADINGS		28
32. TENANT’S AUTHORITY		28
33. FINANCIAL STATEMENTS AND CREDIT REPORTS		28
34. COMMISSIONS		29
35. TIME AND APPLICABLE LAW		29
36. SUCCESSORS AND ASSIGNS		29
37. ENTIRE AGREEMENT		29

TABLE OF CONTENTS

(continued)

	Page
38. EXAMINATION NOT OPTION		29
39. RECORDATION		29
40. LIMITATION OF LIABILITY		29
41. SPECIAL PROVISIONS		29

ii

NET OFFICE LEASE

REFERENCE PAGES

BUILDING:	That certain five (5) story retail/office building which: (i) is depicted as the “Domain Two Office Building” on the site plan attached to this Lease as Exhibit “A”; and (ii) will be constructed on the tract of land owned by Landlord described on Exhibit “B” attached to this Lease.
PARKING FACILITY:	A multi-story structured parking facility depicted as the “Phase 1 Garage” on the site plan attached to this Lease as Exhibit “A”, for which Landlord has an easement estate.
LANDLORD:	Domain Junction 2 LLC, a Delaware limited liability company
LANDLORD’S ADDRESS:	c\o Endeavor Real Estate Group, Ltd. Attn: Property Management Group 11401 Century Oaks Terrace, Suite 350 Austin, Texas 78758
WIRING INSTRUCTIONS FOR RENT PAYMENT:
LEASE REFERENCE DATE:	July 3, 2013
TENANT:	HomeAway, Inc., a Delaware corporation
TENANT’S NOTICE ADDRESS:	1011 West Fifth Street, Suite 300 Austin, Texas 78703 Attention: Chief Financial Officer With copy to: HomeAway, Inc.  1011 West Fifth Street, Suite 300  Austin, Texas 78703  Attention: General Counsel
PREMISES:	All of the rentable space on the second, third, fourth and fifth floors of the Building (for floor plans of the Premises, see Exhibit C)
PREMISES ADDRESS:	11800 Domain Blvd., Suite Number 200, Austin, Texas 78758
PREMISES RENTABLE AREA:	Approximately 114,665 sq. ft.
PROJECT:	The Building and the Parking Facility (as defined in Section 30), combined
THE DOMAIN:	The real estate development project locally known as “The Domain”, in which the Project is located, generally including the area within and bounded by Burnet Road, Gault Lane, Loop 1 (MoPac) and Braker Lane in the City of Austin, Texas, SAVE AND EXCEPT the building known as “Building 45” located on Braker Lane which is currently occupied by IBM. The area identified herein as “The Domain” currently includes:

iii

	(i) the office building known as “Domain 5” located at 11501 Domain Drive; (ii) the office building known as “Domain 2” (to be renamed), located at 3110 Esperanza Crossing; (iii) the office building known as “Domain Gateway” located at 2900 Esperanza Crossing; and (iv) the “Offices at the Domain” (office above retail) and the retail center currently anchored by Neiman Marcus, Macy’s, Dillard’s and Dick’s Sporting Goods.
SCHEDULED COMMENCEMENT DATE:	September 1, 2014 (subject to adjustment as provided in Section 2)
TERM:	Eleven and one-half (11  1⁄2) years, beginning on the Commencement Date and ending on the Termination Date.
TERMINATION DATE:	The last day of the one hundred thirty-eighth (138th) full calendar month after the Commencement Date.

ANNUAL RENT and MONTHLY INSTALLMENT OF

RENT(Article 3):

Period*			Occupied		Rentable Square			Annual Rate		Annual Rent**		Monthly Rent**
from	through		Floors		Footage**			(Per Square Foot)
9/1/2014		6/30/2015		2 and 3		57,165		$	22.65	$	1,294,787.30	$	107,898.94
7/1/2015		8/31/2015		2, 3 and 4		86,059	***	$	22.65	$	1,294,787.30	$	107,898.94
9/1/2015		2/29/2016		2, 3 and 4		86,059		$	23.15	$	1,992,265.85	$	166,022.15
3/1/2016		8/31/2016		2, 3, 4 and 5		114,665		$	23.15	$	2,654,494.75	$	221,207.90
9/1/2016		8/31/2017		2, 3, 4 and 5		114,665		$	23.65	$	2,711,827.25	$	225,985.60
9/1/2017		8/31/2018		2, 3, 4 and 5		114,665		$	24.15	$	2,769,159.75	$	230,763.31
9/1/2018		8/31/2019		2, 3, 4 and 5		114,665		$	24.65	$	2,826,492.25	$	235,541.02
9/1/2019		8/31/2020		2, 3, 4 and 5		114,665		$	25.15	$	2,883,824.75	$	240,318.73
9/1/2020		8/31/2021		2, 3, 4 and 5		114,665		$	25.65	$	2,941,157.25	$	245,096.44
9/1/2021		8/31/2022		2, 3, 4 and 5		114,665		$	26.15	$	2,998,489.75	$	249,874.15
9/1/2022		8/31/2023		2, 3, 4 and 5		114,665		$	26.65	$	3,055,822.25	$	254,651.85
9/1/2023		8/31/2024		2, 3, 4 and 5		114,665		$	27.15	$	3,113,154.75	$	259,429.56
9/1/2024		8/31/2025		2, 3, 4 and 5		114,665		$	27.65	$	3,170,487.25	$	264,207.27
9/1/2025		2/28/2026		2, 3, 4 and 5		114,665		$	28.15	$	3,227,819.75	$	268,984.98

NOTES:

* The time periods have been calculated assuming a September 1, 2014 Commencement Date. If the Commencement Date is delayed under the terms and provisions of Section 3 or Exhibit B attached to this Lease, then the dates will be adjusted accordingly.

** The Rentable Square Footage Amounts and the Annual Rent and Monthly Rent amounts have been adjusted to take into account the rent abatement provisions set out in Section 3.1.1 of this Lease.

*** During the eleventh and twelfth months of the Term, Tenant will be allowed to occupy 86,059 square feet of rentable area but will be paying rent on only 57,165 square feet of rentable area (see Section 3.1.1).

TENANT’S PROPORTIONATE SHARE:	82.1 %
SECURITY DEPOSIT:	A $1,000,000.00 letter of credit (as provided in Section 5).
ASSIGNMENT/SUBLETTING FEE	$750.00

iv

BUILDING BUSINESS HOURS: 7:00 a.m. to 6:30 p.m. each Monday through Friday and 8:00 a.m. to 12:00 p.m. on each Saturday (or such other times specified by Tenant by notice to Landlord), other than New Year’s Day, Memorial Day, the Fourth of July, Labor Day, Thanksgiving Day and Christmas Day.

The Reference Pages information is incorporated into and made a part of the Lease. In the event of any conflict between any Reference Pages information and the Lease, the Lease shall control. This Lease includes the exhibits attached to this Lease, all of which are incorporated into and made a part of this Lease.

LANDLORD:			TENANT:
By:	Domain Junction 2 LLC, a Delaware limited liability company		HomeAway, Inc., a Delaware corporation
	By:	/s/ Paul W. Grafft	By:	/s/ Lynn Atchison
	Printed Name:	Paul W. Grafft	Printed Name:	Lynn Atchison
	Title:	Vice President	Title:	CFO
		Dated:             6/27/13	Dated:	6/24/13

v

LEASE

By this Lease Landlord leases the Premises to Tenant and Tenant leases the Premises from Landlord. The Premises are defined on the Reference Pages and are depicted on the floor plans attached hereto as Exhibit C. The Project is defined on the Reference Pages and is depicted on the site plan attached hereto as Exhibit A. The Reference Pages, including all terms defined thereon, are incorporated as part of this Lease.

1. USE AND RESTRICTIONS ON USE.

1.1 The Premises are to be used solely for general office and related incidental purposes. Tenant shall not allow the Premises to be used for any improper, immoral or unlawful purpose, or commit any waste. Tenant shall not do, permit or suffer in, on, or about the Premises the sale of any alcoholic liquor without the written consent of Landlord first obtained. Tenant shall comply with all governmental laws, ordinances and regulations applicable to the use of the Premises and its occupancy and shall promptly comply with all governmental orders and directions for the correction, prevention and abatement of any violations in the Project or appurtenant land, caused or permitted by, or resulting from the specific use by, Tenant, or in or upon, or in connection with, the Premises, all at Tenant’s sole expense. Tenant shall not do or permit anything to be done on or about the Premises or bring or keep anything into the Premises which will in any way invalidate or prevent the procuring of any insurance protecting against loss or damage to the Project or any of its contents by fire or other casualty or against liability for damage to property or injury to persons in or about the Project or any part thereof.

1.2 Tenant shall not, and shall not direct, suffer or permit any of its agents, contractors, employees, licensees or invitees (collectively, the “Tenant Entities”) to at any time handle, use, manufacture, store or dispose of in or about the Premises or the Project any (collectively “Hazardous Materials”) flammables, explosives, radioactive materials, hazardous wastes or materials, toxic wastes or materials, or other similar substances, petroleum products or derivatives or any substance subject to regulation by or under any federal, state and local laws and ordinances relating to the protection of the environment or the keeping, use or disposition of environmentally hazardous materials, substances, or wastes, presently in effect or hereafter adopted, all amendments to any of them, and all rules and regulations issued pursuant to any of such laws or ordinances (collectively “Environmental Laws”), nor shall Tenant suffer or permit any Hazardous Materials to be used in any manner not fully in compliance with all Environmental Laws, in the Premises or the Project and appurtenant land or allow the environment to become contaminated with any Hazardous Materials. Notwithstanding the foregoing, Tenant may handle, store, use or dispose of products containing small quantities of Hazardous Materials (such as aerosol cans containing insecticides, toner for copiers, paints, paint remover and the like) to the extent customary and necessary for the use of the Premises for general office purposes; provided that Tenant shall always handle, store, use, and dispose of any such Hazardous Materials in a safe and lawful manner and never allow such Hazardous Materials to contaminate the Premises, Project and appurtenant land or the environment. Tenant shall protect, defend, indemnify and hold each and all of the Landlord Entities (as defined in Article 31) harmless from and against any and all loss, claims, liability or costs (including court costs and attorney’s fees) incurred by reason of any actual or asserted failure of Tenant to fully comply with all applicable Environmental Laws, or the presence, handling, use or disposition in or from the Premises of any Hazardous Materials by Tenant or any Tenant Entity (even though permissible under all applicable Environmental Laws or the provisions of this Lease), or by reason of any actual or asserted failure of Tenant to keep, observe, or perform any provision of this Section 1.2.

1.3 Tenant and the Tenant Entities will be entitled to the non-exclusive use of the common areas of the Project as they exist from time to time during the Term, subject to Landlord’s reasonable rules and regulations regarding such use. Notwithstanding the foregoing, the Building shall not contain common areas on the second, third, fourth or fifth floors, and Tenant shall have exclusive use and occupancy of such floors.

1.4 The Project and the Premises are subject to that certain Amended and Restated Declaration of Covenants, Conditions and Restrictions for “The Domain” dated July 24, 2007 recorded as Document No. 2007136702 of the Official Public Records of Travis County, Texas, as amended if applicable (the “Domain CCRs”) and the assessments and charges levied thereunder (the “Domain Assessments”). Under the terms of the Domain CCRs, owners and occupants of the Premises have the right to utilize certain common areas and private streets more fully described therein and are subject to the restrictions and obligations set out therein. Tenant agrees to comply with all of the terms, conditions and requirements applicable to Tenant and/or the Premises under the Domain CCRs.

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1.5 Landlord intends to subject the Building to a condominium declaration and the Parking Facility to a separate condominium declaration (individually a “Condominium Declaration” and collectively, the “Condominium Declarations”). Pursuant to the Condominium Declaration covering the Building, the first floor of the Building will be divided into one or more condominium units which will be used for retail purposes and the Premises will be divided into one or more condominium units which will be used for office purposes. The form of Condominium Declaration for the Building is attached hereto as Exhibit “I” and the “Domain Building 2 Expense Allocation Document” which will be executed in connection therewith (the “Expense Allocation Document”) is attached hereto as Exhibit “J”. Pursuant to the Condominium Declaration covering the Parking Facility, the Parking Facility (as the same is expanded from time to time) will be divided into multiple condominium units which will be utilized by occupants of the Building and also by others. It is anticipated that the Condominium Declaration for the Building will be executed and filed of record prior to the Commencement Date and the Expense Allocation Document will be executed (but not filed of record) in conjunction therewith. With respect to the Parking Facility: (i) the rights of Landlord will be governed by that certain “Parking Garage Easement Agreement” which will be filed of record prior to the Commencement Date in substantially the form of Exhibit “K” attached hereto (the “Parking Easement Agreement”); and, (ii) the Condominium Declaration for the Parking Facility will be filed of record after the Commencement Date and concurrently with such filing, the Parking Easement Agreement will be terminated. Tenant agrees to comply with all of the terms, conditions and requirements applicable to Tenant and/or Tenant’s use and occupancy of the Project under the Condominium Declarations, the Expense Allocation Document and the Parking Easement Agreement; provided, however, in the event of any inconsistency between the terms and provisions of this Lease and the terms and conditions of the Condominium Declarations, the Expense Allocation Document and the Parking Easement Agreement, the terms and conditions of this Lease shall control in determining the obligations of Landlord and Tenant to each other pursuant to this Lease. Landlord may attach the necessary exhibits and may make and/or consent to minor changes to the Condominium Declarations, the Expense Allocation Document and/or the Parking Easement Agreement without necessity of obtaining Tenant’s consent, but Landlord will not make or consent to any amendments to the Condominium Declarations, the Expense Allocation Document or the Parking Easement Agreement that materially adversely affects the Premises without the prior written consent of Tenant, which consent shall not be unreasonably withheld, conditioned or delayed. In addition, Tenant will also have the right to review and approve the Condominium Declaration for the Parking Facility, but such approval will not be unreasonably withheld, conditioned or delayed. The assessments and charges levied against the Project under the Condominium Declarations and the Expense Allocation Document (the “Condominium Assessments”) and all expenses incurred by Landlord pursuant to the Parking Easement Agreement (the “Parking Easement Assessments”) will be added to the “Expenses” (hereinafter defined). If Landlord delivers written notice to Tenant attaching the proposed Condominium Declaration for the Parking Facility or any proposed amendment to the Condominium Declarations, the Expense Allocation Document and/or the Parking Easement Agreement and Tenant fails to deliver a written notice of objection to Landlord within twenty (20) calendar days after Landlord’s delivery of such notice and document or documents to Tenant, stating with specificity Tenant’s objections to the proposed document(s), then Tenant will be deemed to have provided Tenant’s written consent to the proposed document(s). Notwithstanding anything else herein to the contrary, Landlord’s notice under this Section must contain a statement in conspicuous, capitalized font that Tenant’s failure to respond within the specified time period will be considered Tenant’s deemed approval of the attached documents.

2. TERM.

2.1 The Term of this Lease shall begin on the date (“Commencement Date”) which shall be the later of: (a) the Scheduled Commencement Date, as shown on the Reference Pages; or (b) the date which is ninety (90) days after the “Delivery Date” (as defined in Exhibit D). Tenant shall, at Landlord’s request, execute and deliver a memorandum agreement provided by Landlord in the form of Exhibit E attached hereto, setting forth the actual Commencement Date, Termination Date and, if necessary, a revised rent schedule. Should Tenant fail to do so within thirty (30) days after Landlord’s request, the information set forth in such memorandum provided by Landlord shall be conclusively presumed to be agreed and correct.

2.2 Tenant agrees that in the event of the inability of Landlord to deliver possession of the Premises for any reason, Tenant shall not be liable for any rent until ninety (90) days after the Delivery Date (subject to adjustment as provided in Section 2.4 below). No such failure to give possession on the Scheduled Commencement Date shall affect the other obligations of Tenant under this Lease, except that (i) if the Delivery Date does not occur on or before September 15, 2014 (other than as a result of Force Majeure or Tenant Delay), Tenant shall receive one (1) additional day of free Annual Rent for each day thereafter until Landlord delivers possession of the Premises; and (ii) if the Delivery Date does not occur on or before December 15, 2014 (other than as a result of Force Majeure or Tenant Delay), Tenant shall have the option to terminate this Lease. If Tenant terminates the Lease as permitted in this section, Landlord shall reimburse Tenant within thirty (30) days thereafter for $1,000,000.00, as Tenant’s sole and exclusive remedy and as liquidated damages which the parties stipulate is a reasonable estimate of Tenant’s damages for disruption to its business, reputation and operations, which are difficult to quantify.

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2.2.1

(a) Landlord represents and warrants to Tenant that it has received its site development permit for construction of the Project.

(b) Landlord agrees that if Landlord fails to commence construction of the Building on or before December 15, 2013 (and if such failure is not due to Force Majeure or Tenant Delay), then Tenant may terminate this Lease by written notice to Landlord. For purposes of this Lease, construction of the Building shall be deemed to have commenced when the excavation for the foundation of the Building shall have been commenced. If Tenant terminates this Lease as permitted in this subsection, Landlord shall, as Tenant’s sole and exclusive remedy, reimburse Tenant within thirty (30) days thereafter for the aggregate amount of all sums paid by Tenant to Tenant’s architects, attorneys and other consultants in connection with this Lease, including but not limited to the design of and preparation of proposed plans and specifications for the Premises prior to the date of termination; except, however, that Landlord’s liability to Tenant under this provision is limited to a maximum of $250,000.00.

(c) Subject to Force Majeure and Tenant Delay, Landlord must complete the structural concrete frame for the Building by June 15, 2014 [said event being referred to as “Interim Construction Requirement” and the corresponding date by which the Interim Construction Requirement must be satisfied being the “Interim Construction Requirement Date”]. If Landlord has not satisfied the Interim Construction Requirement by the Interim Construction Requirement Date (and such failure is not due to Force Majeure or Tenant Delay), then Tenant may terminate this Lease by written notice to Landlord. If Tenant terminates this Lease as permitted in this subsection, Landlord shall reimburse Tenant within thirty (30) days thereafter for $500,000.00, as Tenant’s sole and exclusive remedy and as liquidated damages which the parties stipulate is a reasonable estimate of Tenant’s damages for disruption to its business, reputation and operations, which are difficult to quantify.

2.2.2 In the event of any termination of this Lease under this Section 2.2: (a) the Security Deposit will be returned by Landlord to Tenant; (b) Tenant shall have the right to recover the applicable reimbursement from Landlord provided for in this Section 2.2 as Tenant’s sole and exclusive remedy; and (c) neither Landlord nor Tenant thereafter will have any further rights, remedies or obligations under this Lease.

2.2.3

(a) The obligations of Landlord to make the payments under this Section 2.2 will be guaranteed by SHORENSTEIN REALTY INVESTORS TEN, L.P., a Delaware limited partnership, or another guarantor with financial strength reasonably acceptable to Tenant, pursuant to the form of guaranty attached hereto as Exhibit H; provided, however, that: (i) Landlord may, in lieu of providing such guaranty, deliver to Tenant a letter of credit in the amount of $1,000,000.00 securing the obligations of Landlord to make the payments under this Section 2.2; and (ii) if such letter of credit is provided by Landlord to Tenant after the execution and delivery of the guaranty agreement, then Tenant will promptly return the original executed guaranty agreement to Landlord and execute and deliver to the guarantor under the guaranty agreement, a written release of liability thereunder.

(b) Landlord will provide to Tenant, within ten (10) days after the date of execution of this Lease, either the guaranty referenced above in clause (a) of this Section 2.2.3 or the letter of credit referenced above in clause (a) of this Section 2.2.3.

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(c) If Tenant has not previously terminated this Lease pursuant to a right afforded hereunder, the potential liabilities of Landlord to Tenant under this Section 2.2 will otherwise terminate on the Delivery Date and will be of no further force or effect thereafter (such event being a “Liability Termination”). If the above referenced guaranty has been provided, then the guarantor thereunder will be released from all liability under the guaranty after a Liability Termination. Alternatively, if the above referenced letter of credit has been provided, then all of Tenant’s rights with respect to such Letter of Credit will terminate and be of no further force or effect after a Liability Termination. Tenant shall, within five (5) business days after a Liability Termination: (i) return the original guaranty and execute and deliver to the guarantor under the above referenced guaranty and upon such guarantor’s written request, a full and final release of the guaranty (if a guaranty has been provided); or (ii) return the original letter of credit and execute and deliver to Landlord upon Landlord’s written request a full and final release of all rights to call upon the above referenced letter of credit (if a letter of credit has been provided).

2.3 In the event Landlord permits Tenant, or any agent, employee or contractor of Tenant, to enter, use or occupy the Premises prior to the Commencement Date, such entry, use or occupancy shall be subject to all the provisions of this Lease other than the payment of rent, including, without limitation, Tenant’s compliance with the insurance requirements of Article 11. Said early possession shall not advance the Termination Date.

2.4 Notwithstanding any provision in this Lease to the contrary, if Landlord is delayed in commencing the construction of the Project or in completing the construction of the Project (or any component portion thereof) due to any “Tenant Delay” (as defined in Section 2.5 hereinbelow), then: (a) the December 15, 2013 deadline set out in Section 2.2.1(b) above, the June 15, 2014 deadline set out in Section 2.2.1(c) above, the September 15, 2014 deadline set out in Section 2.2 above and the December 15, 2014 deadline set out in Section 2.2 above will each be extended day for day for each day of Tenant Delay; but (b) the Delivery Date, the Commencement Date and Tenant’s obligations under this Lease, including, without limitation, the obligation to pay Rent, shall be adjusted so that the Delivery Date shall be deemed to be the date that the Delivery Date would have occurred but for such Tenant Delay and the Commencement Date shall be deemed to be the date that the Commencement Date would have occurred but for such Tenant Delay.

2.5 For purposes of this Lease the term “Tenant Delay” shall mean and include any delay caused by: (i) any improper act or neglect on the part of Tenant or any employee, agent, consultant or other party operating by, through or under Tenant; (ii) any failure by Tenant to timely comply with Tenant’s obligations under this Lease; or (iii) any changes by Tenant with respect to the “Landlord’s Work” as defined in Exhibit “D” attached to this Lease or to any of the other work of Landlord under this Lease (including without limitation, any repair or restoration work after a casualty, as contemplated under Section 22 of this Lease). Landlord may not treat an event as a “Tenant Delay” unless Landlord has delivered to Tenant written notice of same.

3. RENT.

3.1 Subject to the rent abatement provisions set out in Section 3.1.1 hereinbelow, Tenant agrees to pay to Landlord the Annual Rent in effect from time to time by paying the Monthly Installment of Rent then in effect on or before the first day of each full calendar month during the Term. The Monthly Installment of Rent in effect at any time shall be one-twelfth (1/12) of the Annual Rent in effect at such time. Rent for any period during the Term which is less than a full month shall be a prorated portion of the Monthly Installment of Rent based upon the number of days in such month. Said rent shall be paid to Landlord in readily available funds, without deduction or offset and without notice or demand by wire transfer to Landlord pursuant to the wiring instructions set out in the Reference Pages (or if Landlord shall so instruct Tenant in writing, Tenant shall deliver all payments to any physical address specified by Landlord in a written notice to Tenant or pursuant to alternative wiring instructions delivered by Landlord to Tenant from time to time or to such other person or at such other place as Landlord may from time to time designate in writing). Unless specified in this Lease to the contrary, all amounts and sums payable by Tenant to Landlord pursuant to this Lease shall be deemed additional rent.

3.1.1 Tenant will be entitled to the following abatements of the Monthly Installments of Rent under this Lease: (a) during the first twelve (12) months of the Term, the Monthly Installment of Rent with respect to the portion of the Premises located on the fourth floor of the Building shall be abated; and (b) during the first eighteen (18) months of the Term, the Monthly Installment of Rent with respect to the portion of the Premises located on the fifth floor of the Building shall be abated. Tenant may proceed with Tenant’s Work and take occupancy of the fourth and/or fifth floors of the Building before the dates set forth above, without Monthly Installments of Rent otherwise becoming due.

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3.2 Tenant recognizes that late payment of any rent or other sum due under this Lease will result in administrative expense to Landlord, the extent of which additional expense is extremely difficult and economically impractical to ascertain. Tenant therefore agrees that if rent or any other sum is not paid within five (5) days of when due and payable pursuant to this Lease, a late charge shall be imposed on Tenant in an amount equal to the greater of: (a) Fifty Dollars ($50.00), or (b) three percent (3%) of the unpaid rent or other payment. Notwithstanding the foregoing, if any late charge would be otherwise payable pursuant to the immediately preceding sentence, but Tenant has not been late in making any payments required under this Lease during the immediately preceding twelve (12) month period, then no late charge shall be assessed unless such failure to pay shall continue for a period of five (5) days after receipt of written notice from Landlord that such payment was not made when due. Landlord agrees that only one (1) late charge will be levied against Tenant for each late payment under this Lease. The provisions of this Section 3.2 in no way relieve Tenant of the obligation to pay rent or other payments on or before the date on which they are due, nor do the terms of this Section 3.2 in any way affect Landlord’s remedies pursuant to Article 19 of this Lease in the event said rent or other payment is unpaid after date due.

3.3 Any rent, expense reimbursements, tax reimbursements and other sums required to be paid under this Lease and not paid within five (5) business days after written notice that it was not paid when due and payable pursuant to this Lease (including all late charges and attorneys’ fees) shall bear interest, until paid, at the lesser of the following rates: (i) 10% per annum; or (ii) the highest rate allowed under applicable law (provided, however, that if late payment notice shall be given on two (2) or more occasions within any twelve (12) month period, then commencing with the date of the second such notice and continuing for twelve (12) months thereafter, the interest under this Section 3.3 shall begin to accrue immediately upon any subsequent failure to pay any rent or other sum due under this Lease, without necessity of any prior notice). All agreements between Landlord and Tenant, whether now existing or hereafter arising, whether herein contained or in any other instrument or agreement, whether written or oral, are hereby expressly limited so that in no contingency or event whatsoever shall any acceleration of rents due, late charges, returned check charges, interest charges, or any other charges whatsoever, be deemed as interest charged, contracted for or received in excess of the amount permitted under applicable law, it particularly being the intention of the parties hereto to conform strictly to the laws of the State of Texas. Any portion of such charges which are deemed as interest in excess of the amount permitted under applicable law, as of the date such charge is due, shall be applied to a reduction of the rental payment next coming due hereunder, or, if such portion of charges exceeds the rental payment next coming due hereunder, such amount shall be refunded to Tenant. To the extent permitted by law, determination of the legal maximum amount of interest shall at all times be made by amortizing, prorating, allocating, and spreading in equal parts during the period of the full term of this Lease, all amounts deemed as interest at any time contracted for, charged or received from Tenant in connection with this Lease.

4. RENT ADJUSTMENTS.

4.1 Subject to the special provisions set out in Section 4.7 of this Lease, Tenant shall pay to Landlord, as additional rent under this Lease: (a) one hundred percent (100%) of all commercially reasonable “Expenses” (as defined hereinbelow) which are properly attributable solely to the Premises; (b) Tenant’s Proportionate Share of all commercially reasonable Expenses which are properly attributable to the Project as a whole; (c) one hundred percent (100%) of all “Taxes” (as defined hereinbelow) which are properly attributable solely to the Premises; and (d) Tenant’s Proportionate Share of all Taxes which are properly attributable to the Project as a whole. All of the foregoing payments are referred to in this Lease collectively as the “Rent Adjustments” and for purposes of this Lease, the terms “Lease Year”, “Expenses” and “Taxes” are defined below:

4.1.1 Lease Year: As used in this Lease, the term ‘Lease Year” means and includes each calendar year falling partly or wholly within the Term.

4.1.2 Expenses: As used in this Lease, the term “Expenses” means and includes all costs of operation, maintenance, repair, replacement and management of the Project (including the amount of any cost-equivalent credits which Landlord may grant to particular tenants of the Project in lieu of providing any standard services or paying any standard costs described in this Section 4.1.2 for similar tenants), as determined in accordance with generally accepted accounting principles, including the following costs by way of illustration, but not limitation: water and sewer charges; insurance charges of or relating to all insurance policies and endorsements deemed by Landlord to be reasonably necessary or desirable and relating in any manner to the protection, preservation, or operation of the Project or any part thereof; utility costs, including, but not limited to, the cost of heat, light, power, steam, chilled water, gas; waste disposal; the cost of janitorial

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services; the cost of security and alarm services (including any central station signaling system); the Domain Assessments, the Condominium Assessments, the Parking Easement Assessments and any other applicable property association dues and charges; costs of cleaning, repairing, replacing and maintaining the common areas, including parking maintenance and repair costs, landscaping expenses and window cleaning costs; labor costs; costs and expenses of managing the Project including management fees; air conditioning maintenance costs; elevator maintenance fees and supplies; material costs; equipment costs including the cost of maintenance, repair and service agreements and rental and leasing costs on maintenance or operating equipment; purchase costs of equipment; current rental and leasing costs of items which would be capital items if purchased (otherwise subject to the limitation on permitted capital item categories under the Lease); tool costs; licenses, permits and inspection fees; wages and salaries; employee benefits and payroll taxes; accounting and legal fees. Notwithstanding the foregoing (i) the annualized Domain Assessment for 2014 allocable to the Premises shall not exceed the product of the number of square feet of floor space in the Premises, multiplied by $0.30; (ii) the Condominium Assessments and the Parking Easement Assessments will be included in the Expenses to the extent and only to the extent that the Condominium Assessments and the Parking Easement Assessments are utilized to pay for items which are included in the definition of Expenses under this Lease; and (iii) except for capital items which are in need of repair or replacement due to casualty, condemnation, intentional misconduct of Tenant or Force Majeure, the Expenses may not include any capital items for five (5) years following the Commencement Date.

4.1.2.1 In addition, Landlord shall be entitled to recover, as additional rent (which, along with any other capital expenditures constituting Expenses, Landlord may either include in Expenses or cause to be billed to Tenant along with Expenses and Taxes but as a separate item): (i) an allocable portion of the cost of capital improvement items which are reasonably calculated to reduce operating expenses; and (ii) other capital expenses which are required under any governmental laws, regulations or ordinances which were not applicable to the Project at the time it was constructed; but the costs described in this sentence shall be amortized over the reasonable life of such expenditures in accordance with such reasonable life and amortization schedules as shall be determined by Landlord in accordance with generally accepted accounting principles, with interest on the unamortized amount at the rate of seven percent (7%) per annum (the “Amortized Capital Costs”).

4.1.2.2 Expenses shall not include “Taxes” (as defined in Section 4.1.3 below), depreciation or amortization of the Project or equipment in the Project except as provided herein, and the following additional categories of expenses:

(a) costs incurred in connection with the original construction of the Project or in connection with any major change in the Project, such as adding or deleting floors;

(b) costs of the design and construction of tenant improvements to the Premises or the premises of any tenants or other occupants and the amount of any allowances or credits paid to or granted to tenants or other occupants for any such design or construction;

(c) depreciation, interest and principal payments on mortgages and other debt costs, if any;

(d) marketing costs, legal fees, space planners’ fees, advertising and promotional expenses, and brokerage fees incurred in connection with the original development, subsequent improvement, or original or future leasing of the Project;

(e) costs of any items to the extent Landlord receives reimbursement from insurance proceeds (such proceeds to be excluded from Expenses in the year in which received, except that any reasonable deductible amount under any insurance policy shall be included within Expenses), or from a third party;

(f) any bad debt loss, rent loss, or reserves for bad debts or rent loss or any reserves of any kind;

(g) costs associated with the operation of the business of the partnership or entity which constitutes the Landlord, as the same are distinguished from the costs of operation of the Project, including partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee, costs of selling, syndicating, financing, mortgaging or hypothecating any of the Landlord’s interest in the Project, and costs incurred in connection with any disputes between Landlord and its employees, between Landlord and project management, or between Landlord and other tenants or occupants;

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(h) the wages and benefits of any employee who does not devote substantially all of his or her employed time to the Project unless such wages and benefits are prorated to reflect time spent on operating and managing the Project vis-à-vis time spent on matters unrelated to operating and managing the Project; provided, that in no event shall Expenses for purposes of this Lease include wages and/or benefits attributable to personnel above the level of Regional Operations Manager;

(i) late charges, penalties, liquidated damages, and interest;

(j) amount paid as ground rental or as rental for the Project by the Landlord, if any;

(k) costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements made for new tenants or other occupants in the Project or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Project;

(l) costs of capital repairs and alterations, capital improvements and equipment and other capital expenses except as set forth in Section 4.1.2.1. above;

(m) any amount paid by Landlord or to the parent organization or a subsidiary or affiliate of the Landlord for supplies and/or services in the Project to the extent the same exceeds the costs of such supplies and/or services rendered by qualified, first-class unaffiliated third parties on a competitive basis;

(n) any compensation paid to clerks, attendants or other persons in commercial concessions (including the parking facility) operated by or on behalf of the Project;

(o) rentals and other related expenses incurred in Landlord’s lease of air conditioning systems, elevators or other equipment (i) which are not commercially reasonable either as to type or amount, based upon the practices of landlords in other first class office buildings located in the Capital of Texas Highway (Loop 360) corridor between Lake Austin on the south and MoPac Expressway (Loop 1) on the north, in the U.S. Highway 183 corridor between the MoPac Expressway (Loop 1) on the south and Oak Knoll Boulevard on the north and in the MoPac Expressway (Loop 1) corridor between Far West Boulevard on the south and Parmer Lane on the north (“Comparable Buildings”), and (ii) which if purchased the cost of which would be excluded from Expenses as a capital cost;

(p) all items and services for which Tenant or any other tenant in the Project is obligated to reimburse Landlord (other than de minimus amounts), or which Landlord provides selectively to one or more tenants (other than Tenant) without reimbursement;

(q) electric power or other utility costs for which any tenant directly contracts with a public service company;

(r) costs for sculptures, paintings, fountains or other objects of art;

(s) rent for any office space occupied by Project management personnel to the extent the size or rental rate of such office space exceeds the size or fair market rental value of office space occupied by management personnel of the Comparable Buildings, and if used for the management of other projects as well, such rent shall be appropriately pro-rated;

(t) Landlord’s general corporate overhead and general and administrative expenses;

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(u) any cost or expense related to monitoring or testing (above routine monitoring or testing), removal, cleanup, abatement or remediation of any Hazardous Substances either now existing in, on or under the Project or brought into the Building or onto the Project after the date of this Lease by Landlord Parties or any other tenant of the Project;

(v) any finder’s fees, brokerage commissions, job placement costs or job advertising costs, other than with respect to dedicated on-site employees providing services to the Project at or below the level of Project Manager;

(w) the cost of any training or incentive programs, or for tenant life-safety information services, other than with respect to dedicated on-site employees providing services to Project at or below the level of Project Manager;

(x) costs arising from Landlord’s charitable or political contributions;

(y) in-house legal and/or accounting;

(z) legal fees and costs, settlements, judgments or awards paid or incurred because of disputes between Landlord and Tenant, Landlord and other tenants or prospective occupants or prospective tenants/occupants;

(aa) legal fees and costs concerning the negotiation and preparation of this Lease or any litigation between Landlord and Tenant;

(bb) any reserves retained by Landlord (other than for Taxes);

(cc) costs for extra or after-hours HVAC, utilities or services which are provided to Tenant and or any occupant of the Project and as to which either (x) Tenant is separately charged, or (y) the same is not offered or made available to Tenant at no charge;

(dd) insurance deductibles in excess of commercially reasonable deductible amounts (provided, however, that all deductible amounts which are $25,000.00 or less will be deemed to be reasonable for all purposes under this Lease and, if Landlord delivers to Tenant written notice of the deductible amount under any particular policy of insurance and Tenant does not deliver to Landlord a written notice objecting to such deductible amount within twenty (20) days after Tenant’s receipt of such notice, then the deductible amount specified in the notice from Landlord to Tenant will be deemed to be reasonable for all purposes under this Lease; provided, however, Landlord’s notice under this Subsection must contain a statement in conspicuous capitalized font that Tenant’s failure to respond within the specified time period will be considered Tenant’s deemed approval of the deductible amount);

(ee) fees payable by Landlord for management of the Project in excess of four percent (4%) of Landlord’s gross rental revenues (excluding the cost of after-hours services or utilities and unapplied security deposits and unearned prepaid rent) from the Project for any calendar year or portion thereof;

(ff) costs arising from the gross negligence, illegal acts or willful misconduct of any Landlord Parties and any of their respective agents, contractors or employees;

(gg) costs associated with portions of the Common Areas dedicated for the exclusive use of other tenants of the Project;

(hh) advertising and promotional expenses and costs of signs in or on the Project;

(ii) all assessments and premiums, which can be paid by Landlord in installments, shall be paid by Landlord in the maximum number of installments permitted by law, and any such installment payments will be given the same accounting treatment by Landlord as other periodic payments;

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(jj) any parties (other than reasonable and customary tenant appreciation and/or holiday events open to all tenants of the Project), entertainment, dining or travel expenses for any purpose;

(kk) the costs of any flowers, gifts, balloons, etc. provided to any prospective tenants, Tenant, other tenants, and occupants of the Project;

(ll) costs reimbursed to Landlord under any warranty carried by Landlord for the Building and/or the Project, which warranties Landlord shall use commercially reasonable efforts to enforce;

(mm) costs of specialty clubs and services and any “validated” parking for any entity;

(nn) costs of any “tap fees” or any sewer or water connection fees for the benefit of any particular tenant in the Building or the Project; and

(oo) costs of magazine and newspaper subscriptions;

In addition, Landlord shall (i) not make a profit by charging items to Expenses that are otherwise also charged separately to others, (ii) not collect Expenses from Tenant and all other tenants/occupants in the Project in an amount in excess of what Landlord incurred for the items included in Expenses, and (iii) not charge a management fee on any expense on which Landlord also receives an administrative charge or fee. Any refunds or discounts actually received by Landlord for any category of Expenses shall reduce Expenses.

4.1.2.3 Notwithstanding any provision in this Lease, if Landlord or Tenant provides for the separate metering of electricity or any other utilities serving the Premises, then either such party may elect by delivering a written notice to the other party for Tenant to pay the electricity or other utility charges directly to the providers thereof, in which event: (i) those electricity or other charges paid directly by Tenant will be excluded from the definition of Expenses reimbursable by Tenant to Landlord under this Lease; and (ii) any subsequent failure by Tenant to pay any electrical or other utility charges applicable to the Premises as and when due and prior to delinquency will constitute a default by Tenant under this Lease, in which event: (a) Landlord will be entitled, at Landlord’s option and election, to pay all past due charges; (b) the amounts paid by Landlord will be reimbursable by Tenant to Landlord as additional rent under this Lease and will bear interest as provided in this Lease for past due installments of rent; and (c) any failure by Tenant to pay such additional rent and interest to Landlord upon demand by Landlord will constitute a default by Tenant under this Lease, subject to the notice and cure periods otherwise set forth herein, entitling Landlord to exercise any and all rights and remedies which may be available to Landlord, under this Lease or otherwise.

4.1.2.4 All Expenses incurred in connection with the elevators in the Building and the areas located on the first floor of the Building and depicted without shading on Page 1 of Exhibit “C” (which include the restrooms, hallways, mechanical rooms and areas depicted as “Electrical Room”, “Mail Room”, “Stair B” and “Lobby”) shall be allocated 100% to the Premises.

4.1.3 Taxes: As used in this Lease, the term “Taxes” means and includes: (i) all taxes and assessments against the Project and all taxes and assessments levied in substitution or supplementation, in whole or in part, of such taxes and assessments; (ii) all personal property taxes and license expenses levied against personal property on location at and used in connection with the operation or maintenance of the Project; (iii) all taxes imposed on any services provided to Landlord, if the charges for such services are included within the definition of Expenses under this Lease; (iv) all sales taxes, use taxes, margin taxes and other taxes now or hereafter imposed by any governmental authority upon the rents or other revenues received by Landlord attributable to the Project, including without limitation all taxes imposed on Landlord pursuant to Chapter 171 of the Texas Tax Code (the “Texas Margin Tax”, but only to the extent such tax is incurred as a result of normal Project operations, and not as a result of sale of all or any part of the Project), but specifically excluding income taxes, as provided herein below; (v) all other taxes, fees or assessments now or hereafter levied by any governmental authority against the Project or its contents or on the operation or use thereof; (vi) all taxes, fees or assessments now or hereafter levied or assessed in lieu of or in whole or in partial replacement of any of the above listed items; (vii) all third party out-of-pocket

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costs and fees incurred in connection with seeking reductions in or refunds of any of the above listed items, including without limitation, any costs incurred by Landlord to challenge the appraised value of the Project (which Landlord agrees to challenge from time to time upon Tenant’s request); (viii) all governmental impositions and charges which may be assessed against the Project, extraordinary as well as ordinary, foreseen and unforeseen, and each and every installment thereof which shall or may during the Term be levied, assessed, imposed, become due and payable, or liens upon, or arising in connection with the use, occupancy or possession of or become due or payable out of or for the Project or any part thereof, and all reasonable third party out-of-pocket costs including attorneys’ fees incurred by Landlord in contesting or negotiating the same with the appropriate governmental authorities; and (ix) all taxes payable by Landlord whether or not now customary or within the contemplation of the parties to this Lease: (a) upon, allocable to, or measured by or on the gross or net rent payable under this Lease, including without limitation any gross income tax or excise tax levied by the State, any political subdivision thereof, or the Federal Government with respect to the receipt of such rent; (b) upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy of the Premises or any portion thereof, including any sales, use or service tax imposed as a result thereof; (c) upon or measured by the Tenant’s gross receipts or payroll or the value of Tenant’s equipment, furniture, fixtures and other personal property of Tenant or leasehold improvements, alterations or additions located in the Premises; or (d) upon this transaction or any document to which Tenant is a party creating or transferring any interest of Tenant in this Lease or the Premises. If the Project is included in any public improvement district, tax increment financing district or other district pursuant to which assessments for capital expenses are levied against the Premises, then all assessments and premiums payable to such districts with respect to such capital improvements which can be paid by Landlord in installments shall be paid by Landlord in the maximum number of installments permitted by law, provided any additional costs for such deferral shall be included in Expenses and amortized over such installment payment period.

4.1.3.1 Nothing herein contained shall be construed to include in the definition of “Taxes” any income, inheritance, estate, succession, transfer, gift, or franchise (as opposed to margin) tax that is or may be imposed upon Landlord; provided, however, that, if at any time during the Term the methods of taxation prevailing at the commencement of the Term shall be altered so that in lieu of or as a substitute for the whole or any part of the taxes now levied, assessed or imposed on real estate as such, there shall be levied, assessed or imposed (i) a tax or taxes on the rents received from such real estate, or (ii) a license fee measured by the rents receivable by Landlord from the Project or any portion thereof, or (iii) a tax or license fee imposed upon Landlord which is otherwise measured by or based in whole or in part upon the Project or any portion thereof, then the same shall be included in the computation of Taxes hereunder, to be computed as if the amount of such tax or fee so payable were that due if the Project were the only property of Landlord subject thereto.

4.1.3.2 In addition to the foregoing, Tenant agrees to pay, before delinquency, any and all taxes levied or assessed against Tenant and which become payable during the term hereof upon Tenant’s equipment, furniture, fixtures and other personal property of Tenant located in the Premises.

4.2 Landlord and Tenant agree that Tenant’s Proportionate Share was determined by dividing the rentable area of the Premises by the rentable area of the Building. Landlord may, at any time and from time to time, modify the ground floor of the Building to add or remove rentable areas from such ground floor. If the rentable area of the Building increases or decreases due to such modifications, Tenant’s Proportionate Share will be recalculated and proportionately increased or decreased, as the case may be. If there is any such adjustment, Landlord and Tenant shall confirm Tenant’s recalculated Tenant’s Proportionate Share in a written amendment to this Lease which will be executed by both Landlord and Tenant. Any recalculation of Tenant’s Proportionate Share under the procedures outlined above will be done by Landlord and Landlord’s recalculation will be binding upon Tenant, absent manifest error.

4.3 The annual determination of Expenses and Taxes shall be made by Landlord, and shall be binding upon Landlord and Tenant, subject to the provisions of this Section 4.3. During the Term, Tenant may review, at Tenant’s sole cost and expense, the books and records supporting such determination in an office of Landlord, or Landlord’s agent, during normal business hours, upon giving Landlord five (5) days advance written notice within one hundred twenty (120) days after receipt of such determination, but in no event more often than once in any one (1) year period, subject to execution of a commercially reasonable confidentiality agreement acceptable to Landlord, and provided that each such audit shall be: (a) conducted at Landlord’s Austin property management office; (b) performed by a reputable independent accounting firm which is reasonably acceptable to Landlord, is not compensated on a contingency basis and is subject to the confidentiality agreement referenced above; and (c) paid for by Tenant, at Tenant’s sole cost and expense (but if any such audit reveals an overstatement of three percent (3%) or more in the Expenses, then Landlord shall reimburse Tenant for the reasonable and direct costs incurred by Tenant for the audit). During any such audit, Tenant shall have access to Expense records for the

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prior two calendar years (in addition to the year in question) for comparison purposes. If Tenant fails to object to Landlord’s determination of Expenses and Taxes within one hundred eighty (180) days after receipt, or if any such objection fails to state with specificity the reason for the objection, Tenant shall be deemed to have approved such determination and shall have no further right to object to or contest such determination. In the event that during all or any portion of any Lease Year, the Building is not fully rented and occupied Landlord shall make an appropriate adjustment in occupancy-related Expenses for such year for the purpose of avoiding distortion of the amount of such Expenses and Taxes to be attributed to Tenant by reason of variation in total occupancy of the Building, by employing consistent and sound accounting and management principles to determine Expenses and Taxes that would have been paid or incurred by Landlord had the Building been one hundred percent (100%) rented and occupied, and the amount so determined shall be deemed to have been Expenses for such Lease Year.

4.4 Prior to the actual determination thereof for a Lease Year, Landlord may from time to time estimate Tenant’s liability for Expenses and/or Taxes for the Lease Year or portion thereof. Landlord will give Tenant written notification of the amount of such estimate and Tenant agrees that it will pay, by increase of its Monthly Installments of Rent due in such Lease Year, additional rent in the amount of such estimate. Any such increased rate of Monthly Installments of Rent pursuant to this Section 4.4 shall remain in effect until further written notification to Tenant pursuant hereto.

4.5 When the above mentioned actual determination of Tenant’s liability for Expenses and/or Taxes is made for any Lease Year and when Tenant is so notified in writing, then:

4.5.1 If the total additional rent Tenant actually paid pursuant to Section 4.3 on account of Expenses and/or Taxes for the Lease Year is less than Tenant’s liability for Expenses and/or Taxes, then Tenant shall pay such deficiency to Landlord as additional rent in one lump sum within thirty (30) days of receipt of Landlord’s bill therefor; and

4.5.2 If the total additional rent Tenant actually paid pursuant to Section 4.3 on account of Expenses and/or Taxes for the Lease Year is more than Tenant’s liability for Expenses and/or Taxes, then Landlord shall credit the difference against the then next due payments to be made by Tenant under this Article 4, or, if the Lease has terminated, refund the difference in cash. within thirty (30 days of such determination.

4.6 If the Commencement Date is other than January 1 or if the Termination Date is other than December 31, Tenant’s liability for Expenses and Taxes for the Lease Year in which said date occurs shall be prorated based upon a three hundred sixty-five (365) day year.

4.7 Notwithstanding any provision in this Lease to the contrary, Landlord and Tenant agree to the following special provisions related to Expenses and Taxes:

4.7.1 During the first ten (10) months of the Term, Tenant will only be required to pay Expenses and Taxes with respect to the portion of the Premises located on the fourth floor of the Building if and after Tenant occupies any portion of the fourth floor of the Building.

4.7.2 During the eleventh and twelfth months of the Term, Tenant will not be required to pay any Expenses or Taxes with respect to the portion of the Premises located on the fourth floor of the Building regardless of whether or not Tenant is occupying all or any portion of the fourth floor of the Building.

4.7.3 During the first eighteen (18) months of the Term, Tenant will only be required to pay Expenses and Taxes with respect to the portion of the Premises located on the fifth floor of the Building if and after Tenant occupies any portion of the fifth floor of the Building.

4.7.4 The first 11-1/2 years of the Term are sometimes referred to in this Lease as the “Initial Term”; the first full calendar year of the Initial Term (which Landlord and Tenant anticipate will be calendar year 2015) is sometimes referred to in this Lease as the “Initial Term Base Year”; the first full calendar year of the First Renewal Term (as defined in Section 41.10 of this Lease) is sometimes referred to in this Lease as the “First Renewal Term Base Year”; and the first full calendar year of the Second Renewal Term (as defined in Section 41.10) is sometimes referred to in this Lease as the “Second Renewal Term Base Year”.

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4.7.4.1 During the Initial Term Base Year and all preceding portions of the Initial Term, the charges to Tenant under this Lease for Expenses will be determined based upon the actual Expenses incurred during such period of time, subject to the “gross-up” provision set out in Section 4.3 of this Lease. After the Initial Term Base Year and during the remainder of the Initial Term, increases in common area maintenance expenses, salaries, janitorial expenses, Domain Assessments and Parking Easement Assessments included in the calculation of “Expenses” will be limited to a maximum of five percent (5%) per annum, determined on a cumulative and compounding basis.

4.7.4.2 If the Term is renewed with respect to the First Renewal Term, then: (i) during the First Renewal Term Base Year and all preceding portions of the First Renewal Term, the charges to Tenant under this Lease for Expenses will be determined based upon the actual Expenses incurred during such period of time, subject to the “gross-up” provision set out in Section 4.3 of this Lease; but (ii) after the expiration of the First Renewal Term Base Year and during the remainder of the First Renewal Term, increases in common area maintenance expenses, salaries, janitorial expenses, Domain Assessments and Parking Easement Assessments included in the calculation of “Expenses” will be limited to a maximum of five percent (5%) per annum, determined on a cumulative and compounding basis.

4.7.4.3 If the Term is renewed with respect to the Second Renewal Term, then: (i) during the Second Renewal Term Base Year and all preceding portions of the Second Renewal Term, the charges to Tenant under this Lease for Expenses will be determined based upon the actual Expenses incurred during such period of time, subject to the “gross-up” provision set out in Section 4.3 of this Lease; but (ii) after the expiration of the Second Renewal Term Base Year and during the remainder of the Second Renewal Term, increases in common area maintenance expenses, salaries, janitorial expenses, Domain Assessments and Parking Easement Assessments included in the calculation of “Expenses” will be limited to a maximum of five percent (5%) per annum, determined on a cumulative and compounding basis.

5. SECURITY DEPOSIT.

5.1 Tenant shall deposit the letter of credit referred to in the Reference Pages of this Lease (the “Letter of Credit”) with Landlord within ten (10) days after the date of execution of this Lease. The form and content of the Letter of Credit and the financial institution issuing the Letter of Credit must be acceptable to Landlord in Landlord’s reasonable discretion. The Letter of Credit, plus all funds drawn on the Letter of Credit from time to time, are referred to in this Lease collectively as the “Security Deposit”.

5.2 The Security Deposit shall be held by Landlord as security for the faithful performance by Tenant of all the terms, covenants and conditions of this Lease to be kept and performed by Tenant and not as an advance rental deposit or as a measure of Landlord’s damage in case of Tenant’s default. Upon the occurrence of an “Event of Default” (hereinafter defined), Landlord may use any part of the Security Deposit for the payment of any rent or any other sum in default, or for the payment of any amount which Landlord may spend or become obligated to spend by reason of Tenant’s default, or to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant’s default. If any portion is so used, Tenant shall within five (5) days after written demand therefor, deposit with Landlord cash or other readily available funds in an amount sufficient to restore the Security Deposit to its original amount and Tenant’s failure to do so shall be a material breach of this Lease. Except to such extent, if any, as shall be required by law, Landlord shall not be required to keep the Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on the Security Deposit. If Tenant shall fully and faithfully perform every provision of this Lease to be performed by it, the Security Deposit or any balance thereof shall be returned to Tenant at such time after the termination of this Lease as may be required by law.

5.3 Upon the occurrence of a monetary Event of Default of any kind or amount or any non-monetary Event of Default giving rise to any sums payable under this Lease, Landlord may draw such portion of the Letter of Credit and apply the funds received by Landlord (the “Drawn Funds”) as may be necessary for the payment of any amount owed under this Lease. Thereafter Tenant shall, within ten (10) days after written demand therefor, deposit with Landlord cash or other readily available funds in an amount equal to the funds expended by Landlord out of the Drawn Funds, so as to restore the Security Deposit to its then required amount or cause a replacement Letter of Credit to be issued in the then required amount hereunder and Tenant’s failure to do so shall be a material breach of this Lease. Landlord will thereafter hold any funds received as a cash Security Deposit.

5.4 For purposes of this Lease, the term “Letter of Credit Reduction Commencement Date” shall mean the date upon which all of the following have occurred: (a) Tenant has completed all of the “Tenant’s Work” (as defined in Section 2.2 of Exhibit “D” attached to this Lease); (b) Tenant has taken occupancy of the Premises for the normal operation of its business; and (c) Tenant has commenced paying Monthly Installments of Rent on the entirety of the Premises and has commenced paying Rent Adjustments with respect to the entirety of the Premises. Until the Letter of Credit Reduction

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Commencement Date the amount of the Letter of Credit will remain at One Million and No/100 Dollars ($1,000,000.00). Provided Tenant is not in default of any of its obligations under this Lease, then the amount of the Letter of Credit will be reduced by One Hundred Thousand and No/100 Dollars ($100,000.00) on the Letter of Credit Reduction Commencement Date and on the final day of each subsequent twelve (12) month period until the Letter of Credit has been reduced to One Hundred Thousand and No/100 Dollars ($100,000.00). During the initial 11  ¹⁄₂ years of the Term, the amount of the Letter of Credit will not be reduced below One Hundred Thousand and No/100 Dollars ($100,000.00). If Tenant renews the Term, the amount of the Security Deposit will remain at $100,000.00 provided Tenant is not in default of any of its obligations under this Lease.

5.5 If the issuer of the Letter of Credit is placed into receivership or if at any time the issuer of the Letter of Credit is not acceptable to Landlord due to a material deterioration in its financial condition (as reasonably determined by Landlord), then Landlord may deliver a written notice to Tenant demanding that the Letter of Credit be replaced by a letter of credit drafted on similar form or another form reasonably acceptable to Landlord and issued by a financial institution which is acceptable to Landlord in its reasonable discretion. Thereafter, Tenant will cause the Letter of Credit to be replaced in the manner required by Landlord, within thirty (30) days after the delivery of Landlord’s notice to Tenant.

5.6 Tenant acknowledges and agrees that but for the agreements of Tenant in this Lease, (including without limitation, the agreement of Tenant to post the Letter of Credit), Landlord would not agree to enter into this Lease. Tenant agrees and acknowledges that no funds drawn from the Letter of Credit will be considered or deemed to be an advance payment of rent, liquidated damages, or a limitation on, or measurement of, Landlord’s damages resulting from the occurrence of an Event of Default under this Lease. Landlord may, without prejudice to any other right or remedy under this Lease, use any Drawn Funds from the Letter of Credit to: (a) pay any arrearages in rent or any other sum owing by Tenant under this Lease; and (b) pay or reimburse Landlord for any other damage, injury, expense or liability of Landlord arising from any Event of Default by Tenant under this Lease.

5.7 Tenant shall renew the Letter of Credit from to time as necessary, so that the Letter of Credit is renewed in each instance at least thirty (30) days prior to its expiration date. If the issuer of the Letter of Credit will not renew the Letter of Credit as required hereunder, then Tenant shall have until the date which is thirty (30) days prior to the then current expiration date of the Letter of Credit to provide to Landlord a replacement letter of credit in form acceptable to Landlord issued by a financial institution which is acceptable to Landlord, in each case subject to Landlord’s reasonable discretion. If Tenant fails to provide a replacement letter of credit to Landlord within the required time and in form approved by Landlord from an issuer approved by Landlord, then Landlord may draw the full amount of the Letter of Credit in which event all of the Drawn Funds will be held by Landlord as a cash Security Deposit.

6. ALTERATIONS.

6.1 Except for those, if any, specifically provided for in Exhibit D to this Lease, Tenant shall not make or suffer to be made any alterations, additions, or improvements, including, but not limited to, the attachment of any fixtures or equipment in, on, or to the Premises or any part thereof or the making of any improvements as required by Article 7, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. When applying for such consent, Tenant shall, if requested by Landlord, furnish complete plans and specifications for such alterations, additions and improvements.

6.2 Landlord’s consent shall not be required with respect to alterations which (i) are not structural in nature, (ii) are not visible from the exterior of the Building, (iii) do not affect or require modification of the Building’s electrical, mechanical, plumbing, HVAC or other systems, and (iv) in the aggregate do not cost more than $100,000.00 as to any related set of alterations (“Minor Alterations”). In the event Landlord consents to the making of any such alteration, addition or improvement by Tenant, the same shall be made by using either Landlord’s contractor or a contractor reasonably approved by Landlord, in either event at Tenant’s sole cost and expense. In any event Landlord may charge Tenant a construction management fee not to exceed three percent (3%) of the cost of such alterations (other than Minor Alterations) to cover its overhead as it relates to such proposed work, plus reasonable third-party costs actually incurred by Landlord in connection with the proposed work and the design thereof, with all such amounts being due thirty (30) days after Landlord’s demand.

6.3 All alterations, additions or improvements proposed by Tenant shall be constructed in accordance with all government laws, ordinances, rules and regulations, and Tenant shall, prior to construction, provide the additional insurance required under Article 11 in such case, and also all such assurances to Landlord as Landlord shall reasonably require to assure payment of the costs thereof, including but not limited to, notices of non-responsibility, waivers of lien, and to protect

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Landlord and the Project and appurtenant land against any loss from any mechanic’s, materialmen’s or other liens. Tenant shall pay in addition to any sums due pursuant to Article 4, any increase in real estate taxes attributable to any such alteration, addition or improvement for so long, during the Term, as such increase is ascertainable; said sums shall be paid in the same way as sums due under Article 4.

7. REPAIR.

7.1 Landlord shall have no obligation to alter, remodel, improve, repair, decorate or paint the Premises, except as specified in Exhibit D if attached to this Lease, and except that Landlord shall repair and maintain the structural portions of the Building and Building operating systems, including the plumbing, air conditioning, heating, elevator and electrical systems installed or furnished by Landlord, and the common areas of the Project, in each case in first class condition in accordance with Comparable Buildings. The costs incurred by Landlord to satisfy the requirements under this Article 7 will be included in the Expenses to the extent permitted under Section 4.1 of this Lease. By taking possession of the Premises, Tenant accepts them as being in good order, condition and repair and in the condition in which Landlord is obligated to deliver them, except for latent defects. It is hereby understood and agreed that no representations respecting the condition of the Premises or the Project have been made by Landlord to Tenant, except as specifically set forth in this Lease.

7.2 Tenant shall, at all times during the Term, keep the Premises in good condition and repair excepting damage by fire, or other casualty, and in compliance with all applicable governmental laws, ordinances and regulations, promptly complying with all governmental orders and directives for the correction, prevention and abatement of any violations or nuisances in or upon, or connected with, the Premises, all at Tenant’s sole expense.

7.3 Landlord shall not be liable for any failure to make any repairs or to perform any maintenance unless such failure shall persist for an unreasonable time (not to exceed thirty (30) days) after written notice of the need of such repairs or maintenance is given to Landlord by Tenant.

7.4 Except as provided in Articles 13 and 22 of this Lease, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant’s business arising from the making of any repairs in or to any portion of the Project or the Premises or to fixtures, appurtenances and equipment in the Project. Except to the extent, if any, prohibited by law, and as provided in Article 13 of this Lease, Tenant waives the right to make repairs at Landlord’s expense under any law, statute or ordinance now or hereafter in effect.

8. LIENS. Tenant shall keep the Premises, the Project and appurtenant land and Tenant’s leasehold interest in the Premises free from any liens arising out of any services, work or materials performed, furnished, or contracted for by Tenant, or obligations incurred by Tenant. In the event that Tenant fails, within thirty (30) days following the imposition of any such lien, to either cause the same to be released of record or provide Landlord with insurance against the same issued by a major title insurance company or such other protection against the same as Landlord shall accept (such failure to constitute an Event of Default), Landlord shall have the right to cause the same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All such sums paid by Landlord and all expenses incurred by it in connection therewith shall be payable to it by Tenant within five (5) days of Landlord’s demand.

9. ASSIGNMENT AND SUBLETTING.

9.1 Tenant shall not have the right to assign or pledge this Lease or to sublet the whole or any part of the Premises whether voluntarily or by operation of law, or permit the use or occupancy of the Premises by anyone other than Tenant, and shall not make, suffer or permit such assignment, subleasing or occupancy if: (a) any Event of Default on the part of Tenant remains uncured; or (b) Landlord has not given its prior written consent (such consent not to be unreasonably withheld, conditioned or delayed). The restrictions set out in the preceding sentence shall be binding upon any and all assignees of the Lease and subtenants of the Premises. In the event Tenant desires to sublet, or permit such occupancy of, the Premises, or any portion thereof, or assign this Lease, Tenant shall give written notice thereof to Landlord at least fifteen (15) days but no more than one hundred twenty (120) days prior to the proposed commencement date of such subletting or assignment, which notice shall set forth the name of the proposed subtenant or assignee, the relevant terms of any sublease or assignment and copies of financial reports and other relevant financial information of the proposed subtenant or assignee. Notwithstanding the foregoing, Landlord’s prior written consent shall not be required for an “Affiliate Transfer” (as defined in Section 9.8 below).

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9.2 Notwithstanding any assignment or subletting, permitted or otherwise, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the rent specified in this Lease and for compliance with all of its other obligations under the terms, provisions and covenants of this Lease. Upon the occurrence of an Event of Default, if the Premises or any part of them are then assigned or sublet, Landlord, in addition to any other remedies provided in this Lease or provided by law, may, at its option, collect directly from such assignee or subtenant all rents due and becoming due to Tenant under such assignment or sublease and apply such rent against any sums due to Landlord from Tenant under this Lease, and no such collection shall be construed to constitute a novation or release of Tenant from the further performance of Tenant’s obligations under this Lease.

9.3 [INTENTIONALLY DELETED.]

9.4 In the event that Tenant sells, sublets, assigns or transfers this Lease (other than pursuant to an Affiliate Transfer), Tenant shall pay to Landlord as additional rent an amount equal to fifty percent (50%) of any Increased Rent (as defined below), less the Costs Component (as defined below), when and as such Increased Rent is received by Tenant. As used in this Section: (a) “Increased Rent” shall mean the excess of (i) all rent and other consideration which Tenant is entitled to receive by reason of any sale, sublease, assignment or other transfer of this Lease, over (ii) the rent otherwise payable by Tenant under this Lease at such time (and for purposes of the foregoing, any consideration received by Tenant in form other than cash shall be valued at its fair market value as determined by Landlord in good faith); and (b) the “Costs Component” with respect to any sale, sublease, assignment or other transfer is the reasonable costs incurred by Tenant for marketing expenses, attorneys’ fees, brokerage commissions and tenant improvements in connection with such sale, sublease, assignment or other transfer.

9.5 Notwithstanding any other provision hereof, it shall be considered reasonable for Landlord to withhold its consent to any assignment of this Lease or sublease of any portion of the Premises if at the time of either Tenant’s notice of the proposed assignment or sublease or the proposed commencement date thereof, there shall exist any uncured default of Tenant or matter which will become a default of Tenant with passage of time unless cured, or if the proposed assignee or sublessee is an entity: (a) with which Landlord is already in current negotiations; (b) is already an occupant of any space in the building located at 3110 Esperanza Crossing, the building located at 11501 Domain Drive, the building currently known as “Domain Seven” to be located at 11501 Alterra Parkway and the building currently known as “Domain Eight” to be located at the southwest corner of the Burnet Road/Palm Way Intersection (but only to the extent the applicable building is (i) then less than eighty percent (80%) occupied, and (ii) owned by Landlord or an entity under common ownership control with Landlord); (c) is a governmental agency; (d) is incompatible with the character of occupancy of the Project; (e) with which the payment for the sublease or assignment is determined in whole or in part based upon its net income or profits; or (f) would subject the Premises to a use which would: (i) involve increased personnel or wear upon the Project; or, (ii) involve a violation of Section 1.2.

9.6 Upon any request to assign or sublet, Tenant will pay to Landlord the Assignment/Subletting Fee specified in the Reference Pages plus, on demand, a sum equal to all of Landlord’s out-of-pocket costs (not to exceed $2,500.00), including reasonable attorney’s fees, incurred in investigating and considering any proposed or purported assignment or pledge of this Lease or sublease of any of the Premises, regardless of whether Landlord shall consent to, refuse consent, or determine that Landlord’s consent is not required for, such assignment, pledge or sublease. Any purported sale, assignment, mortgage, transfer of this Lease or subletting which does not comply with the provisions of this Article 9 shall be void.

9.7 If Tenant is a corporation, limited liability company, partnership or trust, any transfer or transfers of or change or changes within any twelve (12) month period in the number of the outstanding voting shares of the corporation or limited liability company, the general partnership interests in the partnership or the identity of the persons or entities controlling the activities of such partnership or trust resulting in the persons or entities owning or controlling a majority of such shares, partnership interests or activities of such partnership or trust at the beginning of such period no longer having such ownership or control shall be regarded as equivalent to an assignment of this Lease to the persons or entities acquiring such ownership or control and shall be subject to all the provisions of this Article 9 to the same extent and for all intents and purposes as though such an assignment. The foregoing provisions of Section 9.7 shall not apply to any transfers of ownership interests of Tenant on a public stock exchange.

9.8 Notwithstanding the foregoing or anything else to the contrary in this Lease, Tenant shall have the right, without Landlord’s consent, to assign this Lease or sublet all or any part of the Premises to any person or entity who controls, is controlled by, or is under common control with the original Tenant named in this Lease (an “Affiliate”). A Transfer to an Affiliate is referred to herein as an “Affiliate Transfer.” The term “control” shall mean with respect to a corporation, the right

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to exercise, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the shares of the controlled corporation, and with respect to a person or entity that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled person or entity. Tenant shall provide Landlord with written notice of any Affiliate Transfer at least ten (10) days prior to the effective date thereof, together with copies of all documents evidencing such transfer, including without limitation all formation documents of the Affiliate and any other documents reasonably requested by Landlord.

9.9 For purposes of this Lease, the term “Permitted Assignee” shall mean any person or entity receiving an assignment of the rights of Tenant under this Lease pursuant to an assignment that is permitted under the terms and provisions of this Lease and the term “Permitted Subtenant” shall mean and refer to any person or entity subleasing any portion of the Premises from Tenant pursuant to a sublease which is permitted pursuant to the terms and provisions of this Lease. Notwithstanding any provision in this Lease to the contrary, it is agreed and understood that the signage rights afforded to Tenant pursuant to this Lease: (a) may be afforded to any Permitted Assignee; (b) will not be afforded or made available to any subtenant of Tenant subleasing less than seventy percent (70%) of the Premises Rentable Area; (c) may be afforded to any Permitted Subtenant subleasing seventy percent (70%) or more of the Premises Rentable Area only with the prior written approval of Landlord, which will not be unreasonably withheld, conditioned or delayed [it being specifically agreed and understood, however, that it will be reasonable for Landlord to withhold such consent with respect to any proposed sublease to a sub-tenant whose business or name would (in the reasonable opinion of Landlord) be controversial or reflect poorly upon the Project, including without limitation, any business engaged in the dissemination of “adult content” materials (such as Playboy magazine or Hustler magazine), any business engaged in the promotion or sale of fire arms (such as the National Rifle Association or Remington Arms Company, LLC), any business engaged in gambling or the promotion of gambling (such as the Texas Lottery Commission or businesses engaged in casino gambling or horse racing), any business engaged in the disposition of waste products (such as Texas Disposal Systems) or any other business, the name or image of which is not consistent with or might reasonably be considered to detract from the image of The Domain or the environment at The Domain]; and (d) shall otherwise be subject to the requirements of Section 41.8 of this Lease.

10. [INTENTIONALLY DELETED]

11. INSURANCE.

11.1 Tenant shall keep in force throughout the Term: (a) a Commercial General Liability insurance policy or policies to protect the Landlord Entities against any liability to the public or to any invitee of Tenant or a Landlord Entity incidental to the use of or resulting from any accident occurring in or upon the Premises with a limit of not less than $2,000,000 per occurrence and not less than $5,000,000 in the annual aggregate, or such larger amount as Landlord may prudently require from time to time, covering bodily injury and property damage liability and $2,000,000 products/completed operations aggregate; (b) Business Auto Liability covering owned, non-owned and hired vehicles with a limit of not less than $2,000,000 per accident; (c Worker’s Compensation Insurance with limits as required by statute with Employers Liability and limits of $500,000 each accident; (d) All Risk or Special Form coverage protecting Tenant against loss of or damage to Tenant’s alterations, additions, improvements, carpeting, floor coverings, panelings, decorations, fixtures, inventory and other business personal property situated in or about the Premises to the full replacement value of the property so insured; and, (e) Business Interruption Insurance with limit of liability representing loss of at least approximately six (6) months of income.

11.2 The aforesaid policies shall (a) be provided at Tenant’s expense; (b) name the Landlord as an additional insured (General Liability) and loss payee (Property—Special Form); (c) be issued by an insurance company with a minimum Best’s rating of “A-:VII” during the Term; and (d) provide that said insurance shall not be canceled unless thirty (30) days prior written notice (ten days for non-payment of premium) shall have been given to Landlord; a certificate of Liability insurance on ACORD Form 25 and a certificate of Property insurance on ACORD Form 27 shall be delivered to Landlord by Tenant upon the Commencement Date and at least thirty (30) days prior to each renewal of said insurance.

11.3 Whenever Tenant shall undertake any alterations, additions or improvements in, to or about the Premises (“Work”) the aforesaid insurance protection must extend to and include injuries to persons and damage to property arising in connection with such Work, without limitation including liability under any applicable structural work act, and such other insurance as Landlord shall require; and the policies of or certificates evidencing such insurance must be delivered to Landlord prior to the commencement of any such Work.

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11.4

(a) Landlord shall insure the Project during the Term against loss or damage due to fire and other casualties covered within the classification of special form cause of loss property insurance, including , vandalism coverage and malicious mischief, sprinkler leakage and water damage. Such coverage shall be for full replacement cost of the Project (as reasonably determined by Landlord) in compliance with all then existing applicable laws, or as otherwise required by any mortgagee of Landlord, and include a rental loss endorsement. Additionally, at the sole option of Landlord, such insurance coverage may include the risks of flood damage and additional hazards, and one or more loss payee endorsements in favor of the holders of any mortgages or deeds of trust encumbering the interest of Landlord in the Building or the ground or underlying lessors of the Building, or any portion thereof.

(b) Landlord shall carry commercial general liability insurance with respect to the Project during the Term, in coverage and amounts as Landlord shall from time to time reasonably determine consistent with the practices of landlords of Comparable Buildings, or as otherwise required by any mortgagee of Landlord.

(c) Landlord may elect to carry such other policies of insurance with respect to the Project or the operation thereof in coverages and amounts as Landlord may from time to time reasonably determine, consistent with the practices of landlords of Comparable Buildings or as otherwise required by any mortgagee of Landlord.

(d) All costs incurred by Landlord to satisfy the requirements under this Section 11.4 will be included in the Expenses to the extent permitted under Section 4.1 of this Lease.

12. WAIVER OF SUBROGATION. Tenant and Landlord hereby mutually waive their respective rights of recovery against each other for any loss insured by fire, extended coverage, All Risks or other insurance now or hereafter existing for the benefit of the respective party but only to the extent of the net insurance proceeds payable under such policies. Each party shall obtain any special endorsements required by their insurer to evidence compliance with the aforementioned waiver.

13. SERVICES AND UTILITIES.

13.1 Provided Tenant shall not be in default under this Lease, and subject to the other provisions of this Lease, Landlord agrees to furnish to the Premises during Building Business Hours (specified on the Reference Pages), the following services and utilities subject to the rules and regulations of the Building prescribed from time to time: (a) water suitable for normal office use of the Premises; (b) heat and air conditioning suitable for the normal use and occupation of the Premises during Building Business Hours; (c) cleaning and janitorial service; (d) 24/7 elevator service by non-attended automatic elevators; and, (e) equipment to bring to the Premises electricity for lighting, convenience outlets and other normal office use (collectively “Required Services”). To the extent any of the Required Services require electricity, gas, water, wastewater, trash collection and/or any other utilities or services of any kind that are supplied by public utilities or others, Landlord’s covenants hereunder shall only impose on Landlord the obligation to use its good faith and diligent efforts to cause the applicable public utilities or other providers to furnish the same. Failure by Landlord to furnish any of the Required Services to any extent, or any interruption thereof, due to failure of any public utility or other provider to furnish service to the Building, or any other cause beyond the reasonable control of Landlord, shall not render Landlord liable in any respect for damages to either person or property, nor be construed as an eviction of Tenant, nor work an abatement of Rent (except as provided below), nor relieve Tenant from fulfillment of any covenant or agreement hereof (except as provided below). As used herein, the phrase “cause beyond the reasonable control of Landlord” shall include, without limitation, acts of the public enemy, restraining of government, unavailability of materials, strikes, civil riots, floods, hurricanes, tornadoes, earthquakes and other severe weather conditions or acts of God, provided, however, that, at all times Landlord shall use good faith diligent efforts to minimize the impact of such cause on its ability to provide the Required Services. In the event of any failure by Landlord to furnish any of the Required Services to any extent, or any cessation thereof, due to malfunction of any equipment or machinery, or any other cause within the reasonable control of Landlord, Tenant shall have no claim for rebate of Rent or damages on account thereof (except as provided below) provided that Landlord utilizes its good faith and diligent efforts to promptly repair said equipment or machinery and to restore said Required Services as soon thereafter as is reasonably practicable. Notwithstanding the foregoing if (i) any service interruption of a Required Service renders all or any portion of the Premises untenantable, (ii) such interruption does not arise as a result of the negligence or willful misconduct of any Tenant Party, (iii) such interruption does not arise as a result of Force Majeure, (iv) such interruption is not caused by damage to the Building resulting from a fire or casualty (in which case Section 22 shall control), (v) Tenant notifies Landlord of such interruption in writing, and (vi) such interruption continues for five (5) consecutive full business days (the “Restoration Period”), then the Annual Rent (but not Tenant’s obligation to pay Tenant’s Proportionate Share of Expenses)

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with respect to the untenantable portion of the Premises shall be abated prospectively from and after the expiration of such Restoration Period until the Required Service(s) are restored or the affected portion(s) of the Premises are otherwise returned to a tenantable condition. The Premises shall be considered “untenantable” only if they are not reasonably usable (and are not used) by Tenant for the normal operation of its business (and if Tenant uses the Premises, but not for the normal operation of its business), then the Annual Rent will not be fully abated, but will be abated to a fair and equitable extent, based upon Tenant’s actual usage of the Premises). Without limitation of the foregoing, if the Required Services have not been restored prior to the expiration of the Restoration Period, then Tenant may deliver to Landlord a written notice (“Restoration Notice”) describing with specificity the Required Services in need of restoration and the actions necessary to complete such restoration (the “Restoration Work”). In the Restoration Notice, Tenant shall include a statement as to whether or not Tenant will undertake the Restoration Work on its own if Landlord fails to complete the Restoration Work (“Self Help Election Statement”). If Tenant delivers a Restoration Notice to Landlord and includes therein a Self Help Election Statement pursuant to which Tenant notifies Landlord that Tenant will undertake the Restoration Work if Landlord fails to complete the Restoration Work and thereafter Landlord fails to cause the Required Services to be restored within five (5) business days after Landlord’s receipt of the Restoration Notice, then Tenant shall have the right and option to complete the Restoration Work described in the Restoration Notice, and Landlord agrees to reimburse Tenant for the amount of any actual, customary and reasonable out-of-pocket expenses which Tenant may incur in connection therewith. If the Required Services are not restored following an additional sixty (60) day period after the expiration of the Restoration Period (the “Section 13.1 Termination Date”), then Tenant shall have the right to terminate this Lease by delivering a written notice of termination to Landlord at any time up until the time such Required Services are restored. Tenant understands and hereby acknowledges that: (i) if Tenant does not deliver a Restoration Notice to Landlord, then Tenant will have no right to exercise the self help remedies or the termination right afforded to Tenant under this Section 13.1; (ii) if Tenant delivers a Restoration Notice to Landlord, but such Restoration Notice does not include a Self Help Election Statement pursuant to which Tenant notifies Landlord that Tenant intends to undertake the Restoration Work if Landlord fails to do so, then Tenant will have no right to exercise the self help remedies afforded to Tenant under this Section 13.1; (iii) the exercise by Tenant of Tenant’s self-help rights hereunder will not affect Landlord’s right to continue to engage in efforts to restore the Required Services; (iv) if Tenant exercises Tenant’s self-help rights, Tenant will not interfere with any efforts on the part of Landlord to restore the Required Services; and (v) if any actions of Tenant delay Landlord in Landlord’s efforts to restore the Required Services, then the “Section 13.1 Termination Date” referenced above will be extended day for day for each day of such delay.

13.2 Should Tenant require any additional work or service, as described above, including services furnished outside ordinary business hours specified above, Landlord may, upon reasonable advance notice by Tenant, furnish such additional service and Tenant agrees to pay Landlord its actual third-party cost therefor.

13.3 Wherever heat-generating machines or equipment are used by Tenant in the Premises which materially affect the temperature otherwise maintained by the air conditioning system in either event whether with or without Landlord’s approval, Landlord and/or Tenant reserves the right to install supplementary heating and/or air conditioning units in or for the benefit of the Premises and the cost thereof, including the cost of installation and the cost of operations and maintenance, shall be paid by Tenant to Landlord within thirty (30) days of Landlord’s demand.

13.4 Tenant will not, without the written consent of Landlord, which shall not be unreasonably withheld, conditioned or delayed, use any apparatus or device in the Premises which will in any way materially increase the amount of electricity or water usually furnished or supplied for use of the Premises for normal office use, nor connect with electric current, except through existing electrical outlets in the Premises, or water pipes, any apparatus or device for the purposes of using electrical current or water. If Tenant shall require water or electric current in excess of that usually furnished or supplied for use of the Premises as normal office use, Tenant shall procure the prior written consent of Landlord for the use thereof, which shall not be unreasonably withheld, conditioned or delayed, and if Landlord does consent, Landlord may cause a water meter or electric current meter to be installed so as to measure the amount of such excess water and electric current. The cost of any such meters shall be paid for by Tenant. Tenant agrees to pay to Landlord within thirty (30) days of Landlord’s demand, the cost of all such excess water and electric current consumed (as shown by said meters, if any, or, if none, as reasonably estimated by Landlord) at the rates charged for such services by the local public utility or agency, as the case may be, furnishing the same.

13.5 Tenant will not, without the written consent of Landlord, which shall not be unreasonably withheld, conditioned or delayed, contract with a utility provider to service the Premises with any utility, including, but not limited to, telecommunications, electricity, water, sewer or gas, which is not previously providing such service to other tenants in The Domain. Subject to Landlord’s reasonable rules and regulations and the provisions of Articles 6 and 26, Tenant shall be entitled to the use of wiring (“Communications Wiring”) from the existing telecommunications nexus in the Building to the

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Premises, sufficient for normal general office use of the Premises. Tenant shall not install any additional Communications Wiring, nor remove any Communications Wiring, without in each instance obtaining the prior written consent of Landlord, which consent may be withheld in Landlord’s reasonable discretion.

13.6 Tenant may at any time upon notice to Landlord elect to perform all or a portion of its own cleaning and janitorial service for the Premises, whereupon those charges will be excluded from the definition of Expenses reimbursable by Tenant to Landlord under this Lease.

13.7 Landlord will institute a recycling program for Project Tenants consistent with City of Austin guidance.

14. HOLDING OVER. After the termination of this Lease by lapse of time or otherwise, Tenant shall be a tenant at sufferance and shall pay Landlord for each day Tenant retains possession of the Premises or part of them at the “Holdover Rate” (hereinafter defined) prorated on a daily basis. Tenant shall also pay all damages sustained by Landlord by reason of such retention. No provision of this Article 14 shall be deemed to waive Landlord’s right of reentry or any other right under this Lease or at law. For a period of three (3) months following the date of termination of this Lease, the “Holdover Rate” shall be the Annual Rate in effect under this Lease during the last period of time prior to the date of termination of this Lease (the “Existing Rate”). Thereafter, the “Holdover Rate” will be one hundred and twenty-five percent (125%) of the Existing Rate. At all times during any holdover period, Tenant shall continue to pay Rent Adjustments on the same basis as during the last period prior to the date of termination of this Lease.

15. SUBORDINATION. Subject to receipt of a commercially reasonable non-disturbance agreement, this Lease shall be subject and subordinate at all times to ground or underlying leases and to the lien of any mortgages or deeds of trust now or hereafter placed on, against or affecting the Project, Landlord’s interest or estate in the Project, or any ground or underlying lease; provided, however, that if the lessor, mortgagee, trustee, or holder of any such mortgage or deed of trust elects to have Tenant’s interest in this Lease be superior to any such instrument, then, by notice to Tenant, this Lease shall be deemed superior, whether this Lease was executed before or after said instrument. Notwithstanding the foregoing, Tenant covenants and agrees to execute and deliver within fourteen (14) days of Landlord’s request such further instruments evidencing such subordination or superiority of this Lease as may be required by Landlord. The following shall apply with respect to any non-disturbance agreement, to the extent applicable to any casualty occurring at the Project after the Delivery Date: such non-disturbance agreement must contain a confirmation that insurance proceeds resulting from the casualty will be made available to make repairs to the extent provided for under this Lease if and only if: (i) Tenant has stockholder equity (as determined by generally accepted accounting principles) in an amount equal to or greater than $300,000,000.00 (the “Net Worth Test”); (ii) the loan Landlord has in place on the Project is in compliance with a 65% loan to value requirement (with value measured as of the date of the lender’s assessment of the casualty, assuming completion of casualty repairs) (the “LTV Test”); (iii) the insurance proceeds available to Landlord as a result of the casualty are sufficient to pay for all estimated costs of repair or restoration, as certified by an independent architect (it being agreed and understood that such proceeds shall not be advanced for repair or restoration unless and until the amount of any shortage of funds necessary to complete such repair or restoration has been deposited by Landlord for the purposes of paying the costs of such repair or restoration); (iv) the Lease remains in full force and effect (with any termination rights by Tenant resulting from such casualty or condemnation having been waived in writing by Tenant); (v) there shall not be an Event of Default by Tenant under this Lease: (vi) there shall not then be a material event of default by Landlord under the applicable mortgage or deed of trust; (vii) the beneficiary of the applicable mortgage or deed of trust has approved the plans and specifications for reconstruction in its reasonable discretion; and (viii) disbursement of casualty proceeds will be subject to such other commercially reasonable and customary requirements as may be specified in the applicable mortgage or deed of trust. It shall not be necessary for Tenant or the Property to comply with the Net Worth Test or the LTV Test if the casualty event in question results in damage which will cost less than $1,000,000.00 to repair, as estimated and certified by an independent architect. Upon written request by Tenant, but no more than once in any given twelve (12) month period, Landlord will provide Tenant with the amount of the outstanding loan balance on the Building. These statements will be provided for information purposes only. Tenant will have no right to restrict or limit the amount of Landlord’s debt.

16. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with all the rules and regulations as set forth in Exhibit F to this Lease and all reasonable and non-discriminatory modifications of and additions to them from time to time put into effect by Landlord. Landlord shall not be responsible to Tenant for the non-performance by any other tenant or occupant of the Project of any such rules and regulations, although Landlord agrees to enforce such rules and regulations in a uniform and non-discriminatory manner, taking into account and allowing differences in treatment and enforcement based upon appropriate distinctions between office users and retail users of the Project.

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17. REENTRY BY LANDLORD.

17.1 Upon reasonable prior written or verbal notice to Tenant (except in the event of an emergency), Landlord reserves and shall at all times have the right to re-enter the Premises to inspect the same, to supply janitor service and any other service to be provided by Landlord to Tenant under this Lease, to show said Premises to prospective purchasers or mortgagees, to show said Premises to prospective tenants (but only during the last nine (9) months of the Term), and to repair the Premises and any portion of the Project, without abatement of rent, and may for that purpose erect, use and maintain scaffolding, pipes, conduits and other necessary structures and open any wall, ceiling or floor in and through the Project and Premises where reasonably required by the character of the work to be performed, provided entrance to the Premises shall not be blocked thereby, and further provided that the business of Tenant shall not be interfered with unreasonably. Landlord shall have the right at any time to change the arrangement and/or locations of entrances, or passageways, doors and doorways, and corridors, windows, elevators, stairs, toilets or other public parts of the Project and to change the name, number or designation by which the Project (or portion thereof) is commonly known. In the event that Landlord damages any portion of any wall or wall covering, ceiling, or floor or floor covering within the Premises, Landlord shall repair or replace the damaged portion to match the original as nearly as commercially reasonable but shall not be required to repair or replace more than the portion actually damaged. Landlord may, following advance written notice to Tenant: (i) add additional space to the first floor of the Building; (ii) expand the Parking Facility; and (iii) make such alterations to the Project as may be required in connection with the work described in clause (i) and/or clause (ii). Otherwise, Landlord may not alter any part of the Project in any manner that would have any material effect on Tenant’s access to or use of the Premises without Tenant’s prior written consent, which will not be unreasonably withheld, conditioned or delayed. If Landlord delivers to Tenant written notice of any proposed alteration to the Project and Tenant fails to deliver a written notice of objection to Landlord within fifteen (15) calendar days after the date of Landlord’s delivery of such notice, then Tenant will be deemed to have provided Tenant’s written consent to such alteration; provided, however, Landlord’s notice under this subsection must contain a statement in conspicuous capitalized font that Tenant’s failure to respond within the specified time period will be considered Tenant’s deemed approval of such alteration. Tenant hereby waives any claim for damages for any injury or inconvenience to or interference with Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned by any action of Landlord authorized by this Article 17.

17.2 For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to unlock all of the doors in the Premises, excluding Tenant’s vaults and safes or special security areas (designated in advance), and Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency to obtain entry to any portion of the Premises. As to any portion to which access cannot be had by means of a key or keys in Landlord’s possession, Landlord is authorized to gain access by such means as Landlord shall elect and the cost of repairing any damage occurring in doing so shall be borne by Tenant and paid to Landlord within thirty (30) days of Landlord’s demand.

18. DEFAULT.

18.1 Except as otherwise provided in Article 20, the following events shall be deemed to be Events of Default under this Lease:

18.1.1 Tenant shall fail to pay when due any sum of money becoming due to be paid to Landlord under this Lease, whether such sum be any installment of the rent reserved by this Lease, any other amount treated as additional rent under this Lease, or any other payment or reimbursement to Landlord required by this Lease, whether or not treated as additional rent under this Lease, and such failure shall continue for a period of five (5) days after delivery of written notice from Landlord that such payment was not made when due, but if any two (2) such notices shall be given within any twelve (12) month period, then for the twelve (12) month period commencing with the date of the last such notice, the failure to pay within five (5) days after due any additional sum of money becoming due to be paid to Landlord under this Lease during such period shall be an Event of Default without necessity of any notice.

18.1.2 Tenant shall fail to comply with any term, provision or covenant of this Lease which is not provided for in another Section of this Article and shall not cure such failure within thirty (30) days (forthwith, if the failure involves a hazardous condition) after written notice of such failure to Tenant provided, however, that such failure shall not be an Event of Default if such failure could not reasonably be cured during such thirty (30) day period, Tenant has commenced the cure within such thirty (30) day period and thereafter is diligently pursuing such cure to completion, but the total aggregate cure period shall not exceed ninety (90) days.

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18.1.3 Tenant shall fail to vacate the Premises immediately upon termination of this Lease, by lapse of time or otherwise, or upon termination of Tenant’s right to possession only.

18.1.4 Tenant shall become insolvent, admit in writing its inability to pay its debts generally as they become due, file a petition in bankruptcy or a petition to take advantage of any insolvency statute, make an assignment for the benefit of creditors, make a transfer in fraud of creditors, apply for or consent to the appointment of a receiver of itself or of the whole or any substantial part of its property, or file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws, as now in effect or hereafter amended, or any other applicable law or statute of the United States or any state thereof.

18.1.5 A court of competent jurisdiction shall enter an order, judgment or decree adjudicating Tenant bankrupt, or appointing a receiver of Tenant, or of the whole or any substantial part of its property, without the consent of Tenant, or approving a petition filed against Tenant seeking reorganization or arrangement of Tenant under the bankruptcy laws of the United States, as now in effect or hereafter amended, or any state thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within sixty (60) days from the date of entry thereof.

18.1.6 Tenant shall be placed in receivership; or the whole or any substantial part of Tenant’s property shall be placed in receivership; or this Lease shall be rejected, disaffirmed, repudiated or terminated for any reason by any receiver or other person or entity with legal powers to reject, disaffirm, repudiate or terminate this Lease.

19. REMEDIES.

19.1 Except as otherwise provided in Article 20, upon the occurrence of any of the Events of Default described or referred to in Article 18, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever, concurrently or consecutively and not alternatively:

19.1.1 Landlord may, at its election, terminate this Lease or terminate Tenant’s right to possession only, without terminating the Lease.

19.1.2 Upon any termination of this Lease, whether by lapse of time or otherwise, or upon any termination of Tenant’s right to possession without termination of the Lease, Tenant shall surrender possession and vacate the Premises immediately, and deliver possession thereof to Landlord, and Tenant hereby grants to Landlord full and free license to enter into and upon the Premises in such event and to repossess Landlord of the Premises as of Landlord’s former estate and to expel or remove Tenant and any others who may be occupying or be within the Premises and to remove Tenant’s signs and other evidence of tenancy and all other property of Tenant therefrom without being deemed in any manner guilty of trespass, eviction or forcible entry or detainer, and without incurring any liability for any damage resulting therefrom, Tenant waiving any right to claim damages for such re-entry and expulsion, and without relinquishing Landlord’s right to rent or any other right given to Landlord under this Lease or by operation of law.

19.1.3 Upon any termination of this Lease, whether by lapse of time or otherwise, Landlord shall be entitled to recover as damages, all rent, including any amounts treated as additional rent under this Lease, and other sums due and payable by Tenant on the date of termination, plus as liquidated damages and not as a penalty, an amount equal to the sum of: (a) an amount equal to the then present value of the rent reserved in this Lease for the residue of the stated Term of this Lease including any amounts treated as additional rent under this Lease and all other sums provided in this Lease to be paid by Tenant, minus the fair rental value of the Premises for such residue; (b) the estimated expenses described in Section 19.1.4 relating to recovery of the Premises, preparation for reletting and for reletting itself; and (c) the cost of performing any other covenants which would have otherwise been performed by Tenant.

19.1.4 Upon any termination of Tenant’s right to possession only without termination of the Lease:

19.1.4.1 Neither such termination of Tenant’s right to possession nor Landlord’s taking and holding possession thereof as provided in Section 19.1.2 shall terminate the Lease or release Tenant, in whole or in part, from any obligation, including Tenant’s obligation to pay the rent, including any amounts treated as additional rent, under this Lease for the full Term, and if Landlord so elects Tenant shall continue to pay to Landlord the entire amount of the rent as and when it becomes due, including any amounts treated as additional rent under this Lease, for the remainder of the Term plus any other sums provided in this Lease to be paid by Tenant for the remainder of the Term.

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19.1.4.2 Landlord shall use commercially reasonable efforts to relet the Premises or portions thereof to the extent required by applicable law. Landlord and Tenant agree that nevertheless Landlord shall at most be required to use only the same efforts Landlord then uses to lease premises in the Building generally and that in any case that Landlord shall not be required to give any preference or priority to the showing or leasing of the Premises or portions thereof over any other space that Landlord may be leasing or have available and may place a suitable prospective tenant in any such other space regardless of when such other space becomes available and that Landlord shall have the right to relet the Premises for a greater or lesser term than that remaining under this Lease, the right to relet only a portion of the Premises, or a portion of the Premises or the entire Premises as a part of a larger area, and the right to change the character or use of the Premises. In connection with or in preparation for any reletting, Landlord may, but shall not be required to, make repairs, alterations and additions in or to the Premises and redecorate the same to the extent Landlord deems necessary or desirable, and Tenant shall pay the cost thereof, together with Landlord’s expenses of reletting, including, without limitation, any commission incurred by Landlord, within five (5) days of Landlord’s demand. Landlord shall not be required to observe any instruction given by Tenant about any reletting or accept any tenant offered by Tenant unless such offered tenant has a credit-worthiness acceptable to Landlord and leases the entire Premises upon terms and conditions including a rate of rent (after giving effect to all expenditures by Landlord for tenant improvements, broker’s commissions and other leasing costs) all no less favorable to Landlord than as called for in this Lease, nor shall Landlord be required to make or permit any assignment or sublease for more than the current term or which Landlord would not be required to permit under the provisions of Article 9.

19.1.4.3 Until such time as Landlord shall elect to terminate the Lease and shall thereupon be entitled to recover the amounts specified in such case in Section 19.1.3, Tenant shall pay to Landlord upon demand the full amount of all rent, including any amounts treated as additional rent under this Lease and other sums reserved in this Lease for the remaining Term, together with the costs of repairs, alterations, additions, redecorating and Landlord’s expenses of reletting and the collection of the rent accruing therefrom (including reasonable attorney’s fees and broker’s commissions), as the same shall then be due or become due from time to time, less only such consideration as Landlord may have received from any reletting of the Premises; and Tenant agrees that Landlord may file suits from time to time to recover any sums falling due under this Article 19 as they become due. Any proceeds of reletting by Landlord in excess of the amount then owed by Tenant to Landlord from time to time shall be credited against Tenant’s future obligations under this Lease but shall not otherwise be refunded to Tenant or inure to Tenant’s benefit.

19.2 Upon the occurrence of an Event of Default, Landlord may (but shall not be obligated to) cure such default at Tenant’s sole expense. Without limiting the generality of the foregoing, Landlord may, at Landlord’s option, enter into and upon the Premises if Landlord determines in its sole discretion that Tenant is not acting within a commercially reasonable time to maintain, repair or replace anything for which Tenant is responsible under this Lease or to otherwise effect compliance with its obligations under this Lease and correct the same, without being deemed in any manner guilty of trespass, eviction or forcible entry and detainer and without incurring any liability for any damage or interruption of Tenant’s business resulting therefrom and Tenant agrees to reimburse Landlord within five (5) days of Landlord’s demand as additional rent, for any expenses which Landlord may incur in thus effecting compliance with Tenant’s obligations under this Lease, plus interest from the date of expenditure by Landlord at the Wall Street Journal prime rate.

19.3 [Intentionally Deleted.]

19.4 If, on account of any breach or default by either party in such party’s obligations under the terms and conditions of this Lease it shall become necessary or appropriate for either party to employ or consult with an attorney or collection agency concerning or to enforce or defend any of such party’s rights or remedies arising under this Lease or to collect any sums due, the prevailing party shall be entitled to all reasonable costs and fees so incurred, including, without limitation, reasonable attorneys’ fees and costs. EACH PARTY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY.

19.5 Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies provided in this Lease or any other remedies provided by law (all such remedies being cumulative), nor shall pursuit of any remedy provided in this Lease constitute a forfeiture or waiver of any rent due to Landlord under this Lease or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants contained in this Lease.

19.6 No act or thing done by Landlord or its agents during the Term shall be deemed a termination of this Lease or an acceptance of the surrender of the Premises, and no agreement to terminate this Lease or accept a surrender of said Premises shall be valid, unless in writing signed by Landlord. No waiver by either party of any violation or breach of any of

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the terms, provisions and covenants contained in this Lease shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions and covenants contained in this Lease. Landlord’s acceptance of the payment of rental or other payments after the occurrence of an Event of Default shall not be construed as a waiver of such Default, unless Landlord so notifies Tenant in writing. Forbearance by either party in enforcing one or more of the remedies provided in this Lease upon an Event of Default or otherwise shall not be deemed or construed to constitute a waiver of such Default or of such party’s right to enforce any such remedies with respect to such Default, or any subsequent Default or otherwise.

19.7 Landlord hereby waives the benefit of any statutory landlord’s lien and agrees the same shall not apply to Tenant’s property.

19.8 Any and all property which may be removed from the Premises by Landlord pursuant to the authority of this Lease or of law, to which Tenant is or may be entitled, may be handled, removed and/or stored, as the case may be, by or at the direction of Landlord but at the risk, cost and expense of Tenant, and Landlord shall in no event be responsible for the value, preservation or safekeeping thereof. Tenant shall pay to Landlord, upon demand, any and all expenses incurred in such removal and all storage charges against such property so long as the same shall be in Landlord’s possession or under Landlord’s control. Any such property of Tenant not retaken by Tenant from storage within thirty (30) days after removal from the Premises shall, at Landlord’s option, be deemed conveyed by Tenant to Landlord under this Lease as by a bill of sale without further payment or credit by Landlord to Tenant.

20. TENANT’S BANKRUPTCY OR INSOLVENCY.

20.1 If at any time and for so long as Tenant shall be subjected to the provisions of the United States Bankruptcy Code or other law of the United States or any state thereof for the protection of debtors as in effect at such time (each a “Debtor’s Law”):

20.1.1 Tenant, Tenant as debtor-in-possession, and any trustee or receiver of Tenant’s assets (each a “Tenant’s Representative”) shall have no greater right to assume or assign this Lease or any interest in this Lease, or to sublease any of the Premises than accorded to Tenant in Article 9, except to the extent Landlord shall be required to permit such assumption, assignment or sublease by the provisions of such Debtor’s Law. Without limitation of the generality of the foregoing, any right of any Tenant’s Representative to assume or assign this Lease or to sublease any of the Premises shall be subject to the conditions that:

20.1.1.1 Such Debtor’s Law shall provide to Tenant’s Representative a right of assumption of this Lease which Tenant’s Representative shall have timely exercised and Tenant’s Representative shall have fully cured any default of Tenant under this Lease.

20.1.1.2 Tenant’s Representative or the proposed assignee, as the case shall be, shall have deposited with Landlord as security for the timely payment of rent an amount equal to the larger of: (a) three (3) months’ rent and other monetary charges accruing under this Lease; and (b) any sum specified in Article 5; and shall have provided Landlord with adequate other assurance of the future performance of the obligations of the Tenant under this Lease. Without limitation, such assurances shall include, at least, in the case of assumption of this Lease, demonstration to the satisfaction of the Landlord that Tenant’s Representative has and will continue to have sufficient unencumbered assets after the payment of all secured obligations and administrative expenses to assure Landlord that Tenant’s Representative will have sufficient funds to fulfill the obligations of Tenant under this Lease; and, in the case of assignment, submission of current financial statements of the proposed assignee, audited by an independent certified public accountant reasonably acceptable to Landlord and showing a net worth and working capital in amounts determined by Landlord to be sufficient to assure the future performance by such assignee of all of the Tenant’s obligations under this Lease.

20.1.1.3 The assumption or any contemplated assignment of this Lease or subleasing any part of the Premises, as shall be the case, will not breach any provision in any other lease, mortgage, financing agreement or other agreement by which Landlord is bound.

20.1.1.4 Landlord shall have, or would have had absent the Debtor’s Law, no right under Article 9 to refuse consent to the proposed assignment or sublease by reason of the identity or nature of the proposed assignee or sublessee or the proposed use of the Premises concerned.

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21. QUIET ENJOYMENT. Landlord represents and warrants that it has full right and authority to enter into this Lease and that Tenant, while paying the rental and performing its other covenants and agreements contained in this Lease, shall peaceably and quietly have, hold and enjoy the Premises for the Term and will have access to the Premises 24 hours per day, 7 days per week, without hindrance or molestation from Landlord subject to the terms and provisions of this Lease. Landlord shall not be liable for any interference or disturbance by other tenants or third persons, nor shall Tenant be released from any of the obligations of this Lease because of such interference or disturbance.

22. CASUALTY

22.1 In the event the Premises or the Project are damaged by fire or other cause and in Landlord’s reasonable estimation such damage can be materially restored within one (1) year after Landlord’s discovery of the casualty, Landlord shall forthwith repair the same and this Lease shall remain in full force and effect, except that Tenant shall be entitled to a proportionate abatement in rent from the date of such damage. Such abatement of rent shall be made pro rata in accordance with the extent to which the damage and the making of such repairs shall interfere with the use and occupancy by Tenant of the Premises from time to time. Within thirty (30) days from the date of such damage, Landlord shall notify Tenant, in writing, of Landlord’s reasonable estimation of the length of time within which material restoration can be made, and Landlord’s determination shall be binding on Tenant. For purposes of this Lease, the Project or Premises shall be deemed “materially restored” if they are in such condition as would not prevent or materially interfere with Tenant’s use of the Premises for the purpose for which it was being used immediately before such damage.

22.2 If such repairs cannot, in Landlord’s reasonable estimation, be made within one (1) year after Landlord’s discovery of the casualty, Landlord and Tenant shall each have the option of giving the other, at any time within ninety (90) days after such damage, notice terminating this Lease as of the date of such damage. In the event of the giving of such notice, this Lease shall expire and all interest of the Tenant in the Premises shall terminate as of the date of such damage as if such date had been originally fixed in this Lease for the expiration of the Term. In the event that neither Landlord nor Tenant exercises its option to terminate this Lease, then Landlord shall repair or restore such damage, this Lease continuing in full force and effect, and the rent hereunder shall be proportionately abated as provided in Section 22.1.

22.3 Landlord shall not be required to repair or replace any damage or loss by or from fire or other cause to any panelings, decorations, partitions, additions, railings, ceilings, floor coverings, office fixtures or any other property or improvements installed on the Premises by, or belonging to, Tenant other than the initial Tenant Improvements. Any insurance which may be carried by Landlord or Tenant against loss or damage to the Project or Premises shall be for the sole benefit of the party carrying such insurance and under its sole control.

22.4 In the event that Landlord should fail to complete such repairs and material restoration within sixty (60) days after the date estimated by Landlord therefore as extended by this Section 22.4, Tenant may at its option and as its sole remedy terminate this Lease by delivering written notice to Landlord within fifteen (15) days after the expiration of said sixty (60) day period, whereupon the Lease shall end on the date of such notice or such later date fixed in such notice as if the date of such notice was the date originally fixed in this Lease for the expiration of the Term; provided, however, that if construction is delayed because of changes, deletions or additions in construction requested by Tenant, delays in Landlord’s receipt of insurance proceeds, Force Majeure or Tenant Delay, the period for restoration, repair or rebuilding shall be extended for the amount of time Landlord is so delayed.

22.5 Notwithstanding anything to the contrary contained in this Article or elsewhere in this Lease: (a) Landlord shall not have any obligation whatsoever to repair, reconstruct, or restore the Premises when the damages resulting from any casualty covered by the provisions of this Article 22 occur during the last twelve (12) months of the Term or any extension thereof, but if Landlord determines not to repair such damages Landlord shall notify Tenant and if such damages shall render any material portion of the Premises untenantable Tenant shall have the right to terminate this Lease by notice to Landlord within fifteen (15) days after receipt of Landlord’s notice; (b) Landlord shall not have any obligation to commence any repair, reconstruction or restoration of the Premises prior to Landlord’s (or Landlord’s lender’s) receipt of insurance proceeds; (c) if, on or before the Delivery Date, the holder of any indebtedness secured by a mortgage or deed of trust covering the Premises or Project requires that any insurance proceeds be applied to such indebtedness, then Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within fifteen (15) days after such requirement is made by any such holder; (d) if (i) a casualty event occurs at the Premises or the Project after the Delivery Date; and (ii) any one or more of the following conditions exists: (1) Tenant does not meet the “Net Worth Test” referenced and defined in Section 15 of this Lease; (2) Tenant has not waived, in writing, any termination rights which Tenant may have resulting from the casualty; or (3) there exists an Event of Default by Tenant under this Lease; then (iii) Landlord shall have

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the right to terminate this Lease by delivering a written notification of termination to Tenant; and (e) Tenant agrees that Landlord will have a reasonable period of time, prior to any required commencement of work to repair or reconstruct the Premises or the Project, to satisfy the conditions and requirements of Landlord’s lender referenced in Section 15 of this Lease. In the event of a termination of this Lease pursuant to the provisions set out in clause (c) in the immediately preceding sentence, the payment obligations in Section 2.2 of this Lease will terminate and be of no further force or effect. It shall not be necessary for Tenant to comply with the Net Worth Test if the casualty event in question results in damage which will cost less than $1,000,000.00 to repair, as estimated and certified by an independent architect.

22.6 In the event of any damage or destruction to the Project or Premises by any peril covered by the provisions of this Article 22, it shall be Tenant’s responsibility to properly secure the Premises and upon notice from Landlord to remove forthwith, at its sole cost and expense, such portion of all of the property belonging to Tenant or its licensees from such portion or all of the Project or Premises as Landlord shall request.

23. EMINENT DOMAIN. If all or any substantial part of the Premises shall be taken or appropriated by any public or quasi-public authority under the power of eminent domain, or conveyance in lieu of such appropriation, either party to this Lease shall have the right, at its option, of giving the other, at any time within thirty (30) days after such taking, notice terminating this Lease, except that Tenant may only terminate this Lease by reason of taking or appropriation, if such taking or appropriation shall be so substantial as to materially interfere with Tenant’s use and occupancy of the Premises. If neither party to this Lease shall so elect to terminate this Lease, the rental thereafter to be paid shall be adjusted on a fair and equitable basis under the circumstances. In addition to the rights of Landlord above, if any substantial part of the Project shall be taken or appropriated by any public or quasi-public authority under the power of eminent domain or conveyance in lieu thereof, and regardless of whether the Premises or any part thereof are so taken or appropriated, Landlord shall have the right, at its sole option, to terminate this Lease. Landlord shall be entitled to any and all income, rent, award, or any interest whatsoever in or upon any such sum, which may be paid or made in connection with any such public or quasi-public use or purpose, and Tenant hereby assigns to Landlord any interest it may have in or claim to all or any part of such sums, other than any separate award which may be made with respect to Tenant’s trade fixtures and moving expenses; Tenant shall make no claim for the value of any unexpired Term.

24. SALE BY LANDLORD. In event of a sale or conveyance by Landlord of the Building and the successor in interest’s assumption of Landlord’s obligations under this Lease, the same shall operate to release Landlord from any future liability upon any of the covenants or conditions, expressed or implied, contained in this Lease in favor of Tenant, and in such event Tenant agrees to look solely to the responsibility of the successor in interest of Landlord in and to this Lease. Except as set forth in this Article 24, this Lease shall not be affected by any such sale and Tenant agrees to attorn to the purchaser or assignee. If any security has been given by Tenant to secure the faithful performance of any of the covenants of this Lease, Landlord may transfer or deliver said security, as such, to Landlord’s successor in interest, and thereupon Landlord shall be automatically and immediately discharged from any further liability with regard to such security provided Landlord delivers notice of the transfer to Tenant.

25. ESTOPPEL CERTIFICATES. Within fourteen (14) days following any written request which Landlord may make from time to time, Tenant shall execute and deliver to Landlord or mortgagee or prospective mortgagee a sworn statement certifying: (a) the date of commencement of this Lease; (b) the fact that this Lease is unmodified and in full force and effect (or, if there have been modifications to this Lease, that this Lease is in full force and effect, as modified, and stating the date and nature of such modifications); (c) the date to which the rent and other sums payable under this Lease have been paid; (d) the fact that there are no current defaults under this Lease by either Landlord or Tenant except as specified in Tenant’s statement; and (e) such other matters as may be requested by Landlord. Landlord and Tenant intend that any statement delivered pursuant to this Article 25 may be relied upon by any mortgagee, beneficiary or purchaser. Tenant irrevocably agrees that if Tenant fails to execute and deliver such certificate within such fourteen (14) day period, and following five (5) days additional written notice and opportunity to cure, Landlord or Landlord’s beneficiary or agent may execute and deliver such certificate on Tenant’s behalf, and that such certificate shall be fully binding on Tenant.

26. SURRENDER OF PREMISES.

26.1 Tenant shall arrange to meet Landlord for two (2) joint inspections of the Premises, the first to occur at least thirty (30) days (but no more than sixty (60) days) before the last day of the Term, and the second to occur not later than forty-eight (48) hours after Tenant has vacated the Premises.

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26.2 Upon the expiration or termination of the Term, all alterations, additions, and improvements in, on, or to the Premises made or installed by or for Tenant (collectively, the “Alterations”) shall become a part of the realty and shall belong to Landlord without compensation, and title shall pass to Landlord under this Lease as by a bill of sale. At the end of the Term or any renewal of the Term or other sooner termination of this Lease, Tenant will peaceably deliver up to Landlord possession of the Premises, together with all Alterations by whomsoever made, in the same conditions received or first installed, broom clean and free of all debris, excepting only ordinary wear and tear and damage by fire or other casualty. Notwithstanding the foregoing, Tenant shall, prior to the expiration of the Term and at Tenant’s sole cost and expense: (i) remove from the Project any and all of Tenant’s furniture, furnishings, equipment, movable partitions of less than full height from floor to ceiling and other trade fixtures and personal property (collectively, “Personalty”); (ii) remove from the Project any and all “Removal Items” (hereinafter defined); and (iii) repair any damage to the Project caused by Tenant’s removal of the Personalty and the Removal Items. Personalty not so removed shall be deemed abandoned by the Tenant and title to the same shall thereupon pass to Landlord under this Lease as by a bill of sale, but Tenant shall remain responsible for the cost of removal and disposal of such Personalty, as well as any damage caused by such removal. For purposes of this Lease, the term “Removal Items” shall mean and refer to all of the following items, unless Landlord delivers to Tenant a subsequent written notice specifically waiving the requirement for removal of any items (in which event the items specifically identified by Landlord will be no longer considered to be “Removal Items”), to-wit: (a) all data/telecommunications cabling and wiring installed by or on behalf of Tenant, whether inside walls, under any raised floor or above any ceiling (other than installed as part of the initial Tenant Improvements if such cabling is tagged and labeled at both ends of each installed cable in a manner so that it may be reusable by a subsequent tenant); (b) any improvements or Alterations that are special purpose (including second and third floor lobby stairwells, shower and changing areas on floors 2–5, and birdhouses) and not customary to typical office requirements; and (c) any Alterations [other than the initial Tenant Improvements, except for those falling under the categories referenced in the immediately preceding clauses (a) and (b)] which are designated for removal or potential removal by Landlord in a written notice delivered by Landlord to Tenant at or prior to Landlord’s written approval of plans and specifications for such improvements or Alterations.

26.3 All obligations of either party under this Lease not fully performed as of the expiration or earlier termination of the Term shall survive the expiration or earlier termination of the Term. Any otherwise unused Security Deposit shall be credited against the amount payable by Tenant under this Lease.

27. NOTICES. Any notice or document required or permitted to be delivered under this Lease shall be addressed to the intended recipient, by fully prepaid registered or certified United States Mail return receipt requested, or by reputable independent contract delivery service furnishing a written record of attempted or actual delivery, and shall be deemed to be delivered when tendered for delivery to the addressee at its address set forth on the Reference Pages, or at such other address as it has then last specified by written notice delivered in accordance with this Article 27. Any such notice or document may also be personally delivered if a receipt is signed by and received from, the individual, if any, named in Tenant’s Notice Address.

28. [INTENTIONALLY DELETED].

29. [INTENTIONALLY DELETED].

30. PARKING.

30.1 Landlord shall provide Tenant with the use of five (5) parking spaces for each 1,000 square feet of rentable floor area within the Premises actually occupied by Tenant from time to time. Those parking spaces will be made available in the Parking Facility from 7:00 a.m. to 6:30 p.m. each Monday through Friday (except holidays). After 6:30 p.m. on each Monday through Friday (except for holidays), Tenant may continue to park in the Parking Facility, but during those times Landlord’s commitment to Tenant will be reduced to four (4) parking spaces for each 1,000 square feet of rentable floor area within the Premises actually occupied by Tenant from time to time. For example, during the period of time while Tenant is occupying only the second and third floors of the Building, Landlord will be required to provide 286 parking spaces to Tenant during the above-described daytime hours and 229 parking spaces to Tenant during the above-described nighttime hours.

30.1.1 Landlord will reserve and designate ten (10) parking spaces in the Parking Facility for Tenant’s exclusive use from 7:00 a.m. to 6:30 p.m. each Monday through Friday (other than holidays) at a location on the third floor of the Parking Facility in reasonable proximity to the sky bridge connecting the Parking Facility to the Building. Otherwise, Tenant’s right to park in the Parking Facility shall be on an unreserved, non-exclusive, “first-come, first-served” basis.

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30.2 Tenant acknowledges that Landlord intends to (and Tenant agrees that Landlord has the right to) expand the Parking Facility from time to time. Landlord may, at Landlord’s option and election, from time to time and at any time, deliver to Tenant a written notice (“Parking Designation Notice”) specifying one or more designated portions of the Parking Facility (as expanded, if applicable) as the exclusive area within the Parking Facility to be used by Tenant. Tenant’s parking rights may at some point be limited to the third and higher floors in the Parking Facility (as expanded, if applicable), provided, however, that in such event no more than twenty percent (20%) of Tenant’s available parking spaces will be located on the top floor of the Parking Facility (as expanded, if applicable), and at least twenty percent (20%) of Tenant’s available parking spaces shall be located on the floor of the Parking Facility (as expanded, if applicable) connected by the sky bridge to the Building. Tenant shall, after delivery by Landlord to Tenant of a Parking Designation Notice, comply with the provisions set out in such Parking Designation Notice.

30.3 Tenant’s right to park in the Parking Facility shall be at no additional cost to Tenant or its visitors (other than Tenant’s proportionate share of the Expenses and Taxes associated therewith) and shall be provided to Tenant subject to the following terms, conditions, limitations and requirements:

30.3.1 Tenant shall at all times abide by and shall cause each of Tenant’s employees, agents, customers, visitors, invitees, licensees, contractors, assignees and subtenants (collectively, “Tenant’s Parties”) to abide by any rules and regulations (“Rules”) for use of the Parking Facility that Landlord or Landlord’s garage operator reasonably establishes from time to time, and otherwise agrees to use the Parking Facility in a safe and lawful manner. Landlord reserves the right to adopt, modify and enforce the Rules governing the use of the Parking Facility from time to time including any key-card, sticker or other identification or entrance system and hours of operation. Landlord may refuse to permit any person who violates such Rules to park in the Parking Facility, and any violation of the Rules shall subject the car to removal from the Parking Facility.

30.3.2 At least ninety percent (90%) of the parking spaces shall be full size spaces (9’ x 17.5’) spaces. All parking spaces provided to Tenant pursuant to this Lease will be utilized by Tenant only for vehicles small enough to fit within the provided parking spaces. Landlord reserves the right to assign specific spaces, and to reserve spaces for visitors, small cars, fuel efficient or electric cars, disabled persons or for other tenants or guests, and Tenant shall not park and shall not allow Tenant’s Parties to park in any such assigned or reserved spaces. Tenant may validate visitor parking by such method as Landlord may approve. Tenant acknowledges that the Parking Facility may be temporarily closed at any time and from time to time, either in its entirety or in part in order to make repairs or perform maintenance services, or to re-stripe the Parking Facility, or if required by casualty, condemnation or Force Majeure, but in any such case, Landlord will make available to Tenant temporary equivalent parking spaces at a nearby location in the Domain.

30.3.3 Tenant understands and hereby acknowledges that Landlord will have the right to expand the Parking Facility from time to time and to utilize the Parking Facility (as expanded, if applicable) for other uses and general purposes related to the other occupants and users in The Domain. However, if the Parking Facility (as expanded, if applicable) is at any time not entirely utilized for the benefit of Tenant and other occupants of the Building, then a pro rata portion of the expenses and the taxes attributable to the portion of the Parking Facility utilized for occupants other than Building tenants will be deducted from the Expenses and Taxes under this Lease. For example, if twenty percent (20%) of the spaces in the Parking Facility are utilized by parties other than tenants and other occupants of the Building, then twenty percent (20%) of the expenses and taxes attributable to the Parking Facility will be excluded from the Expenses and the Taxes under this Lease. The Parking Facility shall remain open and Tenant’s parking spaces shall remain available during any such Parking Facility expansion work.

30.3.4 Tenant acknowledges that to the fullest extent permitted by law, Landlord shall have no liability for any damage to property or other items located in the Parking Facility (including without limitation, any loss or damage to automobiles or the contents thereof due to theft, vandalism or accident), nor for any personal injuries or death arising out of the use of the Parking Facility by Tenant or any Tenant’s Parties, WHETHER OR NOT SUCH LOSS OR DAMAGE RESULTS FROM LANDLORD’S ACTIVE NEGLIGENCE OR NEGLIGENT OMISSION. The limitation on Landlord’s liability under the preceding sentence shall not apply however to loss or damage arising directly from Landlord’s gross negligence or willful misconduct. Further, and without limiting the foregoing, if Landlord arranges for the Parking Facility to be operated by an independent contractor not affiliated with Landlord, Tenant acknowledges that Landlord shall have no liability for claims arising through acts or omissions of such independent contractor. Tenant and Tenant’s Parties each hereby voluntarily releases, discharges, waives and relinquishes any and all actions or causes of action for personal injury or property damage occurring to Tenant or any of Tenant’s Parties arising as a result of parking in the Parking Facility, or any activities incidental thereto, wherever or however the same may occur, and further agrees that Tenant will not prosecute any

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claim for personal injury or property damage against Landlord or any of its officers, agents, servants or employees for any said causes of action and in all events, Tenant agrees to look first to its insurance carrier and to require that Tenant’s Parties look first to their respective insurance carriers for payment of any losses sustained in connection with any use of the Parking Facility. Tenant hereby waives on behalf of its insurance carriers all rights of subrogation against Landlord or Landlord’s agents.

30.3.5 In the event any surcharge or regulatory fee is at any time imposed by any governmental authority with reference to parking, Tenant shall (commencing after two (2) weeks’ notice to Tenant) pay, per parking pass, such surcharge or regulatory fee to Landlord in advance on the first day of each calendar month concurrently with the month installment of rent due under this Lease. Landlord will enforce any surcharge or fee in an equitable manner amongst the Building tenants.

30.3.6 If Tenant violates any of the terms and conditions of this Article, the operator of the Parking Facility shall have the right to remove from the Parking Facility any vehicles hereunder which shall have been involved or shall have been owned or driven by parties involved in causing such violation, without liability therefor whatsoever and in each such event, Tenant shall reimburse Landlord or the operator of the Parking Facility for all costs and expenses incurred in connection with such vehicle removal.

31. DEFINED TERMS AND HEADINGS. The Article headings shown in this Lease are for convenience of reference and shall in no way define, increase, limit or describe the scope or intent of any provision of this Lease. Any indemnification or insurance of Landlord shall apply to and inure to the benefit of all the following “Landlord Entities”, being Landlord, Landlord’s investment manager, and the trustees, boards of directors, officers, general partners, beneficiaries, stockholders, employees and agents of each of them. Any option granted to Landlord shall also include or be exercisable by Landlord’s trustee, beneficiary, agents and employees, as the case may be. In any case where this Lease is signed by more than one person, the obligations under this Lease shall be joint and several. The terms “Tenant” and “Landlord” or any pronoun used in place thereof shall indicate and include the masculine or feminine, the singular or plural number, individuals, firms or corporations, and each of their respective successors, executors, administrators and permitted assigns, according to the context hereof. The terms “rentable area”, “rentable space” and other similar terms shall mean the rentable area of the Premises or the Building as determined by the American National Standard Method for Measuring Useable Floor Area in Office Buildings, ANSI/BOMA Z65.1-2010 published by the Building Owners and Managers Association International. Tenant hereby accepts and agrees to be bound by the figures for the rentable square footage of the Premises and Tenant’s Proportionate Share shown on the Reference Pages; however, either party may request the re-measurement and re-calculation of either or both figures upon completion of the Building, or other circumstance reasonably justifying adjustment. The term “Building” refers to the structure in which the Premises are located and the common areas (sidewalks, landscaping, etc.) appurtenant thereto.

32. TENANT’S AUTHORITY. If Tenant signs as a corporation, partnership, trust or other legal entity each of the persons executing this Lease on behalf of Tenant represents and warrants that Tenant has been and is qualified to do business in the state in which the Project is located, that the entity has full right and authority to enter into this Lease, and that all persons signing on behalf of the entity were authorized to do so by appropriate actions. Tenant agrees to deliver to Landlord, simultaneously with the delivery of this Lease, a corporate resolution, proof of due authorization by partners, opinion of counsel or other appropriate documentation reasonably acceptable to Landlord evidencing the due authorization of Tenant to enter into this Lease. Tenant hereby represents and warrants that Tenant is not (i) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets Control, U.S. Department of the Treasury (“OFAC”); (ii) designated by the President or OFAC pursuant to the Trading with the Enemy Act, 50 U.S.C. App. § 5, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive Order of the President issued pursuant to such statutes; or (iii) named on the following list that is published by OFAC: “List of Specially Designated Nationals and Blocked Persons”.

33. FINANCIAL STATEMENTS AND CREDIT REPORTS. At Landlord’s request from time to time (but no more than once in any twelve (12) month period), Tenant shall deliver to Landlord a copy, certified by an officer of Tenant as being a true and correct copy, of Tenant’s most recent audited financial statement, or, if unaudited, certified by Tenant’s chief financial officer as being true, complete and correct in all material respects. Tenant hereby authorizes Landlord to obtain one or more credit reports on Tenant at any time, and shall execute such further authorizations as Landlord may reasonably require in order to obtain a credit report.

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34. COMMISSIONS. Landlord shall pay commissions to Endeavor Real Estate Group, Ltd., and to Southwest Strategies Group (collectively, the “Brokers”) in conformance with one or more separate commission agreements entered into by and between Landlord and the Brokers. Landlord and Tenant each represents and warrants to the other that it has not been represented by any broker or agent in connection with this Lease, other than the Brokers. Except for the real estate commissions payable by Landlord to the Brokers, Tenant shall indemnify and hold Landlord harmless from and against all claims (including costs of defense and investigation) of any broker or agent or similar party claiming by, through or under Tenant in connection with this Lease. Landlord shall indemnify and hold Tenant harmless from and against any and all claims (including costs of defense and investigation) of the Brokers and any other broker or agent or similar party claiming by, through or under Landlord in connection with this Lease (except, however, that Landlord will not be required to indemnify Tenant against any claims by Southwest Strategies Group if Tenant has entered into a separate agreement to pay any commissions or other sums to Southwest Strategies Group).

35. TIME AND APPLICABLE LAW. Time is of the essence of this Lease and all of its provisions. This Lease shall in all respects be governed by the laws of the state in which the Project is located. For purposes of this Lease (including all exhibits attached to this Lease), the term “business day” or “business days” shall mean and refer to all calendar days, other than Saturdays, Sundays and days on which the U.S. Federal Reserve Bank in Dallas, Texas is closed.

36. SUCCESSORS AND ASSIGNS. Subject to the provisions of Article 9, the terms, covenants and conditions contained in this Lease shall be binding upon and inure to the benefit of the heirs, successors, executors, administrators and assigns of the parties to this Lease.

37. ENTIRE AGREEMENT. This Lease, together with its exhibits, contains all agreements of the parties to this Lease and supersedes any previous negotiations. There have been no representations made by the Landlord or any of its representatives or understandings made between the parties other than those set forth in this Lease and its exhibits. This Lease may not be modified except by a written instrument duly executed by the parties to this Lease.

38. EXAMINATION NOT OPTION. Submission of this Lease shall not be deemed to be a reservation of the Premises. Landlord shall not be bound by this Lease until it has received a copy of this Lease duly executed by Tenant and has delivered to Tenant a copy of this Lease duly executed by Landlord, and until such delivery Landlord reserves the right to exhibit and lease the Premises to other prospective tenants. Notwithstanding anything contained in this Lease to the contrary, Landlord may withhold delivery of possession of the Premises from Tenant until such time as Tenant has paid to Landlord any security deposit required by Article 5, the first month’s rent as set forth in Article 3 and any sum owed pursuant to this Lease.

39. RECORDATION. Tenant shall not record or register this Lease or a short form memorandum hereof without the prior written consent of Landlord, and then shall pay all charges and taxes incident such recording or registration.

40. LIMITATION OF LIABILITY. Redress for any claim against Landlord under this Lease shall be limited to and enforceable only against and to the extent of Landlord’s interest in the Building. The obligations of Landlord under this Lease are not intended to be and shall not be personally binding on, nor shall any resort be had to the private properties of, any of its or its investment manager’s trustees, directors, officers, partners, beneficiaries, members, stockholders, employees, or agents.

41. SPECIAL PROVISIONS.

41.1 Construction of Improvements. Pursuant to the provisions set out in Exhibit “D” attached to this Lease, Landlord will complete the construction of the Parking Facility and the “Shell Improvements” (as defined in Exhibit “D”) and Tenant will complete the construction of the “Tenant Improvements” (as defined in Exhibit “D”). Except for the completion of the Shell Improvements and the Parking Facility, Landlord has no obligation to construct any improvements for the benefit of Tenant or to otherwise modify the Project or the Premises in any way.

41.2 Early Access. Landlord will allow Tenant to commence construction of the Tenant Improvements on the “Delivery Date” (as defined in Exhibit “D”). Further, to the extent practical, Landlord will provide Tenant with access to the Premises prior to the Delivery Date for purposes of interior construction preparation and preconstruction requirements associated with the Tenant Improvements, provided Tenant does not interfere with the performance of “Landlord’s Work” (as defined in Exhibit “D” attached to this Lease). Additionally, Tenant shall have access to the Premises thirty (30) days prior to the Commencement Date for the sole purpose of move coordination, installing wiring and cabling and furniture installation. The early access rights afforded to Tenant pursuant to this Section 41.2 shall not be construed to affect or modify the Delivery Date or the Commencement Date in any way.

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41.3 The Allowances. Landlord will provide to Tenant the “TI Allowances” and the “Refurbishment Allowance” which are defined and more fully described in Exhibit “D” attached to this Lease.

41.4 Roof Rights. Subject to and conditioned upon Tenant obtaining Landlord’s written consent (which shall not be unreasonably, withheld, conditioned or delayed) and all required approvals from the City of Austin, Texas, Tenant may, at Tenant’s option and expense, have the non-exclusive right to utilize up to but not in excess of 500 square feet of space on the roof above the fifth floor of the Building for the purpose of installing equipment to be utilized in connection with Tenant’s use and enjoyment of the Premises, including without limitation, any supplemental heating, ventilating and air conditioning equipment and equipment for the sending and receiving of communications. Additionally, if and only if Tenant so requests in a written notice delivered to Landlord within six (6) months after the Lease Reference Date, Tenant will make the area above the first floor of the Building depicted on Exhibit “L” attached to this Lease as the “Area For Roof Deck” available to Tenant for the construction and installation by Tenant of a roof top deck if and to the extent Tenant can obtain all necessary building permits for the construction thereof and subject to all limitations or requirements that may be imposed upon Tenant pursuant to such building permits. Prior to the installation of any of the items permitted under this Section 41.4, Tenant will prepare and submit to Landlord plans and specifications for such installations and for all roof penetrations anticipated in connection therewith. In addition, Tenant will provide, in such plans and specifications, for improvements as necessary to screen all rooftop equipment from view. All equipment and other items installed by Tenant on the roof of the Building (including any rooftop deck) will be considered to be a part of the “Tenant Improvements”, as defined in Exhibit “D” attached to this Lease and will be subject to all the conditions, limitations and requirements set out in Exhibit “D” which relate to the Tenant Improvements. Tenant shall pay all costs and expenses of any kind or nature incurred in connection with such items, including without limitation all design, engineering and construction costs.

41.5 Telecommunications. Multiple telecommunications companies have installed fiber optic cables in The Domain. Tenant is responsible for contracting for its own telecommunications needs and all lines and improvements required in connection therewith will be included in the Tenant Improvements and will be subject to the conditions, limitations and requirements relating thereto set out in Exhibit “D” attached to this Lease. Tenant will have the use of riser space in the Building for the purpose of installing Tenant’s telecommunications wiring, so long as such use is consistent with the design of the Building and so long as it does not interfere with any Building systems and so long as Tenant obtains Landlord’s approval of such use in conjunction with the approvals obtained by Tenant for the Tenant Improvements.

41.6 Family Medical. The current restroom and central core design for the Building does not allow room to incorporated breastfeeding areas. Landlord will design such areas to be incorporated into the Building design (either in common areas or within the Premises).

41.7 ADA Requirements. Landlord and Tenant agree that responsibility for compliance with the Americans With Disabilities Act, the Texas Accessibility Standards and the Texas Architectural Barriers Act (collectively, the “ADA”) shall be allocated as follows: (a) Landlord shall be responsible for compliance with the ADA in all common areas of the Building; and (b) Tenant will be responsible for compliance with the ADA in the Premises. All costs and expenses incurred by Landlord (after Landlord’s completion of the Shell Improvements and resulting from laws and requirements not in effect at the time of completion of such Shell Improvements) to comply with the obligations set out in clause (a) in the preceding sentence will be added to the Expenses.

41.8 Signage. Tenant shall have the right to construct and install, on the top fascia exterior of the Building, the signage identified and described on Exhibit “G” attached to this Lease. Such signage shall be considered to be a portion of the “Tenant Improvements” (as defined in Exhibit “D” attached to this Lease) and is subject to all of the conditions, limitations and requirements set out in Exhibit “D” with respect thereto. Without limitation on the generality of the foregoing, it is agreed and understood that the exact location, size, materials and graphics utilized for Tenant’s signage must be approved in advance in writing by Landlord, which approval will not be unreasonably withheld or denied. All of Tenant’s signage will be installed at Tenant’s expense or may be paid for out of the TI Allowances afforded to Tenant pursuant to Exhibit “D” attached to this Lease. Prior to the expiration or termination of this Lease, Tenant shall remove all of Tenant’s signage from the Building and shall repair all damage caused by such removal, at Tenant’s sole cost and expense. All first floor signage will be reserved for future retail tenants in the Building and will not be made available to Tenant.

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41.9 Security. Tenant may, at Tenant’s option and expense, install card key readers at the entrances to any floor in the Building included within the Premises and restrict public access to such floors so long as: (a) Tenant is leasing one hundred percent (100%) of such floor; and (b) Landlord is at all times provided with cards or other means of access to such floor. All card key readers installed by Tenant pursuant to this provision will be included in the Tenant Improvements and will be subject to the conditions, limitations and requirements regarding Tenant Improvements set out in Exhibit “D” attached to this Lease.

41.10 Renewal Options. Subject to the condition that, at the time of exercise of any renewal option hereunder and at all times thereafter until such renewal option is consummated by an amendment to this Lease, no Event of Default is then in existence under this Lease, Tenant is hereby granted the option to renew the Lease Term for two (2) successive periods of five (5) years each, the first such period (“First Renewal Term”) to commence on the day following the expiration of the Initial Term; and the second such period (the “Second Renewal Term”) to commence on the date following the expiration of the First Renewal Term. Tenant must exercise the option to renew for the First Renewal Term by delivering written notice of such election to Landlord no more than twelve (12) months and no less than nine (9) months prior to the expiration of the Initial Term; and Tenant must exercise the option to renew for the Second Renewal Term by delivering written notice of such election to Landlord no more than twelve (12) months and no less than nine (9) months prior to the expiration of the First Renewal Term. Any renewal of this Lease shall be upon the same terms and conditions as this Lease, except: (i) the Annual Rate utilized to calculate the Annual Rent and Monthly Installments of Rent during the First Renewal Term shall be the prevailing Market Base Rent Rate (defined below) as of the date of Tenant’s exercise of the first renewal option; (ii) the Annual Rate used to calculate the Annual Rent and Monthly Installments of Rent during the Second Renewal Term shall be the prevailing Market Base Rent Rate as of the date of Tenant’s exercise of the second renewal option; (iii) Landlord will not be required to construct or install any improvements or refurbishments to the Premises, nor will Landlord be required to afford any construction or refurbishment allowance to Tenant, it being agreed and understood that the terms and provisions of Exhibit D attached to this Lease will not be applicable during any renewal term; (iv) Tenant will not be entitled to any rent abatement during any renewal term; (v) the expense limitations set out in Section 4.7 of this Lease will not be effective after the expiration of the Initial Term; and (vi) the Security Deposit will be as set forth in Section 5.4 hereof. Within ten (10) days after the date upon which the Market Base Rent Rate is determined with respect to any renewal term, Landlord and Tenant will enter into a written amendment to this Lease, renewing the Term of the Lease and otherwise amending the Lease to conform with the agreements set out in this Section 41.10. The Market Base Rent Rate shall, with respect to each renewal term, be determined as follows:

41.10.1 The “Market Base Rent Rate” shall be determined based upon a comparison to the annual base rental rates (net of all pass-throughs for taxes and expenses) then being charged for lease renewals of office space in Comparable Buildings (as defined in Section 4.1.2.2(o) of this Lease), taking into account and adjusting for: (i) differences between the Building and the Premises on the one hand and the building and the leased premises being compared to (including without limitation, differences in the quality, age and location of the applicable buildings being compared to the Building); (ii) differences in quality and credit rating between the Tenant and the tenants being compared; (iii) differences in the operating expenses of the Building and operating expenses of the buildings being compared; (iv) differences between the free rent, abated rent and other concessions (if any) which Landlord may voluntarily choose to offer with respect to the Premises as compared to any free rent, abated rent or other concessions offered in the buildings being compared; (v) all sustainability designations of the Building, if any; (vi) the definition of rentable area; (vii) the leasehold improvements provided; (viii) the time the particular rate under consideration became effective; (ix) differences in the size of the Premises and the premises being compared; (x) differences in the parking ratio and parking facilities provided for the Premises and the premises being compared; (xi) differences in building signage for the Premises and the premises being compared; (xii) differences in nearby amenities for the Premises and the premises being compared; and (xiii) all other relevant factors.

41.10.2 If Tenant exercises any renewal option hereunder, then Tenant shall be obligated to lease the Premises for the applicable renewal term and Landlord shall, within fifteen (15) days after Landlord’s receipt of any notice by Tenant exercising a renewal right hereunder, deliver to Tenant written notice of Landlord’s determination of the Market Base Rent Rate as of the applicable rental adjustment date (the “Rent Adjustment Notice”). If Tenant does not agree with Landlord’s determination of the Market Base Rent Rate, then Tenant shall deliver written notice of such disagreement to Landlord within fifteen (15) days after Landlord’s delivery to Tenant of the Rent Adjustment Notice and if Landlord and Tenant cannot reach mutual agreement as to the amount of the Market Base Rent Rate within a total of forty-five (45) days after the date upon which Tenant exercises any renewal option hereunder (the “Arbitration Commencement Date”), then Landlord and Tenant shall follow the following arbitration provisions which shall be binding upon both parties: Landlord and Tenant shall each, within fifteen (15) days after the Arbitration Commencement Date, simultaneously submit to the other, in a sealed envelope, its good faith estimate of the Market Base Rent Rate (collectively referred to herein as the “Estimates”).

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If the higher of the two Estimates is not more than 105% of the lower Estimate, then the average of the two Estimates shall be deemed to be the Market Base Rent Rate. If the higher Estimate is more than 105% of the lower Estimate, then Landlord and Tenant shall, within ten (10) days of submitting the Estimates, select a Qualified Appraiser (defined below) to determine the Market Base Rent Rate in accordance with the definition provided above. If Landlord and Tenant cannot agree upon a Qualified Appraiser within said ten (10) day period, either Landlord or Tenant may elect to have the Qualified Appraiser appointed by the American Arbitration Association or its successor organization. The Qualified Appraiser shall, within thirty (30) days of being appointed to serve hereunder, determine which of the Landlord’s or Tenant’s Estimates most closely approximates the Market Base Rent Rate and the Estimate so selected shall be deemed to be the Market Base Rent Rate for all purposes hereunder. Landlord and Tenant each hereby covenants and agrees that the Market Base Rent Rate determined in accordance with the foregoing procedures shall be binding upon each of them.

41.10.3 For purposes hereof, the term “Qualified Appraiser” shall mean and refer to an appraiser or broker who: (i) regularly appraises property in Travis County, Texas; (ii) has no personal stake or interest in the outcome of the appraisal; and (iii) has at least three (3) years experience appraising office leasehold interests in Austin, Texas. The cost of the appraisal hereunder shall be borne equally by Landlord and Tenant.

41.10.4 If, for any reason, the Market Base Rent Rate hereunder is not determined prior to any applicable rental adjustment date hereunder, then Tenant shall continue to pay rent at the then existing rate, and, upon final determination of the Market Base Rent Rate hereunder, Tenant shall, if the Market Base Rent Rate is higher than the then existing Annual Rent rate hereunder, pay to Landlord a cash payment equal to such amounts as may be necessary to adjust each Monthly Installment of Rent which has been paid hereunder to the Market Base Rent Rate effective as of the applicable rental adjustment date, and if the Market Base Rent Rate is lower than the existing Annual Rent Rate hereunder, any amount as may be necessary to adjust each Monthly Installment of Rent which has been paid hereunder to the Market Base Rent Rate effective as of the applicable rent adjustment shall be immediately credited against amounts next coming due under this Lease.

41.11 Force Majeure. If either party is delayed or prevented from performing any activities required under this Lease (except for the payment of money) by reason of strikes, lockouts, labor troubles, work stoppages, shortages of materials, transportation delays, failure of power, riots, insurrections, war, acts of God, floods, storms, weather (including delays due to rain or wet ground), fire or other casualty, or any other cause beyond such party’s reasonable control (collectively, “Force Majeure”), the period of delay caused by such event shall be deemed to be added to the time period provided for performing the required activities. In no event shall any period of Force Majeure associated with a time period set forth in Section 2.2 or 22.4 hereof exceed an aggregate of one hundred eighty (180) days.

41.12 Execution. To facilitate execution, this Lease may be executed in any number of counterparts as may be convenient or necessary, and it shall not be necessary that the signatures of all Parties be contained in any one counterpart hereof. Additionally, Landlord and Tenant hereby covenant and agree that, for purposes of facilitating the execution of this Lease: (a) the signature pages taken from separate individually executed counterparts of this Lease may be combined to form multiple fully executed counterparts; and (b) a facsimile signature or a signature sent by electronic mail shall be deemed to be an original signature for all purposes. All executed counterparts of this Lease shall be deemed to be originals, but all such counterparts, when taken together, shall constitute one and the same agreement.

41.13 Generator. Subject to and conditioned upon Tenant obtaining Landlord’s written consent (which shall not be unreasonably withheld, conditioned or delayed) and all required approvals from the City of Austin, Texas, Tenant shall be entitled to install generators or other back-up power supply sources at a location approved by Landlord in writing and convenient to the Building (which location will be on the roof of the Parking Facility if Landlord so requires). Prior to the installation of any such items, Tenant will prepare and submit plans and specifications for such installations for Landlord’s approval (which will not be unreasonably withheld, conditioned or delayed). Tenant will provide, in such plans and specifications, for improvements as necessary to screen all generators from view. All generators will be considered to be part of the “Tenant Improvements”, as defined in Exhibit “D” attached to this Lease and will be subject to the conditions, limitations and requirements set out in Exhibit “D” which relate to the Tenant Improvements.

Executed by Landlord and Tenant on the separate counterpart signature pages attached to this Lease and made a part thereof by this reference.

[REMAINDER OF THE PAGE LEFT INTENTIONALLY BLANK]

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COUNTERPART SIGNATURE PAGE FOR ATTACHMENT TO LEASE AGREEMENT BY AND

BETWEEN DOMAIN JUNCTION 2 LLC AS “LANDLORD” AND HOMEAWAY, INC. AS “TENANT”

Executed by the undersigned on the date set fort hereinbelow.

LANDLORD:	DOMAIN JUNCTION 2 LLC, a Delaware limited liability company
	By:	/s/ Paul W. Grafft
	Printed Name:	Paul W. Grafft
	Title:	Vice President
		Date:             6/27/13

COUNTERPART SIGNATURE PAGE FOR ATTACHMENT TO LEASE AGREEMENT BY AND

BETWEEN DOMAIN JUNCTION 2 LLC AS “LANDLORD” AND HOMEAWAY, INC. AS “TENANT”

Executed by the undersigned on the date set fort hereinbelow.

TENANT:	HOMEAWAY, INC., a Delaware corporation
	By:	/s/ Lynn Atchison
	Printed Name:	Lynn Atchison
	Title:	CFO
		Date:            6/24/13

EXHIBIT A – SITE PLAN

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

Exhibit A is intended only to show the general location of the Premises as of the beginning of the Term of this Lease. It does not in any way supersede any of Landlord’s rights set forth in Article 17 with respect to arrangements and/or locations of public parts of the Project and changes in such arrangements and/or locations. It is not to be scaled; any measurements or distances shown should be taken as approximate.

A-1

A-2

EXHIBIT B – DESCRIPTION OF LAND

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

Lot 3-A, RREEF Domain U Subdivision, a subdivision of record in Travis County, Texas, according to the subdivision plat recorded as Document No. 201300086 in the Official Public Records of Travis County, Texas.

B-1

EXHIBIT C – FLOOR PLANS DEPICTING THE PREMISES

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

C-1

C-2

C-3

C-4

C-5

EXHIBIT D — INITIAL ALTERATIONS

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

ARTICLE I

PARTIES

Section 1.1 Landlord. Domain Junction 2 LLC, a Delaware limited liability company

Section 1.1.1 As of the date hereof and subject to the change at any time and from time to time without notice, Landlord’s review will be performed by Landlord or Endeavor Real Estate Group, Ltd. (hereinafter referred to as “Landlord’s Representative”).

Section 1.2 Tenant. HomeAway, Inc., a Delaware corporation

ARTICLE II

THE WORK

Section 2.1 Landlord’s Work. Landlord shall, at Landlord’s sole cost and expense, complete the construction of the Building shell improvements and Parking Facility pursuant to the plans and specifications described on Exhibit D-1 attached hereto and incorporated herein by reference (the “Shell Improvements”). The Shell Improvements and all work conducted at any time by Landlord and/or by any employee, contractor, agent, or other person or entity acting by, through, under or on behalf of Landlord in connection with the Shell Improvements are referred to herein collectively as the “Landlord’s Work”. Notwithstanding any provision herein to the contrary, Landlord shall have the right (without necessity of obtaining approval from Tenant) to make changes to the plans and specifications described on Exhibit D-1, so long as such changes do not: (a) have a material adverse effect on the Project or Tenant’s rights of access to and from the Premises; or (b) affect the exterior appearance of the Building or the layout of the Premises in any material way.

Section 2.2 Tenant’s Work. Subject to the terms, conditions, limitations and requirements set out hereinbelow, Tenant shall, at Tenant’s sole cost and expense, design and construct any and all additional improvements (over and above the Shell Improvements) which may be desired by Tenant in connection with the Premises (the “Tenant Improvements”). The Tenant Improvements and all work conducted at any time by Tenant and/or by any employee, contractor, agent, or other person or entity acting by, through, under or on behalf of Tenant in connection with the Tenant Improvements are referred to in this Exhibit D collectively as the “Tenant’s Work”. Landlord agrees to cooperate with Tenant as reasonably necessary so that the Tenant Improvements can qualify for LEED silver certification.

Section 2.2.1 Landlord hereby consents to substitution of the following core materials: a) 2x2 ceiling grid, 2x2 ceiling tiles, b) building standard lighting fixtures, c) all wrapped medium pressure duct, and d) fan powered VAV boxes and associated electrical and fire alarm. All cost reductions achieved due to changes under this Section 2.2.1 will be credited to Tenant and all increased costs incurred as a result of changes pursuant to this Section 2.2.1. will be borne by Tenant.

Section 2.2.2 Landlord agrees that Landlord will not unreasonably withhold Landlord’s approval of revisions to the current finish selections of the following restroom core materials provided Tenant delivers adequate documentation to Landlord within thirty (30) days after execution of the Lease, as necessary to allow Landlord’s evaluation of same: a) plumbing fixtures and accessories, b) wall and floor tile, c) lavatory counters, d) toilet partitions, e) ceiling treatments, and f) lighting fixtures. All cost reductions achieved due to changes under this Section 2.2.2 will be credited to Tenant and all increased costs incurred as a result of changes pursuant to this Section 2.2.2. will be borne by Tenant.

Section 2.2.3 Landlord agrees to perform the following core shell changes: a) relocate the rooftop chillers and pumps above the occupied Tenant space to above the mechanical room, b) switch 6-inch sanitary wastewater main to an 8-inch wastewater main, and c) install a screen wall to separate the vent risers from the air intake. All cost reductions achieved due to changes under the preceding sentence will be credited to Tenant and all increased costs incurred as a result of changes pursuant to the preceding

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sentence will be borne by Tenant. In addition, Landlord agrees to perform the following core shell changes at Landlord’s expense: a) remove all wrapped medium pressure duct within the tenant lease space, tap the restroom VAV box within the mechanical room and use either lined or double wall low pressure duct from the mechanical room to the restroom, b) for the end suction pump, add inertial pads or spring isolators, and c) extend the five plumbing vent risers that currently terminate within the roof screen wall to the top of the screen wall to prevent introduction of odors into the outside air intake.

Section 2.2.4 The Tenant Improvements to the second and third floors of the Building are referred to in this Exhibit D as the “Second and Third Floor TI Improvements”.

Section 2.2.5 The Tenant Improvements to the fourth floor of the Building is referred to in this Exhibit D as the “Fourth Floor TI Improvements”.

Section 2.2.6 The Tenant Improvements to the fifth floor of the Building, rooftop items permitted under Section 41.4 of the Lease, signage permitted under Section 41.8 of the Lease, and generators permitted under Section 41.13 of the Lease are referred to in this Exhibit D as the “Fifth Floor TI Improvements”.

Section 2.3 Delivery Date. For purposes of the Lease and this Exhibit D, the “Delivery Date” shall mean the date that is ten (10) days after the date Landlord has completed a sufficient amount of the Shell Improvements so as to allow Tenant to begin construction of the Tenant Improvements without interference or interruption by Landlord or Landlord’s contractors and has notified Tenant thereof in writing.

ARTICLE III

TENANT’S PLANS AND SPECIFICATIONS

Section 3.1 Tenant’s Plans and Specifications. Tenant’s preliminary space plan is approved and attached hereto as Exhibit D-2. Prior to commencement of Tenant’s Work, Tenant shall submit to Landlord’s representative, for Landlord’s approval, two (2) complete, full-size, hard copy detailed plans and specifications for the Tenant Improvements showing the layout of and fully describing all proposed improvements and modifications to the Building, including mechanical and electrical drawings and decorating-plans showing the location of partitions, reflected ceiling plans including light fixtures, electrical outlets, telephone outlets, sprinklers, doors, wall finishes, floor coverings, and all other work to be performed by Tenant (collectively referred to as “Tenant’s Plans”). Tenant’s Plans shall be prepared for Tenant by an architect selected by Tenant and approved in writing by Landlord (“Tenant’s Architect”) and an engineer selected by Tenant and approved in writing by Landlord (“Tenant’s Engineer”) and shall be in a form sufficient to secure the approval of governmental authorities with jurisdiction over the approval thereof. Landlord hereby approves the following potential architects and engineers: Lauckgroup, Kent Engineering.

Section 3.2 Approval of Tenant’s Plans. Tenant’s Plans shall be subject to Landlord’s prior written approval, which approval will not be unreasonably withheld, conditioned or delayed and subject to any required approvals of the City of Austin, Texas (the “City”). Landlord agrees that Landlord will not unreasonably withhold, condition, or delay Landlord’s approval of Tenant’s Plans if the same are consistent with Exhibit D-3 and otherwise acceptable to the City. Landlord shall notify Tenant in writing whether it approves of the Tenant Plans within ten (10) calendar days after its receipt thereof. If Landlord fails to notify Tenant that it disapproves of the Tenant Plans after the submission thereof, then Landlord shall be deemed to have approved the Space Plans. The final plans and specifications approved by Landlord and the City for the Tenant’s Work are referred to in this Exhibit D as the “Final TI Plans”. Tenant may, at Tenant’s option and election, prepare and submit the Tenant’s Plans to Landlord in separate discreet sets of plans and specifications for: (a) the Second and Third Floor TI Improvements; (b) the Fourth Floor TI Improvements; and/or (c) the Fifth Floor TI Improvements.

ARTICLE IV

TENANT’S WORK

Section 4.1 Conduct of Tenant’s Work. The Tenant’s Work shall include and Tenant, at its sole cost and expense, shall perform all work required to complete the Premises strictly in accordance with the Final TI Plans to a finished condition ready for the conduct of business.

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Section 4.2 Building Alterations. Except as permitted under Section 6.2 in the body of this Lease (after completion of the Tenant Improvements), Tenant shall not, without (in each instance) the prior written approval of Landlord, alter or modify the Building, which approval will not be unreasonably withheld, conditioned or delayed. Without limitation on the foregoing, Tenant agrees and acknowledges that Landlord’s written approval is required prior to any (i) modifications to the exterior of the Building; (ii) penetrations of the roof or any floor slab; (iii) alterations to any structural component of the Building; and/or (iv) alterations to any component of any Building system.

Section 4.3 Heavy Articles. All vaults, safes and other heavy articles (“Heavy Articles”) shall be carried onto or within the Building only at such times and in such manner as prescribed by Landlord. Landlord shall have the right to specify weight limitations and positioning of all Heavy Articles. Any damage done to the Building by installation, presence, or removal of any Heavy Article placed by Tenant within or upon the Building shall be repaired at the sole cost and expense of Tenant. Notwithstanding any provision in this Exhibit D or elsewhere in this Lease to the contrary, it is agreed and understood that Landlord will have the right to require Tenant to construct any structural supports or other modifications or alterations that are reasonably necessary in order to support or otherwise accommodate any Heavy Articles placed by Tenant within or upon the Building.

Section 4.4 Requirements For Tenant’s Contractor. Tenant’s Work shall be performed by a general contractor selected by Tenant and approved in writing by Landlord (“Tenant’s Contractor”). Tenant shall cause Tenant’s Contractor to perform all work in a good and workmanlike manner, and at times which do not impede or delay any other tenant in the performance of its work. Any damage to the Premises or the remainder of the Building caused by Tenant or Tenant’s Contractor shall be at the sole cost and expense of Tenant. Tenant shall submit to Landlord, via hand delivery or certified or registered mail, at least three (3) days prior to the commencement of each phase of Tenant’s construction, the following information with respect to that phase:

(a) The name and address of the Tenant’s Contractor, and the names of the plumbing, mechanical, fire sprinkler and electrical contractors (if any) Tenant’s Contractor intends to engage in the construction of its improvements to the Premises. All such contractors shall be subject to Landlord’s prior written approval, which shall not be unreasonably withheld, conditioned or delayed. Landlord hereby approves the following potential contractors and subcontractors:

Balfour-Beatty

Harvey-Cleary Builders

Yates Construction

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Flynn Construction

(b) The actual commencement date of construction and estimated date of completion of the work, fixturing work and date of projected opening.

(c) Evidence of insurance as called for in Section 4.10 of this Exhibit D.

Section 4.5 Compliance With Laws; Liens. All Tenant’s Work shall comply in all respects with applicable Federal, State, City and County statutes, ordinances, regulations, laws and codes. All required building and other permits in connection with the construction and completion of the Premises shall be obtained and paid for by Tenant. Tenant’s Work shall be subject to the general inspection and approval of Landlord or Landlord’s Representative. Tenant’s Contractor shall agree to perform all work under the coordination of Landlord’s Representative. Tenant shall have no authority to place any lien upon the Premises or any interest therein nor in any way to bind Landlord, and any attempt to do so shall be void and of no effect. If, because of any actual or alleged act or omission of Tenant, any lien, affidavit, charge or order for the payment of money shall be filed against Landlord, the Premises or any portion thereof or interest therein, whether or not such lien, affidavit, charge or order is valid or enforceable, Tenant shall, at Tenant’s own cost and expense, cause the same to be discharged of record by payment, bonding or otherwise no later than ten (10) days after written notice to Tenant of the filing thereof, but in all events prior to the foreclosure thereof.

Section 4.6 Quality Materials. All materials used in the performance of Tenant’s Work and in the fixturing of the Premises shall be new and good quality.

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Section 4.7 Temporary Facilities During Construction. Landlord shall provide and pay for all temporary power, water, other utility facilities. Tenant’s Contractor shall provide and pay for the collection of debris, as necessary and required in connection with the Tenant’s Work in the Premises. Storage of construction materials, tools, equipment and debris shall be confined within the Premises. No pipes or conduits may be placed in, on or through any portions of the Project outside of the Premises, except as may be specifically approved in writing by Landlord.

Section 4.8 Discipline. Tenant shall be responsible for the preservation of good order and discipline among the employees of Tenant and Tenant’s Contractor. Tenant shall take such reasonable action as is necessary to avoid a work stoppage in the construction or renovation of the Premises. If, at any time, anyone performing construction work in the Premises on behalf of Tenant shall cause disharmony or interference with anyone performing construction work in the Project on behalf of Landlord or any other tenant, Landlord may, upon forty-eight (48) hours written notice to Tenant, require Tenant to remove from the Premises any person or persons causing such disharmony or interference. In addition, at all times while Tenant is performing Tenant’s Work and installing its trade equipment, furniture and fixtures, Tenant shall not unreasonably interfere with the conducting of business in the Project. Tenant shall comply with such reasonable requests of Landlord as Landlord might make for the purpose of avoiding such interference.

Sections 4.9 Cleanup. Tenant shall maintain the Premises in a clean and or orderly condition during construction and merchandising. Tenant shall promptly remove all unused construction materials, equipment, shipping containers, packaging debris and flammable waste from the Premises. Common areas are not to be used for Tenant’s storage of equipment, merchandise, fixtures, refuse or debris.

Section 4.10 Insurance. Tenant shall provide or shall cause its contractors and subcontractors to provide insurance in responsible companies licensed to do business in Texas in favor of Landlord and Tenant, as their respective interests may appear, as follows:

(a) Liability insurance as required under Section 11 of the Lease.

(b) Worker’s Compensation insurance covering all persons employed in connection with Tenant’s Work and with respect to whom death or bodily injury claims could be asserted against Landlord or the Premises.

At Tenant’s request, Landlord has deleted requirements under this Section 4.10 that Tenant carry builder’s risk insurance. Tenant understands and hereby acknowledges that Tenant will bear all risk of loss with respect to the Tenant Improvements prior to substantial completion thereof. If Landlord advances funds pursuant to the provisions set out in Article V below with respect to the “TI Allowances” and thereafter any Tenant Improvements are damaged or destroyed prior to substantial completion thereof, then Landlord’s obligations with respect to the TI Allowances will be only to advance any remaining undisbursed portions of the TI Allowances and Landlord will have no obligation to advance any additional funds to repair or replace any damaged or destroyed Tenant Improvements.

Section 4.11 Indemnity. Tenant shall and does hereby indemnify and hold Landlord, its agents and employees, harmless from and against any and all claims, demands, suits and causes of action for injury to person or death and for damage to property, including property of Landlord, arising out of or in any way connected with the construction and installation of the Tenant’s Work.

Section 4.12 Lien Waivers. Tenant shall deliver to Landlord a waiver of liens from Tenant’s Contractor and major subcontractors and suppliers and evidence in form acceptable to Landlord that all bills of every description resulting from Tenant’s Work have been paid. Tenant shall keep the Premises free and clear of all claims and liens on account of Tenant’s Work.

Section 4.13 Change Orders. Subject to the terms and provisions hereof, Tenant may, from time to time, submit to Landlord any reasonably requested changes or additions to the Final TI Plans for the Tenant Improvements (each, a “Change Order”) together with the estimated pricing and delays associated with any such Change Order. Landlord agrees to approve reasonable changes which are requested by Tenant, provided such changes are feasible from a design, construction and schedule standpoint.

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ARTICLE V

CONSTRUCTION ALLOWANCES

Section 5.1 The TI Allowances. Landlord will provide to Tenant three (3) separate construction allowances (collectively, the “TI Allowances”), as follows: (a) a construction allowance with respect to the Second and Third Floor TI Improvements (the “Second and Third Floor TI Allowance”) in an amount equal to $2,286,600.00; (b) a construction allowance with respect to the Fourth Floor TI Improvements (the “Fourth Floor TI Allowance”) in an amount equal to $1,155,760.00; and (c) a construction allowance with respect to the Fifth Floor TI Improvements (the “Fifth Floor TI Allowance”) in an amount equal to $1,144,240.00. Any amount left over from the Second and Third Floor TI Allowance may be applied to the Fourth Floor TI Improvements (if and only if Tenant has previously completed the construction of the Second and Third Floor TI Improvements in conformance with the Final TI Plans and there is a sufficient remaining amount of the applicable allowances to pay for remaining construction of such improvements) and the Fifth Floor TI Improvements (if and only if Tenant has previously completed the construction of the Second and Third Floor TI Improvements and the Fourth Floor TI Improvements in conformance with the Final TI Plans and there is a sufficient remaining amount of the applicable allowances to pay for remaining construction of such improvements). Any amount left over from the Fourth Floor TI Allowance may be applied to the Fifth Floor TI Improvements (if and only if Tenant has previously completed the construction of the Second and Third Floor TI Improvements and the Fourth Floor TI Improvements in conformance with the Final TI Plans and there is a sufficient remaining amount of the applicable allowances to pay for remaining construction of such improvements).

Section 5.2 Disbursement of the Second and Third Floor TI Allowance.

Section 5.2.1 After Tenant has accepted all bids for the Second and Third Floor TI Improvements, Tenant shall provide Landlord with a written detailed cost breakdown (the “Second and Third Floor TI Costs Statement”), by trade, of the final costs to be incurred, or which have been incurred, in connection with the design and construction of the Second and Third Floor TI Improvements (the “Second and Third Floor TI Costs”).

Section 5.2.2 For purposes hereof, any excess of the amount of the Second and Third Floor TI Costs over and above the remaining unexpended funds in the Second and Third Floor Allowance is referred to as the “Excess Second and Third Floor TI Costs”. Tenant shall from time to time make payments to the Architect, the Engineer and the Contractor for a proportionate amount (based on total Second and Third Floor TI Costs) of the Excess Second and Third Floor TI Costs with each draw request.

Section 5.2.3 On or before the twentieth (20^th) day of each calendar month thereafter during the construction of the Second and Third Floor TI Improvements, Tenant shall deliver to Landlord the following items (collectively, the “Second and Third Floor Payment Request Materials”):

(a) a request for payment of the Tenant’s Contractor showing the schedule, by trade, of percentage of completion of the Second and Third Floor TI Improvements, detailing the portion of the Second and Third Floor TI Improvements completed and the portion not completed;

(b) invoices from the Tenant’s Contractor for labor rendered and materials delivered to the Premises in connection with the Second and Third Floor TI Improvements;

(c) a general contractor’s affidavit and lien waiver, executed by Tenant’s Contractor releasing all liens against the Project for work previously performed and stating that all subcontractors, laborers and material suppliers engaged in or supplying materials for the work have been paid in full or will be paid with such disbursement;

(d) subcontractors lien waivers releasing all liens against the Project for work previously performed and executed by all subcontractors and materialmen who have furnished labor and/or material for Tenant’s Work;

(e) a certificate for payment, executed by Tenant verifying and confirming the statements made in the Tenant’s Contractor’s request for payment and certifying that the Tenant’s Work has progressed to the point indicated in the Tenant’s Contractor’s request for payment and certifying that all portions of the Tenant’s Work which have been completed are in conformance with the Final TI Plans and this Exhibit D.

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Section 5.2.4 If full and complete Second and Third Floor Payment Request Materials are received by Landlord on or before the twentieth (20^th) day of a calendar month and if none of the payment amounts requested therein are contested by Landlord in good faith, then Landlord shall (subject to the retainage provisions set out in Section 5.6 below) make a progress payment to Tenant no later than the twentieth (20^th) day of the next succeeding calendar month.

Section 5.2.5 Notwithstanding any provision herein to the contrary, prior to the final disbursement of funds out of the Second and Third Floor TI Allowance, Tenant shall furnish to Landlord the following items (on forms approved by Landlord) as the same relate to and concern the Second and Third Floor Improvements:

(a) A temporary or final certificate of occupancy for the Second and Third Floor Improvements;

(b) [Intentionally Deleted].

(c) A certificate executed by Tenant, stating that construction of the Second and Third Floor TI Work has been completed in accordance with the Final TI Plans and this Exhibit D, which certificate shall also state the total Tenant Improvement Costs incurred in connection with the Second and Third Floor TI Work in reasonable detail;

(d) A general contractor’s affidavit and lien waiver, executed by Tenant’s Contractor stating that construction of the Second and Third Floor TI Improvements has been fully and finally completed in accordance with the Final TI Plans and this Exhibit D and that all subcontractors, laborers and material suppliers engaged in or supplying materials for such work have been paid in full or will be paid with such disbursement;

(e) Subcontractor’s lien waivers, executed by all subcontractors and materialmen who have furnished labor and/or materials for Tenant’s Work;

(f) A certificate of completion from Tenant’s Architect certifying that the Second and Third Floor TI Work has been fully and finally completed in accordance with the Final TI Plans and this Exhibit D;

(g) Delivery to Landlord of one set of as-built plans for the Second and Third Floor of the Building.

Section 5.3 Disbursement of the Fourth Floor TI Allowance.

Section 5.3.1 After Tenant has accepted all bids for the Fourth Floor TI Improvements, Tenant shall provide Landlord with a written detailed cost breakdown (the “Fourth Floor TI Costs Statement”), by trade, of the final costs to be incurred, or which have been incurred, in connection with the design and construction of the Fourth Floor TI Improvements (the “Fourth Floor TI Costs”).

Section 5.3.2 For purposes hereof, any excess of the amount of the Fourth Floor TI Costs over and above the remaining unexpended funds in the Fourth Floor Allowance is referred to as the “Excess Fourth Floor TI Costs”. Tenant shall from time to time make payments to the Architect, the Engineer and the Contractor for a proportionate amount (based on total Fourth Floor TI Costs) of the Excess Fourth Floor TI Costs with each draw request.

Section 5.3.3 On or before the twentieth (20^th) day of each calendar month thereafter during the construction of the Fourth Floor TI Improvements, Tenant shall deliver to Landlord the following items (collectively, the “Fourth Floor Payment Request Materials”):

(a) a request for payment of the Tenant’s Contractor showing the schedule, by trade, of percentage of completion of the Fourth Floor TI Improvements, detailing the portion of the Fourth Floor TI Improvements completed and the portion not completed;

(b) invoices from the Tenant’s Contractor for labor rendered and materials delivered to the Premises in connection with the Fourth Floor TI Improvements;

(c) a general contractor’s affidavit and lien waiver, executed by Tenant’s Contractor releasing all liens against the Project for work previously performed and stating that all subcontractors, laborers and material suppliers engaged in or supplying materials for the work have been paid in full or will be paid with such disbursements;

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(d) subcontractors lien waivers releasing all liens against the Project for work previously performed and executed by all subcontractors and materialmen who have furnished labor and/or material for Tenant’s Work;

(e) a certificate for payment, executed by Tenant verifying and confirming the statements made in the Tenant’s Contractor’s request for payment and certifying that the Tenant’s Work has progressed to the point indicated in the Tenant’s Contractor’s request for payment and certifying that all portions of the Tenant’s Work which have been completed are in conformance with the Final TI Plans and this Exhibit D.

Section 5.3.4 If full and complete Fourth Floor Payment Request Materials are received by Landlord on or before the twentieth (20^th) day of a calendar month and if none of the payment amounts requested therein are contested by Landlord in good faith, then Landlord shall (subject to the retainage provisions set out in Section 5.6 below) make a progress payment to Tenant no later than the twentieth (20^th) day of the next succeeding calendar month.

Section 5.3.5 Notwithstanding any provision herein to the contrary: (a) Landlord will not, in any event, be obligated to pay any portion of the Fourth Floor TI Allowance prior to the date that is six (6) months after the Commencement Date; and (b) prior to the final disbursement of funds out of the Fourth Floor TI Allowance, Tenant shall furnish to Landlord the following items (on forms approved by Landlord) as the same relate to and concern the Fourth Floor Improvements:

(a) A temporary or final certificate of occupancy for the Fourth Floor Improvements;

(b) [Intentionally Deleted].

(c) A certificate executed by Tenant, stating that construction of the Fourth Floor TI Work has been completed in accordance with the Final TI Plans and this Exhibit D, which certificate shall also state the total Tenant Improvement Costs incurred in connection with the Fourth Floor TI Work in reasonable detail;

(d) A general contractor’s affidavit and lien waiver, executed by Tenant’s Contractor stating that construction of the Fourth Floor TI Improvements has been fully and finally completed in accordance with the Final TI Plans and this Exhibit D and that all subcontractors, laborers and material suppliers engaged in or supplying materials for such work have been paid in full or will be paid with such disbursements;

(e) Subcontractor’s lien waivers, executed by all subcontractors and materialmen who have furnished labor and/or materials for Tenant’s Work;

(f) A certificate of completion from Tenant’s Architect certifying that the Fourth Floor TI Work has been fully and finally completed in accordance with the Final TI Plans and this Exhibit D;

(g) Delivery to Landlord of one set of as-built plans for the Fourth Floor of the Building.

Section 5.4 Disbursement of the Fifth Floor TI Allowance.

Section 5.4.1 After Tenant has accepted all bids for the Fifth Floor TI Improvements, Tenant shall provide Landlord with a written detailed cost breakdown (the “Fifth Floor TI Costs Statement”), by trade, of the final costs to be incurred, or which have been incurred, in connection with the design and construction of the Fifth Floor TI Improvements (the “Fifth Floor TI Costs”).

Section 5.4.2 For purposes hereof, any excess of the amount of the Fifth Floor TI Costs over and above the remaining unexpended funds in the Fifth Floor Allowance is referred to as the “Excess Fifth Floor TI Costs”. Tenant shall from time to time make payments to the Architect, the Engineer and the Contractor for a proportionate amount (based on total Fifth Floor TI Costs) of the Excess Fifth Floor TI Costs with each draw request.

Section 5.4.3 On or before the twentieth (20^th) day of each calendar month thereafter during the construction of the Fifth Floor TI Improvements, Tenant shall deliver to Landlord the following items (collectively, the “Fifth Floor Payment Request Materials”):

(a) a request for payment of the Tenant’s Contractor showing the schedule, by trade, of percentage of completion of the Fifth Floor TI Improvements, detailing the portion of the Fifth Floor TI Improvements completed and the portion not completed;

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(b) invoices from the Tenant’s Contractor for labor rendered and materials delivered to the Premises in connection with the Fifth Floor TI Improvements;

(c) a general contractor’s affidavit and lien waiver, executed by Tenant’s Contractor releasing all liens against the Project for work previously performed and stating that all subcontractors, laborers and material suppliers engaged in or supplying materials for the work have been paid in full or will be paid with such disbursements;

(d) subcontractors lien waivers releasing all liens against the Project for work previously performed and executed by all subcontractors and materialmen who have furnished labor and/or material for Tenant’s Work;

(e) a certificate for payment, executed by Tenant verifying and confirming the statements made in the Tenant’s Contractor’s request for payment and certifying that the Tenant’s Work has progressed to the point indicated in the Tenant’s Contractor’s request for payment and certifying that all portions of the Tenant’s Work which have been completed are in conformance with the Final TI Plans and this Exhibit D.

Section 5.4.4 If full and complete Fifth Floor Payment Request Materials are received by Landlord on or before the twentieth (20^th) day of a calendar month and if none of the payment amounts requested therein are contested by Landlord in good faith, then Landlord shall (subject to the retainage provisions set out in Section 5.6 below) make a progress payment to Tenant no later than the twentieth (20^th) day of the next succeeding calendar month.

Section 5.4.5 Notwithstanding any provision herein to the contrary: (a) Landlord will not, in any event, be obligated to pay any portion of the Fifth Floor TI Allowance prior to the date that is twelve (12) months after the Commencement Date; and (b) prior to the final disbursement of funds out of the Fifth Floor TI Allowance, Tenant shall furnish to Landlord the following items (on forms approved by Landlord) as the same relate to and concern the Fifth Floor Improvements:

(a) A temporary or final certificate of occupancy for the Fifth Floor Improvements;

(b) [Intentionally Deleted].

(c) A certificate executed by Tenant, stating that construction of the Fifth Floor TI Work has been completed in accordance with the Final TI Plans and this Exhibit D, which certificate shall also state the total Tenant Improvement Costs incurred in connection with the Fifth Floor TI Work in reasonable detail;

(d) A general contractor’s affidavit and lien waiver, executed by Tenant’s Contractor stating that construction of the Fifth Floor TI Improvements has been fully and finally completed in accordance with the Final TI Plans and this Exhibit D and that all subcontractors, laborers and material suppliers engaged in or supplying materials for such work have been paid in full or will be paid with such disbursement;

(e) Subcontractor’s lien waivers, executed by all subcontractors and materialmen who have furnished labor and/or materials for Tenant’s Work;

(f) A certificate of completion from Tenant’s Architect certifying that the Fifth Floor TI Work has been fully and finally completed in accordance with the Final TI Plans and this Exhibit D;

(g) Delivery to Landlord of one set of as-built plans for the Fifth Floor of the Building.

Section 5.5 Tenant Improvement Costs. The phrase “Tenant Improvement Costs” as used herein shall include all actual costs and expenses incurred in connection with the performance of the Tenant’s Work, including: (a) actual hard construction costs incurred in connection with the Tenant’s Work; plus (b) the cost of space planning, architectural services, construction document preparation and engineering fees; plus (c) a construction management fee which shall be paid by Tenant to Landlord in an amount equal to 1.7% of the costs outlined in subpart (a) above (and Tenant shall engage Tenant’s own construction manager to supervise and coordinate Tenant’s Work); plus (d) up to (but not in excess of) $229,330.00 for Tenant’s moving and cabling costs.

Section 5.6 Retainage. Landlord and Tenant agree that eight percent (8%) retainage will be withheld from all payments to Tenant’s Contractor in order to comply with statutory retainage requirements. Landlord may withhold funds payable out of each TI Allowance as necessary to satisfy

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such retainage requirements and the retainage withheld by Landlord will not be disbursed until the later of the date which is forty (40) days after the final completion of the portion of the Tenant Improvements covered by such TI Allowance or the date upon which all of the requirements under this Exhibit D relating to the final disbursements of such TI Allowance have been satisfied.

Section 5.7 Disbursement Deadlines. Notwithstanding any provision in this Lease to the contrary, Landlord will not in any event be obligated to disburse any portion of the TI Allowances after the date that is thirty (30) months after the Commencement Date. Any unutilized portion of the TI Allowances remaining after the payment of all Tenant Improvement costs will be forfeited.

Section 5.8 Landlord Failure to Pay TI Allowances. Should Landlord fail to timely pay Tenant for any portions of the TI Allowances as the same shall otherwise be due and payable hereunder, and provided Tenant has provided landlord with thirty (30) days prior written notice of such failures, Tenant may thereafter deliver to Landlord a second written notice of such failure (the “Second TI Allowance Notice”). If a Second TI Allowance Notice includes a statement of the exact amount of TI Allowances payable pursuant to this Lease and such amounts are in fact due and payable pursuant to this Lease and the Second TI Allowance Notice includes a statement and Landlord fails to pay to Tenant the amount rightfully demanded by Tenant pursuant to the Second TI Allowance Notice, then Tenant may offset the amount of such unpaid portion of the TI Allowances against the amounts next becoming due by Tenant under this Lease.

ARTICLE VI

REFURBISHMENT ALLOWANCE

Section 6.1 The Refurbishment Allowance. In addition to the TI Allowances, Landlord will (at Tenant’s option and election) provide to Tenant a refurbishment allowance (the “Refurbishment Allowance”) in an amount equal to the lesser of: (a) the costs actually incurred by Tenant (the “Refurbishment Costs”) in connection with any repainting, recarpeting or other refurbishment of the Premises (the “Refurbishment Work”); or (b) $1,146,650.00.

Section 6.2 Approval of Refurbishment Plans. Prior to the commencement of any Refurbishment Work, Tenant shall submit to Landlord, for Landlord’s approval, a description in reasonable detail of the proposed Refurbishment Work (the “Refurbishment Plans”). The Refurbishment Plans shall be subject to Landlord’s prior written approval (which will not be unreasonably withheld, conditioned or delayed) and subject to any required approvals by the City. The Refurbishment Plans approved by Landlord and the City are referred to in this Exhibit D as the “Final Refurbishment Plans”.

Section 6.3 Disbursement of Refurbishment Allowance. Landlord will provide the Refurbishment Allowance to Tenant if and after and only if and after Tenant completes the Refurbishment Work in conformance with the requirements set out in this Article VI and Tenant furnishes to Landlord the following items (on forms approved by Landlord) as the same relate to and concern the Refurbishment Work:

(a) copies of all contracts with contractors or suppliers with respect to the Refurbishment Work;

(b) a certificate executed by Tenant, stating that the Refurbishment Work has been fully and finally completed in accordance with the Final Refurbishment Plans and this Exhibit D, which certificate shall also state the total of all Refurbishment Costs incurred by Tenant; and

(c) lien waivers executed by all contractors, subcontractors and materialmen who have furnished labor and/or materials in connection with the Refurbishment Work.

Section 6.4 The Refurbishment Deadline. Notwithstanding any provision in this Lease to the contrary, the Refurbishment Allowance will be provided to Tenant only if and to the extent: (a) Tenant commences the Refurbishment Work within one hundred eighty (180) days after the date that is sixty (60) months after the Commencement Date, and (b) completes the Refurbishment Work on or before the date that is seventy-two (72) months after the Commencement Date. Any unutilized portion of the Refurbishment Allowance remaining after the payment of all Refurbishment Costs incurred in conformance with this Exhibit “D” will be forfeited.

Section 6.4.1 Reimbursement of Refurbishment Costs. In addition to all rent and other sums which are payable by Tenant to Landlord under this Lease, Tenant agrees to pay to Landlord the full amount of all Refurbishment Costs paid for by Landlord pursuant to the provisions of this Article 6 (the “Reimbursed Refurbishment Costs”) plus interest as provided below.

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Section 6.4.2 For purposes hereof, the term “Refurbishment Cost Repayment Period” shall mean the remainder of the Initial Term, after the date upon which Landlord delivers the Refurbishment Allowance to Tenant.

Section 6.4.3 On the first day of the Refurbishment Cost Repayment Period and on the first day of each calendar month thereafter during the remainder of the Term, Tenant shall pay to Landlord, as additional rent, an amount sufficient to amortize the Reimbursed Refurbishment Costs over the Refurbishment Cost Repayment Period, utilizing an eight percent (8%) per annum interest factor.

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EXHIBIT D-1 – PLANS AND SPECIFICATIONS FOR SHELL IMPROVEMENTS AND PARKING FACILITY

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

1. Building Z1 drawings and project manual

Construction Set and Addendum #1 (drawings and specifications) dated April 1, 2013, prepared by Arthur M. Gensler Jr. & Associates, Inc., as well as the following Addendums:

Addendum #2 (drawings and specifications) dated April 17, 2013

Addendum #3 (drawings and specifications) dated April 23, 2013

Addendum #4 (drawings and specifications) dated April 24, 2013

2. Z5 Garage drawings and project manual

Construction Set and Addendum #1, dated 4/3/13, prepared by Arthur M. Gensler Jr. & Associates, Inc.

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EXHIBIT D-2 – TENANT’S PRELIMINARY SPACE PLAN

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

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EXHIBIT E – COMMENCEMENT DATE MEMORANDUM

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

COMMENCEMENT DATE MEMORANDUM

THIS MEMORANDUM, made as of             , 20            , by and between             (“Landlord”) and             (“Tenant”).

Recitals:

A. Landlord and Tenant are parties to that certain Lease, dated for reference             , 20            (the “Lease”) for certain premises (the “Premises”) consisting of approximately             square feet at the building commonly known as             .

B. Tenant is in possession of the Premises and the Term of the Lease has commenced.

C. Landlord and Tenant desire to enter into this Memorandum confirming the Commencement Date, the Termination Date and other matters under the Lease.

NOW, THEREFORE, Landlord and Tenant agree as follows:

1. The actual Commencement Date is             .

2. The actual Termination Date is             .

3. The schedule of the Annual Rent and the Monthly Installment of Rent set forth on the Reference Pages is deleted in its entirety, and the following is substituted therefore:

[insert rent schedule]

4. Capitalized terms not defined herein shall have the same meaning as set forth in the Lease.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written.

LANDLORD:			TENANT:
By:   Domain Junction 2 LLC, a Delaware limited liability company			HomeAway, Inc., a Delaware corporation
	By:	,    a	By:
		,              its	Printed Name:
		General Partner	Title:
		By:
		Printed Name:
		Title:
		Dated:	Dated:

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EXHIBIT F – RULES AND REGULATIONS

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

1. Except as otherwise permitted by the Lease, no sign, placard, picture, advertisement, name or notice shall be installed or displayed on any part of the outside or inside of the Project without the prior written consent of the Landlord. Landlord shall have the right to remove, at Tenant’s expense and without notice, any sign installed or displayed in violation of this rule. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at Tenant’s expense by a vendor designated or approved by Landlord.

2. If Landlord objects in writing to any curtains, blinds, shades or screens attached to or hung in or used in connection with any window or door of the Premises, Tenant shall immediately discontinue such use. No awning shall be permitted on any part of the Premises. Tenant shall not place anything or allow anything to be placed against or near any glass partitions or doors or windows which may appear unsightly, in the opinion of Landlord, from outside the Premises.

3. Tenant shall not obstruct any sidewalks, halls, passages, exits, entrances, elevators, or stairways of the Project. No tenant and no employee or invitee of any tenant shall go upon the roof of the Project.

4. Any directory of the Project, if provided, will be exclusively for the display of the name and location of tenants only and Landlord reserves the right to exclude any other names.

5. Tenant shall not cause any unnecessary labor by carelessness or indifference to the good order and cleanliness of the Premises. Landlord shall not in any way be responsible to any Tenant for any loss of property on the Premises, however occurring, or for any damage to any Tenant’s property by the janitor or any other employee or any other person.

6. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed. No foreign substance of any kind whatsoever shall be thrown into any of them, and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the Tenant who, or whose employees or invitees, shall have caused it.

7. Tenant shall store all its trash and garbage within its Premises. Tenant shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage and refuse disposal shall be made in accordance with directions issued from time to time by Landlord. Tenant will comply with any and all recycling procedures designated by Landlord.

8. Landlord will furnish Tenant two (2) keys free of charge to each door in the Premises that has a passage way lock. Landlord may charge Tenant a reasonable amount for any additional keys, and Tenant shall not make or have made additional keys on its own. Tenant, upon the termination of its tenancy, shall deliver to Landlord the keys of all doors which have been furnished to Tenant, and in the event of loss of any keys so furnished, shall pay Landlord therefore.

9. If Tenant requires telephone, data, burglar alarm or similar service, the cost of purchasing, installing and maintaining such service shall be borne solely by Tenant. No boring or cutting for wires will be allowed without the prior written consent of Landlord.

10. No equipment, materials, furniture, packages, bulk supplies, merchandise or other property will be received in the Project or carried in the elevators except between such hours and in such elevators as may be designated by Landlord. The persons employed to move such equipment or materials in or out of the Project must be acceptable to Landlord.

11. Tenant shall not place a load upon any floor which exceeds the load per square foot which such floor was designed to carry and which is allowed by law. Heavy objects shall stand on such platforms as determined by Landlord to be necessary to properly distribute the weight. Business machines and mechanical equipment belonging to Tenant which cause noise or vibration that may be transmitted to the structure of the Project or to any space in the Project to such a degree as to be objectionable to Landlord or to any tenants shall be placed and maintained by Tenant, at Tenant’s expense, on vibration eliminators or other devices sufficient to eliminate the noise or vibration. Landlord will not be responsible for loss of or damage to any such equipment or other property from any cause, and all damage done to the Project by maintaining or moving such equipment or other property shall be repaired at the expense of Tenant.

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12. Landlord shall in all cases retain the right to control and prevent access to the Project of all persons whose presence in the judgment of Landlord would be prejudicial to the safety, character, reputation or interests of the Project and its tenants, provided that nothing contained in this rule shall be construed to prevent such access to persons with whom any tenant normally deals in the ordinary course of its business, unless such persons are engaged in illegal activities. Landlord reserves the right to exclude from the Project between the hours of 6 p.m. and 7 a.m. the following day, or such other hours as may be established from time to time by Landlord, and on Sundays and legal holidays, any person unless that person is known to the person or employee in charge of the Project and has a pass or is properly identified. Tenant shall be responsible for all persons for whom it requests passes and shall be liable to Landlord for all acts of such persons. Landlord shall not be liable for damages for any error with regard to the admission to or exclusion from the Project of any person.

13. Tenant shall not use any method of heating or air conditioning other than that supplied or approved in writing by Landlord.

14. Tenant shall not waste electricity, water or air conditioning. Tenant shall keep corridor doors closed. Tenant shall close and lock the doors of its Premises and entirely shut off all water faucets or other water apparatus and electricity, gas or air outlets before Tenant and its employees leave the Premises. Tenant shall be responsible for any damage or injuries sustained by other tenants or occupants of the Project or by Landlord for noncompliance with this rule.

15. Except as otherwise permitted by the Lease, Tenant shall not install any radio or television antenna, satellite dish, loudspeaker or other device on the roof or exterior walls of the Project without Landlord’s prior written consent, which consent may be withheld in Landlord’s sole discretion, and which consent may in any event be conditioned upon Tenant’s execution of Landlord’s standard form of license agreement. Tenant shall be responsible for any interference caused by such installation.

16. Tenant shall not affix any floor covering to the floor of the Premises in any manner except as approved by Landlord. Tenant shall repair any damage resulting from noncompliance with this rule.

17. Tenant shall not install, maintain or operate upon the Premises any vending machine without Landlord’s prior written consent, except that Tenant may install food and drink vending machines solely for the convenience of its employees.

18. No cooking shall be done or permitted by any tenant on the Premises, except that Underwriters’ Laboratory approved microwave ovens or equipment for brewing coffee, tea, hot chocolate and similar beverages shall be permitted provided that such equipment and use is in accordance with all applicable federal, state and city laws, codes, ordinances, rules and regulations.

19. Tenant shall not use in any space or in the public halls of the Project any hand trucks except those equipped with the rubber tires and side guards or such other material-handling equipment as Landlord may approve. Tenant shall not bring any other vehicles of any kind into the Project.

20. Tenant shall not permit any motor vehicles to be washed or mechanical work or maintenance of motor vehicles to be performed in any parking lot.

21. Landlord shall have the right, exercisable without notice and without liability to any tenant, to change the name and address of the Project.

22. Tenant requests for services must be submitted to the Project office by an authorized individual. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instruction from Landlord, and no employee of Landlord will admit any person (Tenant or otherwise) to any office without specific instructions from Landlord.

23. Tenant shall not permit smoking or carrying of lighted cigarettes or cigars other than in areas designated by Landlord as smoking areas.

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24. Canvassing, soliciting, distribution of handbills or any other written material in the Project is prohibited and each tenant shall cooperate to prevent the same. No tenant shall solicit business from other tenants or permit the sale of any good or merchandise in the Project without the written consent of Landlord.

25. Tenant shall not permit any animals other than service animals, e.g. seeing-eye dogs, to be brought or kept in or about the Premises or any common area of the Project.

26. These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of any premises in the Project. Landlord agrees to enforce the Rules and Regulations in a uniform and consistent manner, provided, however, Landlord may make reasonable distinctions between office and retail tenants at the Project.

27. Landlord reserves the right to make such other and reasonable rules and regulations as in its judgment may from time to time be needed for safety and security, for care and cleanliness of the Project, and for the preservation of good order in and about the Project. Tenant agrees to abide by all such rules and regulations herein stated and any additional rules and regulations which are adopted. Tenant shall be responsible for the observance of all of the foregoing rules by Tenant’s employees, agents, clients, customers, invitees and guests.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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EXHIBIT G –SIGNAGE

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

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EXHIBIT H – GUARANTY

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

In consideration of, and as an inducement for the granting, execution and delivery of the foregoing Lease Agreement, dated             , 2013 (the “Lease”), including Section 2.2 to the Lease by DOMAIN JUNCTION 2 LLC, a Delaware limited liability company, landlord named therein (“Landlord”, which term shall be deemed to include the named Landlord and its successors and assigns”), to HOMEAWAY, INC., a Delaware corporation, tenant named therein (“Tenant”, which term shall be deemed to include the named Tenant and its successors and assigns), and in further consideration of the sum of One Dollar ($1.00) and other good and valuable consideration paid by Tenant to the undersigned, the receipt and sufficiency of which are hereby acknowledged, the undersigned, SHORENSTEIN REALTY INVESTORS TEN, L.P., a Delaware limited partnership (“Guarantor”), which term shall be deemed to include the named Guarantor and its successors and assigns), does hereby guarantee, absolutely and unconditionally, to Tenant the full and prompt payment of all charges and sums payable by Landlord under Section 2.2 of the Lease, and Guarantor hereby covenants and agrees to and with Tenant that if default shall at any time be made by Landlord in the payment of any such charges and sums, Guarantor shall and will forthwith pay such charges and sums to Tenant pursuant to Section 2.2 to the Lease, including, without limitation, all reasonable attorneys’ fees and disbursements actually incurred by Tenant in connection with the enforcement of this Guaranty.

This Guaranty is an absolute and unconditional guaranty of payment (and not of collection). The liability of Guarantor is co-extensive with that of Landlord and also joint and several and this Guaranty shall be enforceable against Guarantor without the necessity of any suit or proceeding on Tenant’s part of any kind or nature whatsoever against Landlord and without the necessity of any notice of non-payment, non-performance or non-observance or of any notice of acceptance of this Guaranty or of any other notice or demand to which Guarantor might otherwise be entitled, all of which Guarantor hereby expressly waives. Guarantor hereby expressly agrees that the validity of this Guaranty and the obligations of Guarantor hereunder shall in no way be terminated, affected, diminished or impaired by reason of (a) the assertion or the failure to assert by Tenant against Landlord of any of the rights or remedies reserved by Tenant pursuant to the terms, covenants and conditions of Section 2.2 of the Lease, or (b) any non-liability of Landlord under Section 2.2 of the Lease due to the insolvency of Landlord or any discharge in bankruptcy of Landlord.

This Guaranty shall be a continuing guaranty, and the liability of Guarantor hereunder shall in no way be affected, modified or diminished by reason of (a) any assignment, renewal, modification, amendment or extension of the Lease, or (b) any modification or waiver of or change in any of the terms, covenants and conditions of the Lease by Landlord and Tenant, or (c) any extension of time that may be granted by Tenant to Landlord, or (d) any consent, release, indulgence or other action, inaction or omission under or in respect of the Lease, or (e) any dealings or transactions or matter or thing occurring between Landlord and Tenant, or (f) any bankruptcy, insolvency, reorganization, liquidation, arrangement, assignment for the benefit of creditors, receivership, trusteeship or similar proceeding affecting Landlord, whether or not notice thereof is given to Guarantor. The obligations of Guarantor shall be enforceable regardless of any circumstance which might otherwise constitute a legal or equitable discharge of a surety or a guarantor; and Guarantor waives the benefit of all principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms of this Guaranty, and agrees that the obligations of Guarantor hereunder shall not be affected by any circumstances, whether or not referred to in this Guaranty, which might otherwise constitute a legal or equitable discharge of a surety or guarantor. Without limiting the generality of and in addition to the foregoing, Guarantor hereby irrevocably waives any and all claims or other rights it may now have or hereafter acquire against Tenant, Landlord or any other person under Sections 43.001-005 of the Texas Civil Practice and Remedies Code, as amended, Rule 31, Texas Rules of Civil Procedure, as amended, and Section 17.001, Texas Civil Practice and Remedies Code, as amended.

Should Tenant be obligated by any bankruptcy or other law to repay to Landlord or to Guarantor or to any trustee, receiver or other representative of either of them, as a result of a preference or otherwise, any amounts previously paid to Tenant pursuant to this Guaranty, this Guaranty shall be reinstated in the amount of such repayments and to the extent such repayments are actually made. Tenant shall not be required to litigate or otherwise dispute its obligations to make such repayments if it in good faith believes that such obligation exists.

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No delay on the part of Tenant in exercising any right, power or privilege under this Guaranty or failure to exercise the same shall operate as a waiver of or otherwise affect any such right, power or privilege, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

No waiver or modification of any provision of this Guaranty nor any termination of this Guaranty shall be effective unless in writing, signed by Tenant; nor shall any such waiver be applicable except in the specific instance for which given.

All of Tenant’s rights and remedies under Section 2.2 of the Lease and under this Guaranty, now or hereafter existing at law or in equity or by statute or otherwise, are intended to be distinct, separate and cumulative and no exercise or partial exercise of any such right or remedy therein or herein mentioned is intended to be in exclusion of or a waiver of any of the others.

No payment or performance by Guarantor pursuant to any provision hereof shall entitle Guarantor by subrogation or otherwise to the rights of Tenant to any payment by Landlord or out of the property of Landlord, except after payment of all sums or fulfillment of all covenants, terms, conditions or agreements to be paid or performed by Landlord.

Without regard to principles of conflicts of laws, the validity, interpretation, performance and enforcement of this Guaranty shall be governed by and construed in accordance with the internal laws of the State of Texas. Guarantor hereby submits to the non-exclusive personal jurisdiction in the State of Texas, the court thereof and the United States District Courts sitting therein, for the enforcement of this Guaranty, and Guarantor hereby waives any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of Texas for the purpose of litigation to enforce this Guaranty.

NOTWITHSTANDING ANY PROVISION IN THE LEASE OR THIS GUARANTY TO THE CONTRARY, IT IS AGREED AND UNDERSTOOD THAT THE LIABILITY OF GUARANTOR UNDER THIS GUARANTY WILL TERMINATE ON THE “DELIVERY DATE” (AS THAT TERM IS DEFINED IN THE LEASE) AND THEREAFTER THIS GUARANTY WILL BE OF NO FURTHER FORCE OR EFFECT.

IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty this             day of             , 2013.

	GUARANTOR:
	SHORENSTEIN REALTY INVESTORS TEN, L.P., a Delaware limited partnership
Signed, sealed and delivered in the presence of:	By:
	(Seal)
Witness	By:
	(Seal)
	Address:
Notary Public
My Commission Expires:

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EXHIBIT I – FORM OF CONDOMINIUM DECLARATION FOR THE BUILDING

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

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AFTER RECORDING RETURN TO:

DAVID WOLFF, ESQ.

METCALFE WOLFF STUART & WILLIAMS, L.L.P.

221 W. 6^TH STREET, SUITE 1300

AUSTIN, TEXAS 78701

DECLARATION OF CONDOMINIUM REGIME FOR

THE DOMAIN BUILDING 2 CONDOMINIUMS

The street address of the Regime created hereby is:
	Austin, Texas

The street address is provided for informational purposes only. The street address may change from time to time. Any change in the street address shall have no effect on the description of the Regime, Units, General Common Elements or Limited Common Elements set forth in the Declaration.

DECLARATION OF CONDOMINIUM REGIME FOR THE DOMAIN BUILDING 2

CONDOMINIUMS

THE STATE OF TEXAS	§
	§
COUNTY OF TRAVIS	§

This Declaration of Condominium Regime for The Domain Building 2 Condominiums (this “Declaration”), is made on this             day of             , 2013, by DOMAIN JUNCTION 2 LLC, a Delaware limited liability company (“Declarant”), and is as follows:

RECITALS

WHEREAS Declarant is the owner of                     , according to the plat filed as Document No.                      of the Official Public Records of Travis County (the “Land”), together with all easements, rights and appurtenances thereto and all of the Improvements (defined below) thereon, and;

NOW, THEREFORE, for and in consideration of the mutual covenants, conditions, and obligations set forth herein, the receipt and sufficiency of which are acknowledged by Declarant, the Land and Improvements are hereby made subject to a condominium regime in accordance with the provisions of Chapter 82 of the Texas Property Code (the “Uniform Act”) and the provisions of this Declaration, the terms and provisions of which are as follows:

BASIC PROVISIONS

A. (i) NAME OF CONDOMINIUM: The Domain Building 2 Condominiums.

     (ii) NAME OF ASSOCIATION: The Domain Building 2 Condominium Association, Inc., a Texas non-profit corporation.

B. COUNTY IN WHICH CONDOMINIUM IS LOCATED: Travis.

C. DESCRIPTION OF UNIT BOUNDARIES AND IDENTIFYING NUMBER:

See Section 1.53 and Exhibit “A-2”, attached hereto and incorporated herein by reference.

D. MAXIMUM NUMBER OF UNITS DECLARANT MAY CREATE: TWO (2) UNITS. The condominium shall contain two (2) units in the Building (defined below): the Office Unit and the Retail Unit. The Retail Unit may be built in phases. Each unit established pursuant to this Declaration shall be restricted to commercial use.

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E. PERCENTAGE INTEREST IN COMMON ELEMENTS ALLOCATED TO EACH UNIT: “Percentage Interest in Common Elements” shall mean the undivided interest in and to the Common Elements (defined below) and Common Expense Liability (defined below) allocated to each Unit by the following allocation, except to the extent the foregoing allocation varies from the allocations set forth in the Allocation Document, in which case the allocations set forth in the Allocation Document will control:

Unit Designated by Identifying No.	Percentage of Interest In Common Elements
100 (Office Unit)		80	%
200 (Retail Unit)		20	%

F. RESTRICTIONS ON USE, OCCUPANCY OR ALIENATION OF UNITS: The Regime (defined below) is a commercial condominium. Restrictions on use, occupancy and alienation of units are set forth in Articles Two and Three of this Declaration and the Rules and Regulations (defined below).

G. DESCRIPTION OF AND RECORDING DATA FOR RECORDED EASEMENTS, AND LICENSES APPURTENANT TO OR INCLUDED IN THE CONDOMINIUM OR TO WHICH ANY PORTION OF THE CONDOMINIUM IS OR MAY BECOME SUBJECT BY RESERVATION IN THIS DECLARATION: See Exhibit “A-1” attached hereto and incorporated herein for all purposes.

H. METHODS FOR AMENDING THE DECLARATION: See Article 11 of this Declaration.

I. PLAT AND PLAN: See (i) Exhibit “A-1”, which, inter alia, identifies the Land; and (ii) Exhibits “A-1” and “A-2”, which, inter alia, identifies certain Limited Common Elements and the Units and Building.

J. ASSOCIATION’S OBLIGATIONS TO REBUILD OR REPAIR FOLLOWING A CASUALTY OR OTHER DISPOSITION OF CASUALTY INSURANCE PROCEEDS: See Article 9 of the Declaration.

K. COMPLETION OF IMPROVEMENTS INDICATED ON PLAT AND PLAN. Declarant shall complete the Units, and other improvements shown on Exhibit “A-1” and “A-2”, as revised, modified, or amended pursuant to the applicable terms or provisions of this Declaration. All improvements reflected on the Plats and Plans MUST BE BUILT, except the single story portions of the Retail Unit may be built in subsequent phases as shown on Exhibit “A-1” and “A-2”.

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ARTICLE 1

DEFINITIONS

1.1 “Access Easement” means a perpetual, irrevocable and non-exclusive easement and right of access and entry to each Unit and the Limited Common Elements, from time to time as may be reasonably necessary for (a) the maintenance, repair or replacement of any of the Common Elements thereon or accessible therefrom; (b) the making of emergency repairs therein necessary to prevent harm or damage to the Common Elements, any Unit or any occupant and (c) such other reasonable purposes as are deemed by the Association to be necessary for the performance of the obligations of the Association as described herein, in the Uniform Act or the other Governing Documents.

1.2 “Allocation Document” means that certain “Domain Building 2 Expense Allocation Document” adopted on or about the date hereof by the Owners and incorporated herein for all purposes.

1.3 “Association” shall mean The Domain Building 2 Condominium Association, Inc., a Texas non-profit corporation, the members of which shall be the Owners of the Units within the Regime. The term “Association” shall have the same meaning as the term “unit owners association” in the Uniform Act.

1.4 “Assessment” or “Assessments” shall mean assessments (regular, capital, and special) imposed by the Association pursuant to this Declaration or other Governing Documents.

1.5 “Board” shall mean the Board of Directors of the Association.

1.6 “Building” shall mean the structure described on Exhibit “A-2”, including without limitation the Structure.

1.7 “By-Laws” shall mean the corporate bylaws of the Association.

1.8 “Common Elements” shall mean all portions of the Land and Improvements other than the Units. Without limiting in any way the generality of the foregoing, the Common Elements shall include those items defined as “General Common Elements” or “Limited Common Elements” in this Declaration.

1.9 “Common Elements Easement” means a perpetual, irrevocable and non-exclusive easement over the Common Elements for ingress to and egress from each Unit, together with the non-exclusive right to use and enjoy the General Common Elements and the exclusive right to use and enjoy the Limited Common Elements appurtenant to each Owner’s Unit (subject to the rights of other Owners to use and enjoy such Limited Common Elements if appurtenant to more than one Unit).

1.10 “Common Expense” or “Common Expenses” means any and all costs, expenses and financial obligations of the Association, together with any allocations to reserves made pursuant to the provisions of the Governing Documents, including without limitation, costs incurred for the management and operation of the Regime, the repair, maintenance, insurance,

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and operation of the Common Elements, reserves for replacements or other expenses or liabilities, any costs due and payable by the Owners in accordance with the Existing CC&R’s, and any costs incurred or to be incurred by pursuant to any resolution duly adopted by the Board or the Owners.

1.11 “Common Expense Liability” shall mean the liability for Assessments levied on each Unit for Common Expenses.

1.12 “Declarant’s Easement Rights” shall mean (a) a temporary, non-exclusive easement and right of access and entry over, across and through the Regime by the Declarant, its employees, agents and contractors from time to time as may be necessary for the construction of the Improvements, and (b) an easement through the Common Elements as may be reasonably necessary for discharging the Declarant’s obligations under the Uniform Act or the Governing Documents.

1.13 “Default Rate” shall mean the lesser of (a) twelve percent (12%) or (b) the highest lawful rate.

1.14 “Easements” means, collectively, the Access Easement, the Common Elements Easement, the Roof Easement, the Support Easement, the Systems Maintenance Easement, the Utility Easement and the Vertical Access Easement, but specifically excludes the Parking Easement.

1.15 “Environmental Law” means all federal, state and local health, safety, environmental or natural resource laws, statutes, regulations, rules, ordinances, codes, licenses, permits, orders, approvals, plans, authorizations, concessions, franchises and similar items (whether now existing or hereafter enacted or promulgated) of all governmental authorities, having jurisdiction, and all other state, federal, and local laws, regulations, rules, ordinances, and orders which govern: (a) the existence, cleanup and/or remedy of contamination on property; (b) the emission or discharge of Hazardous Substances into the environment; (c) the control of Hazardous Substances; (d) the use, generation, transport, treatment, storage, disposal, removal, or recovery of Hazardous Substances; or (e) the safety and health of employees; as well as all applicable judicial and administrative and regulatory decrees, judgments or orders (including without limitation the “common law”) and all applicable covenants running with the land that relate to the protection of health, safety, environment or natural resources, including, without limitation: (i) the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as now or hereafter amended, “CERCLA”), 42 U.S.C. §§ 9601 et seq.; (ii) the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, as amended by the Hazardous and Solid Waste Amendments of 1984 (as now or hereafter amended, “RCRA”), 42 U.S.C. §§ 6901 et seq.; (iii) the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; (iv) the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. §§ 11001 et seq.; (v) the Federal Water Pollution Control Act, also known as the Clean Water Act, 33 U.S.C. §§ 1251 et seq.; (vi) the Clean Air Act, as amended by the Clean Air Act Amendments, 42 U.S.C. §§ 7401 et seq.; (vii) the National Environmental Policy Act, 42 U.S.C. §§ 4321, et seq.; (viii) the Endangered Species Act of 1973 (as now or hereafter amended), 16 U.S.C. §§ 1531 et seq.; (ix) the Occupational Safety and Health Act, 29 U.S.C. §§ 651 et seq.; (x) the Hazardous Material Transportation Act

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(as now or hereafter amended), 49 U.S.C. §§ 5101 et seq.; (xi) any corresponding applicable law of the State of Texas; and (xii) all regulations, rules, guidelines, or standards promulgated pursuant to such federal and local laws, as such regulations, rules, guidelines, and standards may be amended from time to time, including, but not limited to, any rules and/or regulations applicable to jurisdictional wetlands.

1.16 “Event of Default” means a (a) monetary default by any Owner under any Governing Document which fails to be cured within 30 days of written notice thereof from the Association to such Owner, (b) non-monetary default by any Owner under any Governing Document which fails to be cured within 60 days of written notice thereof from the Association to such Owner, provided, if such non-monetary default has a Material Adverse Effect on another Owner or such other Owner’s Unit or the Common Elements, such cure period shall be limited to 5 days, or such longer period of time as may be reasonable required, so long as such Owner commences to cure such default within the foregoing 5-day period and thereafter diligently pursues such default to completion, or (c) a default by the Association under any Governing Document which fails to be cured within 60 days of written notice thereof from an Owner to the Association, provided, if such default has a Material Adverse Effect on another Owner or such other Owner’s Unit or the Common Elements, such cure period shall be limited to 15 days, or such longer period of time as may be reasonable required, so long as the Association commences to cure such default within the foregoing 15-day period and thereafter diligently pursues such default to completion.

1.17 “First Mortgagee” shall mean a Mortgagee that holds any indebtedness secured by a first and prior Mortgage upon a Unit.

1.18 “General Common Elements” shall mean all portions of the Common Elements that are not Limited Common Elements.

1.19 “Governing Documents” means, collectively, the Allocation Document, the Bylaws, the Certificate of Formation, this Declaration and the Rules and Regulations.

1.20 “Hazardous Substances” means any substance: (a) the presence of which requires investigation, reporting, removal or remediation under any Environmental Law; (b) that is or becomes defined as a “hazardous waste”, “hazardous substance”, “hazardous material”, “extremely hazardous substance”, or other type of pollutant or contaminant under any applicable Environmental Law; (c) that is toxic, reactive, explosive, corrosive, flammable, radioactive, carcinogenic, mutagenic, teratogenic, or otherwise hazardous and is or becomes regulated by any applicable Environmental Law; (d) that is or contains oil, gasoline, diesel fuel, aviation fuel, or other petroleum hydrocarbons, products or derivatives, other than petroleum, crude oil, and petroleum products to the extent contained within regularly operated motor vehicles; (e) that is or contains PCBs, asbestos, radon or urea formaldehyde; (f) that is fungi or bacterial matter which reproduces through the release of spores or the splitting of cells, including but not limited to, mold (including, without limitation, penicillium/aspergillus and stachybotrys chartarum); or (g) the presence of which causes or threatens to cause a nuisance upon the Secured Property or to adjacent property or poses or threatens to pose a hazard to the health or safety of any person, to plant or animal life, or to the environment.

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The term “Hazardous Substance” shall not include, however, any materials that are customarily used, stored, released, generated or transported in the construction, operation, use, maintenance and cleaning of properties similar to the Regime, but only during the period that the same are stored in reasonable and customary quantities and used in accordance with applicable Environmental Laws and the manufacturer’s recommended standards; provided, however that under no circumstances may any such excluded materials (1) contain a Hazardous Substance in a concentration, or at a level, that would subject the material to regulation, reporting, removal or remediation under any Environmental Laws or (2) subject the Regime to higher than customary insurance rates.

1.21 “Improvements” shall mean and refer to all improvements related to or existing upon the Land, including without limitation, the Building.

1.22 “Land” shall mean                     , according to the plat filed as Document No.                      of the Official Public Records of Travis County, and all easements, rights and appurtenance related to the Land.

1.23 “Legal Requirements” means any and all present and future judicial decisions, statutes rulings, rules, regulations, permits, certificates, or ordinances of any federal, state or municipal authority in any way applicable to any Owner, any Unit or the Regime, including zoning ordinances, subdivision and building codes, flood disaster laws, applicable architectural barrier, health and environmental laws and regulations and all other applicable restrictive covenants, including, but not limited to, the Use Restrictions and the Existing CC&R’s.

1.24 “Limited Common Elements” shall mean those portions of the Land and Improvements, if any, so designated on Exhibit “A-2”, such other portions of the Land and Improvements reserved for the exclusive use of one or more Owners to the exclusion of other Owners, and, unless otherwise provided in this Declaration, such portions of the Land and Improvements designated as Limited Common Elements under the Uniform Act.

1.25 “Major Decision” means any action with respect to any matter coming before the Association, whether initiated by an Owner or any other Person, relating to (i) architectural or aesthetic changes to the exterior of the Improvements; (ii) structural changes to the Improvements and/or changes to the Systems; (iii) changes to the Governing Documents (except as otherwise permitted in Article 11); (iv) the levy of any special Assessments under Section 6.5 below for capital improvements to the Regime; (v) a decision not to restore the Improvements unless an Owner elects not to restore its Unit in accordance with the terms set forth in Section 9.4 below; or (vi) any other matter having a Material Adverse Effect on an Owner or a Unit or the Common Elements.

1.26 “Material Adverse Effect” means any act, event, condition or circumstance that could materially and adversely affect the business, operations, condition (financial or otherwise), or value of a Unit.

1.27 “Member” shall mean any person(s), entity or entities holding membership rights in the Association.

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1.28 “Mortgage” shall mean any mortgage(s) or deed(s) of trust covering any portion of a Unit given to secure the payment of a debt.

1.29 “Mortgagee” shall mean the holder or holders of any Mortgage.

1.30 “Office Parking Easement Rights” shall mean the easement rights allocated to the Office Unit in the Parking Easement.

1.31 “Office Unit” shall mean the Office Unit as shown on the Plan and the portion of the Skin of the Building that surrounds the Office Unit, as designated on the Plan, all walls, floors, ceilings, hallways, lobbies, windows, doors, elevators and other Improvements that serve the Office Unit exclusively, to the extent the same do not constitute the Structure. [Units to be measured to outside of façade so as to include Skin.].

1.32 “Owner” shall mean the person(s), entity or entities, including Declarant, holding a fee simple interest to a Unit, but shall not include a Mortgagee.

1.33 “Parking Easement” shall mean that certain Parking Garage Easement of even date hereto by and between Declarant and RREEF Domain, L.P.

1.34 “Percentage Interest” is synonymous with “Allocated Interest” as defined in the Uniform Act and shall mean the undivided interest in and to the Common Elements and Common Expense Liability allocated to each Unit pursuant to the terms of this Declaration. The Percentage Interest associated with each Unit is reflected in Paragraph E of the Basic Provisions above and Section 2.3 below.

1.35 “Person” shall mean any individual, individuals, or any entities having the legal right to hold title to real property.

1.36 “Plat” shall mean the plat attached hereto as Exhibit “A-1”, as changed, modified or amended in accordance with this Declaration.

1.37 “Plan” shall mean the dimensional drawings attached hereto as Exhibit “A-2”, which identifies or describes the Building, Units and Limited Common Elements unless otherwise described on the Plat, or changed, modified or amended in accordance with this Declaration.

1.38 “Regime” shall mean the Land, Improvements, Units, General Common Elements and Limited Common Elements which comprise the condominium regime established by this Declaration.

1.39 “Replacement Reserve Fund” shall mean the reserve fund established pursuant to Section 6.2 for maintenance, repairs, and replacements to Common Elements and other special purposes permitted by the provisions of this Declaration.

1.40 “Retail Parking Easement Rights” shall mean the easement rights allocated to the Retail Unit in the Parking Easement.

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1.41 “Retail Unit” shall mean the Retail Unit as shown on the Plan, including the portion of the Skin of the Building that surrounds the Retail Unit, as designated on the Plan, all walls, floors, ceilings, hallways, lobbies, windows, doors, elevators and other Improvements that serve the Retail Unit exclusively, to the extent the same do not constitute the Structure.

1.42 “Roof Easement” means a perpetual, irrevocable and non-exclusive easement for the placement of electric, satellite, telecommunications, transmitting and other equipment and for the use and maintenance of such equipment on a portion of the roof of the Building in a location shown on the Plan or otherwise approved by the Association, such approval not to be unreasonably withheld, conditioned or delayed.

1.43 “Rules and Regulations” shall mean The Domain Building 2 Condominium Association, Inc. rules and regulations attached hereto as Exhibit “B” regulating the use and enjoyment of the Regime by the Owners and their respective employees, agents, contracts, tenants and invitees. The Rules and Regulations may be amended only by unanimous agreement of the Board as a Major Decision.

1.44 “Signage” shall mean any signage, lettering, decorations, banners, advertising or marketing media, awnings, canopies, window covering, or any other form of expression on the Skin or in the interior of the Improvements only if the same is visible from the exterior of the Improvements.

1.45 “Signage Rights” shall mean the right to affix Signage to the Skin, as described in Section 4.3 of this Declaration.

1.46 “Skin” The exterior façade and the surface of such façade of the Improvements or the portions thereof, as applicable, but excluding any exterior doors.

1.47 “Special Services” shall mean: (i) special benefits or services provided by the Association to a Unit; or (ii) a higher level of service provided to a Unit than the Association then currently provides to such Unit.

1.48 “Structure” shall mean all foundations, footings, columns, flat slabs, sheer walls, girders, support beams, post tension cables or rods and including any and all other structural components that support, uphold or are a part of the Building or any other Improvement to the extent such Structure serves one or more of the Units or the Common Elements.

1.49 “Support Easement” means a perpetual, irrevocable and non-exclusive easement for maintenance, repair, replacement and improvement of all foundations, footings, columns, girders, support beams, load bearing walls, Skin and any and all other structural members that support, uphold or are a part of the Building.

1.50 “Systems” shall mean all fixtures, utilities, equipment, pipes, lines, wires, computer cables, conduits, circuits, junction boxes, hangers, pull boxes, terminal points, electronic devices, air compressors, air handlers, chillers and other systems used in the production, heating, cooling and/or transmission of air, water, gas, electricity, communications, waste water, sewage, audio and video signals, and other utility services including the main switch gear conduits, plumbing chases and mechanical shafts located on the Land and/or Improvements.

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1.51 “Systems Maintenance Easement” means a perpetual, irrevocable and non-exclusive easement for use, maintenance, repair, replacement and improvement (but not expansion, except as may be approved in accordance with the Governing Documents) of all Systems.

1.52 “Unilateral Decisions” means any right or action unilaterally available to an Owner under the Governing Documents.

1.53 “Unit” shall mean the physical portion of the Building designated for separate ownership or occupancy as a Unit. The boundaries of the Units are depicted on the Plan, and include: (a) all Systems that exclusively serve the Unit; (b) the finish materials, fixtures and appliances contained within the Unit; and (c) the Skin surrounding each such Unit; but excluding any portion of the Building or Systems that serve more than one Unit or the Common Elements, all as subject to and further described in § 82.052 of the Uniform Act. Notwithstanding any provision of this Declaration to the contrary, if construction of any Unit has not been substantially completed, then, until construction of the Unit is substantially completed and the Notice (as hereinafter defined) for such Unit has been filed, such Unit shall be defined as the physical portion of the Regime designated for separate ownership or occupancy, the boundaries of which are set forth in the Plat and Plan, as amended from time to time in accordance with this Declaration. The Owners may file a Notice of Change (the “Notice”) in the Official Public Records of Travis County, Texas, to describe the Unit, but only if changes are made to any Unit in accordance with this Declaration. The Notice, upon recordation in the Official Public Records of Travis County, Texas, shall automatically amend this Declaration for the purpose of defining the Unit to which the Notice relates.

1.54 “Utility Easement” means all existing recorded easements for utilities and any additional utility easements which Declarant or the Association may grant.

1.55 “Utility Service Contract” or “Utility Service Contracts” shall mean and refer to one or more contracts (if any) which are entered into by the Association for the provision of electric, water, natural gas, propane, or wastewater utility services to the Units.

1.56 “Vertical Access Easement” means a perpetual, irrevocable and non-exclusive easement for access through the stairways, the elevators, the elevator shafts, fire rooms, fire systems and lobbies located within the Building.

ARTICLE 2

DIVISION AND CONVEYANCE OF UNITS

2.1 Separate Estates. The Land and Improvements are hereby divided into fee simple estates consisting of separate Units, together with the exclusive rights to use the Limited Common Elements, if any, appurtenant thereto, the non-exclusive right to use the General Common Elements, and the Percentage Interest in and to the Common Elements associated with

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and appurtenant to each Unit as set forth in Basic Provision E. The General Common Elements shall be owned in common by the Owners of the Units, in proportion to their Percentage Interests. Each Owner of a Unit having or hereafter acquiring a Limited Common Element assigned only to such Unit on Exhibit “A-2”, or on a subsequent amendment to this Declaration, shall be entitled to exclusive ownership and possession of its Unit and exclusive use of the Limited Common Elements appurtenant thereto. Each Owner shall have an unrestricted right of ingress and egress to their Unit, which shall be perpetual and shall run with and be appurtenant to each Unit.

2.2 Description and Conveyance of Units. No Unit shall be conveyed to any other party unless the conveyance also includes the Common Elements appurtenant thereto. Any attempted conveyance, encumbrance, judicial sale or other voluntary or involuntary transfer of all or any portion of a Common Element, which does not include the Unit appurtenant thereto, shall be void. The description of a Unit in any deed, lease, Mortgage, deed of trust or other instrument shall include, at a minimum: (i) the name of the Regime; (ii) the recording data for this Declaration, including any amendments, plats, and plans; (iii) the county in which the condominium is located; and (iv) the identifying number of the Unit.

2.3 Percentage Interest. The Percentage Interests assigned to each Unit under this Declaration are: Office Unit – 80%; Retail Unit – 20%.

2.4 Subdivision of Units. Units may not be subdivided without the written consent of all Owners. However, either Unit Owner may create a condominium regime governing multiple ownership of its Unit, which shall be subject and subordinate to this Declaration.

ARTICLE 3

USE RESTRICTIONS FOR THE UNITS

3.1 Permitted and Prohibited Uses for the Office Unit. The Office Unit shall be used or occupied for office purposes and related uses associated with the operation of the Office Unit as an office building and compatible with the operation of the Regime as a first class, multi-purpose retail and office project; provided, however, that the Owner of the Office Unit shall have the right to convert the Office Unit to use for a multi-family development and related uses associated with a multi-family development. Any uses that violate Legal Requirements or that are prohibited under the Existing CC&Rs shall be prohibited within the Office Unit.

3.2 Permitted and Prohibited Uses for the Retail Unit. The Retail Unit shall be used or occupied solely for the sale of retail goods and other commercial purposes that shall be compatible with the operation of the Condominium as a first class, multi-purpose retail and office project. Without limiting the foregoing, any uses that violate the Legal Requirements and the following uses shall be prohibited in the Retail Unit: (1) tattoo parlor; (2) dry cleaning plant (provided, however, this prohibition shall not be applicable to nominal supportive facilities for onsite dry cleaning operations that are oriented to pickup and delivery by the ultimate consumer where no cleaning services are conducted at such location); (3) flea market or swap shop; (4) meeting hall or place of worship; (5) pawn shops; (6) check cashing services; (7) bowling alley, skating rink, billiard room or venture whose primary business is the operation of video or arcade

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games; (8) massage parlor (except as administered by a licensed massage therapist), adult book/pornographic materials store or the showing of hardcore pornographic films (provided, however, that this restriction shall not prohibit customary national and regional video operators such as Blockbuster and Hollywood Video) or any sexually oriented business; (9) beauty or barber college or other place of instruction, reading room or any other operation catering primarily to students or trainees rather than to customers, except as may be approved by the Board; (10) funeral parlor; (11) facility for the sale of paraphernalia for use with illicit drugs; (12) off-track betting parlor; (13) carnival, amusement park or circus; (14) gas station; (15) auto repair shop; (16) any use that results in strong obnoxious odors in other spaces within the Building; (17) pet kennel; (18) animal medical services establishment; (19) coin operated laundry; and (20) auto parts store. Any uses that violate Legal Requirements or that are prohibited under the Existing CC&Rs shall be prohibited in the Retail Unit.

ARTICLE 4

EASEMENTS, ENCROACHMENTS AND SIGNAGE

4.1 Easements. The Declarant hereby reserves the Access Easement, the Roof Easement, the Support Easement, the Systems Maintenance Easement, the Utility Easement and the Vertical Access Easement for the benefit of the Association and its agents and representatives, and each Owner shall by virtue of the recordation of this Declaration, accept the deed to such Owner’s Unit subject to the Access Easement, the Support Easement, the Systems Maintenance Easement, the Utility Easement and the Vertical Access Easement. Additionally, the Association shall have an easement through the Common Elements as may be reasonably necessary for discharging the Association’s obligations under the Uniform Act or the Governing Documents. Declarant hereby reserves for the benefit of each Owner the Common Elements Easement (and declares that by virtue of this Declaration the Common Elements shall be subject to the Common Elements Easement), the Support Easement, the System Maintenance Easement, the Utility Easement and the Vertical Access Easement. Each Owner shall provide the Association with access to such Owner’s Units for Access Easement purposes. Declarant hereby further reserves (a) for the Owner of the Office Unit, the Office Parking Easement Rights, and (b) for the Owner of the Retail Unit, the Retail Parking Easement Rights. Additionally, the Declarant hereby reserves the Roof Easement for the benefit of the Owner of the Office Unit and its agents, representatives and tenants, excepting therefrom the single story Retail roof on which Declarant hereby reserves the Roof Easement for the benefit of the Owner of the Retail Unit and its agents, representatives, and tenants (except with respect to any rooftop deck on such single story Retail roof utilized by the Office Unit), and Declarant hereby further reserves for the benefit of the Owner of the Retail Unit the Roof Easement on the roof above the Office Unit as necessary for the Owner of the Retail Unit to use and maintain an exhaust vent and related equipment located thereon and serving the Retail Unit as set forth in the Plan

4.2 Encroachments. If as a result of the original construction, reconstruction, repair, shifting, settlement or other circumstance any portion of the Common Elements encroaches upon an Owner’s Unit, an irrevocable and perpetual easement for such encroachment and for the maintenance of the same is hereby granted and conveyed to the Association by each Owner at the time each Owner’s Unit is conveyed to the Owner. If as a result of the original construction,

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reconstruction, repair, shifting, settlement or other circumstance any portion of an Owner’s Unit encroaches upon the Common Elements, or upon any adjoining Owner’s Unit, an irrevocable and perpetual easement for such encroachment and for the maintenance of the same is hereby granted to the Owner of such Owner’s Unit. Such encroachments and easements shall not be considered or determined to be encumbrances either upon a Unit or upon the Common Elements.

4.3 Signage Rights on the Skin of the Buildings. The Owner of the Office Unit and the Owner of the Retail Unit shall have the right to erect Signage on the Skin attached to its respective Unit or Limited Common Elements, provided that such Signage: (a) is in compliance with the Governing Documents and the Legal Requirements; and (b) does not flash or produce a disturbing noise. All Signage shall be subject to such further restrictions and requirements as set forth in the Rules and Regulations and the Existing CC&Rs. Each Owner shall be responsible, at its sole expense, to (i) obtain and maintain all necessary permits and approvals required under all applicable Legal Requirements with respect to the erection and maintenance of its Signage; (ii) keep and maintain, or cause to be kept and maintained, its Signage in good condition and repair; and (iii) keep or cause to be kept all lighting and other equipment in connection with its Signage in good working order and condition. The Association may remove any such Signage, as necessary, in connection with any of its maintenance and repair or other obligations under this Declaration or may require the Unit Owner to do so. The Owner of the Unit utilizing the Signage Rights shall be responsible for the cost to repair Common Elements or Units if such repairs are necessitated by use or misuse of their respective Signage Rights. The Association does not insure equipment or improvements installed pursuant to the Signage Rights and is not liable to any Owner or any other Person for any loss or damage from any cause to the equipment or improvements installed pursuant to the Signage Rights. The Owners are hereby permitted to assign their respective Signage Rights to their tenants of their respective Unit.

4.4 Construction Easement to Owner of Retail Unit. Declarant hereby grants to the Owner of the Retail Unit a perpetual, irrevocable and non-exclusive easement and right of access and entry, over, across and through the Common Elements located at grade level by the Owner of the Retail Unit, its employees, agents and contractors from time to time as may be reasonably necessary for the future construction of the single-story expansions of the Retail Unit contemplated by the Owner of the Retail Unit in the areas depicted on the Plat and Plan (each an “Expansion”). The Owner of the Retail Unit shall have no obligation to construct the Expansion. The Owner of the Retail Unit shall provide written notice that it intends to commence construction of the Expansion to the Association and all other Owners no less than thirty (30) prior to commencing construction of an Expansion. Construction of any Expansion shall not unreasonably disrupt the use, operation or access to any other Owner’s Unit, its Limited Common Elements or such Owner’s use of the General Common Elements. During the course of any construction of an Expansion, the Owner of the Retail Unit shall maintain builder’s risk insurance on an “all risk” basis (including collapse) on a completed value (non-reporting) form for full replacement cost covering all work incorporated and all materials and equipment engaged, and naming the Association and all other Owners as additional insureds. TO THE FULLEST EXTENT ALLOWED BY LAW, THE OWNER OF THE RETAIL UNIT SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS THE ASSOCIATION AND ALL OTHER OWNERS, TOGETHER WITH THEIR RESPECTIVE PARTNERS, MEMBERS, EMPLOYEES, OFFICERS, DIRECTORS, CONTRACTORS, AGENTS AND TENANTS, FROM AND AGAINST ANY AND ALL CLAIMS, COSTS, LIABILITIES,

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ACTIONS AND DAMAGES, INCLUDING WITHOUT LIMITATION, COURT COSTS AND REASONABLE ATTORNEYS’ FEES, FROM ANY THIRD PARTY ARISING IN CONNECTION WITH THE CONSTRUCTION OF THE EXPANSION, TO THE EXTENT CAUSED BY THE NEGLIGENCE OR WILLFUL MISCONDUCT OF THE OWNER OF THE RETAIL UNIT OR ITS AGENTS, EMPLOYEES OR CONTRACTORS.

ARTICLE 5

THE ASSOCIATION

5.1 Organization. The Association was formed and incorporated on                     , 2013, as a nonprofit corporation created for the purposes, charged with the duties, and vested with the powers prescribed by law or set forth in its Articles and Bylaws, as amended, or in this Declaration. Neither the Articles nor Bylaws shall for any reason be further amended or otherwise changed without the written consent of all Owners, or interpreted so as to be inconsistent with this Declaration.

5.2 Membership. Any Person upon becoming an Owner shall automatically become a Member of the Association. Membership shall be appurtenant to and shall run with the ownership of the Unit which qualifies the Owner thereof for membership, and membership may not be severed from, or in any way transferred, pledged, mortgaged, or alienated except together with the title to the Unit.

5.3 Voting Rights. The right to cast votes, and the number of votes which may be cast, for election of members to the Board and on all other matters to be voted on by the Members shall be equal to one (1) vote for each percent of said Member’s Percentage Interest.

5.4 Powers and Authority of the Association. The business affairs of the Regime shall be managed by the Association acting through the Board. The Association shall have the powers provided in §82.102 of the Uniform Act, subject only to such limitations upon the exercise of such power as are expressly set forth in this Declaration. It shall further have the power to do and perform any and all acts which may be necessary or proper for or incidental to the exercise of any of the express powers granted to it by §82.102 of the Uniform Act or by this Declaration. Any and all actions taken by the Association or the Board pursuant to the Governing Documents are binding on all Owners.

5.5 Right of Action by Owners. The Owners, acting collectively or individually, shall have the right to maintain actions against the Association or any other Owner for its or their failure to comply with the provisions hereof or to perform its duties and responsibilities hereunder.

5.6 Major Decisions. The rights of each Owner with respect to Major Decisions shall be identical and each Owner shall be entitled to consent to all Major Decisions. Neither the Association, the Board nor any other Person acting on behalf of the Association or the Declarant shall have the authority to act on any matter constituting a Major Decision, without the prior written approval of all Owners.

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5.7 Unilateral Decisions. An Owner may make any Unilateral Decision without notifying the other Owners. If an Owner desires to confirm whether an act is a Unilateral Decision, such Owner may notify the other Owner (the “Unaffected Owner”) in writing of the action to be taken or other effect of the proposed decision. The Unaffected Owner shall have ten (10) days after receipt of the original notice to deliver written notice to the proposing Owner if the proposed decision is a Unilateral Decision and if not, the reason or explanation of why the proposed decision is not a Unilateral Decision. If no objection is received by the proposing Owner within the 10-day time period, the proposing Owner may take all appropriate action necessary or desired to accomplish the purpose of the Unilateral Decision.

5.8 Utility Service Contracts. Without limitation on the generality of the Association powers set out in Section 5.4 above, the Association shall have the power to enter into Utility Service Contracts as provided in this Section 5.8. The Association shall enter into Utility Service Contracts with any service providers chosen by the Board after thirty (30) days advance written notice to all Owners, which notice will include all material terms and conditions of the proposed Service Contract; provided, however, an Owner may opt out of such Service Contract and contract directly with any service provider in Owner’s sole and absolute discretion by providing written notice thereof to the Association. A Utility Service Contract may be entered into on such noticed terms and provisions only if such Utility Service Contract is approved by Owners holding greater than fifty percent (50%) of the votes in the Association. Unless an Owner contracted directly with a service provider as set forth herein, each Owner will be required to accept services and pay for charges under any such approved Utility Service Contract (the “Shared Utility Services”). Each Owner will be required to enter into an agreement with the Association for the provision of such services (the “Utility Services Agreement”). Each Utility Services Agreement shall be on the Association’s prescribed form, which: (i) will include commercially reasonable procedures to substantiate each Unit Owner’s consumption of the Shared Utility Services; (ii) will provide that such Shared Utility Services be provided to the Unit at the cost charged to the Association for such services including a five percent (5%) administrative fee which will be retained by the Association; and (iii) will include requirements that the Association provide each Owner written and reasonable substantiation of the Shared Utility Services consumed by each Unit during each billing period. The Association may, at its option and election, add the charges payable by such Owner under any Utility Services Agreement to the Assessments against such Owner’s Unit. In this regard, it is agreed and understood that if any Owner fails to pay any charges due by such Owner under the terms of any Utility Services Agreement, the Association shall be entitled to collect such charges by exercising the same rights and remedies it would be entitled to exercise under this Declaration with respect to the failure by such Owner to pay Assessments.

5.9 Special Services. An Owner may request that the Association provide Special Services. If the Board receives a request signed by an Owner (the “Requesting Owner”) which: (i) requests Special Services; and (ii) includes a description of the Special Services desired by the Requesting Owner, then the Board shall investigate the terms upon which the Special Services can be provided. At the completion of its investigation, the Board will: (a) notify the Requesting Owner of the Special Services the Association can provide, if any; and (b) if the Board has determined that the Board can provide the requested Special Services, provide the Requesting Owner with the costs and expenses which will be charged to the Requesting Owner’s Unit to provide the Special Services (the “Service Charge”). The Service Charge may include a

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reasonable administrative charge to be retained by the Association in an amount which the Board deems appropriate. The Association will be required to provide the Special Services if the Service Charge for a Unit is approved by the Owner thereof. When the Association commences to provide the Special Service, the Association may levy the applicable Service Charge against the Requesting Owner’s Unit. The Association may, at its option and election, add the Service Charge payable by the Requesting Owner to the Assessments against such Owner’s Unit. In this regard, it is agreed and understood that, if any Owner fails to pay any Service Charge, the Association shall be entitled to collect the Service Charge by exercising the same rights and remedies it would be entitled to exercise under this Declaration with respect to the failure by such Owner to pay Assessments. In addition, in the event of nonpayment by any Owner of any Service Charge and after the lapse of at least thirty (30) days since such charges were due, the Association may, upon five (5) days’ prior written notice to such Owner (which may run concurrently with such thirty-day period), in addition to all other rights and remedies available at law, equity or otherwise, terminate, in such manner as the Board deems appropriate, any Special Services provided to such Owner’s Unit.

5.10 Existing CC&R’s. The Regime is subject to that certain Amended and Restated Declaration of Covenants, Conditions and Restrictions for “The Domain” recorded under Document No. 2007136702 of the Official Public Records of Travis County, Texas (the “Existing CC&R’s”). Pursuant to Section 1(b) of Article I of the Existing CC&R’s, the Association has the exclusive right to act as the “Owner” of the “Parcel” comprised of the Land for all purposes under the Existing CC&R’s, including voting rights and payment of assessments, which assessments shall be included in Assessments under this Declaration and allocated to each Owner pursuant to its Percentage Interest.

ARTICLE 6

FUNDS AND ASSESSMENTS

6.1 Assessments.

(a) The Association (acting by and through the Board) may from time to time levy Assessments against each Unit, but in any event, Assessments must be levied at least annually. The level of Assessments against each Unit shall be equivalent to the Percentage Interest attributable to such Unit multiplied by the total Assessments levied by the Board, unless otherwise provided in this Article 4 or the Allocation Document.

(b) Where the obligation to pay an Assessment first arises after the commencement of the year or other period for which the Assessment was levied, the Assessment shall be prorated as of the date when said obligation first arose in proportion to the amount of the Assessment year or other period remaining after said date.

(c) Each unpaid Assessment and late charges, together with such interest thereon and costs of collection thereof as hereinafter provided, shall be the personal obligation of the Owner of the Unit against which the Assessment fell due. In accordance with §82.113(c) of the Uniform Act, the Association’s lien for Assessments will be created and perfected upon recording of this Declaration, and no other recordation of a lien or notice of a lien is required. Upon the occurrence of an Event of Default for payment of any Assessment, the Association may enforce payment of such Assessments in accordance with the provisions of this Article and §82.113 of the Uniform Act.

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6.2 Maintenance Fund. The Board shall establish a reasonable reserve to act as a maintenance fund into which shall be deposited all Assessments paid to the Association and from which disbursements shall be made in performing the functions of the Association under this Declaration. The funds of the Association must be used solely for purposes authorized by this Declaration, as it may from time to time be amended.

6.3 Regular Annual Assessments. Prior to the beginning of each fiscal year, the Board shall estimate the expenses to be incurred by the Association during such year in performing its functions, powers, and authority under this Declaration or the Governing Documents, including but not limited to the cost of: (i) General Common Element maintenance, repair, or replacement; (ii) utilities consumed by the General Common Elements (and, if applicable, by the occupants of the Units); (iii) professional management of the Regime; (iv) the costs of providing services to the Regime and General Common Elements; (v) any taxes associated with the General Common Elements and any personal property owned by the Association; (vi) insurance as described in Section 7.1 of this Declaration; (vii) the cost of enforcing the Declaration; and (viii) a reasonable provision for contingencies and appropriate replacement reserves, less any expected income and any surplus from the prior year’s fund. The Board shall prepare an annual budget (the “Annual Budget”) based on such estimate and adopt Assessments sufficient to pay the net expenses reflected on the Annual Budget. The Board shall send a copy of the Annual Budget, together with a notice of the Assessments to be levied against each Unit to each Owner at least sixty (60) days prior to the effective date of the Annual Budget. The Annual Budget shall automatically become effective unless Owners of Units holding at least fifty percent (50%) of the votes in the Association disapprove the Annual Budget at a meeting of Owners called for such purpose. The Board shall have no obligation to call a meeting of Owners for the purpose of disapproving an Annual Budget unless a petition requesting a meeting for consideration of the budget is presented to the Board and signed by Owners of Units holding at least fifty percent (50%) of the votes in the Association. A petition must be presented to the Board within thirty (30) days after the Board has delivered the Annual Budget and notice of Assessment to each Owner. If any Annual Budget is disapproved by the Owners of Units holding at least fifty percent (50%) of the votes in the Association, then the prior year’s budget will continue in effect until a new budget is adopted by the Board and not disapproved by the Owners in accordance with the procedures set forth in this Section 6.3. In the event the prior year’s budget is to be applied to the next fiscal year as a result of Owner disapproval as provided in this Section 6.3, the prior year’s budget will be increased by the Board to discharge any actual expenses properly incurred by the Association and required to be paid by the Association in accordance with the Governing Documents or the Uniform Act. All such regular Assessments shall be due and payable to the Association at the beginning of the fiscal year or during the fiscal year in equal monthly installments on or before the first day of each month, or in such other manner as the Board may designate in its reasonable and good discretion.

6.4 Allocation of Common Expenses. Common Expenses shall be allocated in the manner set forth in Basic Provision E above. The Allocation Document may be amended and supplemented from time to time upon the unanimous written approval of the Owners without the need of amending this Declaration or recording any copies of the Allocation Document.

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6.5 Special Assessments. In addition to the regular annual Assessments provided for above, the Board may levy special Assessments whenever in the Board’s reasonable opinion such special Assessments are necessary to enable the Board to carry out the obligation of the Association under Governing Documents and the Uniform Act, including arising as a result of unanticipated events. The amount of any special Assessments shall be at the reasonable and good faith discretion of the Board. Special Assessments shall be allocated between the Owners in accordance with their respective Percentage Interests, except as otherwise set forth in the Allocation Document.

6.6 Late Charges. If any Assessment is not paid before it is delinquent, the Owner responsible for the payment thereof may be required by the Board to pay a late charge at such rate the Board may reasonably and uniformly designate from time to time, and such late charge (and any reasonable handling costs) shall be a charge upon the Unit to which the Assessment relates, collectible in the same manner as herein provided for collection of Assessments, including foreclosure of the lien against such Unit; provided, however, such charge shall never exceed the maximum charge permitted under applicable law.

6.7 Owner’s Personal Obligation for Payment of Assessments. All Assessments provided for herein shall be the personal and individual debt of the Owner of the Unit covered by such Assessments. No Owner may exempt itself from liability for such Assessments. In the event an Owner defaults in the payment of any Assessment, the Owner of the Unit shall be obligated to pay interest at the Default Rate on the amount of the Assessment from the due date thereof, together with all costs and expenses of collection, including reasonable attorneys’ fees.

6.8 Assessment Lien and Foreclosure. All sums assessed in the manner provided in this Article 6, but unpaid shall, together with late charges and interest as provided in Section 6.6 and Section 6.7 above and the cost of collection, including attorneys’ fees, thereupon become a continuing lien and charge on the Unit covered by such Assessment, which shall bind such Unit in the hands of the Owner, and such Owner’s heirs, devisees, personal representatives, successors or assigns. The obligation to pay Assessments hereunder is part of the purchase price of each Unit when sold to an Owner. An express lien on each Unit is hereby granted and conveyed by Declarant to the Association to secure the payment thereof in each such instance, each such lien to be superior and paramount to any homestead or other exemption provided by law. The aforesaid lien shall be superior to all other liens and charges against the said Unit, except only for: (i) a lien for real property taxes and other governmental assessments or charges against the Unit unless otherwise provided by § 32.05 of the Texas Tax Code; (ii) a lien or encumbrance recorded before this Declaration is recorded; or (iii) a first vendor’s lien or first deed of trust lien recorded before the date on which the Assessment sought to be enforced becomes delinquent. The Association shall have the power to subordinate the aforesaid Assessment lien to any other lien. Such power shall be entirely discretionary with the Board and such subordination must be approved by the Board in writing and signed by a duly authorized officer of the Association. To evidence the aforesaid Assessment lien, the Association may prepare a written notice of Assessment lien setting forth the amount of the unpaid indebtedness, the name of the Owner of the Unit covered by such lien and a description of the Unit. Such

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notice shall be signed by one of the officers of the Association and shall be recorded in the Official Public Records of Travis County, Texas. Such lien for payment of Assessments shall attach with the priority above set forth from the date that such payment becomes delinquent and, upon an Event of Default, may be enforced by suit against the Owner personally obligated to pay the Assessment and/or for foreclosure of the aforesaid lien judicially. NOTWITHSTANDING ANY PROVISION IN THIS SECTION 6.8 OR THE DECLARATION TO THE CONTRARY, THE ASSOCIATION SHALL NOT HAVE THE AUTHORITY TO FORECLOSE ON THE DEFAULTING OWNER’S UNIT FOR NON-PAYMENT OF ASSESSMENTS IF THE ASSESSMENTS CONSIST SOLELY OF FINES. In any foreclosure proceeding, the Owner shall be required to pay the costs, expenses, and reasonable attorneys’ fees incurred by the Association related thereto. The Association shall have the power to bid on the property at foreclosure or other legal sale and to acquire, hold, lease, mortgage, convey, or otherwise deal with the same. Upon the written request of any Mortgagee, the Association shall report to said Mortgagee any unpaid Assessments remaining unpaid for longer than thirty (30) days after the same are due. Except as otherwise provided by applicable law, no sale or transfer of a Unit shall relieve any Owner of a Unit or such Owner’s transferee of the Unit from liability for any Assessments thereafter becoming due or from the lien associated therewith. If an Owner conveys such Owner’s Unit and on the date of such conveyance Assessments against the Unit remain unpaid, or said Owner owes other sums or fees under this Declaration to the Association, the Owner shall pay such amounts to the Association out of the sales price of the Unit, and such sums shall be paid in preference to any other charges against the Unit other than a lien of a First Mortgagee or Assessment Liens and charges in favor of the State of Texas or a political subdivision thereof for taxes on the Unit which are due and unpaid. The Owner conveying such Unit shall remain personally liable for all such sums until the same are fully paid, regardless of whether the transferee of the Unit also assumes the obligation to pay such amounts.

ARTICLE 7

GENERAL RESTRICTIONS

Each Unit, and all Common Elements appurtenant thereto, shall be owned, held, encumbered, leased, used, occupied, and enjoyed subject to the following limitations and restrictions:

7.1 Hazardous Activities. No activities shall be conducted or permitted within the Regime which are or might be unsafe or hazardous to any person or property, or violate any Legal Requirement to the Units, or thereafter the security or health of any persons, or thereafter the value of the Land/or Improvements. No Owner shall use, or permit the use of by its tenants, employees, guests, invitees or contractors, any Hazardous Substances within the Regime.

7.2 Insurance Rates. Nothing shall be done or kept within any Unit which would increase the rate of insurance, unless such Owner pays the additional cost incurred as a result thereof, or cause the cancellation of insurance covering the Regime or any part thereof.

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7.3 Mining and Drilling. No portion of the Regime shall be used for the purpose of mining, quarrying, drilling, boring, or exploring for or removing oil, gas, or other hydrocarbons, minerals of any kind, rocks, stones, sand, gravel, aggregate, or earth.

7.4 Noise. No noise shall be permitted to exist or operate upon any portion of the Regime so as to be offensive or detrimental to any other portion of the Regime or to its occupants; however, normal noises associated with restaurant operations, including outdoor dining and sound systems, shall be permitted.

7.5 Nuisance. No noxious, destructive or offensive activities shall be permitted to exist or operate upon any portion of the Regime, nor shall anything be done upon the Regime which may be offensive or detrimental to any portion of the Regime or to its occupants. Any businesses operating within the Retail Unit shall be vented so as to minimize disturbance of the occupants of the Office Unit.

7.6 Animals. No kennels or other facilities for selling or boarding dogs or other animals for commercial purposes shall be allowed on any portion of the Regime. No animals, including dogs, cats, pigs, hogs, swine, poultry, fowl, wild animals, horses, cattle, sheep, goats, or any other type of animal may be kept, maintained, or cared for on the Regime, other than service animals.

7.7 Rubbish and Debris. No rubbish or debris of any kind shall be placed or permitted to accumulate upon any portion of the Regime, other than those areas of the Regime specifically designated therefore, and no odors shall be permitted to arise therefrom so as to render the Regime or any portion thereof unsanitary, unsightly, offensive, or detrimental to any other property or to its occupants. The Board shall determine what constitutes rubbish, debris, or odors and what conditions render any portion of the Regime unsanitary, unsightly, offensive or detrimental to any other property or to its occupants. Notwithstanding the foregoing, this paragraph shall not be construed to prevent the normal construction of Improvements upon any portion of the Regime.

7.8 Refuse Collection Areas. Refuse collection areas must be designed to contain all refuse generated on-site and deposited between collections. Deposited refuse should not be visible from outside the refuse enclosure. Refuse collection enclosures shall be of a design, construction and location approved by the Board.

7.9 Temporary Structures. No tent, shack, or other temporary building, improvement, or structure shall be placed upon any portion of the Regime; provided, however, that temporary structures necessary for storage of building materials, tools and equipment, and for office space for architects, builders, and foremen during actual construction may be maintained with the prior approval of the Board, approval to include the nature, size, duration, and location of such structure, provided, however, that no such approval shall be required in connection with the construction of the Expansion. All temporary structures shall be removed from the Regime within thirty (30) days after the completion of the Improvements. The Board will determine, in its sole discretion, the date of such completion.

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7.10 Compliance with the Restrictions. Each Owner shall comply strictly with the provisions of the Declaration as the same may be amended from time to time. Failure to comply with any of the provisions of this Declaration shall constitute a violation hereof, and shall give rise to a cause of action to recover sums due for damages or injunctive relief or both, maintainable by the Board on behalf of the Association, by an aggrieved Owner, or by the Declarant. All uses must additionally comply with all restrictive covenants applicable to the Land, including but not limited to the Existing CC&R’s, and all applicable Legal Requirements, zoning regulations and requirements.

7.11 Rentals. Nothing in this Declaration shall prevent the rental of any Unit or any portion thereof by its Owner for commercial purposes.

7.12 Boundaries of Units. Upon completion of the Improvements, the physical boundaries of the Units and the Common Elements shall be conclusively presumed to be the boundaries of such areas. Additionally, there is hereby granted a valid and existing easement pursuant to §82.064 of the Uniform Act for any encroachments now existing or hereafter arising due to any such variances, settling, rising, or other movement, which easement shall exist for the duration of the Regime.

7.13 Separate Taxes. Taxes, assessments and other charges of the State, any political subdivision, any special improvement district, or other taxing or assessing authority, shall be assessed against the Units and collected as provided in §82.005 of the Uniform Act.

7.14 Use of General Common Elements. Each Owner may use the General Common Elements in accordance with the purpose for which they are intended, without hindering or encroaching upon the lawful rights of the other Owners.

7.15 Architectural Features. Any Expansion shall be no taller than the actual height of the ground floor Retail Unit in the multi-story building to which such Expansion is attached. Any mechanical equipment related to an Expansion of the Retail Unit located on the roof of the Expansion shall be located as far as reasonably possible from the windows of the Office Unit and shall be properly screened as reasonably practical from the view of any Owner.

ARTICLE 8

MAINTENANCE AND REPAIRS

8.1 Maintenance by the Association.

(a) Except as provided in the Allocation Document, all General Common Elements shall be maintained by the Association, the cost and expense of which shall constitute a Common Expense and be payable by the Association, subject, however, to allocation between the Owners in accordance with the provisions of the Allocation Document. The Association shall maintain such General Common Elements in good operating condition and repair and otherwise in accordance with the terms of this Declaration. The Association shall repair and, where applicable, replace such General Common Elements and shall establish and maintain an adequate

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reserve fund for such purposes, to be funded by Monthly Assessments. Nothing herein shall be deemed or construed as relieving any Owner from liability or responsibility for damage to the Common Elements caused by the negligence or misconduct of such Owner or such Owner’s tenants, occupants or invitees, subject to the provisions of Section 9.3 below.

(b) The Association shall not be liable for injury or damage to any person or property caused by the elements or by the Owner of any Unit or its tenant, family members, guests and invitees, or any other Person, or resulting from any utility, rain, snow or ice which may leak or flow from any portion of the Common Elements or from any pipe, drain, conduit, appliance or equipment which the Association (as opposed to an Owner) is responsible to maintain hereunder, including without limitation liability for any mold growth resulting therefrom. The Association shall not be liable to any Owner or occupants of any Unit or such Owner’s or occupant’s tenant, guest or family, for loss or damage, by theft or otherwise, of any property which may be stored in or upon any of the Common Elements. The Association shall not be liable to any Owner or occupant of any Unit or such Owner’s or occupant’s tenant, guest or family for any damage or injury caused in whole or in part by the Association’s failure to discharge its responsibilities hereunder where such damage or injury is not a foreseeable, natural result of the Association’s failure to discharge its responsibilities. If the need for General Common Element maintenance or repair is required of the Association and such maintenance is caused by the willful or negligent act of any Owner, its tenants, employees, guests, invitees or contractors, the cost of such maintenance or repairs shall, to the extent not covered by the Association’s insurance, be deemed a debt of such Owner to the Association, payable on demand, and payment thereof shall be secured in the same manner as Assessments.

8.2 Maintenance by Owner.

(a) Except as otherwise provided in the Allocation Document, each Owner, at the Owner’s sole cost and expense, shall maintain the Owner’s Unit and the Limited Common Elements appurtenant to its Unit in good operating condition and repair and in accordance with the requirements of this Declaration and shall repair, and where appropriate, replace the fixtures and appliances therein contained and all interior doors and interior windows within the Unit and exterior doors and windows of such Owner’s Unit. Subject to Section 9.3 below, an Owner shall pay for the cost and expense of any structural repairs to the Building caused by the negligence or willful misconduct of such Owner or the occupants or the invitees of such Owner. Any maintenance and repair work done by or at the instance of an Owner shall be done in a good and workmanlike manner, in accordance with the terms of this Declaration, using materials of equal or better quality than the original quality of the materials removed and/or replaced and shall be done in such a manner as not (i) to impair the structural soundness or integrity of the Building, (ii) to impair or materially alter the exterior appearance of any General Common Element, or (iii) to impair or alter in any manner any other Owner’s Unit or Limited Common Elements. In the event an Owner fails to discharge the Owner’s maintenance and repair obligations hereunder and such failure affects the General Common Elements or any other Owner’s Unit or Limited Common Elements, the Association or the Owner of the affected Unit or Limited Common Elements (the “Aggrieved Owner”) shall be entitled (but not obligated) to cause such work to be done, and the cost and expense thereof (together with interest thereon at the Default Rate from the date paid by the Association or the Aggrieved Owner until the date such sum is repaid to the Association or the Aggrieved Owner by such Owner) shall be assessed against such Owner and

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secured by a lien upon such Owner’s Unit. Such lien may be enforced in the same method as is provided for the enforcement of Assessment liens pursuant to the provisions of Section 6.8 of this Declaration. Damage to the interior of any Unit or a Limited Common Element resulting from such maintenance, repair or replacement activities by the Association, whether by reason of an emergency or otherwise, shall constitute a Common Expense and be payable by the Association; provided, however, that if such maintenance, repairs or replacements are the result of the misuse or negligence of an Owner, or its guests or invitees, then such Owner shall be responsible and liable for all such damage and the Association shall be entitled to assess the applicable Owner for such amount, and such assessed amount shall thereafter be considered an Assessment for purposes of this Declaration, payable on demand, and payment thereof shall be secured in the same manner as Assessments.

(b) No Owner shall have the right to modify, alter, decorate, redecorate, or improve any of the General Common Elements without first obtaining the written consent of the Board, which consent may be in its sole discretion. However, under no circumstances shall any Owner do any act nor allow any condition to exist which will have a Material Adverse Effect on any other Owners and their use of the General Common Elements or the Limited Common Elements appurtenant to their Units.

(c) Each Owner shall have the right to maintain, modify, alter, repair, decorate, redecorate, or improve such Owner’s Unit or the Limited Common Elements of Owner, and to repair such Unit or Limited Common Elements of Owner provided that such action does not impair the structural integrity or weaken the support of any of the Units, the Building, or any General Common Elements or Limited Common Elements, and provided that all such action is performed in a good and workmanlike manner and does not unreasonably interfere with the other Owner’s use of or business in such Owner’s Unit. Each Owner may modify any Limited Common Element appurtenant to such Owner’s Unit, provided that such modification does not have a Material Adverse Effect on any other Owner’s use and enjoyment of such Owner’s Unit, any General Common Elements or Limited Common Elements nor impair the structural integrity or weaken the support of any of the Units, Building, the structure or any Common Elements, and provided that all such modification is performed in a good and workmanlike manner.

(d) Each Owner shall maintain, repair and replace as necessary its equipment packages located on the roof of the Building as shown on Exhibit “A-2”. Should damage to the roof result from such maintenance, repair and replacement activities by the Owner, or its tenants, guests or invitees, then such Owner shall be responsible and liable for all such damage.

(e) Mechanic’s Liens: Indemnification. No labor performed or materials furnished and incorporated in a Unit with the consent or at the request of an Owner, its agents or representatives, shall be the basis for the filing of a lien against the Unit of any other Owner not expressly consenting to or requesting the same, or against the Common Elements. Each Owner shall indemnify and hold harmless each of the other Owners, the Declarant, the Association and the Manager from and against all liabilities and obligations arising from the claim of any lien against the Unit of such other Owners or the Common Elements.

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(f) Compliance with the Governing Documents. The Association, each Owner and any occupant of any Unit automatically shall be deemed to have agreed to comply strictly with the provisions of the Governing Documents and all Legal Requirements. Any Event of Default by an Owner shall be grounds for an action to recover damages or sums due, with interest thereon at the Default Rate, or for injunctive relief, or both, and for reimbursement of all attorneys’ fees incurred in connection therewith, which action may be maintained by the Board or the Manager in the name of the Association on behalf of all of the Owners or, in a proper case, by an aggrieved Owner.

ARTICLE 9

INSURANCE AND CASUALTY AND REBUILDING

9.1 Insurance - Association.

(a) Except as set forth in Allocation Document, the Association shall obtain and maintain, as a Common Expense, insurance for all portions of the Regime as required by § 82.111 of the Uniform Act, other than those portions which constitute Units; provided, however, such insurance required by § 82.111 of the Uniform Act must cover at least one hundred percent (100%) of the replacement cost or actual cash value of the insured property as of the completion of the Improvements and at each renewal date of such insurance. The Board may also obtain such other insurance in such reasonable amounts as the Board may deem desirable. The Board has the option to purchase and maintain additional insurance coverage, including that which is commonly provided by an “Umbrella Policy”. The Association is not providing liability coverage for accidents or occurrences that occur within a Unit or, unless the Board elects to do so, any portion of the Limited Common Elements. The Board may, but will not be required to obtain, fidelity bonds indemnifying the Association, the Board and the Owners from loss of funds resulting from fraudulent or dishonest acts of any employee of the Association or of any other person handling the funds of the Association in such an amount as the Board may deem desirable.

(b) The name of the insured under the foregoing described policies shall be set forth substantially as follows:

“THE DOMAIN BUILDING 2 CONDOMINIUM ASSOCIATION, INC. for the use and benefit of the individual owners (which owners may be designated by name if required by law).”

Notwithstanding the foregoing, the policies may be issued in the name of an authorized representative of the Association. Loss payable provisions shall be in favor of the Association as a trustee for each Owner and each such Owner’s First Mortgagee. Each Owner and such Owner’s First Mortgagee, if any, shall be beneficiaries of such policies in the amount of the “Allocation of Interest in Common Areas” assigned to such Owner’s Unit as specified in the Declaration.

9.2 Insurance - Owner. Except as set forth in the Allocation Document, no later than upon completion of the Improvements, each Owner shall obtain and maintain insurance on all portions of such Owner’s Unit and any Limited General Elements appurtenant to such Unit, as

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well as any Improvements located thereon, in an amount equal to one hundred percent (100%) of the replacement cost or actual cash value of the insured property as of the completion of the Improvements and at each renewal date of such insurance. An Owner shall also obtain and maintain, if applicable, insurance for workers’ compensation and employer’s liability, commercial general liability and business automobile in accordance with the Allocation Document. Upon written request from the Association, Board or any Owner, an Owner shall promptly deliver proof of coverage for the insurance required under the Governing Documents.

9.3 Waiver of Subrogation. The Association and each Owner by his possession or acceptance of title to a Unit hereby waives any and every claim which arises or may arise in its or his favor against any other Owner or the Association for any and all loss of, or damage to, its property located within or upon, or constituting a part of, the Regime, which loss or damage is covered (or required to be covered) by valid and collectible fire and extended coverage insurance policies, to the extent such loss or damage is recoverable thereunder. Inasmuch as the foregoing mutual waivers will preclude the assignment of any of such claim by way of subrogation (or otherwise) to an insurance company (or any other party), the Association and each Owner immediately shall give to each insurance company which has issued policies of insurance to such Owners, written notice of the terms of this mutual waiver and cause such policies to be endorsed, if necessary, to prevent the invalidation of such coverages by reason hereof

9.4 Application of Insurance Proceeds in the Event of Damage. If the Regime is damaged by fire or any other disaster, the insurance proceeds shall held and disbursed pursuant to §82.111 of the Uniform Act. In the event a deductible is applicable to any insurance for the Regime carried by the Association, the Board may levy a Special Assessment to cover the amount of such deductible, which shall be allocated between the Owners in accordance with each Owner’s respective Allocation of Interest in Common Areas. Notwithstanding anything to the contrary in this Declaration or the Uniform Act, an Owner shall not be obligated to rebuild or restore its Unit (the “Affected Unit”) following a casualty or condemnation provided that (a) such Owner, at its sole cost and expense, undertakes any demolition and restoration of the Affected Unit necessary to ensure that the other Unit of the Regime (the “Non-Affected Unit”) is structurally sound, operable and substantially the same in quality of materials and aesthetic character as that which existed prior to such casualty, and that any remaining portions of the Affected Unit are also of the same quality of materials and aesthetic character as that which existed prior to such casualty, and (b) prior to undertaking such demolition and restoration work, the Owner of the Non-Affected Unit has approved the plans and specifications for such demolition and restoration work, such approval not to be unreasonably withheld, conditioned or delayed. Additionally, in the instance that the Owner of the Non-Affected Unit disapproves such plans and specification, the Owner of the Non-Affected Unit shall provide detailed reasons for such disapproval to the Owner of the Affect Unit.

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ARTICLE 10

CONDEMNATION

10.1 Participation in Condemnation Proceedings; Expenses. If all or any part of the Regime is taken or threatened to be taken by condemnation, eminent domain, or by any other similar power, the Board and each Owner whose Unit is being taken in whole or part will be entitled to participate in proceedings incident thereto at their respective expense. The Board will give notice of the existence of such proceedings to all owners and Mortgagees of which the Board has knowledge. The expense or participation in such proceedings by the Board will be borne by the Association. The Board is specifically authorized to obtain and pay for such assistance from attorneys, appraisers, architects, engineers, expert witnesses, and other persons as the Board in its discretion deems necessary or advisable to aid or advise it in matters relating to such proceedings. All damages or awards for any such taking will be deposited with the Board, acting as trustee, and such damages or awards will be applied or paid as provided herein.

10.2 Condemnation of Common Elements. In the event that an action in eminent domain is brought against a portion of the General Common Elements or any Limited Common Elements that are not exclusively assigned to a single Unit, the Board will have the sole authority to determine whether to defend any such proceedings; to make any settlement with respect thereto; or to convey such property to the condemning authority in lieu of such condemnation proceeding. With respect to any such taking of General Common Elements or Limited Common Elements that are not exclusively assigned to a single Unit, all damages and awards will be determined for such taking as a whole and not separately for each Owner’s interest therein. After the damage and award for any taking is determined, the Board will determine, in its sole and absolute discretion, whether to replace or restore the General Common Elements or Limited Common Elements, or, may, if it deems advisable, call a meeting of the Association. At such meeting the Members by a vote of at least eighty percent (80%) of the total votes in the Association, will decide whether to replace or restore, to the extent possible, the General Common Elements or Limited Common Elements taken by eminent domain proceedings. Any damages or awards not used for replacement or restoration of General Common Elements or Limited Common Elements will be paid to the Owners as provided in § 82.007(c) of Uniform Act. In the event that an eminent domain action is brought against a portion of the Limited Common Element which is assigned to a single Unit, the Owner or Owners of such Unit will have the sole authority to determine whether to defend any such proceedings; to make any settlement with respect thereto; or to convey such property to the condemning authority in lieu of such condemnation proceedings. With respect to the taking of Limited Common Element assigned to a single Unit, all damages and awards remaining after any necessary repairs or replacements pertaining to such Limited Common Element, will be paid to the Association as required in § 82.007(c) of Uniform Act, and then will be distributed by the Association to the Owner or Owners of the Unit or Units to which the Limited Common Element was assigned.

10.3 Deposit and Disposition of Funds and Regrouping of Surviving Units. In the event that any eminent domain proceeding results in the taking of or damage to one or more Units, then the damage and awards for such taking and the payment thereof, and the regrouping of ownership interests, will be determined in accordance with § 82.007(a) and (b) of the Uniform Act.

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ARTICLE 11

AMENDMENTS TO DECLARATION

11.1 Amendment by Declarant. Any amendment of this Declaration will be a Major Decision requiring written agreement of all Owners. Notwithstanding the foregoing, prior to the sale of the Retail Unit by Declarant to RREEF Domain LP (“RREEF”) pursuant to that certain Repurchase Agreement by and between Declarant and RREEF referenced in Section 3(e) of that certain Contribution Agreement by and between RREEF and SRI Ten Domain LLC, a Delaware limited liability company, of even date herewith, without the prior written consent of RREEF (which RREEF may withhold in its reasonable discretion), Declarant may not (i) subject to Section 11.2 below, amend or otherwise modify the terms or conditions of this Declaration or (ii) undertake any action of any kind as Owner except those actions which it could take under the Governing Documents if it owned only the Office Unit. Any such amendment or modification of, or action as “Owner” under, this Declaration prior to the sale of the Retail Unit by Declarant in violation of this Section 11.1 is void and of no force or effect without RREEF’s prior written consent.

11.2 Other Permitted Methods of Amendments. Notwithstanding anything to the contrary in this Declaration, this Declaration may also be amended in accordance with §82.067(a) and (f) of the Uniform Act. The Association may amend this Declaration in accordance with §82.007(a), §82.056(d), §82.058(c), or §82.062 of the Uniform Act. Certain Owners may amend this Declaration in accordance with §82.058(b) and §82.062 of the Uniform Act. No amendment will be effective until an original thereof is duly recorded in the Official Public Records of Travis County, Texas.

11.3 Termination. This Declaration may be terminated in accordance with §82.068 of the Uniform Act.

ARTICLE 12

MISCELLANEOUS

12.1 Notices. Any notice permitted or required to be given by this Declaration shall be in writing and may be delivered either personally or by mail. If delivery is made by mail, it shall be deemed to have been delivered upon actual receipt if delivered by United States mail, postage prepaid, addressed to the person at the address given by such person to the Association for the purpose of service of notices, or, if such person refuses to accept delivery, upon the date of such refusal. Such address may be changed from time to time by notice in writing given by such person to the Association.

12.2 Interpretation. The provisions of this Declaration shall be liberally construed to effectuate the purposes of creating a uniform plan for the development and operation of the Regime and of promoting and effectuating the fundamental concepts of the Regime set forth in this Declaration. This Declaration shall be construed and governed under the laws of the State of Texas.

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12.3 Enforcement and Nonwaiver. Except as otherwise provided herein, any Owner at its own expense, Declarant or the Board shall have the right to enforce any provision of the Declaration. Such right of enforcement shall include both damages for, and injunctive relief against, the breach of any such provision. The failure to enforce any provision of the Declaration at any time shall not constitute a waiver of the right thereafter to enforce any such provision or any other provision of the Declaration. The Association shall have the right, when appropriate in its judgment, to claim or impose a lien upon any Unit in order to enforce any right or effect compliance with this Declaration.

12.4 Construction. The provisions of this Declaration shall be deemed independent and severable, and the invalidity or partial invalidity of any provision or portion thereof shall not affect the validity or enforceability of any other provision or portion thereof. Unless the context requires a contrary construction, the singular shall include the plural and the plural the singular; and the masculine, feminine or neuter shall each include the masculine, feminine and neuter. All captions and titles used in this Declaration are intended solely for convenience of reference and shall not enlarge, limit or otherwise effect that which is set forth in any of the paragraphs, sections or articles hereof.

12.5 Injury to Person or Property. BY ACCEPTANCE OF TITLE TO A UNIT, EACH OWNER ACKNOWLEDGES THAT THE DECLARANT AND THE ASSOCIATION SHALL HAVE NO DUTY OR OBLIGATION TO ANY OWNER, OR THEIR TENANTS, AGENTS OR INVITEES OR THEIR GUESTS: (I) TO SECURE OR OTHERWISE ENCLOSE ANY LIMITED COMMON ELEMENT, GENERAL COMMON ELEMENT OR OTHER IMPROVEMENT; OR (II) TO PROVIDE SECURITY OR PROTECTION TO ANY OWNER OR THEIR TENANTS, GUESTS, EMPLOYEES, CONTRACTORS AND INVITEES FROM HARM OR LOSS. BY ACCEPTING TITLE TO A UNIT, EACH OWNER AGREES THAT (I) THE LIMITATIONS SET FORTH IN THIS SECTION 12.5 ARE REASONABLE AND CONSTITUTE THE EXERCISE OF ORDINARY CARE BY THE ASSOCIATION AND THE DECLARANT AND (II) TO INDEMNIFY AND HOLD HARMLESS THE ASSOCIATION AND THE DECLARANT FROM ANY CLAIM OF DAMAGES, TO PERSON OR PROPERTY ARISING OUT OF AN ACCIDENT OR INJURY IN OR ABOUT THE REGIME TO THE EXTENT AND ONLY TO THE EXTENT CAUSED BY THE ACTS OR OMISSIONS OF SUCH OWNER, ITS TENANTS, GUESTS, EMPLOYEES, CONTRACTORS OR INVITEES TO THE EXTENT SUCH CLAIM IS NOT COVERED BY INSURANCE OBTAINED BY THE ASSOCIATION AT THE TIME OF SUCH ACCIDENT OR INJURY.

12.6 DISCLAIMERS OF WARRANTIES AND LIMITATION OF LIABILITY. EXCEPT AS SPECIFICALLY PROVIDED IN ANY PURCHASE DOCUMENT BETWEEN DECLARANT AND AN OWNER EXECUTED IN CONNECTION WITH THE SALE OF A UNIT BY THE DECLARANT TO SUCH OWNER, EACH UNIT CONVEYED BY DECLARANT IS BEING CONVEYED IN ITS “AS IS” AND “WHERE IS” CONDITION, WITH ALL EXISTING DEFECTS (PATENT AND LATENT) AND WITHOUT WARRANTY (INCLUDING, WITHOUT LIMITATION, WARRANTIES OF HABITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE) OR REPRESENTATION MADE BY DECLARANT OR ANY AGENT, EMPLOYEE, MEMBER, OFFICER, PARTNER OR PRINCIPAL OF DECLARANT OR ANY OTHER PARTY AS TO

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(a) THE PHYSICAL (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL) CONDITION OF THE PROPERTY, THE CONDOMINIUM AND THE UNITS, INCLUDING WITHOUT LIMITATION ANY IMPROVEMENTS TO ANY UNIT OR THE COMMON ELEMENTS OR THE CONDITION OF ANY APPLIANCES, WINDOWS, EXTERIOR OR INTERIOR WALLS, FLOORS, ROOF, ELEVATOR SYSTEMS, PUMPS, FIRE AND OTHER BUILDING EMERGENCY SYSTEMS, ELECTRICAL LINES AND SYSTEMS, WATER LINES, HOT WATER HEATERS AND OTHER HVAC AND PLUMBING SYSTEMS, (b) THE PHYSICAL (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL) CONDITION OF THE AREAS SURROUNDING OR ADJACENT TO THE PROPERTY, OR (c) ANY OTHER MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE COMPLIANCE OF THE PROPERTY, THE CONDOMINIUM AND THE UNITS WITH FEDERAL, STATE OR LOCAL LAWS, OR AS TO ANY OTHER MATTER IN CONNECTION THEREWITH. TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OWNER BY ITS ACCEPTANCE OF A DEED OR OCCUPANCY OF A UNIT AGREES THAT IN NO EVENT SHALL DECLARANT OR ANY AGENT, EMPLOYEE, MEMBER, OFFICER OR PRINCIPAL OF DECLARANT BE RESPONSIBLE OR LIABLE UNDER CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, OR OTHER THEORY OF LAW OR EQUITY, FOR ANY INCIDENTAL, SPECIAL, PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL LOSS OR DAMAGE OF ANY NATURE ARISING FROM THE CREATION OF THE CONDOMINIUM OR THE SALE OF A UNIT, AND EACH OWNER BY ITS ACCEPTANCE OF A DEED TO OR OCCUPANCY OF A UNIT EXPRESSLY WAIVES THE RIGHT TO CLAIM, SEEK OR COLLECT ANY SUCH DAMAGES TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN ANY PURCHASE DOCUMENT BETWEEN DECLARANT AND AN OWNER EXECUTED IN CONNECTION WITH THE SALE OF A UNIT BY THE DECLARANT TO SUCH OWNER.

12.7 References to the Uniform Act. References or citations to the Uniform Act shall mean such sections or provisions of the Uniform Act in effect as of the effective date of this Declaration.

ARTICLE 13

Special Declarant Rights

13.1 Special Declarant Rights. Declarant hereby reserves the following rights (collectively, the “Special Declarant Rights”):

(a) The right to complete the Improvements in accordance with the Plat and the Plan; and

(b) The Declarant’s Easement Rights.

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Any of the Special Declarant Rights may be exercised by the Declarant for the time period specified in the Uniform Act, but in no event after the closing of the sale of the Retail Unit to RREEF as described in Section 11.1, at which time the Special Declarant Rights shall be deemed terminated and shall be evidenced by a recorded instrument signed by the Declarant.

[REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE

IMMEDIATELY FOLLOWS.]

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EXECUTED to be effective this     day of June, 2013.

DECLARANT:

DOMAIN JUNCTION 2 LLC,

a Delaware limited liability company

By:

Name:

Title:

State of	§
	§
County of	§

This instrument was acknowledged before me on June     , 2013, by                     , as                     of Domain Junction 2 LLC, a Delaware limited liability company, on behalf of said limited liability company.

Notary Public

My Commission expires:                                                        

CONSENT OF MORTGAGEE

The undersigned, being the sole owner and holder of a deed of trust lien dated                     , recorded as Document No.                     , Official Public Records of Travis County, Texas, securing a note of even date therewith in the amount of $                     , executes this Declaration solely for the purpose of evidencing its consent to this Declaration and makes no representation or warranty, express or implied, of any nature whatsoever, to any Owner with respect to any Unit or the effect of the terms and provisions of this Regime.

By:

Printed Name:

Title:

EXHIBIT “A-1”

DOMAIN BUILDING 2 CONDOMINIUMS

[SURVEY]

Exhibit “A-1”

EXHIBIT “A-2”

DOMAIN BUILDING 2 CONDOMINIUMS

[ARCHITECTURAL PLANS]

Exhibit “A-2”

EXHIBIT “B”

DOMAIN BUILDING CONDOMINIUMS

RULES AND REGULATIONS

I. AUTHORITY

The following Rules and Regulations apply to the Domain Building 2 Condominiums (the “Regime”) and have been adopted by the Board of Directors of the Domain Building 2 Condominium Association, Inc. (the “Association”) pursuant to Section 82.102(a)(7) of the Texas Uniform Condominium Act (the “Act”). These rules regulate the use, leasing or sale, maintenance, repair, modification and appearance of Units and common elements. These rules may be amended from time to time by the Board. In the event of any conflict between these rules and the Declaration of Condominium Regime for the Domain Building 2 Condominiums, recorded in the Official Public Records of Travis County, Texas (the “Declaration”), or any provision of the Act, the provisions of the Declaration or the Act shall control. Any capitalized term not otherwise defined herein shall have the meaning as defined in the Declaration.

II. COMPLIANCE

Each Owner shall comply with these Rules and Regulations, the Declaration and the Bylaws of the Association (collectively, the Rules and Regulations, the Declaration and the Bylaws of the Association are referred to herein as the “Governing Documents”). Each Owner is responsible for compliance with the Governing Documents by the residents or occupants of such Owner’s Unit, and their respective invitees, tenants, agents, employees or contractors.

GOVERNMENTAL ORDINANCES. Owners and their tenants, guests, invitees, contractors and agents shall comply with all applicable governmental ordinances, as well as these policies.

COMMUNICATIONS. Please direct any repair requests, complaints or rule violations to                     ,                     , Austin, Texas 787     , telephone: (     )             .

III. POLICIES APPLICABLE TO ALL OWNERS, OCCUPANTS AND GUESTS

1. Security, safety and lighting. Neither the Association nor the Association’s management company provides or warrants security. Each occupant is responsible for his own security and that of its tenants, guests, invitees, contractors or agents.

Occupants are requested to immediately report General Common Element lighting problems or hazardous conditions immediately to the Association’s management company representative. The Association cannot and does not check exterior lighting on a daily basis. The Association generally must rely on Owners and occupants to notify the Association’s managing agent when lights are burned out or insufficient in some manner. Occupants must assume that electronic or mechanical devices may malfunction from time to time.

Exhibit “B” - 1

2. Storage of property in common areas. Except as expressly permitted under the Declaration, no property may be stored temporarily or permanently on General Common Elements. Management company employees and service personnel, board members and persons designated by them may remove and throw away any property stored in violation of this rule. This provision does not prohibit the use of Limited Common Elements adjacent to Unit 200 for retail or dining purposes permitted by the Owner of Unit 200.

3. Trash. Trash, rubbish or debris shall not be left or deposited, even temporarily, on any General Common Elements.

4. Noise. Except as permitted under Section 5.4 of the Declaration or arising out of construction activities by a Unit Owner, Unit Owners and occupants shall use commercially reasonable methods to minimize, noise from electrical, mechanical or other sources that may be heard outside their Unit.

5. Nuisances. No unsafe, noxious, offensive or illegal activity or odor is permitted on the Property. No activity shall be conducted on the Regime which in the judgment of the Board might reasonably be considered as annoying to neighbors of ordinary sensibilities, or might be reasonably calculated to reduce the desirability of the Regime. No person may do anything that will increase insurance rates for the Regime, or which may cause such improvements to be uninsurable or which may cause any policy to be canceled, suspended or materially modified by the issuing company without the prior written consent of the Board.

6. Vehicle repair. Vehicles must be serviced or repaired off the Regime. Vehicles which have expired license plates, expired inspection stickers, flat tires or which are obviously inoperable due to missing parts are prohibited and must be removed from the Regime at the expense of the Owner whose tenant, occupant, licensee, contractor or agent owns such vehicle. Such vehicles must be removed from the property immediately upon notice from any Board member or management representative.

7. Parking.

a. Parking of vehicles, motorcycles and bicycles in grass areas, dirt areas, flower beds or sidewalks is prohibited, except within areas designated for such use.

b. No vehicles may be parked or unattended in such a manner as to block the passage of other vehicles on the streets or in driveways within the Regime. No vehicle (shall be left parked and unattended, in the street, along the curb or in driveway areas in such a manner as to prevent the ingress and/or egress of emergency vehicles (i.e., fire, EMS) or service vehicles (i.e., refuse trucks). No inoperable vehicle may be stored on the Property.

c. No boats or recreational vehicles may be parked on the Regime at any time.

Exhibit “B” - 2

8. Towing illegally parked vehicles. Vehicles parked in violation of these rules may be removed and stored without permission of the vehicle’s owner or operator. Notice and removal shall be in accordance with Chapter 684 of the Texas Transportation Code (formerly article 6701g-2). A Unit Owner is liable for all costs of towing illegally parked vehicles of the Unit Owner, his guests or tenants.

9. Criminal activity. While on the Regime, no person may violate any criminal laws, health codes or other applicable laws. No tampering with water, lighting, timers, sprinklers or other facilities located within the general common area is allowed.

10. Common Element repairs. If any General Common Element (for example, common wastewater disposal system, etc.) is in need of repair or maintenance, Owners and occupants are requested to contact the Association’s management company immediately and leave a message about what needs to be fixed.

11. Fees for special services. Fees chargeable to Owners for special services (such as furnishing resale certificates, eligibility certificates, copies of declarations, copies of information sent to mortgagees, copies of accounting records, etc.) shall be set by the Board from time to time.

12. Change of address. Owners shall keep the Association timely informed of their current addresses.

13. Names and addresses of tenants. Owners shall notify the Association of current names, addresses and telephone numbers of tenants of their respective Units.

14. Name and address of new Owners. An Owner may not sell or convey his Unit unless all amounts due and owing to the Association are paid in full. If an Owner sells, conveys or transfers his Unit without paying all amounts due and owing to the Association, the seller of such Unit shall remain liable for all such sums. If an Owner sells or transfers ownership of his Unit and fails to notify the Association of the sale, the seller of such Unit shall continue to be liable for the assessments accruing after the sale or transfer until such time as the selling or transferring Owner notifies the Association in writing of the name and address of the new Owner.

Exhibit “B” - 3

EXHIBIT J – FORM OF DOMAIN BUILDING 2 EXPENSE ALLOCATION DOCUMENT

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

DOMAIN BUILDING 2 EXPENSE ALLOCATION DOCUMENT

This document is that certain Domain Building 2 Expense Allocation Document (the “Allocation Document”) described in the Declaration of Condominium Regime for the Domain Building 2 Condominium (the “Declaration”), made and established on             , 2013 by Domain Junction 2 LLC, a Delaware limited liability company, as Declarant therein. All terms which are capitalized herein but not defined herein shall have those meanings subscribed to them in the Declaration. This Allocation Document is incorporated by reference into the Declaration for all purposes, and shall set forth the percentages by which the Owners of the Office Unit and the Retail Unit share in the listed expenses and the extent that any Owners shall undertake the maintenance obligations contained in this Allocation Agreement. All other Common Expenses not listed herein or in the Declaration shall be shared by the Owners in accordance with the Percentage Interest, unless otherwise specified in the Declaration or agreed by the Owners. This Allocation Document may be amended by the Owners only as provided in the Declaration.

MAINTENANCE OBLIGATIONS AND EXPENSE ALLOCATIONS

Item	Party Obligated to Undertake Maintenance	Office Unit Expense Allocation	Retail Unit Expense Allocation
All portions of the Office Unit, as set forth in the Declaration and as shown on the Plan, including the roof of the Building (other than that portion of the roof over the single story retail), the rooftop deck over the single story retail portion of the Building (and the portion of the roof under such deck), the portion of the Skin of the Building that surrounds the Office Unit, as designated on the Plan, all walls, floors, ceilings, hallways, lobbies, windows, doors, elevators and other Improvements that exclusively serve the Office Unit	Office Unit Owner	100%	0%
Limited Common Elements of the Office Unit, as set forth in the Declaration and as shown on the Plan, that exclusively serve the Office Unit, including the elevator, the elevator lobby and the skywalk	Office Unit Owner	100%	0%

ALLOCATION DOCUMENT – Page 2

All portions of the Retail Unit, as set forth in the Declaration and as shown on the Plan, including the portion of the Skin of the Building that surrounds the Retail Unit and the portion of the roof of the single story retail portion of the Building (other than the portion of the Office Unit rooftop deck), as designated on the Plan, all walls, floors, ceilings, hallways, lobbies, windows, doors, and other Improvements that exclusively serve the Retail Unit	Retail Unit Owner	0%	100%
Limited Common Elements of the Retail Unit, as set forth in the Declaration and as shown on the Plan that exclusively serve the Retail Unit, including any exterior dining areas and ventilation chases	Retail Unit Owner	0%	100%
All perimeter area landscaping and hardscaping (including the paseo [as shown on the Plan]) that is a General Common Element, as stated on the Plan1 (the “Landscape/Hardscape Common Elements”)	Retail Unit Owner	50%	50%
General Common Elements, as set forth in the Declaration and as shown on the Plan (other than the Landscape/Hardscape Common Elements), including the structure and any Systems that serve both the Office Unit and the Retail Unit, all replacement reserves for such General Common Elements, and all organizational, operating and administration costs of the Association	Association	80%	20%

INSURANCE MAINTENANCE OBLIGATIONS AND INSURANCE EXPENSE ALLOCATIONS

ASSOCIATION MAINTAINED INSURANCE

Property Insurance. The Owner of the Office Unit shall obtain and pay (subject to reimbursement as provided in this Allocation Document) all expenses relating to the property insurance coverage required to be maintained by the Association under Section 9.1 of the Declaration and the Act; provided, however, that the Owner of the Office Unit shall not be liable for failure to obtain any required insurance coverage or for any loss or damage resulting from such failure, if such failure is due to the reasonable unavailability of such insurance coverage.

¹  Upon completion of the Improvements, the Retail Unit Owner and Office Unit Owner shall delegate the maintenance obligations and costs related to the maintenance of any patio areas appurtenant to the Retail Unit solely to the Retail Unit Owner.

ALLOCATION DOCUMENT – Page 3

The Owner of the Retail Unit shall reimburse the Owner of the Office Unit within thirty (30) days of receipt of invoice of the premium for the property insurance for the portion reasonably allocated to the Retail Unit by the insurance company or, if not reasonably allocated, a portion of the costs equal to the percentage interest (the “Retail Unit’s Allocated Insurance Interest”) represented by a fraction, the numerator of which is the gross square feet of building area within the Retail Unit and the denominator of which is the combined gross square feet of building area within the Retail Unit and the Office Unit.

General Liability Insurance. The Owner of the Office Unit shall obtain and pay (subject to reimbursement as provided in this Allocation Document) all expenses relating to the commercial general liability insurance (“CGL Insurance”) required to be maintained by the Association under Section 9.1 of the Declaration and the Act in an amount agreed upon by the Board of Directors of the Association; provided, however, that the Owner of the Office Unit shall not be liable for failure to obtain any required insurance coverage or for any loss or damage resulting from such failure, if such failure is due to the reasonable unavailability of such insurance coverage.

The Owner of the Retail Unit shall reimburse the Owner of the Office Unit within thirty (30) days of receipt of invoice of the premium for the CGL Insurance for the portion reasonably allocated to the Retail Unit by the insurance company or, if not reasonably allocated, an amount equal to the Retail Unit’s Allocated Insurance Interest.

Other Association Insurance. The cost of directors and officers liability insurance and any other insurance the Owners agree should be maintained by the Association shall be paid in part by the Retail Unit Owner in accordance with the Retail Allocated Insurance Interest, with the balance paid by the Office Unit Owner.

Determination of Retail Unit’s Allocated Insurance Interest. At any time after completion of the Building or any additions thereto, either Owner may have the building area gross square footage of each Owner’s Unit measured by a registered architect, and the Owner seeking the measurement will notify the other Owner, prior to the date the Units are measured, that it has retained an architect to measure the Units. The Owner which measured must promptly deliver a copy of the architect’s report to the other Owner. The Owners shall execute and deliver to each other a letter agreement which correctly sets forth the building area of each Unit and the Retail Unit’s Allocated Insurance Interest. Upon delivery of the architect’s measurement to the other Owner, such other Owner may retain its own architect. If the second architect’s measurements are delivered to the Owner which initiated the measurement within thirty days of the delivery of the first measurement and they disagree, the two architects shall select a third architect to make a final determination of the square footage and both Owners shall be bound by the third architect’s determination. The Owner whose architect differs most from the third architect’s determination shall pay the third architect’s fee.

OWNER MAINTAINED INSURANCE

Commencing upon the conveyance of any Unit to an Owner, such Owner shall obtain and maintain insurance coverage as required by this Allocation Document. Such Owners shall carry such other or additional insurance in such amounts and against such risks as such Owners shall reasonably deem necessary with respect to the Improvements, facilities and contents within such Owner’s Unit, at their sole cost and expense.

ALLOCATION DOCUMENT – Page 4

TYPE	WHO MUST CARRY	MINIMUM AMOUNT	OTHER REQUIREMENTS
1. Workers’ Compensation and Employer’s Liability	All Units	Statutory Limits, if state has no statutory limits then: $1,000,000 each accident $1,000,000 policy limit bodily injury by disease $1,000,000 each employee, bodily injury by disease	1. No “alternative” forms of coverage will be permitted
2. Commercial General Liability (Occurrence Basis)	All Units	$ 1,000,000 per occurrence $ 2,000,000 general aggregate $ 2,000,000 product-completed operations aggregate limit. $ 1,000,000 personal and advertising injury limit $ 50,000 fire legal liability	1. ISO form CG 0001 0196, or equivalent 2. Insured Parties will be named as “additional insureds” on ISO Form CG 20 11 and if performing improvements CG 2026 or equivalent 3. Aggregate limit of insurance (per location endorsement ISO CG2504, or equivalent) and if performing improvements, also CG 2503) 4. Deletion of exclusions for liability assumed under contract (personal and advertising injury) 5. Defense will be provided as an additional benefit and not included within the limit of liability 6. Coverage for products liability CG2407 or equivalent (only required if the Unit has restaurant use) 7. Total pollution exclusion with heating equipment and hostile fire exception CG 21 65 or equivalent
3. Business Automobile Liability (Occurrence Basis)	All Units	Combined single limit for bodily injury and property damage of $1,000,000 per occurrence or its equivalent.	1. ISO form CA 0001 1001, or equivalent 2. Insured Parties will be named as “additional insureds” 3. Includes owned, hired and non-owned vehicles

ALLOCATION DOCUMENT – Page 5

TYPE	WHO MUST CARRY	MINIMUM AMOUNT	OTHER REQUIREMENTS
4. Causes of Loss-Special Form (formerly known as “All-Risk”) Property Insurance	All Units	One hundred percent (100%) of the then current replacement cost of the Unit (to be procured by such Unit)	1. ISO form CP 1030, or better 2. Name Insured Parties as “insured as its interest may appear” 3. Contain only standard printed exclusions 4. Provide damage due to water and sprinkler leakage and flood and collapse and terrorism (covering losses from domestic and international terrorist acts) and shall be written with limits of coverage typically required with respect to facilities similar to the Condominium 5. Cost of debris removal and value of grading, paving, landscaping, architects, and development fees endorsement 6. Waiver of any right of the insurer to repair, rebuild or replace any damage or destruction if decision is made pursuant to the Declaration not to do so

ADDITIONAL INSURED STATUS. Each Policy requiring an additional insured endorsement shall be endorsed, using an additional insured endorsement, to name as additional insureds the Association, Declarant, each Owner (other than the Owner who is procuring the insurance), each of their designees and each First Mortgagee of a Unit (collectively, the “Insured Parties”).

REVIEW OF POLICIES. The Association shall periodically, and not less than once every three years, review all insurance Policies maintained by all Owners to determine the adequacy of the coverage and review the current market conditions, available insurance terms and conditions, market trends for similar sized properties and to adjust the Policies accordingly.

LANDSCAPE/HARDSCAPE COMMON ELEMENTS MAINTENANCE

The Owner of the Retail Unit shall be responsible at its sole cost and expense (subject to reimbursement as provided in this Allocation Document) for all expenses relating to the maintenance and repair of the Landscape/Hardscape Common Elements (the “Landscape/Hardscape Maintenance Expenses”).

Within thirty (30) days of receipt of invoices and supporting documentation for the Maintenance Expenses (but not more often than quarterly), the Owner of the Office Unit shall reimburse to the Owner of the Retail Unit an amount equal to 50% of the Landscape/Hardscape Maintenance Expenses, as referenced in this Allocation Document (the “Office Unit Reimbursement Obligation”).

ALLOCATION DOCUMENT – Page 6

RIGHTS IF A PARTY FAILS TO PAY REIMBURSEMENT OBLIGATIONS

In the event that an Owner (the “Reimbursing Owner”) fails to timely reimburse the other Owner (the “Performing Owner”) for a reimbursement obligation set forth in this Allocation Document or any other Governing Document, and such failure continues after the expiration of a second, written 30-day “reminder” notice delivered to the Reimbursing Owner, such unpaid amounts shall be delinquent and shall be considered as an unpaid Assessment pursuant to the terms of Article 6 of the Declaration and the Performing Owner shall have all of the rights and remedies granted to the Association and described in Sections 6.6 through 6.8 of the Declaration.

ALLOCATION DOCUMENT – Page 7

IN WITNESS WHEREOF, Declarant has duly executed this Allocation Document effective as of the date set forth above.

DECLARANT:

DOMAIN JUNCTION 2 LLC,

a Delaware limited liability company

By:

Name:

Title:

ALLOCATION DOCUMENT – Page 1

EXHIBIT K – FORM OF PARKING EASEMENT AGREEMENT

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

K-1

PARKING GARAGE EASEMENT AGREEMENT

THIS PARKING GARAGE EASEMENT AGREEMENT (this “Agreement”) is made as of the      day of June, 2013, by and between RREEF DOMAIN LP, a Texas limited partnership (“RREEF Domain”) and DOMAIN JUNCTION 2 LLC, a Delaware limited liability company (“Domain Junction”). RREEF Domain and Domain Junction are herein sometimes referred to collectively as the “Parties” and individually as a “Party.”

Recitals

A. RREEF Domain is the owner of certain real property situated in Austin, Travis County, Texas, being more particularly described or depicted on Exhibit A attached hereto (the “Z Block Tract”).

B. Domain Junction is the owner of certain real property adjacent to the Z Block Tract described or depicted on Exhibit B attached hereto (the “Building 2 Tract”) (each of the Z Block Tract and the Building 2 Tract is sometimes referred to separately as a “Parcel” and are collectively referred to as the “Parcels”).

C. The Building 2 Tract is subject to a condominium regime created by Domain Junction as declarant (the “Building 2 Regime”) comprised of two (2) units, consisting of (i) Unit 100 intended for office use (the “Office Unit”), the owners of which (together with such owner’s tenants, employees, agents and invitees, the “Office Permitted Users”) shall be permitted to use certain parking spaces within the Parking Garage (as defined below) and (ii) Unit 200 intended for retail uses (the “Retail Unit”) the occupants of which (together with such owner’s tenants, employees, agents and invitees, the “Retail Permitted Users”) shall be permitted to use certain parking spaces within the Parking Garage, all as more particularly described in this Agreement. The owner of the Office Unit and the owner of the Retail Unit are herein collectively called the “Unit Owners” and individually a “Unit Owner.”

D. Domain Junction desires to build a parking structure containing no fewer than 621 parking spaces (the “Parking Garage”) on the approximate area depicted on Exhibit C attached hereto (the “Parking Garage Tract”), which Parking Garage shall be used by the Office Permitted Users and Retail Permitted Uses. The Parking Garage Tract is part of the Z Block Tract.

E. RREEF Domain has agreed to grant Domain Junction the Parking Easements (as defined below) the purposes of constructing, operating and using the Parking Garage on the terms and conditions set forth herein, including RREEF Domain’s right to expand the Parking Garage in its sole discretion as described in Exhibit E attached hereto (the “Parking Garage Expansion Area”), as more particularly described below.

F. Domain Junction and RREEF Domain now desire to enter into this Agreement to set forth their respective rights and obligations with regard to the Parking Easements and the use and operation of the Parking Garage.

NOW, THEREFORE, for and in consideration of the premises and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, RREEF Domain and Domain Junction do hereby agree as follows:

1. Parking Easements. RREEF Domain hereby grants upon the terms and conditions set forth in this Agreement the following (collectively, the “Parking Easements”):

(a) an exclusive, non-revocable (except as provided herein with respect to the Parking Garage Expansion) easement to Domain Junction to construct, operate, maintain and use the Parking Garage in the approximate area depicted on Exhibit C attached hereto, together with rights of access, ingress and egress on all publicly dedicated streets and private streets or rights of way, driveways, curb cuts, sidewalks, walkways and skybridges located on the Z Block Tract for vehicular and pedestrian access to and from the Parking Garage;

(b) an exclusive, non-revocable (except as provided herein with respect to the Parking Garage Expansion) easement for the benefit of the Office Unit to use and/or to make available for use by the Office Permitted Users (i) those 459 parking spaces in the Parking Garage identified on Exhibit D attached hereto as the “Office Parking Spaces” and (ii) between the hours of 8:00 a.m. and 6:00 p.m. on any weekday (i.e. Monday through Friday), the Office Permitted Users shall have the right to use 114 of the “Retail Parking Spaces” identified on Exhibit D;

(c) an exclusive, non-revocable (except as provided herein with respect to the Parking Garage Expansion) easement for the benefit of the Retail Unit to use and/or to make available for use by the Retail Permitted Users subject to the easement granted in Section l(b)(ii) above, those 162 parking spaces in the Parking Garage identified on Exhibit D attached hereto as the “Retail Parking Spaces”.

2. Construction of the Parking Garage. Domain Junction shall, at its sole cost and expense (including, without limitation, payment of all impact fees, reservation fees, connection charges, tap-in charges or other such charges in connection with any utilities serving the Parking Garage), construct the Parking Garage pursuant to the plans and specifications described in Exhibit F attached hereto (the “Plans and Specifications”), and shall diligently pursue to completion the construction of the Parking Garage in accordance with the Plans and Specifications. Domain Junction shall be responsible for obtaining all governmental approvals, permits and utility connections required for construction and operation of the Parking Garage; provided, however, that RREEF Domain agrees, at Domain Junction’s request and at no out-of-pocket third party costs to RREEF Domain, to cooperate as may be reasonably necessary for Domain Junction to obtain the same. RREEF Domain grants to Domain Junction and its agents, employees, contractors and subcontractors a temporary construction easement over and across the Z Block Tract as reasonably necessary for the construction of the Parking Garage, which construction easement shall terminate automatically upon the Final Completion (as hereafter defined) of the Parking Garage. “Final Completion” shall mean issuance of certificates or permits from the applicable governmental authority necessary for the legal use of the Parking Garage by the Office Permitted Users and Retail Permitted Users. During the course of construction of the Parking Garage, Domain Junction shall maintain builder’s risk insurance on an “all risk” basis (including collapse) on a completed value (non-reporting) form for full replacement cost covering all work incorporated and all materials and equipment engaged.

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3. Taxes. The tax parcel of which the Parking Garage is a part (the “Tax Parcel”) includes other adjacent property and improvements thereon. Ad valorem taxes shall be allocated annually to the buildings and other improvements included in the Tax Parcel by an independent MAI appraiser, with at least ten (10) years’ experience in commercial real estate of comparable scale and quality in central Texas, selected by RREEF Domain (“Landlord’s Appraiser”). The reasonable cost of such allocation by RREEF Domain shall be included in ad valorem taxes. Ad valorem taxes for the Tax Parcel shall be equitably allocated based on the valuations determined by Landlord’s Appraiser among the buildings and other improvements included in the Tax Parcel on the basis of building square footage and product type and structured parking spaces, taking into account the contributory value of the improvements of each building and parking structure and the market based allocation of each building and parking structure in the Tax Parcel (the equitably allocation of ad valorem taxes for the Parking Garage Tract is herein called the “Parking Garage Tract Tax Allocation”). During the term of this Agreement, at least thirty (30) days prior to ad valorem taxes for the Tax Parcel being due, RREEF Domain shall provide written notice to Domain Junction of the amount of the Parking Garage Tract Tax Allocation, together with supporting evidence prepared by Landlord’s Appraiser in his or her determination of the amount thereof. Domain Junction shall have fifteen (15) days thereafter to provide payment of the Parking Garage Tract Tax Allocation to RREEF Domain. RREEF Domain covenants and agrees that, so long as Domain Junction timely pays any amount it owes under this Section 3, all ad valorem taxes for the Tax Parcel shall be paid prior to delinquency; provided, however, that nothing herein shall prohibit RREEF Domain from contesting the amount of ad valorem taxes for the Tax Parcel in accordance with applicable law.

4. Maintenance. Domain Junction shall, at its sole cost and expense, maintain in good condition and repair the Parking Garage, including all maintenance and repair costs, insurance costs, utility expenses, security costs (if any), and all other costs or expenses incurred in connection with the operation and/or maintenance of the Parking Garage and any other improvements located on the Parking Garage Tract, as well as all driveways, streets, curb cuts and other improvements located on the Z Block Tract and serving the Parking Garage Tract and Parking Easements (such costs, together with ad valorem taxes payable by Domain Junction under Section 3 above, hereafter the “Parking Garage Operating Expenses”). The Parking Garage Operating Expenses shall allocated to the Units Owners as follows: (i) eighty-three and nine one-hundredths percent (83.09%) by the Owner of the Office Unit, and (ii) sixteen and ninety-one hundredths percent (16.91%) by the Owner of the Retail Unit. The Unit Owners shall pay their respective portions of the Parking Garage Operating Expenses in monthly installments in such amounts as are estimated and billed by Domain Junction at the beginning of each twelve (12) month period commencing and ending on dates designated by Domain Junction, each installment being due on the first business day of each calendar month. If at any time during such twelve (12) months period it shall appear that Domain Junction has underestimated the Parking Garage Operating Expenses for such twelve (12) month period, Domain Junction may re-estimate the Parking Garage Operating Expenses and may bill the Unit Owners for any deficiency which may have accrued during such twelve (12) month period and thereafter subsequent monthly installments shall also be adjusted as necessary. Within one hundred twenty (120) days after the end of each such twelve (12) month period, Domain Junction shall deliver to

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the Unit Owners a statement of the Parking Garage Operating Expenses actually incurred for such twelve (12) month period and each of the Unit Owners shall pay Domain Junction within thirty (30) days of receipt of such statement, or RREEF Domain shall credit each of the Unit Owner’s account, the amount of any excess or deficiency in the Parking Garage Operating Expenses paid by the Unit Owners to Domain Junction during such twelve (12) month period. Failure of Domain Junction to provide the statement called for hereunder shall not relieve Unit Owners from their obligations hereunder. The Parking Garage Operating Expenses shall include an administrative fee payable to Domain Junction in the amount of five percent (5%) of the Parking Garage Operating Expenses. If a Unit Owner fails to pay timely its portion of the Garage Operating Expenses, then any amounts outstanding shall bear interest at the lesser of twelve percent (12%) per annum or the highest legal interest rate until paid in full.

5. RREEF Domain Obligations: RREEF Domain shall not permit (to the extent in RREEF Domain’s reasonable control) or cause any structure, barrier, fence, curb, wall, ditch, barricade or gates or other improvements on the Z Block Tract to obstruct or affect the Parking Easements or use or operation of the Parking Garage.

6. Event of Default; Remedies.

(a) The following shall constitute an event of default (each an “Event of Default”) under this Agreement: (a) failure by a Party to timely pay any amount due hereunder to the other Party and such failure continues for a period of five (5) days after written notice of such failure; and (b) failure by a Party to perform any non-monetary obligation hereunder and such failure continues for a period of thirty (30) days after written notice of such failure; provided, however, that if, despite reasonable efforts, curative action cannot be completed within said 30-day period, then no Event of Default shall occur so long as the non-performing Party commences curative action within the required 30-day period and thereafter diligently pursues such curative action to completion. Upon the failure by a Party to timey pay any amounts due hereunder to the other Party, any outstanding amounts shall bear interest at the rate of the lesser of twelve percent (12%) per annum or the highest legal interest rate until paid in full.

(b) Upon the occurrence of an Event of Default, in addition to any other remedies available in law or in equity, (a) if the defaulting Party fails to complete any curative action required under the terms hereof within the applicable cure period set forth above, then the non-defaulting Party (including any Unit Owner) may perform such obligations and the cost for doing so shall be reimbursed by the non-performing Party upon demand, and/or (b) the non-defaulting Party (including any Unit Owner) shall be entitled to seek injunctive and/or specific performance against the defaulting Party, and each Party hereto acknowledges and agrees the inadequacy of legal remedies and irreparable harm which may result by a breach of this Agreement.

(c) In any action to enforce the terms and obligations of this Agreement, the prevailing Party shall be entitled to recover court costs and expenses, including reasonable attorneys’ fees, arising as a result of such action.

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7. Indemnification. TO THE FULLEST EXTENT ALLOWED BY LAW, BUT SUBJECT TO THE PROVISIONS OF SECTION 8(b) BELOW, EACH PARTY TO THIS AGREEMENT SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS THE OTHER PARTY, TOGETHER WITH ITS PARTNERS, MEMBERS, EMPLOYEES, OFFICERS, DIRECTORS, CONTRACTORS, AGENTS AND TENANTS, FROM AND AGAINST ANY AND ALL CLAIMS, COSTS, LIABILITIES, ACTIONS AND DAMAGES, INCLUDING WITHOUT LIMITATION, COURT COSTS AND REASONABLE ATTORNEYS’ FEES, FROM ANY THIRD PARTY CLAIMS ARISING IN CONNECTION WITH THIS AGREEMENT, THE PARKING EASEMENTS, THE PARKING GARAGE OR THE PARKING GARAGE EXPANSION (AS DEFINED BELOW), TO THE EXTENT CAUSED BY THE NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFYING PARTY OR ITS AGENTS, EMPLOYEES OR CONTRACTORS. ADDITIONALLY, TO THE FULLEST EXTENT ALLOWED BY LAW, EACH PARTY TO THIS AGREEMENT SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS THE OTHER PARTY, TOGETHER WITH ITS PARTNERS, MEMBERS, EMPLOYEES, OFFICERS, DIRECTORS, CONTRACTORS, AGENTS AND TENANTS, FROM AND AGAINST ANY AND LIEN CLAIMS ARISING AS A RESULT OF SUCH PARTY’S CONSTRUCTION, MAINTENANCE OR REPAIR ACTIVITIES HEREUNDER, INCLUDING WITHOUT LIMITATION, COURT COSTS AND REASONABLE ATTORNEYS’ FEES.

8. Insurance.

(a) Domain Junction, at its sole expense, shall at all times maintain (i) comprehensive liability insurance and, if necessary, umbrella liability insurance, covering the use of the Parking Easements and the Parking Garage, with the original coverage having combined single limits of not less than $3,000,000.00 and naming RREEF Domain as an additional insured; and (ii) full replacement cost all-risk property insurance covering the Parking Garage.

(b) RREEF Domain and Domain Junction each waive any and every claim which arises or may arise in its favor against any the other party hereto for any and all loss of, or damage to, its property located within or upon, or constituting a part of, the Parking Garage Tract or the Z Block Tract, which loss or damage is covered (as required hereunder to be covered) by valid and collectible fire and extended coverage insurance policies, to the extent such loss or damage is recoverable thereunder. Inasmuch as the foregoing mutual waivers will preclude the assignment of any of such claim by way of subrogation (or otherwise) to an insurance company (or any other party), RREEF Domain and Domain Junction each Owner immediately shall give to each insurance company which has issued policies of insurance to such party, written notice of the terms of this mutual waiver and cause such policies to be endorsed, if necessary, to prevent the invalidation of such coverages by reason hereof.

9. Expansion of Parking Garage.

(a) RREEF Domain shall have the right, in its sole discretion and upon no less than thirty (30) days prior written notice to Domain Junction, to expand the Parking Garage to accommodate future development of the Z Block Tract and to relocate the location of Office Parking Spaces and the Retail Parking Spaces as described in Section 9(c) below within the Parking Garage Expansion Area (the “Parking Garage Expansion”). The expansion parking garage shall initially consist of six (6) parking levels (including one on grade) with an ability to add a seventh level (the Parking Garage, as expanded in accordance with the terms herein, is

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called the “Expanded Parking Garage”). RREEF Domain shall not unreasonably disrupt Domain Junction’s use or operation of the Parking Garage during the construction of the Expansion and shall not reduce the Office Parking Spaces or Retail Parking Spaces. In the event that the construction of the Expanded Parking Garage reduces the number of available Office Parking Spaces and/or Retail Parking Spaces in the Parking Garage during construction, RREEF Domain shall provide an equal number of parking spaces to the applicable Unit Owner on other parcels within The Domain for so long as the number of available Office Parking Spaces and/or Retail Parking Spaces in the Parking Garage is reduced in connection with such construction. Such off-site parking spaces shall be allocated to the Retail Permitted Uses and, as necessary during such time, any eliminated Office Parking Spaces will be replaced with a comparable number of Retail Parking Spaces.

(b) During the course of any construction of the Parking Garage Expansion, RREEF Domain shall maintain builder’s risk insurance on an “all risk” basis (including collapse) on a completed value (non-reporting) form for full replacement cost covering all work incorporated and all materials and equipment engaged.

(c) In the event RREEF Domain elects to construct the Parking Garage Expansion, RREEF Domain shall execute and record a declaration of condominium regime (the “Parking Garage Declaration”) by which the Parking Garage Tract, together with the Expanded Parking Garage and all other land and improvements on the Z Block Tract and the various rights and appurtenances thereto set forth in this Agreement, shall be converted to a condominium regime (the “Z Block Regime”), with those portions of the Expanded Parking Garage set forth in Exhibit G attached identified as the “Expanded Garage Office Parking Spaces” and the “Expanded Garage Retail Parking Spaces”, together with all rights necessary for the use of the Expanded Garage Office Parking Spaces, Expanded Garage Retail Parking Spaces and the Expanded Parking Garage, being distinct condominium units (the unit comprising the Expanded Garage Office Parking Spaces is hereafter called the “Office Parking Unit” and unit comprising the Expanded Garage Retail Parking Spaces is hereafter called the “Retail Parking Unit”). The Parking Garage Declaration shall include those provisions listed on Schedule 1 attached hereto. Prior to executing and recording the Parking Garage Declaration, RREEF Domain shall deliver the Parking Garage Declaration to Domain Junction for review and approval, such approval not to be unreasonably withheld, conditioned or delayed, based solely on the failure of the Parking Garage Declaration to include any provisions required under Schedule 1 or with regard to any provision in the Parking Garage Declaration that Domain Junction reasonably believes will affect its use of the Expanded Garage Office Parking Spaces or the Expanded Garage Retail Parking Spaces in manner that makes such use materially and adversely different from Domain Junction’s then existing use of the Parking Garage. In the event Domain Junction does not approve the Parking Garage Declaration, it shall provide detailed description of the reason for such disapproval to RREEF Domain and thereafter the parties shall in good faith negotiate a resolution to the reasons set forth for such disapproval. The Office Parking Unit shall be conveyed by special warranty deed from the declarant under the Z Block Regime to the owner of the Office Unit and the Retail Parking Unit shall be conveyed by special warranty deed from the declarant under the Z Block Regime to the owner of the Retail Unit, and RREEF Domain shall convey said units, at its sole cost, free and clear of any and all liens affecting the Z Block Tract or any other unit (save and except any liens created by Domain Junction). The operating costs for the common elements of the Regime shall be equitably allocated among the Unit Owners and

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the owners of the unit or units comprising the remainder of the Z Block Regime. Upon the recording of the Parking Garage Declaration, the Completion of the Expanded Parking Garage and the conveyances of the Office Parking Unit and the Retail Parking Unit as set forth above, this Agreement shall be terminated, and all owners of the Parcels and their respective mortgagees shall enter into appropriate documentation for such termination.

10. General Provisions.

(a) Modification and Cancellation. This Agreement may be modified or canceled only by written agreement signed by all of the then owners of the Parcels, or their respective successors and assigns (and any mortgagees holding first lien security interests on any portion of the Parcels), as long as they have any interest as owner of any portion of the Parcels.

(b) No Dedication. No provision of this Agreement shall ever be construed to grant or create any rights whatsoever in or to any portion of the Parcels other than the easements, covenants, conditions and restrictions specifically set forth herein. Nothing in this Agreement shall ever constitute or be construed as a dedication of any interest herein described to the public or give any member of the public any right whatsoever.

(c) Notice. Any notice hereunder must be in writing, and shall be effective upon three (3) business days after being deposited in the United States mail, certified mail, return receipt requested, addressed as set forth below (or as may be designated from time to time pursuant to the procedures provided in this Section 10(c), or when actually received by the party to be notified, if hand delivered. For purposes of notice, the addresses of the parties, until changed as herein provided, shall be as follows:

If to Domain Junction:	c/o Shorenstein Properties LLC
	235 Montgomery Street San Francisco, CA 94104 Attention: Russell M. Cooper Fax: (415) 765-9080
And to:	c/o Shorenstein Properties LLC
	235 Montgomery Street San Francisco, CA 94104 Attention: Margaret A. Leahy Fax: (415) 772-7080
With a copy to:	Pillsbury Winthrop Shaw Pittman LLP
	909 Fannin, Suite 2000 Houston, Texas 77010 Attention: Laura Hannusch Fax: (281) 582-6304
If to RREEF Domain:	c/o RREEF America L.L.C.
	875 North Michigan Avenue, 41st Floor Chicago, IL 60611-1901 Attention: Michael Nigro Fax: (312) 266-9346

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With a copy to: Seyfarth Shaw LLP 131 South Dearborn Street, Suite 2400 Chicago, IL 60603 Attention: Joel D. Rubin Fax: (312) 460-7600

(d) Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto. The parties do not rely upon any statement, promise or representation not herein expressed, and this Agreement once executed and delivered shall not be modified or altered in any respect except by a writing executed and delivered in the same manner as required by this document.

(e) Severability. If any provision of this Agreement shall be or become invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired thereby.

(f) Rights of Successors. The easements, restrictions, benefits and obligations hereunder shall create mutual benefits and servitudes running with the land. Notwithstanding anything to the contrary in this Agreement, upon an owner’s sale of all of its property comprising a part of the Parcels, such owner shall be released from all unaccrued liabilities and other obligations arising under this Agreement from and after the effective date of such sale. Subject to the other provisions hereof, this Agreement shall bind and inure to the benefit of the parties and their respective heirs, representatives, lessees, successors and assigns. The singular number includes the plural and the masculine gender includes the feminine and neuter.

(g) No Merger. It is expressly understood and agreed that the parties hereto do not intend that there be, and there shall in no event be, a merger of the dominant and servient tenements in the Parcels by virtue of the present or future ownership of any portion of said tenements being vested in the same person(s) or entity, but instead intend that the easement servitudes shall not be extinguished thereby and that said dominant and servient tenements be kept separate.

(h) Estoppel Certificates. Any owner of any portion of the Parcels (or any mortgagee holding a first lien security interest in any portion of the Parcels) may, at any time and from time to time, in connection with the leasing, sale or transfer of its property, or in connection with the financing or refinancing of its property by any bona fide mortgage, deed of trust or sale-leaseback made in good faith and for value, deliver a written notice to any other owner requesting such owner to execute a certificate certifying that, to the best of such owner’s knowledge, (i) the owner requesting such certificate is not in default in the performance of its obligations under this Agreement, or, if in default, describing the nature and amount or degree of such default and (ii) such other information regarding the status of the obligations under this Agreement as may be reasonably requested. An owner shall execute and return such certificate within fifteen (15) days following its receipt of a request therefor.

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(i) Counterparts; Multiple Originals. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

(j) Headings. The headings herein are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of intent of this document nor in any way affect the terms and provisions hereof.

(k) Survey of Areas. Any owner of a Parcel may, at its own expense and upon ten (10) days’ prior written notice to the other owners of the other Parcels, have the Parking Garage Tract surveyed and upon completion shall deliver the resulting survey to the other owners of any Parcel for review. Five (5) business days after delivery of said survey, the metes and bounds description of the survey shall be substituted or appended, as applicable, for the applicable portion of Exhibit C and the owners of the Parcels agree to execute and record an amendment to this Agreement to so replace the description of such areas; provided, however, that said amendment shall not in any other way amend, modify, limit, restrict or expand the rights and obligations set forth herein.

(l) RREEF Domain acknowledges and agrees that Domain Junction shall have the right, but not the obligation, at any time (i) to finance, mortgage, encumber, pledge or assign as security its right, title and interest in and to the easement and other rights created hereby pursuant to one or more mortgages or deeds of trust and (ii) in connection with Domain Junction’s use of the Domain 2 Tract, to lease the Parking Garage or any portion thereof on terms and conditions satisfactory to Domain Junction in its sole discretion.

[Signature Page Follows]

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EXECUTED as of the date first set forth above.

DOMAIN JUNCTION:

DOMAIN JUNCTION 2 LLC,

a Delaware limited liability company

By:

Name:

Title:

STATE OF                 §

                                     §

COUNTY OF             §

This instrument was acknowledged before me on             , 2013, by                     , as                      of                     , a                     , on behalf of said                    .

Notary Public in and for the State of

[Signature Page to Parking Easement Agreement]

RREEF DOMAIN: RREEF DOMAIN, LP, a Texas limited partnership
By:	RREEF DOMAIN GP, LLC a Delaware limited liability company Its: General Partner
By:
Name:
Title:

STATE OF                 

COUNTY OF                 

Before me, a Notary Public in and for the jurisdiction aforesaid, personally appeared this date                     , personally well known (or satisfactorily proven) to me to be the person whose name is subscribed to the foregoing and annexed Instrument, who, being by me first duly sworn, did depose and state that he/she is the                      of RREEF Domain GP, LLC, a Delaware limited liability company, general partner of RREEF Domain, LP a Texas limited partnership, which entity is a party to the foregoing and annexed Instrument, and that he, being duly authorized so to do, executed said Instrument on behalf of said entity as its free act and deed for the uses and purposes therein contained.

WITNESS my hand and official seal this             day of                 , 2013.

[Notarial Seal]

Notary Public                        

[Signature Page to Parking Easement Agreement]

CONSENT AND SUBORDINATION OF LENDER

The undersigned Lender hereby consents to the recordation of this instrument and subordinates the lien of the Deed of Trust dated                     , recorded under Document No.                      in the Official Public Records of Travis County, Texas, for the benefit of Lender, for so long as this instrument remains in effect.

LENDER:

JP MORGAN CHASE, N.A.

By:

Its:

STATE OF	§
	§
COUNTY OF	§

This instrument was ACKNOWLEDGED before me on                     , 2013, by                     ,                     of JP MORGAN CHASE, N.A., on behalf of said national banking association.

[SEAL]

EXHIBIT A

Legal Description of Z Block Tract

[See attached five (5) pages]

Exhibit A – Page 1

7.565 ACRES	FN NO. 13-251 (KWA)
FUTURE LOT 1 RREEF DOMAIN	MAY 30, 2013
BLOCK 2 SUBDIVISION	BPI JOB NO. R0101231-10038

DESCRIPTION

OF A 7.565 ACRE TRACT OF LAND OUT OF THE JAMES ROGERS SURVEY, ABSTRACT NO. 659, SITUATED IN THE CITY OF AUSTIN, TRAVIS COUNTY, TEXAS, BEING A PORTION OF LOT 2A, RREEF DOMAIN BLOCK C SUBDIVISION, A SUBDIVISION OF RECORD IN DOCUMENT NO. 201300086 OF THE OFFICIAL PUBLIC RECORDS OF TRAVIS COUNTY, TEXAS; SAID 7.565 ACRES OF LAND BEING MORE PARTICULARLY DESCRIBES BY METES AND BOUNDS AS FOLLOWS:

BEGINNING, at a 1/2 inch iron rod with “BPI” cap set at the northwesterly corner of Lot 3A of said RREEF Domain Block U Subdivision, being an interior corner of said Lot 2A, for the northeasterly corner hereof;

THENCE, along the westerly line of said Lot 3A, being an interior line of said Lot 2A, for a portion of the easterly line hereof, the following nine (9) courses and distances:

1) Along a non-tangent curve to the left, having a radius of 39.50 feet, a central angle of 141°08’44”, an arc length of 97.31 feet, and a chord which bears, S01°59’31”E, a distance of 74.50 feet to a 1/2 inch iron rod with “BPT” cap set at the point of tangency of said curve;

2) S72°33’53”E, a distance of 98.71 feet to a 1/2 inch iron rod with “BPI” cap set at the point of curvature of a curve to the right;

3) Along said curve, having a radius of 60.50 feet, a central angle of 90°02’58”, an arc length of 95.09 feet, and a chord which bears, S27°32’24”E, a distance of 85.60 feet to a 1/2 inch iron rod with “BPI” cap set at the point of tangency of said curve;

4) S17°29’05”W, a distance of 86.60 feet to a 1/2 inch iron rod with “BPI” cap set at the point of curvature of a curve to the left;

5) Along said curve, having a radius of 24.50 feet, a central angle of 90°02’58”, an arc length of 38.51 feet, and a chord which bears, S27°32’24”E, a distance of 34.66 feet to a 1/2 inch iron rod with “BPI” cap set at the point of tangency of said curve;

6) S72°33’53”F, a distance of 38.61 feet to a 1/2 inch iron rod with “BPI” cap set at the point of curvature of a curve to the right;

7) Along said curve, having a radius of 79.50 feet, a central angle of 21°04’24”, an arc length of 29.24 feet, and a chord which bears, S62°01’41”E, a distance of 29.08 feet to a 1/2 inch iron rod with “BPI” cap set at the point of tangency of said curve;

Exhibit A – Page 2

FN NO. 13-251 (KWA)

MAY 30, 2013

PAGE 2 OF 3

8) S5l°29’29”E, a distance of 25.48 feet to a 1/2 inch iron rod with “BPI” cap set at the point of curvature of a curve to the left;

9) Along said curve, having a radius of 24.50 feet, a central angle of 30°47’19”, an arc length of 13.17 feet, and a chord which bears, S66°53’08”E, a distance of 13.01 feet to a 1/2 inch iron rod with “BPI” cap set at the southwesterly corner of said Lot 3A, for an angle point hereof;

THENCE, leaving the southwesterly corner of said Lot 3A, over and across said Lot 2A, for a portion of the easterly, southerly, westerly and a portion of the northerly lines hereof, the following sixteen (16) courses and distances:

1) Along a non-tangent curve to the left, having a radius of 146.50 feet, a central angle of 27°31’17”, an are length of 70.37 feet, and a chord which bears, S31°11’46”W, a distance of 69.70 feet to a 1/2 inch iron rod with “BPI” cap set at the point of tangency of said curve;

2) S17°26’07”W, a distance of 430.01 feet to a 1/2 inch iron rod with “BPI” cap set at the southeasterly corner hereof;

3) N72°33’53”W, a distance of 244.06 feet to a 1/2 inch iron rod with “BPI” cap set for an angle point;

4) S12°33’53”E, a distance of 10.97 feet to a 1/2 inch iron rod with “BPI” cap set for an angle point;

5) N73°32’36”W, a distance of 87.81 feet to a 1/2 inch iron rod with “BPI” cap set for an angle point;

6) N72°33’53”W, a distance of 145.36 feet to a 1/2 inch iron rod with “BPI” cap set at the point of curvature of a curve to the right;

7) Along said curve, having a radius of 334.50 feet, a central angle of 05°34’36”, an arc length of 32.56 feet, and a chord which bears, N69°46’35”W, a distance of 32.54 feet to a 1/2 inch iron rod with “BPI” cap set at the point of compound curvature of a curve to the right, for the southwesterly corner hereof, from which a PK Nail with “Baker Aicklen Washer” found for an angle point in the northerly line of said Lot 2A bears, N00°54’14”W, a distance of 53.46 feet;

8) Along said compound curve, having a radius of 24.50 feet, a central angle of 84°32’02”, an arc length of 36.15 feet, and a chord which bears, N24°43’15”W, a distance of 32.96 feet to a 1/2 inch iron rod with “BPI” cap set at the point of tangency of said curve;

Exhibit A – Page 3

FN NO. 13-251 (KWA)

MAY 30, 2013

PAGE 3 OF 3

9) N17°32’46”E, a distance of 209.11 feet to a 1/2 inch iron rod with “BPI” cap set for an angle point;

10) N21⁰28’53”E, a distance of 257.91 feet to a 1/2 inch iron rod with “BPI” cap set at the point of curvature of a curve to the right;

11) Along said curve, having a radius of 330.50 feet, a central angle of 15°45’31”, an arc length of 90.90 feet, and a chord which bears, N37°16’20”E, a distance of 90.61 feet to a 1/2 inch iron rod with “BPI” cap set at the point of curvature of a compound curve to the right;

12) Along said compound curve, having a radius of 191.50 feet, a central angle of 10°53’11”, an arc length of 36.39 feet, and a chord which bears, N52°25’37”E, a distance of 36.33 feet to a 1/2 inch iron rod with “BPI” cap set at the point of tangency of said curve;

13) N57°52’13”E, a distance of 31.37 feet to a 1/2 inch iron rod with “BPI” cap set for an angle point;

14) N60°06’55”E, a distance of 84.70 feet to a 1/2 inch iron rod with “BPI” cap set at the point of curvature of a curve to the right;

15) Along said curve to the right, having a radius of 448.50 feet, a central angle of 08°27’56”, an arc length of 66.27 feet, and a chord which bears, N64°20’53”E, a distance of 66.21 feet to a 1/2 inch iron rod with “BPI” cap set at the point of tangency of said curve;

16) N68°34’51”E, a distance of 44.06 feet to the POINT OF BEGINNING containing an area of 7.565 acres (329,530 sq. ft.) of land, more or less, within these metes and bounds.

I, MARK J. JEZISEK, A REGISTERED PROFESSIONAL LAND SURVEYOR, DO HEREBY CERTIFY THAT THE PROPERTY DESCRIBED HEREIN WAS DETERMINED BY A SURVEY MADE ON THE GROUND UNDER MY DIRECTION AND SUPERVISION. A SURVEY EXHIBIT WAS PREPARED TO ACCOMPANY THIS FIELDNOTE DESCRIPTION.

	/s/ Mark J. Jezisek                                                                              5/30/13
BURY & PARTNERS, INC. 221 WEST SIXTH STREET, SUITE 600 AUSTIN, TEXAS 78701	MARK J. JEZISEK R.P.L.S. NO. 5267 STATE OF TEXAS	DATE

Exhibit A – Page 4

Exhibit A – Page 5

SHEET 2 OF 2

Exhibit A – Page 6

EXHIBIT B

Legal Description of Building 2 Tract

Lot 3A, RREEF Domain Block U Subdivision, according to the map or plat thereof recorded under Document No. 201300086 of the Official Public Records of Travis County, Texas.

Exhibit B – Page 1

EXHIBIT C

Depiction of Parking Garage Tract (including Parking Garage and Access Driveways)

“Phase 1 Garage” as depicted on the attached site plan

Exhibit C – Page 1

Exhibit C – Page 2

EXHIBIT D

Depiction of Office Parking Spaces and Retail Parking Spaces

[See attached six (6) pages]

Exhibit D – Page 1

                    FLOOR 1

PHASE 1 PARKING GARAGE

RETAIL PARKING ONLY  (48)

SHARED                               (30)

Exhibit D – Page 2

                    FLOOR 2

PHASE 1 PARKING GARAGE

SHARED                               (84)

Exhibit D – Page 3

FLOOR 3

PHASE 1 PARKING GARAGE

OFFICE ONLY

Exhibit D – Page 4

FLOOR 4

PHASE 1 PARKING GARAGE

OFFICE ONLY

Exhibit D – Page 5

FLOOR 5

PHASE 1 PARKING GARAGE

OFFICE ONLY

Exhibit D – Page 6

FLOOR 6

PHASE 1 PARKING GARAGE

OFFICE ONLY

Exhibit D – Page 7

EXHIBIT E

Parking Garage Expansion Area

“Z5 Garage” as depicted on the attached site plan

Exhibit E – Page 1

Exhibit E – Page 2

EXHIBIT F

Plans and Specifications

[See attached four (4) pages]

Exhibit F – Page 1

Exhibit F – Page 2

Gensler	April 23, 2013	The Domain - Garage Z5 Phase 1
25.1088.500	Addendum #3	Austin, Texas

SECTION 00 01 10	TABLE OF CONTENTS	3
DIVISION 00 - PROCUREMENT AND CONTRACTING REQUIREMENTS
Section No.	Title
SECTION 00 30 00	GEOTECHNICAL
00 31 00	Geotechnical Data	1
	Geotechnical Engineering Report (dated February 27, 2013)	62
00 60 00	Forms	1
	Submittal Transmittal	1
	Data Transfer Agreement	1
	Request for Interpretation	1
	Sustitution Request	1
	Change Order	1
SECTION DIVISION 01 00 00–GENERAL
Section No.	Title
01 10 00	Summary	3
01 14 00	Work Restrictions	2
01 23 00	Alternates	2
01 25 00	Substitution Procedures	4
01 26 13	Requests for Information (RFI’s)	3
01 31 00	Project Management and Coordination	6
01 33 00	Submittal Procedures	1817
01 40 00	Quality Requirements	6
01 42 00	References	12
01 50 00	Temporary Facilities and Controls	11
01 60 00	Product Requirements	8
01 73 00	Execution Requirements	7
01 73 29	Cutting and Patching	5
01 74 19	Construction Waste Management and Disposal	4
01 77 00	Closeout Procedures	87
01 78 23	Operations and Maintenance Data	8
01 78 39	Project Record Documents	5
01 79 00	Demonstration and Training	7
01 81 13.19	Sustainable Design Requirements	7
	LEED Scorecard	2
	LEED Criteria Worksheet	1
01 91 13	Fundamental Comissioning	13
FACILITY CONSTRUCTION SUBGROUP
DIVISION 02 – EXISTING CONDITIONS (Not Used)
DIVISION 03 – CONCRETE
Section No.	Title
03 30 00	Cast-In-Place Concrete (by IIWA)	23
03 41 00	Precast Structural Concrete (by IIWA)	15

TABLE OF CONTENTS	00 01 10 - 1
Copyright 2013 Gensler

Exhibit F – Page 3

Gensler	April 23, 2013	The Domain - Garage Z5 Phase 1
25.1088.500	Addendum #3	Austin, Texas

DIVISION 04 – MASONRY
Section No.	Title
04 20 00	Unit Masonry (by HWA)	7
DIVISION 05 – METALS
Section No.	Title
05 12 00	Structural Steel Framing (by HWA)	10
05 31 00	Steel Decking (by HWA)	4
05 50 00	Metal Fabrications	15
DIVISION 06 – WOOD, PLASTICS, AND COMPOSITES
Section No.	Title
06 10 53	Miscellaneous Rough Carpentry	5
06 20 00	Finish Carpentry	4
DIVISION 07 – THERMAL AND MOISTURE PROTECTION
Section No.	Title
07 16 16	Crystalline Waterproofing	4
07 18 00	Traffic Coatings	4
07 19 00	Water Repellents	4
07 54 00	Thermoplastic (TPO) Membrane Roofing	13
07 60 00	Flashing and Sheet Metal	7
07 92 00	Joint Sealants	11
DIVISION 08 – OPENINGS
Section No.	Title
08 11 13	Hollow Metal Doors and Frames	9
08 71 00	Door Hardware	8
DIVISION 09 – FINISHES
Section No.	Title
09 91 23	Exterior Painting	6
DIVISION 10 – SPECIALTIES
Section No.	Title
10 14 00	Signage	6
10 44 00	Fire Protection Specialties	4
10 82 33	Greenscreen	4
DIVISION 11 – EQUIPMENT (Not Used)
DIVISION 12 – FURNISHINGS (Not Used)
DIVISION 13 – SPECIAL CONSTRUCTION (Not Used)
DIVISION 14 – CONVEYING EQUIPMENT
Section No.	Title
14 21 00	Electric Traction Elevators	22
DIVISIONS 15 through 19 (Reserved by CSI for future development).

TABLE OF CONTENTS	00 01 10 - 2
Copyright 2013 Gensler

Exhibit F – Page 4

Gensler	April 23, 2013	The Domain - Garage Z5 Phase 1
25.1088.500	Addendum #3	Austin, Texas

DIVISION 21 – FIRE SUPPRESSION (by Encotech)
Section No.	Title
21 13 16	Dry-Pipe Sprinkler Systems	6
DIVISION 22 – PLUMBING (by Encotech)
Section No.	Title
22 00 52	Common Work Results for Plumbing	6
22 00 61	Hangers and Supports for Plumbing Piping and Equipment	6
22 00 76	Identification for Plumbing Piping and Equipment	3
22 00 82	Plumbing Insulation	9
22 01 11	General-Duty Valves for Plumbing Piping	4
22 01 40	Domestic Water Piping	9
22 01 45	Domestic Water Piping Specialties	3
22 01 50	Sanitary Waste and Vent Piping	5
22 01 55	Sanitary Waste and Vent Piping Specialties	5
DIVISION 23 (Not Used)
DIVISION 24 (Not Used)
DIVISION 25 (Not Used)
DIVISION 26 – ELECTRICAL (by Encotech)
Section No.	Title
26 00 01	Electrical General Provisions	14
26 00 30	Electrical Grounding Section	2
26 01 10	Electrical Raceway	4
26 01 20	Electrical Insulated Conductors	2
26 01 30	Electrical Boxes	2
26 01 40	Electrical Wiring Devices	2
DIVISION 27 (Not Used)
DIVISION 28 (Not Used)
DIVISION 29 (Not Used)
DIVISION 30 (Not Used)
DIVISION 31 – EARTHWORK (by HWA)
Section No.	Title
31 63 29	Drilled Concrete Piers	9
DIVISION 32 (Not Used)

END OF TABLE OF CONTENTS

TABLE OF CONTENTS	00 01 10 - 3
Copyright 2013 Gensler

Exhibit F – Page 5

EXHIBIT G

Depiction of Expanded Garage Office Parking Spaces and Retail Parking Spaces

[See attached six (6) pages]

Exhibit G – Page 1

FLOOR 1

EXPANDED GARAGE

NO OFFICE PARKING

Exhibit G – Page 2

FLOOR 2

EXPANDED GARAGE

NO OFFICE PARKING

Exhibit G – Page 3

FLOOR 3

EXPANDED GARAGE

SHARED (114) BETWEEN RETAIL & OFFICE

OFFICE ONLY (30)

Exhibit G – Page 4

FLOOR 4

EXPANDED GARAGE

OFFICE ONLY (160)

Exhibit G – Page 5

FLOOR 5

EXPANDED GARAGE

OFFICE ONLY (160)

Exhibit G – Page 6

FLOOR 6

EXPANDED GARAGE

OFFICE ONLY (109)

Exhibit G – Page 7

SCHEDULE 1

Parking Garage Declaration-Required Provisions

The Office Permitted Users and the Retail Permitted Users shall have free, reasonable and continuous access to the Expanded Garage Office Parking Spaces and the Expanded Garage Ritual Parking Spaces, respectively, in all material respects identical to their respective use of the Office Parking Spaces and Retail Parking Spaces.

The owners of the Office Parking Unit and Retail Parking Unit shall have the right to charge for use of the Expanded Garage Office Parking Spaces and the Expanded Garage Ritual Parking Spaces, respectively, without the pass-through of such charges to the condominium association or any other party.

Assessments by the condominium association shall be comparable in scope to the maintenance charges set forth in Section 4 above and shall be commercially reasonable and comparable to assessments for parking structures in similar mixed-use developments.

The skybridge connecting the Office Unit to the Parking Garage shall be included in the Office Parking Unit.

The condominium association shall be required to maintain insurance in amounts no less than those required for the association under the declaration for the Building 2 Regime (the “Domain 2 Declaration”).

Following a casualty, (a) the Office Parking Unit shall be restored to useable condition comparable to that existing prior to the casualty unless the Office Unit Owner agrees differently and (b) Retail Parking Unit shall be restored to useable condition comparable to that existing prior to the casualty unless the Retail Unit Owner agrees differently. Notwithstanding anything to the contrary in the Uniform Act, an owner of a unit shall not be obligated to rebuild or restore its unit (including, without limitation, the Office Parking Unit and the Retail Parking Unit, as applicable) (the “Affected Unit”) following a casualty or condemnation provided that such owner, at its sole cost and expense, undertakes any demolition and restoration of the Affected Unit necessary to ensure that the other units of the Regime (including, without limitation, the Office Parking Unit and the Retail Parking Unit, as applicable) are structurally sound, operable and substantially the same in quality of materials and aesthetic character as that which existed prior to such casualty, unless such other unit owners agree differently.

Any amendment of the Parking Garage Declaration affecting the Garage Expansion or provisions of this Schedule 1 shall require the written agreement of the Retail Unit Owner and Office Unit Owner, except as set forth in §§ 82.007(a), 82.056(d), 82.058(b) and (c), 82.062, 82.067(a) and (f) of the Uniform Act.

The Parking Garage Declaration can only be terminated in accordance with § 82.068 of the Uniform Act.

Schedule 1 – Page 1

EXHIBIT L – DEPICTION OF ROOF DECK

attached to and made a part of Lease bearing the

Lease Reference Date of July 3, 2013 between

Domain Junction 2 LLC, as Landlord and

HomeAway, Inc., as Tenant

L-1

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Brian H. Sharples, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HomeAway, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 31, 2013	By:	/s/ Brian H. Sharples
		Brian H. Sharples
		President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Lynn Atchison, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HomeAway, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 31, 2013	By:	/s/ Lynn Atchison
		Lynn Atchison
		Chief Financial Officer and Secretary
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of HomeAway, Inc. for the quarterly period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Brian H. Sharples, as Chief Executive Officer of HomeAway, Inc., hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HomeAway, Inc.

Date: July 31, 2013	By:	/s/ Brian H. Sharples
		Brian H. Sharples
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of HomeAway, Inc. for the quarterly period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lynn Atchison, as Chief Financial Officer of HomeAway, Inc., hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HomeAway, Inc.

Date: July 31, 2013	By:	/s/ Lynn Atchison
		Lynn Atchison
		Chief Financial Officer and Secretary

XML

Net Income Per Share

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Net Income Per Share

9. Net Income Per Share

The following table sets forth the computation of basic and diluted net income per share of common stock (in thousands, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Numerator
Net income	$	5,470	$	2,856	$	10,765	$	5,257
Denominator
Weighted average common shares outstanding-basic		84,920		82,262		84,482		81,816
Dilutive effect of stock options, warrants and restricted stock units		2,727		2,475		2,701		2,822
Weighted average common shares outstanding-diluted		87,647		84,737		87,183		84,638
Net income per share:
Basic	$	0.06	$	0.03	$	0.13	$	0.06
Diluted	$	0.06	$	0.03	$	0.12	$	0.06

The following common equivalent shares were excluded from the calculation of net income per share as their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Stock options and warrants		3,525		5,402		3,368		4,762
Restricted stock awards		3		622		467		17
Total common equivalent shares excluded		3,528		6,024		3,835		4,779

XML

Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Revenue:
Listing	$ 73,264	$ 60,241	$ 140,095	$ 114,209
Other	13,344	11,375	25,977	21,510
Total revenue	86,608	71,616	166,072	135,719
Costs and expenses:
Cost of revenue (exclusive of amortization shown separately below)	13,845	11,295	27,126	21,827
Product development	14,441	10,324	26,840	20,026
Sales and marketing	28,867	24,074	55,234	48,808
General and administrative	18,069	14,652	34,118	27,489
Amortization expense	2,995	3,282	6,175	5,730
Total costs and expenses	78,217	63,627	149,493	123,880
Operating income	8,391	7,989	16,579	11,839
Other income (expense):
Interest income	299	240	542	409
Other income (expense)	66	(1,582)	(1,525)	(2,310)
Total other income (expense)	365	(1,342)	(983)	(1,901)
Income before income taxes	8,756	6,647	15,596	9,938
Income tax expense	(3,286)	(3,791)	(4,831)	(4,681)
Net income	$ 5,470	$ 2,856	$ 10,765	$ 5,257
Net income per share:
Basic	$ 0.06	$ 0.03	$ 0.13	$ 0.06
Diluted	$ 0.06	$ 0.03	$ 0.12	$ 0.06
Weighted average number of shares outstanding:
Basic	84,920	82,262	84,482	81,816
Diluted	87,647	84,737	87,183	84,638

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of HomeAway, Inc. and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission, or the SEC. All significant intercompany transactions and balances have been eliminated. In the opinion of the Company’s management, the accompanying interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal recurring adjustments and those items discussed in these Notes, necessary for a fair presentation of the Company’s financial position, as of June 30, 2013; results of operations for the three and six months ended June 30, 2013 and June 30, 2012; comprehensive income for the three and six months ended June 30, 2013 and June 30, 2012; cash flows for the six months ended June 30, 2013 and June 30, 2012; and stockholders’ equity for the six months ended June 30, 2013. Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012. Operating results for this interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, or for any other period.

Out of Period Adjustment

During the three months ended June 30, 2013, the Company identified a prior period accounting error related to certain foreign currency hedging instruments which resulted in the understatement of other current assets and other income (expense). This error was not material to any prior period results of operations. Therefore, the Company recorded the error correction in the same quarter it was identified, which increased other income and income before income taxes by approximately $820,000 ($486,000 after tax) during the three months ended June 30, 2013. The cumulative effect had no impact on the results of operations for the six months ended June 30, 2013. The adjustment had no impact on cash flows from operations or total cash flows for the prior or current period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These differences could have a material effect on the Company’s future results of operations and financial position. Significant items subject to estimates and assumptions include certain revenue, the allowance for doubtful accounts, the fair value of short-term investments, the carrying amounts of goodwill and other indefinite-lived intangible assets, depreciation and amortization, the valuation of stock options and deferred income taxes.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received during the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1:	Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2:	Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3:	Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The following section describes the valuation methodologies used to measure certain financial assets and financial liabilities at fair value.

Money Market Funds and Short-Term Investments

The Company’s cash equivalents, restricted cash and short-term investments classified as Level 1 are valued using quoted prices generated by market transactions involving identical assets. Short-term investments classified as Level 2 are valued using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments in active markets; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. The Company did not hold any cash equivalents, restricted cash or short-term investments categorized as Level 3 as of June 30, 2013 or December 31, 2012.

Short-term investments include certificates of deposit, corporate bonds, U.S. government agency bonds and municipal bonds and are classified as available-for-sale and reported at fair value using the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a component of other comprehensive income (loss), net of related estimated tax provisions or benefits. Additionally, the Company periodically assesses whether an other than temporary impairment loss on investments has occurred due to declines in fair value or other market conditions. Declines in fair value considered other than temporary are recorded as an impairment in the consolidated statement of operations. The Company did not record an impairment of its investments for any of the periods presented.

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities and deferred revenue approximate fair value because of the relatively short maturity of these instruments.

The following table summarizes the basis used to measure certain financial assets and liabilities at fair value on a recurring basis in the Company’s consolidated balance sheets at June 30, 2013 (in thousands):

	Balance as of June 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
Money market funds	$	98,637	$	98,637	$	—	$	—
Total cash equivalents		98,637		98,637		—		—
Restricted cash
Money market funds		730		730		—		—
Total restricted cash		730		730		—		—
Short-term investments
Certificates of deposit		1,808		—		1,808		—
Corporate bonds		109,563		—		109,563		—
U.S. government agency bonds		1,008		—		1,008		—
Municipal bonds		42,038		—		42,038		—
Total short-term investments		154,417		—		154,417		—
Total financial assets	$	253,784	$	99,367	$	154,417	$	—

The following table summarizes the basis used to measure certain financial assets and liabilities at fair value on a recurring basis in the Company’s consolidated balance sheets at December 31, 2012 (in thousands):

	Balance as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
Money market funds	$	136,314	$	136,314	$	—	$	—
Total cash equivalents		136,314		136,314		—		—
Restricted cash
Money market funds		514		514		—		—
Total restricted cash		514		514		—		—
Short-term investments
Certificates of deposit		502		—		502		—
Corporate bonds		66,989		—		66,989		—
U.S. government agency bonds		1,013		—		1,013		—
Municipal bonds		11,826		—		11,826		—
Total short-term investments		80,330		—		80,330		—
Total financial assets	$	217,158	$	136,828	$	80,330	$	—

Business Segment

The Company has one operating segment consisting of various products and services related to its online marketplace of accommodation rental listings. The Company’s chief operating decision maker is considered to be the Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance of the business and other activities at the single operating segment level.

Cash and Cash Equivalents

Cash and cash equivalents include investments in money market funds and certificates of deposit that are readily convertible into cash. Cash and cash equivalents are stated at cost, which approximates fair value. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consisted of the following at June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013		December 31, 2012
Demand deposit accounts	$	83,242	$	53,164
Money market funds		98,637		136,314
Total	$	181,879	$	189,478

Restricted Cash

Restricted cash of $730,000 and $514,000 at June 30, 2013 and December 31, 2012, respectively, was held in money market funds owned by the Company in conjunction with leased office space and to secure credit card availability and reimbursable direct debits due from the Company.

Short-term Investments

Short-term investments generally consist of marketable securities that have original maturities greater than ninety days as of the date of purchase. Investments in which the Company has the ability and intent, if necessary, to liquidate in order to support its current operations, including those with contractual maturities greater than one year from the date of purchase, are classified as short-term. The Company’s investment securities are classified as available-for-sale and are presented at estimated fair value with any unrealized gains and losses included in other comprehensive income (loss).

Cash flows from purchases, sales and maturities of available-for-sale securities are classified as cash flows from investing activities and reported gross, including any related premiums or discounts. Premiums related to purchases of available-for-sale securities were $6,435,000 and $1,987,000 during the six months ended June 30, 2013 and 2012, respectively. Fair values are based on quoted market prices. Short-term investments consisted of the following at June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Certificates of deposit	$	1,811	$	—	$	(3	)	$	1,808
Corporate bonds		109,794		69		(300	)		109,563
U.S. government agency bonds		1,007		1		—			1,008
Municipal bonds		42,321		5		(288	)		42,038
Total short-term investments	$	154,933	$	75	$	(591	)	$	154,417

	December 31, 2012
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Certificates of deposit	$	502	$	—	$	—		$	502
Corporate bonds		66,918		116		(45	)		66,989
U.S. government agency bonds		1,011		2		—			1,013
Municipal bonds		11,817		9		—			11,826
Total short-term investments	$	80,248	$	127	$	(45	)	$	80,330

For fixed income securities that have unrealized losses as of June 30, 2013, the Company does not have the intent to sell any of these investments and it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. The Company has evaluated these fixed income securities and determined that no credit losses exist. Accordingly, the Company has determined that the unrealized losses on fixed income securities as of June 30, 2013 were temporary in nature.

The following table summarizes the contractual underlying maturities of the Company’s short-term investments at June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013
	Less than 1 Year		1 to 3 Years		Total
Certificates of deposit	$	—	$	1,808	$	1,808
Corporate bonds		56,634		52,929		109,563
U.S. government agency bonds		1,008		—		1,008
Municipal bonds		7,781		34,257		42,038
Total short-term investments	$	65,423	$	88,994	$	154,417

	December 31, 2012
	Less than 1 Year		1 to 3 Years		Total
Certificates of deposit	$	3	$	499	$	502
Corporate bonds		41,307		25,682		66,989
U.S. government agency bonds		—		1,013		1,013
Municipal bonds		8,249		3,577		11,826
Total short-term investments	$	49,559	$	30,771	$	80,330

Non-marketable Equity Investment

During the six months ended June 30, 2013, the Company invested $3,667,000 for a non-controlling equity interest in a privately-held company in China. As of June 30, 2013, the total carrying value of the Company’s investment in the privately-held company was $10,113,000. The Company’s investment in the privately-held company is reported using the cost method of accounting or marked down to fair value when an event or circumstance indicates an other-than-temporary decline in value has occurred. It was not practicable to estimate the fair value of this asset as of June 30, 2013. No event or circumstance indicating an other-than-temporary decline in value of the Company’s interest in the non-marketable equity investment was identified. This investment is recorded in other non-current assets on the consolidated balance sheets.

Accounts Receivable

Accounts receivable are primarily generated from three sources. Amounts due from credit card merchants who process the Company’s credit card sales from property listings and remit the proceeds to the Company are the primary source of accounts receivable. Accounts receivable are also generated from Internet display advertising amounts due in the ordinary course of business as well as amounts due to the Company for property listings or other products purchased on account. Accounts receivable from Internet display advertising revenue and products purchased on account are recorded at the invoiced amount and are non-interest bearing. Accounts receivable outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts by estimating losses on receivables based on known troubled accounts and historical experiences of losses incurred.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Computer equipment and purchased software are generally depreciated over three years. Furniture and fixtures are generally depreciated over five to ten years. Leasehold improvements are depreciated on a straight-line basis over the shorter of the contractual lease period or their estimated useful life. Upon disposal, property and equipment and the related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in the statements of operations. Ordinary maintenance and repairs are charged to expense, while expenditures that extend the physical or economic life of the assets are capitalized.

The Company capitalizes certain internally developed software and website development costs. These capitalized costs were approximately $28,076,000 and $23,985,000 at June 30, 2013 and December 31, 2012, respectively, and are included in property and equipment, net, in the balance sheet. Internally developed software costs are generally depreciated over five years.

The Company recorded depreciation expense on internally developed software and website development costs as follows for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Depreciation expense on internally developed software and website development costs	$	1,020	$	558	$	1,752	$	1,385

Goodwill and Intangible Assets

Goodwill arises from business combinations and is measured as the excess of the purchase consideration over the sum of the acquisition-date fair values of tangible and identifiable intangible assets acquired, less any liabilities assumed.

Goodwill and intangible assets deemed to have indefinite useful lives, such as certain trade names, are not amortized. Tests for impairment of goodwill and indefinite-lived intangible assets are performed on an annual basis as of October 1, or when events or circumstances indicate that the carrying amount of these assets may not be recoverable.

Circumstances that could trigger an impairment test outside of the annual test include but are not limited to: a significant adverse change in the business climate or legal factors; adverse cash flow trends; an adverse action or assessment by a regulator; unanticipated competition; loss of key personnel; decline in stock price; and the results of tests for recoverability of a significant asset group. The Company determined that no triggering event occurred during any of the periods presented.

For goodwill and indefinite lived intangible assets, the Company completes what is referred to as the “Step 0” analysis, which involves evaluating qualitative factors, including macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance related to its goodwill and its indefinite lived intangible assets. If the Company’s “Step 0” analysis indicates that it is more likely than not that the fair value of a reporting unit or of an indefinite lived intangible asset is less than its carrying amount, the Company would perform a quantitative two-step impairment test. The quantitative analysis compares the fair value of the Company’s reporting unit or indefinite-lived intangible assets to its carrying amount, and an impairment loss is recognized equivalent to the excess of the carrying amount over fair value. If, after assessing the totality of events or circumstances, the Company determines that it is more likely than not that the fair value of a reporting unit or indefinite lived intangible asset exceeds its carrying amount, then the quantitative impairment tests are unnecessary.

The Company’s annual evaluation of goodwill and indefinite-lived intangible assets for impairment was as of October 1, 2012, and the Company determined that the quantitative tests were not necessary.

The determination of whether or not goodwill or indefinite-lived intangible assets have become impaired involves a significant level of judgment. Changes in the Company’s strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of goodwill or intangible assets.

No impairment of goodwill or indefinite-lived intangible assets was identified in any of the periods presented.

Identifiable intangible assets consist of trade names, customer listings, technology, domain names and contractual non-compete agreements associated with acquired businesses. Intangible assets with finite lives are amortized over their estimated useful lives on a straight-line basis and reviewed for impairment whenever events or changes in circumstances indicate that an asset’s carrying value may not be recoverable (see Note 3). The straight-line method of amortization represents the Company’s best estimate of the distribution of the economic value of the identifiable intangible assets.

Impairment of Long-lived Assets

The Company evaluates long-lived assets held for use, such as property and equipment, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated future undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value in the period in which the determination is made. No impairments of long-lived assets have been recorded during any of the periods presented.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an agreement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured.

The Company generates a significant portion of its revenue from customers purchasing online advertising services related to the listing of their properties for rent, primarily on a subscription basis over a fixed-term. The Company also generates revenue based on the number of traveler inquiries and reservation bookings for property listings on the Company’s websites, local and national Internet display advertisers, license of property management software and ancillary products and services.

Payments for term-based subscriptions received in advance of services being rendered are recorded as deferred revenue and recognized on a straight-line basis over the listing period. Revenue for inquiry-based contracts are determined on a fixed fee-per-inquiry as stated in the arrangement and recognized when the service has been performed.

Internet display advertising revenue is generated primarily from advertisements appearing on the Company’s websites. There are several types of Internet advertisements, and the way in which advertising revenue is earned varies among them. Depending upon the terms, revenue might be earned each time an impression is delivered, each time a user clicks on an ad, each time a graphic ad is displayed, or each time a user clicks-through on the ad and takes a specified action on the destination site. The Company recognizes advertising revenue on a cost-per-thousand (CPM) impression basis whereby advertisers pay the Company based on the number of times their ads appear on the Company’s websites.

The Company sells gift cards with no expiration date to travelers and does not charge administrative fees on unused cards. There is a portion of the gift card obligation that, based on historical redemption patterns, will not be used by the Company’s customers and is not required to be remitted to relevant jurisdictions, or breakage. At the point of sale, the Company recognizes breakage as deferred revenue and amortizes it over 48 months based on historical redemption patterns. The Company also records commission revenue for each gift card sale over the same 48-month redemption period.

The Company earns commission revenue for reservations made online through its websites, which is calculated as a percentage of the value of the reservation. This revenue is earned as the customers’ refund privileges lapse and is included in other revenue in the consolidated statement of operations.

Through its professional software for bed and breakfasts and professional property managers, the Company makes selected, online bookable properties available to online travel agencies and channel partners. The Company receives a percentage of the transaction value or a fee from the property manager for making this inventory available, which is recognized when earned. This revenue is included in other revenue in the consolidated statement of operations.

The Company generates revenue from the licensing of software products, the sale of maintenance agreements and the sale of hosted software solutions. For software license sales, one year of maintenance is typically included as part of the initial purchase price of the bundled offering with annual renewals of the maintenance component of the agreement following in subsequent years.

The Company recognizes revenue from the sale of perpetual licenses upon delivery, which generally occurs upon electronic transfer of the license key that makes the product available to the purchaser.

As software is usually sold with maintenance, the amount of revenue allocated to the software license is determined by estimating the fair value of the maintenance and subtracting it from the total invoice or contract amount. Vendor-specific objective evidence, or VSOE, of the fair value of maintenance services is determined by the standard published list pricing for maintenance renewals, as the Company generally charges list prices for maintenance renewals. In determining VSOE, the Company requires that a substantial majority of the selling price for maintenance services fall within a reasonably narrow pricing range. Maintenance and support revenue is recognized ratably over the term of the agreement beginning on the activation date. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met.

Sales of hosted software solutions are generally for a one-year period. Revenue is recognized on a straight-line basis over the contract term. Certain implementation services related to the hosting services are essential to the customer’s use of the hosting services. For sales of these hosting services where the Company is responsible for implementation, the Company recognizes implementation revenue ratably over the estimated period of the hosting relationship, which the Company considers to be three years. Recognition starts once the product has been made available to the customer.

Training and consulting revenue is recognized upon delivery of the training or consulting services to the end customer.

The Company accounts for sales incentives to customers as a reduction of revenue at the time that the revenue is recognized from the related product sale. The Company also reports revenue net of any sales tax collected.

Stock-Based Compensation

The cost of stock-based compensation is recognized in the financial statements based upon the estimated grant date fair value of the awards measured using the Black–Scholes valuation model. The fair value of restricted stock awards and units is determined based on the number of shares granted and the fair value of the Company’s common stock as of the grant date. Fair value is generally recognized as an expense on a straight-line basis, net of estimated forfeitures, over the employee requisite service period. When estimating forfeitures, the Company considers voluntary termination behaviors as well as trends of actual option forfeitures.

The Company uses the “with and without” approach in determining the order in which tax attributes are utilized. As a result, the Company only recognizes a tax benefit from stock-based awards in additional paid-in capital if an incremental tax benefit is realized after all other tax attributes currently available to the Company have been utilized. When tax deductions from stock-based awards are less than the cumulative book compensation expense, the tax effect of the resulting difference (“shortfall”) is charged first to additional paid-in capital to the extent of the Company’s pool of windfall tax benefits with any remainder recognized in income tax expense. The Company has determined that it has a sufficient windfall pool available and therefore no amounts have been recognized in income tax expense. In addition, the Company accounts for the indirect effects of stock-based awards on other tax attributes through the consolidated statements of operations.

The benefits of tax deductions in excess of recognized compensation costs are reported as financing cash inflows, but only when such excess tax benefits are realized by a reduction to current taxes payable.

The following table summarizes the excess tax benefit that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Excess tax benefit from stock-based compensation	$	2,887	$	1,927	$	4,245	$	2,530

This tax benefit has been recorded as additional paid-in capital on the Company’s consolidated balance sheets as of June 30, 2013 and December 31, 2012.

Income Taxes

The Company recognizes income taxes using an asset and liability approach. This approach requires the recognition of deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. The measurement of deferred taxes is based on provisions of the enacted tax law and the effects of future changes in tax laws or rates are not anticipated. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Evaluating the need for an amount of a valuation allowance for deferred tax assets requires significant judgment and analysis of the positive and negative evidence available, including past operating results, estimates of future taxable income, reversals of existing taxable temporary differences and the feasibility of tax planning in order to determine whether all or some portion of the deferred tax assets will not be realized. Based on the available evidence and judgment, the Company has determined that it is more likely than not that certain loss carryforwards will not be realized; therefore, the Company has established a valuation allowance for such deferred tax assets to reduce the loss carryforward assets to amounts expected to be utilized.

The Company may be subject to income tax audits by the respective tax authorities in any or all of the jurisdictions in which the Company operates. The Company is currently undergoing an audit at its subsidiary in Germany. Significant judgment is required in determining uncertain tax positions. The Company recognizes the benefit of uncertain income tax positions only if these positions are more likely than not to be sustained. Also, the recognized income tax benefit is measured at the largest amount that is more than 50% likely of being realized. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of an audit or the refinement of an estimate. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. The countries in which the Company may be subject to potential examination by tax authorities include the United States, Switzerland, the United Kingdom, Germany, France, Spain, the Netherlands, Brazil, Australia, Colombia, Italy and Thailand.

The calculation of the Company’s tax liabilities involves the inherent uncertainty associated with the application of complex tax laws. As a multinational corporation, the Company conducts its business in many countries and is subject to taxation in many jurisdictions. The taxation of the Company’s business is subject to the application of various and sometimes conflicting tax laws and regulations as well as multinational tax conventions. The Company’s effective tax rate is highly dependent upon the geographic distribution of its worldwide earnings or losses, the tax regulations and tax rates in each geographic region, the availability of tax credits and carryforwards, and the effectiveness of its tax planning strategies. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings. Consequently, taxing authorities may impose tax assessments or judgments against the Company that could materially impact its tax liability and/or its effective income tax rate. The Company believes it has adequately provided in its financial statements for additional taxes that it estimates may be assessed by the various taxing authorities. While the Company believes that it has adequately provided for all uncertain tax positions, amounts asserted by tax authorities could be greater or less than the Company’s accrued position. These tax liabilities, including the interest and penalties, are adjusted pursuant to a settlement with tax authorities, completion of audit, refinement of estimates or expiration of various statutes of limitation.

Foreign Currency Translation

The functional currency of the Company’s foreign subsidiaries is generally their respective local currency. The financial statements of the Company’s international operations are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities, the historical exchange rate for stockholders’ equity, and a weighted average exchange rate for each period for revenue, expenses, and gains and losses. Foreign currency translation adjustments are recorded as a separate component of stockholders’ equity. Gains and losses from foreign currency denominated transactions are recorded in other income (expense) in the Company’s consolidated statements of operations.

The following table summarizes the foreign currency transaction gain (loss) that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2013		2012			2013			2012
Foreign currency transaction gain (loss)	$	67	$	(1,541	)	$	(1,468	)	$	(2,292	)

Derivative Financial Instruments

As a result of the Company’s international operations, it is exposed to various market risks that may affect its consolidated results of operations, cash flows and financial position. These market risks include, but are not limited to, fluctuations in currency exchange rates. The Company’s primary foreign currency exposures are in Euros and British Pound Sterling. As a result, the Company faces exposure to adverse movements in currency exchange rates as the financial results of its operations are translated from local currency into U.S. dollars upon consolidation. Additionally, foreign exchange rate fluctuations on transactions denominated in currencies other than the functional currency result in gains and losses that are reflected in other income (expense) in the Company’s consolidated statements of operations.

The Company may enter into derivative instruments to hedge certain net exposures of nonfunctional currency denominated assets and liabilities, primarily related to intercompany loans, even though it does not elect to apply hedge accounting or hedge accounting does not apply. Gains and losses resulting from a change in fair value for these derivatives are reflected in the period in which the change occurs and are recognized on the consolidated statement of operations in other income (expense). Cash flows from these contracts are classified within net cash provided by operating activities on the consolidated statements of cash flows.

The Company does not use financial instruments for trading or speculative purposes. The Company recognizes all derivative instruments on the balance sheet at fair value and its derivative instruments are generally short-term in duration. The Company is exposed to the risk that counterparties to derivative contracts may fail to meet their contractual obligations. Derivative contracts outstanding were not material as of June 30, 2013 or December 31, 2012.

Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted income per share is computed by dividing net income by the weighted average common shares outstanding plus potentially dilutive common shares.

Restricted stock awards provide the holder of unvested shares the right to participate in dividends declared on the Company’s common stock. Accordingly, these shares are included in the weighted average shares outstanding for the computation of basic earnings per share in periods of undistributed earnings. Restricted stock awards are excluded from the basic earnings per share in periods of undistributed losses as the holders are not contractually obligated to participate in the losses of the Company. Unvested restricted stock units do not provide the holder the right to participate in dividends declared on the Company’s common stock. Accordingly, these shares are excluded in the weighted average shares outstanding for the computation of basic earnings per share in periods of undistributed earnings or losses.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss), cumulative foreign currency translation adjustments, and unrealized gains and losses on available-for-sale securities.

Recent Accounting Pronouncements

In January 2013, the Financial Accounting Standards Board (“FASB”) issued amended guidance that enhances disclosure requirements about the nature of an entity’s right to offset and related arrangements associated with its derivative instruments, repurchase agreements, and securities lending transactions. This new guidance requires the disclosure of the gross amounts subject to rights of offset, amounts offset in accordance with the accounting standards followed, and the related net exposure. This new guidance is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. This guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows since it is an enhancement to current required disclosures.

In February 2013, the FASB issued new accounting guidance that improves the reporting of reclassifications out of accumulated other comprehensive income. This new guidance requires entities to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income when applicable or to cross-reference the reclassifications with other disclosures that provide additional detail about the reclassifications made when the reclassifications are not made to net income. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2012. This guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows since it is an enhancement to current required disclosures.

In July 2013, the FASB issued new accounting guidance that requires that unrecognized tax benefits be classified as an offset to deferred tax assets to the extent of any net operating loss carryforwards, similar tax loss carryforwards, or tax credit carryforwards available at the reporting date in the applicable tax jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. An exception would apply if the tax law of the tax jurisdiction does not require the Company to use, and it does not intend to use, the deferred tax asset for such purpose. This guidance will have no impact to the Company.

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Total Stock-Based Compensation Expense

The following table summarizes the total stock-based compensation expense that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Cost of revenue	$	827	$	495	$	1,672	$	911
Product development		2,501		1,204		4,228		2,435
Sales and marketing		2,278		2,039		3,886		3,309
General and administrative		4,530		3,210		7,806		5,491
Total	$	10,136	$	6,948	$	17,592	$	12,146

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Subsequent Events

6 Months Ended

Jun. 30, 2013

Subsequent Events [Abstract]

Subsequent Events

10. Subsequent Events

In July 2013, the Company entered into a lease agreement (the “Lease”) for approximately 115,000 square feet of office space in Austin, Texas. The term of the Lease is eleven and one-half (11 ½) years and is scheduled to commence on September 1, 2014. The commencement date may be adjusted in the event the landlord does not complete construction of the building prior to such date. In the event the landlord does not commence construction by December 15, 2013, or deliver the building subject to the Lease to the Company by December 15, 2014, the Company has the option to terminate the Lease. Future minimum lease payments under the Lease will range from $108,000 per month to $269,000 per month.

In July 2013, the Company signed an agreement to acquire 100% of the outstanding stock of travelmob Pte. Ltd. (“travelmob”). The acquisition is expected to close in the third quarter of 2013. Travelmob features over 14,000 Asia Pacific short- term rental listings including luxury villas, urban apartments, houseboats, a private island and even some shared spaces. As part of the acquisition, the Company agreed to sell a non-controlling interest in travelmob back to certain sellers and will make a $7.0 million investment in the business, leaving the Company with a controlling interest in travelmob for total cash consideration paid by the Company of approximately $18.5 million. Under the terms of the acquisition agreement, the Company will loan the business up to $8.0 million over the next few years and has a call option to purchase the remaining non-controlling interest of travelmob in two installments for periods defined in the agreement beginning on December 31, 2015 and December 31, 2016, respectively, for amounts to be determined based on operating results of travelmob. In the event the Company does not exercise its call option to purchase the remaining shares of travelmob by such deadlines, the remaining travelmob shareholders have a put option to require the Company to repurchase their remaining interest in two installments for periods defined in the agreement beginning on January 31, 2016 and February 1, 2017, respectively, upon the expiration of the Company’s call option periods.

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Income Taxes - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income Taxes [Line Items]
Income tax expense (benefit)	$ 3,286,000	$ 3,791,000	$ 4,831,000	$ 4,681,000
Unrecognized tax benefits	6,377,000		6,377,000
Unrecognized tax benefits increase for tax positions related to prior year	340,000		573,000
2012 Research and Experiment
Income Taxes [Line Items]
Income tax expense (benefit)			$ (614,000)

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Summary of Amortization Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Goodwill And Intangible Assets Disclosure [Abstract]
Amortization expense	$ 2,995	$ 3,282	$ 6,175	$ 5,730

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Net Income Per Share (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net Income Per Share of Common Stock

The following table sets forth the computation of basic and diluted net income per share of common stock (in thousands, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Numerator
Net income	$	5,470	$	2,856	$	10,765	$	5,257
Denominator
Weighted average common shares outstanding-basic		84,920		82,262		84,482		81,816
Dilutive effect of stock options, warrants and restricted stock units		2,727		2,475		2,701		2,822
Weighted average common shares outstanding-diluted		87,647		84,737		87,183		84,638
Net income per share:
Basic	$	0.06	$	0.03	$	0.13	$	0.06
Diluted	$	0.06	$	0.03	$	0.12	$	0.06

Common Equivalent Shares Excluded from Calculation of Net Loss Per Share as their Inclusion Would have been Anti-Dilutive

The following common equivalent shares were excluded from the calculation of net income per share as their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Stock options and warrants		3,525		5,402		3,368		4,762
Restricted stock awards		3		622		467		17
Total common equivalent shares excluded		3,528		6,024		3,835		4,779

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Summary of Income Tax Expenses

The following table summarizes the total income tax expense that the Company recorded, and the related effective tax rate, for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Income tax expense	$	3,286		$	3,791		$	4,831		$	4,681
Effective tax rate		37.5	%		57.0	%		31.0	%		47.1	%

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Accumulated Other Comprehensive Income (Loss) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Equity [Abstract]
Foreign currency translation	$ (10,273)	$ (5,530)
Unrealized gains (losses) on short-term investments	(517)	80
Total	$ (10,790)	$ (5,450)

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Summary of Excess Tax Benefit (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Accounting Policies [Abstract]
Excess tax benefit from stock-based compensation	$ 2,887	$ 1,927	$ 4,245	$ 2,530

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Accrued Expenses (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Payables And Accruals [Abstract]
Compensation and related benefits	$ 14,448	$ 16,828
Gift cards	4,964	5,655
Taxes	3,234	3,362
Marketing	3,466	1,130
Other	7,438	6,881
Total	$ 33,550	$ 33,856

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Computation of Basic and Diluted Net Income Per Share of Common Stock (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Numerator
Net income	$ 5,470	$ 2,856	$ 10,765	$ 5,257
Denominator
Weighted average common shares outstanding-basic	84,920	82,262	84,482	81,816
Dilutive effect of stock options, warrants and restricted stock units	2,727	2,475	2,701	2,822
Weighted average common shares outstanding-diluted	87,647	84,737	87,183	84,638
Basic	$ 0.06	$ 0.03	$ 0.13	$ 0.06
Diluted	$ 0.06	$ 0.03	$ 0.12	$ 0.06

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Short -Term Investments (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Gross Cost	$ 154,933	$ 80,248
Gross Unrealized Gains	75	127
Gross Unrealized Losses	(591)	(45)
Estimated Fair Value	154,417	80,330
Certificates of deposit
Schedule of Available-for-sale Securities [Line Items]
Gross Cost	1,811	502
Gross Unrealized Gains
Gross Unrealized Losses	(3)
Estimated Fair Value	1,808	502
Corporate bonds
Schedule of Available-for-sale Securities [Line Items]
Gross Cost	109,794	66,918
Gross Unrealized Gains	69	116
Gross Unrealized Losses	(300)	(45)
Estimated Fair Value	109,563	66,989
U.S. government agency bonds
Schedule of Available-for-sale Securities [Line Items]
Gross Cost	1,007	1,011
Gross Unrealized Gains	1	2
Gross Unrealized Losses
Estimated Fair Value	1,008	1,013
Municipal bonds
Schedule of Available-for-sale Securities [Line Items]
Gross Cost	42,321	11,817
Gross Unrealized Gains	5	9
Gross Unrealized Losses	(288)
Estimated Fair Value	$ 42,038	$ 11,826

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Changes for Traveler Guarantees (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Commitments And Contingencies Disclosure [Abstract]
Traveler guarantee liability, beginning balance	$ 566	$ 247
Costs accrued for new vacation rentals	1,094	986
Guarantee obligations honored	(701)	(667)
Traveler guarantee liability, ending balance	$ 959	$ 566

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consists of the following at June 30, 2013 and December 31, 2012, respectively (in thousands):

	June 30, 2013			December 31, 2012
Foreign currency translation	$	(10,273	)	$	(5,530	)
Unrealized gains (losses) on short-term investments		(517	)		80
Total	$	(10,790	)	$	(5,450	)

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Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Statement Of Income And Comprehensive Income [Abstract]
Foreign currency translation adjustments, Tax	$ 0	$ 0	$ 0	$ 0
Unrealized gain (loss) on short-term investments, Tax	$ 0	$ 0	$ 0	$ 0

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities
Net income	$ 10,765	$ 5,257
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	6,357	5,089
Amortization of intangible assets	6,175	5,730
Amortization of premiums on securities and other	1,897	1,149
Stock-based compensation	17,592	12,146
Excess tax benefit from stock-based compensation	(4,245)	(2,530)
Deferred income taxes	(1,695)	(4,594)
Net realized/unrealized foreign exchange loss	257	914
Realized loss on foreign currency forwards	765	705
Changes in operating assets and liabilities, net of assets and liabilities assumed in business combinations:
Accounts receivable	(2,529)	(929)
Income tax receivable	(1,212)	(138)
Prepaid expenses and other assets	2	(6,660)
Accounts payable	(1,570)	1,281
Accrued expenses	1,944	2,531
Income tax payable	(5,883)	6,296
Deferred revenue	29,379	26,418
Other non-current liabilities	1,293	2,274
Net cash provided by operating activities	59,292	54,939
Cash flows from investing activities
Acquisition of businesses, net of cash acquired	(150)	(16,207)
Change in restricted cash	(246)	758
Purchases of intangibles and other assets	(551)	(155)
Purchases of non-marketable equity investment	(3,667)	(6,446)
Purchases of short-term investments	(100,460)	(41,460)
Proceeds from maturities and redemptions of marketable securities	23,880	19,664
Net settlement of foreign currency forwards	(765)	(705)
Purchases of property and equipment	(11,006)	(11,272)
Net cash used in investing activities	(92,965)	(55,823)
Cash flows from financing activities
Proceeds from exercises of options to purchase common stock	23,960	15,772
Excess tax benefit from stock-based compensation	4,245	2,530
Net cash provided by financing activities	28,205	18,302
Effect of exchange rate changes on cash	(2,131)	(925)
Net (decrease) increase in cash and cash equivalents	(7,599)	16,493
Cash and cash equivalents at beginning of period	189,478	118,208
Cash and cash equivalents at end of period	181,879	134,701
Cash paid for taxes	$ 12,116	$ 5,801

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Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2013

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

3. Goodwill and Other Intangible Assets

Goodwill

Changes in the Company’s goodwill balance for the year ended December 31, 2012 and the six months ended June 30, 2013 are summarized in the table below (in thousands):

Balance at December 31, 2011	$	301,015
Acquired in business combinations		11,190
Foreign currency translation adjustments		207
Balance at December 31, 2012		312,412
Foreign currency translation adjustments		(3,821	)
Balance at June 30, 2013	$	308,591

Intangible Assets

The Company’s intangible assets, excluding goodwill, consist primarily of intangible assets acquired in business combinations and were recorded at their estimated fair values on the date of acquisition. The finite-lived intangible assets are summarized in the table below (in thousands):

			June 30, 2013							December 31, 2012
	Useful Life (Years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Trade names and trademarks		10	$	23,830	$	(3,680	)	$	20,150	$	24,000	$	(2,474	)	$	21,526
Developed technology		2-8		26,165		(22,050	)		4,115		26,435		(20,983	)		5,452
Customer relationships		5-13		60,096		(38,152	)		21,944		60,321		(35,124	)		25,197
Non-compete agreements and domain names		2-5		3,371		(3,004	)		367		3,376		(2,853	)		523
Total			$	113,462	$	(66,886	)	$	46,576	$	114,132	$	(61,434	)	$	52,698

Amortization of non-compete agreements is recorded over the term of the agreements.

The following table summarizes the amortization expense that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Amortization expense	$	2,995	$	3,282	$	6,175	$	5,730

The Company has the following indefinite-lived intangible assets recorded in its consolidated balance sheets as of June 30, 2013 and December 31, 2012, respectively (in thousands):

	June 30, 2013		December 31, 2012
Trademarks, trade names and other	$	7,029	$	7,029

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Description of Business

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Description of Business

1. Description of Business

HomeAway, Inc. (the “Company”) operates an online vacation rental property marketplace that enables property owners and managers to market properties available for rental to vacation travelers who rely on the Company’s websites to search for and find available properties. These property owners and managers pay the Company to publish detailed property listings, including photographs, descriptions, location, pricing, availability and contact information. The Company also sells, itself or through third parties, complementary products, including travel guarantees, insurance products and property management software and services. Travelers use the network of websites to search for vacation rentals that meet their desired criteria, including location, size and price. Travelers that find properties that meet their requirements through the Company’s marketplace are able to contact property owners and managers directly by phone or through form-based communication tools on the Company’s websites.

The Company is a Delaware corporation headquartered in Austin, Texas.

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Summary of Rental Expenses (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Leases [Abstract]
Rental expense	$ 1,262	$ 1,123	$ 2,494	$ 2,127

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Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Segment	Jun. 30, 2012	Dec. 31, 2012
Significant Accounting Policies [Line Items]
Other income (expense)	$ 66,000	$ (1,582,000)	$ (1,525,000)	$ (2,310,000)
Income before income taxes	8,756,000	6,647,000	15,596,000	9,938,000
Number of operating segment			1
Available for sales securities, premium	6,435,000	1,987,000	6,435,000	1,987,000
Carrying value of non-marketable equity investment	3,667,000		3,667,000
Total carrying value of company investments	10,113,000		10,113,000
Primary sources of accounts receivable			3
Capitalized certain internally developed software	28,076,000		28,076,000		23,985,000
Recognized income tax positions, percentage	50.00%		50.00%
Money market funds
Significant Accounting Policies [Line Items]
Restricted cash	730,000		730,000		514,000
Breakage Revenue
Significant Accounting Policies [Line Items]
Revenue recognition period	48 months		48 months
Commission Revenue
Significant Accounting Policies [Line Items]
Revenue recognition period	48 months		48 months
Error Correction
Significant Accounting Policies [Line Items]
Other income (expense)	820,000
Income before income taxes	820,000
Income after income taxes	$ 486,000
Equipment, computer hardware and purchased computer software
Significant Accounting Policies [Line Items]
Property, plant and equipment useful life			3 years
Furniture and fixtures | Minimum
Significant Accounting Policies [Line Items]
Property, plant and equipment useful life			5 years
Furniture and fixtures | Maximum
Significant Accounting Policies [Line Items]
Property, plant and equipment useful life			10 years
Leasehold Improvements
Significant Accounting Policies [Line Items]
Property, plant and equipment useful life description			Shorter of the contractual lease period or their useful life.
Internally Developed Software and Website Development Costs
Significant Accounting Policies [Line Items]
Property, plant and equipment useful life			5 years

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Maturities of Short -Term Investment (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Investment [Line Items]
Short-term Investments, Less than 1 Year	$ 65,423	$ 49,559
Short-term Investments, 1 to 3 Years	88,994	30,771
Short-term Investments, fair value	154,417	80,330
Certificates of deposit
Investment [Line Items]
Short-term Investments, Less than 1 Year		3
Short-term Investments, 1 to 3 Years	1,808	499
Short-term Investments, fair value	1,808	502
Corporate Bonds
Investment [Line Items]
Short-term Investments, Less than 1 Year	56,634	41,307
Short-term Investments, 1 to 3 Years	52,929	25,682
Short-term Investments, fair value	109,563	66,989
U.S. government agency bonds
Investment [Line Items]
Short-term Investments, Less than 1 Year	1,008
Short-term Investments, 1 to 3 Years		1,013
Short-term Investments, fair value	1,008	1,013
Municipal bonds
Investment [Line Items]
Short-term Investments, Less than 1 Year	7,781	8,249
Short-term Investments, 1 to 3 Years	34,257	3,577
Short-term Investments, fair value	$ 42,038	$ 11,826

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Amortized Finite-Lived Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 113,462	$ 114,132
Accumulated Amortization	(66,886)	(61,434)
Net Carrying Amount	46,576	52,698
Trade names and trademarks
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	10 years
Gross Carrying Amount	23,830	24,000
Accumulated Amortization	(3,680)	(2,474)
Net Carrying Amount	20,150	21,526
Developed technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	26,165	26,435
Accumulated Amortization	(22,050)	(20,983)
Net Carrying Amount	4,115	5,452
Developed technology | Minimum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	2 years
Developed technology | Maximum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	8 years
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	60,096	60,321
Accumulated Amortization	(38,152)	(35,124)
Net Carrying Amount	21,944	25,197
Customer relationships | Minimum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	5 years
Customer relationships | Maximum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	13 years
Non-compete agreements and domain names
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	3,371	3,376
Accumulated Amortization	(3,004)	(2,853)
Net Carrying Amount	$ 367	$ 523
Non-compete agreements and domain names | Minimum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	2 years
Non-compete agreements and domain names | Maximum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	5 years

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Common Equivalent Shares Excluded from Calculation of Net Loss Per Share as their Inclusion Would have been Anti-Dilutive (Detail) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common equivalent shares excluded from the calculation of net income per share	3,528	6,024	3,835	4,779
Stock options and warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common equivalent shares excluded from the calculation of net income per share	3,525	5,402	3,368	4,762
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common equivalent shares excluded from the calculation of net income per share	3	622	467	17

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Total Stock-Based Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 10,136	$ 6,948	$ 17,592	$ 12,146
Cost of revenue
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	827	495	1,672	911
Product development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	2,501	1,204	4,228	2,435
Sales and marketing
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	2,278	2,039	3,886	3,309
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 4,530	$ 3,210	$ 7,806	$ 5,491

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Accounts receivable, Allowance for doubtful accounts	$ 669	$ 633
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	350,000,000	350,000,000
Common stock, shares issued	85,202,582	83,441,153
Common stock, shares outstanding	85,202,582	83,441,153

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

6. Stock-Based Compensation

During the three and six months ended June 30, 2013, the Company issued an aggregate of 830,402 and 1,339,501 restricted stock units, respectively, under its 2011 Equity Incentive Plan, or 2011 Plan, for an aggregate fair value of $26,014,000 and $38,880,000, respectively. Additionally, during the three and six months ended June 30, 2013, the Company issued an aggregate of 816,211 and 1,509,842 options, respectively, to purchase common stock under the 2011 Plan for an aggregate fair value of $11,631,000 and $20,861,000, respectively.

The following table summarizes the total stock-based compensation expense that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Cost of revenue	$	827	$	495	$	1,672	$	911
Product development		2,501		1,204		4,228		2,435
Sales and marketing		2,278		2,039		3,886		3,309
General and administrative		4,530		3,210		7,806		5,491
Total	$	10,136	$	6,948	$	17,592	$	12,146

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Condensed Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 5,470	$ 2,856	$ 10,765	$ 5,257
Other comprehensive income (loss):
Foreign currency translation adjustments (net of $0 tax)	(324)	(3,900)	(4,743)	(2,224)
Unrealized gain (loss) on short-term investments (net of $0 tax)	(495)	(123)	(597)	139
Total other comprehensive income (loss)	(819)	(4,023)	(5,340)	(2,085)
Comprehensive income (loss)	$ 4,651	$ (1,167)	$ 5,425	$ 3,172

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 181,879	$ 189,478
Short-term investments	154,417	80,330
Accounts receivable, net of allowance for doubtful accounts of $669 and $633 as of June 30, 2013 and December 31, 2012, respectively	18,549	16,343
Income tax receivable	1,702	775
Prepaid expenses and other current assets	7,137	7,312
Restricted cash	176	284
Deferred tax assets	5,364	5,425
Total current assets	369,224	299,947
Property and equipment, net	37,048	32,901
Goodwill	308,591	312,412
Intangible assets, net	53,605	59,727
Restricted cash	554	230
Deferred tax assets	1,633	1,807
Other non-current assets	18,778	15,651
Total assets	789,433	722,675
Current liabilities:
Accounts payable	5,279	6,613
Income tax payable	593	11,137
Accrued expenses	33,550	33,856
Deferred revenue	154,988	126,351
Total current liabilities	194,410	177,957
Deferred revenue, less current portion	2,491	2,879
Deferred tax liabilities	15,754	17,615
Other non-current liabilities	8,522	7,191
Total liabilities	221,177	205,642
Commitments and contingencies (Note 5)
Stockholders' equity
Common stock: $0.0001 par value; 350,000,000 shares authorized; 85,202,582 and 83,441,153 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively	9	8
Additional paid-in capital	664,497	618,700
Accumulated other comprehensive loss	(10,790)	(5,450)
Accumulated deficit	(85,460)	(96,225)
Total stockholders' equity	568,256	517,033
Total liabilities and stockholders' equity	$ 789,433	$ 722,675

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Subsequent Events - Additional Information (Detail) (Subsequent Event, USD $)	1 Months Ended
	Jul. 31, 2013 sqft
Subsequent Event [Line Items]
Square feet of leased office space	115,000
Lease Term	11 years 6 months
Travelmob
Subsequent Event [Line Items]
Percentage of voting right acquired	100.00%
Cash consideration of business acquisition	$ 18,500,000
Investment in business	7,000,000
Number of rental listings	14,000
Minimum
Subsequent Event [Line Items]
Future minimum payment per month	108,000
Maximum
Subsequent Event [Line Items]
Future minimum payment per month	269,000
Maximum | Travelmob
Subsequent Event [Line Items]
Loan made by company	$ 8,000,000

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Fair Value of Financial Assets and Liabilities Measured on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	$ 154,417	$ 80,330
Certificates of deposit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	1,808	502
Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	109,563	66,989
U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	1,008	1,013
Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	42,038	11,826
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	98,637	136,314
Restricted cash	730	514
Short-term investments	154,417	80,330
Total financial assets	253,784	217,158
Fair Value, Measurements, Recurring | Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	98,637	136,314
Restricted cash	730	514
Fair Value, Measurements, Recurring | Certificates of deposit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	1,808	502
Fair Value, Measurements, Recurring | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	109,563	66,989
Fair Value, Measurements, Recurring | U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	1,008	1,013
Fair Value, Measurements, Recurring | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	42,038	11,826
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	98,637	136,314
Restricted cash	730	514
Short-term investments
Total financial assets	99,367	136,828
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	98,637	136,314
Restricted cash	730	514
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | Certificates of deposit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents
Restricted cash
Short-term investments	154,417	80,330
Total financial assets	154,417	80,330
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents
Restricted cash
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Certificates of deposit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	1,808	502
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	109,563	66,989
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	1,008	1,013
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	42,038	11,826
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents
Restricted cash
Short-term investments
Total financial assets
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring | Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents
Restricted cash
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring | Certificates of deposit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring | U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

Summary of Rental Expense

The following table summarizes the total rental expense that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Rental expense	$	1,262	$	1,123	$	2,494	$	2,127

Changes for Traveler Guarantees

Expected future claims for traveler guarantees, which are presented as a current liability in the Company’s consolidated balance sheets, and changes for the guarantees are as follows (in thousands):

Traveler guarantee liability at December 31, 2011	$	247
Costs accrued for new vacation rentals		986
Guarantee obligations honored		(667	)
Traveler guarantee liability at December 31, 2012		566
Costs accrued for new vacation rentals		1,094
Guarantee obligations honored		(701	)
Traveler guarantee liability at June 30, 2013	$	959

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Stock-Based Compensation - Additional Information (Detail) (Stock Incentive Plan 2011, USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013
Restricted stock units
Stock Based Compensation And Stockholders Equity [Line Items]
Share based compensation, Number of shares issued	830,402	1,339,501
Restricted stock units issued, aggregate fair value	$ 26,014,000	$ 38,880,000
Stock options
Stock Based Compensation And Stockholders Equity [Line Items]
Share based compensation, Number of shares issued	816,211	1,509,842
Common stock issued pursuant to stock awards, aggregate fair value	$ 11,631,000	$ 20,861,000

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Indefinite-Lived Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Goodwill And Intangible Assets Disclosure [Abstract]
Trademarks, trade names and other	$ 7,029	$ 7,029

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Summary of Foreign Currency Transaction Gain (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Accounting Policies [Abstract]
Foreign currency transaction gain (loss)	$ 67	$ (1,541)	$ (1,468)	$ (2,292)

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Changes in Goodwill Balance (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Goodwill And Intangible Assets Disclosure [Abstract]
Beginning balance	$ 312,412	$ 301,015
Acquired in business combinations		11,190
Foreign currency translation adjustments	(3,821)	207
Ending balance	$ 308,591	$ 312,412

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

5. Commitments and Contingencies

Leases

The Company leases its facilities and certain office equipment under non-cancellable operating leases.

The following table summarizes the total rental expense that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Rental expense	$	1,262	$	1,123	$	2,494	$	2,127

Guarantees

The Company offers two guarantee products to travelers: Basic Rental Guarantee and Carefree Rental Guarantee. The Basic Rental Guarantee is offered to travelers that book a vacation rental property listed on any one of the Company’s websites to protect 50% of their vacation rental payments up to $1,000 against Internet fraud. Travelers may also purchase additional protection to cover 100% of vacation rental payments up to $10,000 against Internet fraud, misrepresentation, wrongful denial of entry, wrongful deposit loss or, beginning in 2012, losses from phishing claims by the purchase of the Carefree Rental Guarantee. The Company does not maintain insurance from any third party for claims under these guarantees, and any amounts payable for claims made under these guarantees are payable by the Company. Amounts recorded for estimated future claims under the guarantees are based on historical experience and estimates of potential future claims are recorded either in cost of revenue or in general and administrative expense in the Company’s consolidated statement of operations depending on whether the expense is related to estimated claims under the Basic Rental Guarantee or to the Carefree Rental Guarantee.

Expected future claims for traveler guarantees, which are presented as a current liability in the Company’s consolidated balance sheets, and changes for the guarantees are as follows (in thousands):

Traveler guarantee liability at December 31, 2011	$	247
Costs accrued for new vacation rentals		986
Guarantee obligations honored		(667	)
Traveler guarantee liability at December 31, 2012		566
Costs accrued for new vacation rentals		1,094
Guarantee obligations honored		(701	)
Traveler guarantee liability at June 30, 2013	$	959

The Company maintains a guarantee of £5,000,000 (approximately $7,600,000 as of June 30, 2013) in favor of a bank in the United Kingdom for extending credit to the Company in connection with the wholly owned United Kingdom subsidiary’s business of collecting its subscription revenues in advance via credit card payments.

Legal

From time to time, the Company is involved in litigation relating to claims arising in the ordinary course of business. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using available information. Views on estimated losses are developed by management in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. After taking all of the above factors into account, the Company determines whether an estimated loss from a contingency related to litigation should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The Company further determines whether an estimated loss from a contingency related to litigation should be disclosed by assessing whether a material loss is deemed reasonably possible. Such disclosures will include an estimate of the additional loss or range of loss or will state that such an estimate cannot be made.

Management believes that there are no claims or actions pending or threatened against the Company, the ultimate disposition of which would have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

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Schedule of Cash and Cash Equivalents (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
Cash and Cash Equivalents [Line Items]
Demand deposit accounts	$ 181,879	$ 189,478	$ 134,701	$ 118,208
Demand Deposits
Cash and Cash Equivalents [Line Items]
Demand deposit accounts	83,242	53,164
Money market funds
Cash and Cash Equivalents [Line Items]
Demand deposit accounts	$ 98,637	$ 136,314

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Commitments and Contingencies - Additional Information (Detail)	Jun. 30, 2013 Subsidiary's Bank Credit, United Kingdom USD ($)	Jun. 30, 2013 Subsidiary's Bank Credit, United Kingdom GBP (£)	Jun. 30, 2013 Basic Rental Guarantee USD ($)	Jun. 30, 2013 Carefree Rental Guarantee USD ($)
Commitments and Contingencies [Line Items]
Guarantee maximum exposure, percentage			50.00%	100.00%
Guarantee maximum exposure amount	$ 7,600,000	£ 5,000,000	$ 1,000	$ 10,000

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Income Taxes

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes

The following table summarizes the total income tax expense that the Company recorded, and the related effective tax rate, for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Income tax expense	$	3,286		$	3,791		$	4,831		$	4,681
Effective tax rate		37.5	%		57.0	%		31.0	%		47.1	%

At June 30, 2013, the Company’s effective tax rate estimate for the year ended December 31, 2013 differed from the statutory rate primarily due to non-deductible stock compensation charges, state taxes, amortization of tax charges on the intercompany sale of assets that were deferred in prior periods, which is partially offset by the benefit of disqualifying dispositions of incentive stock options, the effect of different statutory tax rates in foreign jurisdictions, and the federal research and experimentation tax credit. At June 30, 2012, the Company’s effective tax rate estimate for the year ended December 31, 2012 differed from the statutory rate primarily due to non-deductible stock compensation charges, state taxes, the effect of different statutory tax rates in foreign jurisdictions, and amortization of tax charges on the intercompany sale of assets that were deferred in prior periods, which is partially offset by the benefit of disqualifying dispositions of incentive stock options.

The federal research and experimentation tax credit was extended on January 2, 2013 by the signing of the American Taxpayer Relief Act of 2012, or the Act. The Act retroactively extended this tax credit from January 1, 2012 through December 31, 2013. Because the Act was enacted during 2013, an income tax benefit of $614,000 related to the 2012 research and experimentation tax credit is reflected as a discrete item in the Company’s results of operations for the quarter ended March 31, 2013.

The balance of unrecognized tax benefits as of June 30, 2013 is approximately $6,377,000. During the three and six months ended June 30, 2013, the balance increased by $340,000 and $573,000, respectively, for tax positions related to the prior year.

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Accrued Expenses

6 Months Ended

Jun. 30, 2013

Payables And Accruals [Abstract]

Accrued Expenses

4. Accrued Expenses

The Company’s accrued expenses are comprised of the following at June 30, 2013, and December 31, 2012 (in thousands):

	June 30, 2013		December 31, 2012
Compensation and related benefits	$	14,448	$	16,828
Gift cards		4,964		5,655
Taxes		3,234		3,362
Marketing		3,466		1,130
Other		7,438		6,881
Total	$	33,550	$	33,856

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Consolidated Statement of Changes in Stockholders' Equity (USD $) In Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit
Beginning Balance at Dec. 31, 2012	$ 517,033	$ 8	$ 618,700	$ (5,450)	$ (96,225)
Beginning Balance, (in Shares) at Dec. 31, 2012		83,441
Issuance of stock under Company plans, net of shares withheld for taxes	23,961	1	23,960
Issuance of stock under Company plans, net of shares withheld for taxes, (in Shares)		1,762
Stock-based compensation	17,592		17,592
Excess tax benefits related to employee stock options	4,245		4,245
Other comprehensive loss	(5,340)			(5,340)
Net income	10,765				10,765
Ending Balance at Jun. 30, 2013	$ 568,256	$ 9	$ 664,497	$ (10,790)	$ (85,460)
Ending Balance, (in Shares) at Jun. 30, 2013		85,203

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Summary of Income Tax Expenses (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income Tax Disclosure [Abstract]
Income tax expense	$ 3,286	$ 3,791	$ 4,831	$ 4,681
Effective tax rate	37.50%	57.00%	31.00%	47.10%

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Summary of Depreciation Expenses on Internally Developed Software and Website Development Costs (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Depreciation and Other Amortization Expenses [Line Items]
Depreciation expense on internally developed software and website development costs			$ 6,357	$ 5,089
Internally Developed Software and Website Development Costs
Depreciation and Other Amortization Expenses [Line Items]
Depreciation expense on internally developed software and website development costs	$ 1,020	$ 558	$ 1,752	$ 1,385

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of HomeAway, Inc. and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission, or the SEC. All significant intercompany transactions and balances have been eliminated. In the opinion of the Company’s management, the accompanying interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal recurring adjustments and those items discussed in these Notes, necessary for a fair presentation of the Company’s financial position, as of June 30, 2013; results of operations for the three and six months ended June 30, 2013 and June 30, 2012; comprehensive income for the three and six months ended June 30, 2013 and June 30, 2012; cash flows for the six months ended June 30, 2013 and June 30, 2012; and stockholders’ equity for the six months ended June 30, 2013. Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012. Operating results for this interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, or for any other period.

Out of Period Adjustment

Out of Period Adjustment

During the three months ended June 30, 2013, the Company identified a prior period accounting error related to certain foreign currency hedging instruments which resulted in the understatement of other current assets and other income (expense). This error was not material to any prior period results of operations. Therefore, the Company recorded the error correction in the same quarter it was identified, which increased other income and income before income taxes by approximately $820,000 ($486,000 after tax) during the three months ended June 30, 2013. The cumulative effect had no impact on the results of operations for the six months ended June 30, 2013. The adjustment had no impact on cash flows from operations or total cash flows for the prior or current period.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These differences could have a material effect on the Company’s future results of operations and financial position. Significant items subject to estimates and assumptions include certain revenue, the allowance for doubtful accounts, the fair value of short-term investments, the carrying amounts of goodwill and other indefinite-lived intangible assets, depreciation and amortization, the valuation of stock options and deferred income taxes.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value is defined as the price that would be received during the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1:	Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2:	Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3:	Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The following section describes the valuation methodologies used to measure certain financial assets and financial liabilities at fair value.

Money Market Funds and Short-Term Investments

The Company’s cash equivalents, restricted cash and short-term investments classified as Level 1 are valued using quoted prices generated by market transactions involving identical assets. Short-term investments classified as Level 2 are valued using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments in active markets; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. The Company did not hold any cash equivalents, restricted cash or short-term investments categorized as Level 3 as of June 30, 2013 or December 31, 2012.

Short-term investments include certificates of deposit, corporate bonds, U.S. government agency bonds and municipal bonds and are classified as available-for-sale and reported at fair value using the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a component of other comprehensive income (loss), net of related estimated tax provisions or benefits. Additionally, the Company periodically assesses whether an other than temporary impairment loss on investments has occurred due to declines in fair value or other market conditions. Declines in fair value considered other than temporary are recorded as an impairment in the consolidated statement of operations. The Company did not record an impairment of its investments for any of the periods presented.

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities and deferred revenue approximate fair value because of the relatively short maturity of these instruments.

The following table summarizes the basis used to measure certain financial assets and liabilities at fair value on a recurring basis in the Company’s consolidated balance sheets at June 30, 2013 (in thousands):

	Balance as of June 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
Money market funds	$	98,637	$	98,637	$	—	$	—
Total cash equivalents		98,637		98,637		—		—
Restricted cash
Money market funds		730		730		—		—
Total restricted cash		730		730		—		—
Short-term investments
Certificates of deposit		1,808		—		1,808		—
Corporate bonds		109,563		—		109,563		—
U.S. government agency bonds		1,008		—		1,008		—
Municipal bonds		42,038		—		42,038		—
Total short-term investments		154,417		—		154,417		—
Total financial assets	$	253,784	$	99,367	$	154,417	$	—

The following table summarizes the basis used to measure certain financial assets and liabilities at fair value on a recurring basis in the Company’s consolidated balance sheets at December 31, 2012 (in thousands):

	Balance as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
Money market funds	$	136,314	$	136,314	$	—	$	—
Total cash equivalents		136,314		136,314		—		—
Restricted cash
Money market funds		514		514		—		—
Total restricted cash		514		514		—		—
Short-term investments
Certificates of deposit		502		—		502		—
Corporate bonds		66,989		—		66,989		—
U.S. government agency bonds		1,013		—		1,013		—
Municipal bonds		11,826		—		11,826		—
Total short-term investments		80,330		—		80,330		—
Total financial assets	$	217,158	$	136,828	$	80,330	$	—

Business Segment

Business Segment

The Company has one operating segment consisting of various products and services related to its online marketplace of accommodation rental listings. The Company’s chief operating decision maker is considered to be the Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance of the business and other activities at the single operating segment level.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include investments in money market funds and certificates of deposit that are readily convertible into cash. Cash and cash equivalents are stated at cost, which approximates fair value. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consisted of the following at June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013		December 31, 2012
Demand deposit accounts	$	83,242	$	53,164
Money market funds		98,637		136,314
Total	$	181,879	$	189,478

Restricted Cash

Restricted Cash

Restricted cash of $730,000 and $514,000 at June 30, 2013 and December 31, 2012, respectively, was held in money market funds owned by the Company in conjunction with leased office space and to secure credit card availability and reimbursable direct debits due from the Company.

Short-term Investments

Short-term Investments

Short-term investments generally consist of marketable securities that have original maturities greater than ninety days as of the date of purchase. Investments in which the Company has the ability and intent, if necessary, to liquidate in order to support its current operations, including those with contractual maturities greater than one year from the date of purchase, are classified as short-term. The Company’s investment securities are classified as available-for-sale and are presented at estimated fair value with any unrealized gains and losses included in other comprehensive income (loss).

Cash flows from purchases, sales and maturities of available-for-sale securities are classified as cash flows from investing activities and reported gross, including any related premiums or discounts. Premiums related to purchases of available-for-sale securities were $6,435,000 and $1,987,000 during the six months ended June 30, 2013 and 2012, respectively. Fair values are based on quoted market prices. Short-term investments consisted of the following at June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Certificates of deposit	$	1,811	$	—	$	(3	)	$	1,808
Corporate bonds		109,794		69		(300	)		109,563
U.S. government agency bonds		1,007		1		—			1,008
Municipal bonds		42,321		5		(288	)		42,038
Total short-term investments	$	154,933	$	75	$	(591	)	$	154,417

	December 31, 2012
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Certificates of deposit	$	502	$	—	$	—		$	502
Corporate bonds		66,918		116		(45	)		66,989
U.S. government agency bonds		1,011		2		—			1,013
Municipal bonds		11,817		9		—			11,826
Total short-term investments	$	80,248	$	127	$	(45	)	$	80,330

For fixed income securities that have unrealized losses as of June 30, 2013, the Company does not have the intent to sell any of these investments and it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. The Company has evaluated these fixed income securities and determined that no credit losses exist. Accordingly, the Company has determined that the unrealized losses on fixed income securities as of June 30, 2013 were temporary in nature.

The following table summarizes the contractual underlying maturities of the Company’s short-term investments at June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013
	Less than 1 Year		1 to 3 Years		Total
Certificates of deposit	$	—	$	1,808	$	1,808
Corporate bonds		56,634		52,929		109,563
U.S. government agency bonds		1,008		—		1,008
Municipal bonds		7,781		34,257		42,038
Total short-term investments	$	65,423	$	88,994	$	154,417

	December 31, 2012
	Less than 1 Year		1 to 3 Years		Total
Certificates of deposit	$	3	$	499	$	502
Corporate bonds		41,307		25,682		66,989
U.S. government agency bonds		—		1,013		1,013
Municipal bonds		8,249		3,577		11,826
Total short-term investments	$	49,559	$	30,771	$	80,330

Non-marketable Equity Investment

During the six months ended June 30, 2013, the Company invested $3,667,000 for a non-controlling equity interest in a privately-held company in China. As of June 30, 2013, the total carrying value of the Company’s investment in the privately-held company was $10,113,000. The Company’s investment in the privately-held company is reported using the cost method of accounting or marked down to fair value when an event or circumstance indicates an other-than-temporary decline in value has occurred. It was not practicable to estimate the fair value of this asset as of June 30, 2013. No event or circumstance indicating an other-than-temporary decline in value of the Company’s interest in the non-marketable equity investment was identified. This investment is recorded in other non-current assets on the consolidated balance sheets.

Accounts Receivable

Accounts Receivable

Accounts receivable are primarily generated from three sources. Amounts due from credit card merchants who process the Company’s credit card sales from property listings and remit the proceeds to the Company are the primary source of accounts receivable. Accounts receivable are also generated from Internet display advertising amounts due in the ordinary course of business as well as amounts due to the Company for property listings or other products purchased on account. Accounts receivable from Internet display advertising revenue and products purchased on account are recorded at the invoiced amount and are non-interest bearing. Accounts receivable outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts by estimating losses on receivables based on known troubled accounts and historical experiences of losses incurred.

Property and Equipment

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Computer equipment and purchased software are generally depreciated over three years. Furniture and fixtures are generally depreciated over five to ten years. Leasehold improvements are depreciated on a straight-line basis over the shorter of the contractual lease period or their estimated useful life. Upon disposal, property and equipment and the related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in the statements of operations. Ordinary maintenance and repairs are charged to expense, while expenditures that extend the physical or economic life of the assets are capitalized.

The Company capitalizes certain internally developed software and website development costs. These capitalized costs were approximately $28,076,000 and $23,985,000 at June 30, 2013 and December 31, 2012, respectively, and are included in property and equipment, net, in the balance sheet. Internally developed software costs are generally depreciated over five years.

The Company recorded depreciation expense on internally developed software and website development costs as follows for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Depreciation expense on internally developed software and website development costs	$	1,020	$	558	$	1,752	$	1,385

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill arises from business combinations and is measured as the excess of the purchase consideration over the sum of the acquisition-date fair values of tangible and identifiable intangible assets acquired, less any liabilities assumed.

Goodwill and intangible assets deemed to have indefinite useful lives, such as certain trade names, are not amortized. Tests for impairment of goodwill and indefinite-lived intangible assets are performed on an annual basis as of October 1, or when events or circumstances indicate that the carrying amount of these assets may not be recoverable.

Circumstances that could trigger an impairment test outside of the annual test include but are not limited to: a significant adverse change in the business climate or legal factors; adverse cash flow trends; an adverse action or assessment by a regulator; unanticipated competition; loss of key personnel; decline in stock price; and the results of tests for recoverability of a significant asset group. The Company determined that no triggering event occurred during any of the periods presented.

For goodwill and indefinite lived intangible assets, the Company completes what is referred to as the “Step 0” analysis, which involves evaluating qualitative factors, including macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance related to its goodwill and its indefinite lived intangible assets. If the Company’s “Step 0” analysis indicates that it is more likely than not that the fair value of a reporting unit or of an indefinite lived intangible asset is less than its carrying amount, the Company would perform a quantitative two-step impairment test. The quantitative analysis compares the fair value of the Company’s reporting unit or indefinite-lived intangible assets to its carrying amount, and an impairment loss is recognized equivalent to the excess of the carrying amount over fair value. If, after assessing the totality of events or circumstances, the Company determines that it is more likely than not that the fair value of a reporting unit or indefinite lived intangible asset exceeds its carrying amount, then the quantitative impairment tests are unnecessary.

The Company’s annual evaluation of goodwill and indefinite-lived intangible assets for impairment was as of October 1, 2012, and the Company determined that the quantitative tests were not necessary.

The determination of whether or not goodwill or indefinite-lived intangible assets have become impaired involves a significant level of judgment. Changes in the Company’s strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of goodwill or intangible assets.

No impairment of goodwill or indefinite-lived intangible assets was identified in any of the periods presented.

Identifiable intangible assets consist of trade names, customer listings, technology, domain names and contractual non-compete agreements associated with acquired businesses. Intangible assets with finite lives are amortized over their estimated useful lives on a straight-line basis and reviewed for impairment whenever events or changes in circumstances indicate that an asset’s carrying value may not be recoverable (see Note 3). The straight-line method of amortization represents the Company’s best estimate of the distribution of the economic value of the identifiable intangible assets.

Impairment of Long-lived Assets

Impairment of Long-lived Assets

The Company evaluates long-lived assets held for use, such as property and equipment, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated future undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value in the period in which the determination is made. No impairments of long-lived assets have been recorded during any of the periods presented.

Revenue Recognition

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an agreement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured.

The Company generates a significant portion of its revenue from customers purchasing online advertising services related to the listing of their properties for rent, primarily on a subscription basis over a fixed-term. The Company also generates revenue based on the number of traveler inquiries and reservation bookings for property listings on the Company’s websites, local and national Internet display advertisers, license of property management software and ancillary products and services.

Payments for term-based subscriptions received in advance of services being rendered are recorded as deferred revenue and recognized on a straight-line basis over the listing period. Revenue for inquiry-based contracts are determined on a fixed fee-per-inquiry as stated in the arrangement and recognized when the service has been performed.

Internet display advertising revenue is generated primarily from advertisements appearing on the Company’s websites. There are several types of Internet advertisements, and the way in which advertising revenue is earned varies among them. Depending upon the terms, revenue might be earned each time an impression is delivered, each time a user clicks on an ad, each time a graphic ad is displayed, or each time a user clicks-through on the ad and takes a specified action on the destination site. The Company recognizes advertising revenue on a cost-per-thousand (CPM) impression basis whereby advertisers pay the Company based on the number of times their ads appear on the Company’s websites.

The Company sells gift cards with no expiration date to travelers and does not charge administrative fees on unused cards. There is a portion of the gift card obligation that, based on historical redemption patterns, will not be used by the Company’s customers and is not required to be remitted to relevant jurisdictions, or breakage. At the point of sale, the Company recognizes breakage as deferred revenue and amortizes it over 48 months based on historical redemption patterns. The Company also records commission revenue for each gift card sale over the same 48-month redemption period.

The Company earns commission revenue for reservations made online through its websites, which is calculated as a percentage of the value of the reservation. This revenue is earned as the customers’ refund privileges lapse and is included in other revenue in the consolidated statement of operations.

Through its professional software for bed and breakfasts and professional property managers, the Company makes selected, online bookable properties available to online travel agencies and channel partners. The Company receives a percentage of the transaction value or a fee from the property manager for making this inventory available, which is recognized when earned. This revenue is included in other revenue in the consolidated statement of operations.

The Company generates revenue from the licensing of software products, the sale of maintenance agreements and the sale of hosted software solutions. For software license sales, one year of maintenance is typically included as part of the initial purchase price of the bundled offering with annual renewals of the maintenance component of the agreement following in subsequent years.

The Company recognizes revenue from the sale of perpetual licenses upon delivery, which generally occurs upon electronic transfer of the license key that makes the product available to the purchaser.

As software is usually sold with maintenance, the amount of revenue allocated to the software license is determined by estimating the fair value of the maintenance and subtracting it from the total invoice or contract amount. Vendor-specific objective evidence, or VSOE, of the fair value of maintenance services is determined by the standard published list pricing for maintenance renewals, as the Company generally charges list prices for maintenance renewals. In determining VSOE, the Company requires that a substantial majority of the selling price for maintenance services fall within a reasonably narrow pricing range. Maintenance and support revenue is recognized ratably over the term of the agreement beginning on the activation date. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met.

Sales of hosted software solutions are generally for a one-year period. Revenue is recognized on a straight-line basis over the contract term. Certain implementation services related to the hosting services are essential to the customer’s use of the hosting services. For sales of these hosting services where the Company is responsible for implementation, the Company recognizes implementation revenue ratably over the estimated period of the hosting relationship, which the Company considers to be three years. Recognition starts once the product has been made available to the customer.

Training and consulting revenue is recognized upon delivery of the training or consulting services to the end customer.

The Company accounts for sales incentives to customers as a reduction of revenue at the time that the revenue is recognized from the related product sale. The Company also reports revenue net of any sales tax collected.

Stock-Based Compensation

Stock-Based Compensation

The cost of stock-based compensation is recognized in the financial statements based upon the estimated grant date fair value of the awards measured using the Black–Scholes valuation model. The fair value of restricted stock awards and units is determined based on the number of shares granted and the fair value of the Company’s common stock as of the grant date. Fair value is generally recognized as an expense on a straight-line basis, net of estimated forfeitures, over the employee requisite service period. When estimating forfeitures, the Company considers voluntary termination behaviors as well as trends of actual option forfeitures.

The Company uses the “with and without” approach in determining the order in which tax attributes are utilized. As a result, the Company only recognizes a tax benefit from stock-based awards in additional paid-in capital if an incremental tax benefit is realized after all other tax attributes currently available to the Company have been utilized. When tax deductions from stock-based awards are less than the cumulative book compensation expense, the tax effect of the resulting difference (“shortfall”) is charged first to additional paid-in capital to the extent of the Company’s pool of windfall tax benefits with any remainder recognized in income tax expense. The Company has determined that it has a sufficient windfall pool available and therefore no amounts have been recognized in income tax expense. In addition, the Company accounts for the indirect effects of stock-based awards on other tax attributes through the consolidated statements of operations.

The benefits of tax deductions in excess of recognized compensation costs are reported as financing cash inflows, but only when such excess tax benefits are realized by a reduction to current taxes payable.

The following table summarizes the excess tax benefit that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Excess tax benefit from stock-based compensation	$	2,887	$	1,927	$	4,245	$	2,530

This tax benefit has been recorded as additional paid-in capital on the Company’s consolidated balance sheets as of June 30, 2013 and December 31, 2012.

Income Taxes

Income Taxes

The Company recognizes income taxes using an asset and liability approach. This approach requires the recognition of deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. The measurement of deferred taxes is based on provisions of the enacted tax law and the effects of future changes in tax laws or rates are not anticipated. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Evaluating the need for an amount of a valuation allowance for deferred tax assets requires significant judgment and analysis of the positive and negative evidence available, including past operating results, estimates of future taxable income, reversals of existing taxable temporary differences and the feasibility of tax planning in order to determine whether all or some portion of the deferred tax assets will not be realized. Based on the available evidence and judgment, the Company has determined that it is more likely than not that certain loss carryforwards will not be realized; therefore, the Company has established a valuation allowance for such deferred tax assets to reduce the loss carryforward assets to amounts expected to be utilized.

The Company may be subject to income tax audits by the respective tax authorities in any or all of the jurisdictions in which the Company operates. The Company is currently undergoing an audit at its subsidiary in Germany. Significant judgment is required in determining uncertain tax positions. The Company recognizes the benefit of uncertain income tax positions only if these positions are more likely than not to be sustained. Also, the recognized income tax benefit is measured at the largest amount that is more than 50% likely of being realized. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of an audit or the refinement of an estimate. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. The countries in which the Company may be subject to potential examination by tax authorities include the United States, Switzerland, the United Kingdom, Germany, France, Spain, the Netherlands, Brazil, Australia, Colombia, Italy and Thailand.

The calculation of the Company’s tax liabilities involves the inherent uncertainty associated with the application of complex tax laws. As a multinational corporation, the Company conducts its business in many countries and is subject to taxation in many jurisdictions. The taxation of the Company’s business is subject to the application of various and sometimes conflicting tax laws and regulations as well as multinational tax conventions. The Company’s effective tax rate is highly dependent upon the geographic distribution of its worldwide earnings or losses, the tax regulations and tax rates in each geographic region, the availability of tax credits and carryforwards, and the effectiveness of its tax planning strategies. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings. Consequently, taxing authorities may impose tax assessments or judgments against the Company that could materially impact its tax liability and/or its effective income tax rate. The Company believes it has adequately provided in its financial statements for additional taxes that it estimates may be assessed by the various taxing authorities. While the Company believes that it has adequately provided for all uncertain tax positions, amounts asserted by tax authorities could be greater or less than the Company’s accrued position. These tax liabilities, including the interest and penalties, are adjusted pursuant to a settlement with tax authorities, completion of audit, refinement of estimates or expiration of various statutes of limitation.

Foreign Currency Translation

Foreign Currency Translation

The functional currency of the Company’s foreign subsidiaries is generally their respective local currency. The financial statements of the Company’s international operations are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities, the historical exchange rate for stockholders’ equity, and a weighted average exchange rate for each period for revenue, expenses, and gains and losses. Foreign currency translation adjustments are recorded as a separate component of stockholders’ equity. Gains and losses from foreign currency denominated transactions are recorded in other income (expense) in the Company’s consolidated statements of operations.

The following table summarizes the foreign currency transaction gain (loss) that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2013		2012			2013			2012
Foreign currency transaction gain (loss)	$	67	$	(1,541	)	$	(1,468	)	$	(2,292	)

Derivative Financial Instruments

Derivative Financial Instruments

As a result of the Company’s international operations, it is exposed to various market risks that may affect its consolidated results of operations, cash flows and financial position. These market risks include, but are not limited to, fluctuations in currency exchange rates. The Company’s primary foreign currency exposures are in Euros and British Pound Sterling. As a result, the Company faces exposure to adverse movements in currency exchange rates as the financial results of its operations are translated from local currency into U.S. dollars upon consolidation. Additionally, foreign exchange rate fluctuations on transactions denominated in currencies other than the functional currency result in gains and losses that are reflected in other income (expense) in the Company’s consolidated statements of operations.

The Company may enter into derivative instruments to hedge certain net exposures of nonfunctional currency denominated assets and liabilities, primarily related to intercompany loans, even though it does not elect to apply hedge accounting or hedge accounting does not apply. Gains and losses resulting from a change in fair value for these derivatives are reflected in the period in which the change occurs and are recognized on the consolidated statement of operations in other income (expense). Cash flows from these contracts are classified within net cash provided by operating activities on the consolidated statements of cash flows.

The Company does not use financial instruments for trading or speculative purposes. The Company recognizes all derivative instruments on the balance sheet at fair value and its derivative instruments are generally short-term in duration. The Company is exposed to the risk that counterparties to derivative contracts may fail to meet their contractual obligations. Derivative contracts outstanding were not material as of June 30, 2013 or December 31, 2012.

Net Income Per Share

Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted income per share is computed by dividing net income by the weighted average common shares outstanding plus potentially dilutive common shares.

Restricted stock awards provide the holder of unvested shares the right to participate in dividends declared on the Company’s common stock. Accordingly, these shares are included in the weighted average shares outstanding for the computation of basic earnings per share in periods of undistributed earnings. Restricted stock awards are excluded from the basic earnings per share in periods of undistributed losses as the holders are not contractually obligated to participate in the losses of the Company. Unvested restricted stock units do not provide the holder the right to participate in dividends declared on the Company’s common stock. Accordingly, these shares are excluded in the weighted average shares outstanding for the computation of basic earnings per share in periods of undistributed earnings or losses.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss), cumulative foreign currency translation adjustments, and unrealized gains and losses on available-for-sale securities.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In January 2013, the Financial Accounting Standards Board (“FASB”) issued amended guidance that enhances disclosure requirements about the nature of an entity’s right to offset and related arrangements associated with its derivative instruments, repurchase agreements, and securities lending transactions. This new guidance requires the disclosure of the gross amounts subject to rights of offset, amounts offset in accordance with the accounting standards followed, and the related net exposure. This new guidance is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. This guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows since it is an enhancement to current required disclosures.

In February 2013, the FASB issued new accounting guidance that improves the reporting of reclassifications out of accumulated other comprehensive income. This new guidance requires entities to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income when applicable or to cross-reference the reclassifications with other disclosures that provide additional detail about the reclassifications made when the reclassifications are not made to net income. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2012. This guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows since it is an enhancement to current required disclosures.

In July 2013, the FASB issued new accounting guidance that requires that unrecognized tax benefits be classified as an offset to deferred tax assets to the extent of any net operating loss carryforwards, similar tax loss carryforwards, or tax credit carryforwards available at the reporting date in the applicable tax jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. An exception would apply if the tax law of the tax jurisdiction does not require the Company to use, and it does not intend to use, the deferred tax asset for such purpose. This guidance will have no impact to the Company.

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

7. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consists of the following at June 30, 2013 and December 31, 2012, respectively (in thousands):

	June 30, 2013			December 31, 2012
Foreign currency translation	$	(10,273	)	$	(5,530	)
Unrealized gains (losses) on short-term investments		(517	)		80
Total	$	(10,790	)	$	(5,450	)

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Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2013

Payables And Accruals [Abstract]

Accrued Expenses

The Company’s accrued expenses are comprised of the following at June 30, 2013, and December 31, 2012 (in thousands):

	June 30, 2013		December 31, 2012
Compensation and related benefits	$	14,448	$	16,828
Gift cards		4,964		5,655
Taxes		3,234		3,362
Marketing		3,466		1,130
Other		7,438		6,881
Total	$	33,550	$	33,856

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Fair Value of Financial Assets and Liabilities Measured on Recurring Basis

The following table summarizes the basis used to measure certain financial assets and liabilities at fair value on a recurring basis in the Company’s consolidated balance sheets at June 30, 2013 (in thousands):

	Balance as of June 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
Money market funds	$	98,637	$	98,637	$	—	$	—
Total cash equivalents		98,637		98,637		—		—
Restricted cash
Money market funds		730		730		—		—
Total restricted cash		730		730		—		—
Short-term investments
Certificates of deposit		1,808		—		1,808		—
Corporate bonds		109,563		—		109,563		—
U.S. government agency bonds		1,008		—		1,008		—
Municipal bonds		42,038		—		42,038		—
Total short-term investments		154,417		—		154,417		—
Total financial assets	$	253,784	$	99,367	$	154,417	$	—

The following table summarizes the basis used to measure certain financial assets and liabilities at fair value on a recurring basis in the Company’s consolidated balance sheets at December 31, 2012 (in thousands):

	Balance as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
Money market funds	$	136,314	$	136,314	$	—	$	—
Total cash equivalents		136,314		136,314		—		—
Restricted cash
Money market funds		514		514		—		—
Total restricted cash		514		514		—		—
Short-term investments
Certificates of deposit		502		—		502		—
Corporate bonds		66,989		—		66,989		—
U.S. government agency bonds		1,013		—		1,013		—
Municipal bonds		11,826		—		11,826		—
Total short-term investments		80,330		—		80,330		—
Total financial assets	$	217,158	$	136,828	$	80,330	$	—

Schedule of Cash and Cash Equivalents

Cash and cash equivalents consisted of the following at June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013		December 31, 2012
Demand deposit accounts	$	83,242	$	53,164
Money market funds		98,637		136,314
Total	$	181,879	$	189,478

Short-Term Investments

Short-term investments consisted of the following at June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Certificates of deposit	$	1,811	$	—	$	(3	)	$	1,808
Corporate bonds		109,794		69		(300	)		109,563
U.S. government agency bonds		1,007		1		—			1,008
Municipal bonds		42,321		5		(288	)		42,038
Total short-term investments	$	154,933	$	75	$	(591	)	$	154,417

	December 31, 2012
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Certificates of deposit	$	502	$	—	$	—		$	502
Corporate bonds		66,918		116		(45	)		66,989
U.S. government agency bonds		1,011		2		—			1,013
Municipal bonds		11,817		9		—			11,826
Total short-term investments	$	80,248	$	127	$	(45	)	$	80,330

Summary of Contractual Underlying Maturities of Short-Term Investments

The following table summarizes the contractual underlying maturities of the Company’s short-term investments at June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013
	Less than 1 Year		1 to 3 Years		Total
Certificates of deposit	$	—	$	1,808	$	1,808
Corporate bonds		56,634		52,929		109,563
U.S. government agency bonds		1,008		—		1,008
Municipal bonds		7,781		34,257		42,038
Total short-term investments	$	65,423	$	88,994	$	154,417

	December 31, 2012
	Less than 1 Year		1 to 3 Years		Total
Certificates of deposit	$	3	$	499	$	502
Corporate bonds		41,307		25,682		66,989
U.S. government agency bonds		—		1,013		1,013
Municipal bonds		8,249		3,577		11,826
Total short-term investments	$	49,559	$	30,771	$	80,330

Summary of Depreciation Expenses on Internally Developed Software and Website Development Costs

The Company recorded depreciation expense on internally developed software and website development costs as follows for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Depreciation expense on internally developed software and website development costs	$	1,020	$	558	$	1,752	$	1,385

Summary of Excess Tax Benefit

The following table summarizes the excess tax benefit that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Excess tax benefit from stock-based compensation	$	2,887	$	1,927	$	4,245	$	2,530

Summary of Foreign Currency Transaction Gain (Loss)

The following table summarizes the foreign currency transaction gain (loss) that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2013		2012			2013			2012
Foreign currency transaction gain (loss)	$	67	$	(1,541	)	$	(1,468	)	$	(2,292	)

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Jul. 23, 2013
Document Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Trading Symbol	AWAY
Entity Registrant Name	HOMEAWAY INC
Entity Central Index Key	0001366684
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		85,255,889

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Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2013

Goodwill And Intangible Assets Disclosure [Abstract]

Changes in Goodwill Balance

Changes in the Company’s goodwill balance for the year ended December 31, 2012 and the six months ended June 30, 2013 are summarized in the table below (in thousands):

Balance at December 31, 2011	$	301,015
Acquired in business combinations		11,190
Foreign currency translation adjustments		207
Balance at December 31, 2012		312,412
Foreign currency translation adjustments		(3,821	)
Balance at June 30, 2013	$	308,591

Amortized Finite-Lived Intangible Assets

The finite-lived intangible assets are summarized in the table below (in thousands):

			June 30, 2013							December 31, 2012
	Useful Life (Years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Trade names and trademarks		10	$	23,830	$	(3,680	)	$	20,150	$	24,000	$	(2,474	)	$	21,526
Developed technology		2-8		26,165		(22,050	)		4,115		26,435		(20,983	)		5,452
Customer relationships		5-13		60,096		(38,152	)		21,944		60,321		(35,124	)		25,197
Non-compete agreements and domain names		2-5		3,371		(3,004	)		367		3,376		(2,853	)		523
Total			$	113,462	$	(66,886	)	$	46,576	$	114,132	$	(61,434	)	$	52,698

Summary of Amortization Expenses

The following table summarizes the amortization expense that the Company recorded for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Amortization expense	$	2,995	$	3,282	$	6,175	$	5,730

Indefinite-Lived Intangible Assets

The Company has the following indefinite-lived intangible assets recorded in its consolidated balance sheets as of June 30, 2013 and December 31, 2012, respectively (in thousands):

	June 30, 2013		December 31, 2012
Trademarks, trade names and other	$	7,029	$	7,029