Terms of Service

Engagement Agreement

This Engagement Agreement (“Agreement”) is entered into by and between ScaleFactor, Inc. (“ScaleFactor,” “we” or “us”) and you (“Company”or “you”).

It confirms our understanding of the terms and objectives of this engagement and the nature and limitations of the services that ScaleFactor provides (the “ScaleFactor Services”).

IMPORTANT! THIS AGREEMENT GOVERNS THE PROVISION OF THE SCALEFACTOR SERVICES. BY CLICKING “I AGREE”, USING ANY OF SCALEFACTOR SERVICES, OR OTHERWISE SIGNIFYING YOUR ACCEPTANCE OF THIS AGREEMENT, YOU REPRESENT AND WARRANT THAT (A) YOU ARE AUTHORIZED TO ENTER THIS AGREEMENT FOR AND ON BEHALF OF COMPANY, AND ARE DOING SO, (B) YOU CAN LEGALLY ENTER INTO THESE TERMS AND (C) YOU HAVE READ AND UNDERSTAND AND AGREE THAT COMPANY SHALL BE BOUND BY THE TERMS OF THIS AGREEMENT AND SCALEFACTOR’S PRIVACY POLICY (https://portal.scalefactor.com/pages/privacy-policy/“) AND ALL MODIFICATIONS AND ADDITIONS PROVIDED FOR. IF YOU DO NOT AGREE TO THIS AGREEMENT OR THE PRIVACY POLICY, PLEASE DO NOT USE ANY OF SCALEFACTOR SERVICES.

  1. Appointment as ScaleFactor: Subject to the terms and conditions of this Agreement, the Company hereby engages ScaleFactor to perform the services selected by the Company through the Market Place or as otherwise agreed in writing by the parties (as modified from time to time, the “Selected Services”), and ScaleFactor hereby accepts such engagement. Company may select additional ScaleFactor Services to be provided by ScaleFactor from time to time. Any additional Selected Services shall be governed by the terms of this Agreement.In responding to requests for any of the ScaleFactor Services made by your officers, managers, employees, or agents, we will presume that all requests have been authorized by your internal procedures. If you wish to limit the individuals who can request services, you must notify us of any limitations in writing.If we at any time determine in our sole discretion that a conflict of interest exists that prevents us from providing any of the Selected Services in accordance with applicable ethical rules, we will notify you of the conflict and may withdraw from representing you to the extent that such withdrawal is required or permitted by applicable ethical rules.
  2. Performance of Duties: ScaleFactor will provide the Selected Services to the Company. ScaleFactor will report directly to the person identified in writing by the Company in connection with the performance of the Selected Services under this Agreement. ScaleFactor will typically work from outside the Company’s offices, but may work within in the Company’s offices and attend meetings at the corporate office when reasonably necessary and upon reasonable prior written notice. The Company acknowledges and agrees that accounting records provided by the Company are solely the Company’s responsibility.None of the ScaleFactor Services are intended to be an audit, review or compilation of the financial statements and will not result in the submission or issuance of financial statements as defined by Statements of Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. Any financial statements prepared by ScaleFactor are to be used by the Company solely for analytical purposes and for internal use only.ScaleFactor will not make management decisions on behalf of the Company. The Company is responsible for all management functions and decisions. ScaleFactor’s engagement is limited to the Selected Services (as modified from time to time). ScaleFactor will rely on the accuracy and completeness of the documents and information provided by the Company or made available to ScaleFactor by the Company. ScaleFactor will not audit, review, or otherwise attest to the accuracy or completeness of the Company’s financial statements or accounting records. Accordingly, ScaleFactor’s engagement cannot be relied upon to disclose errors, fraud, or other illegal acts that may exist. ScaleFactor will, however, inform Company of any material errors, fraud or other illegal acts that it discovers.The Company is solely responsible (a) for adopting sound accounting policies, (b) for maintaining an adequate and efficient accounting system, (c) for safeguarding assets, (d) for authorizing transactions, (e) for retaining supporting documentation for those transactions, (f) for devising a system of internal controls that will, among other things, help assure the preparation of proper financial statements, (g) for management decisions and functions, (h) for designating a competent employee to oversee any of the Selected Services provided by ScaleFactor, and (i) for evaluating the adequacy and results of those Selected Services.The Company is also solely responsible (a) for the design and implementation of programs and controls to prevent and detect fraud, (b) for informing ScaleFactor about all known or suspected fraud affecting the Company involving (i) management, (ii) employees who have significant roles in internal control, and (iii) others where the fraud could have a material effect on the financial statements, (c) for informing ScaleFactor of any allegations of fraud or suspected fraud affecting the Company received in communications from employees, former employees, regulators, or others of which management has knowledge, and (d) for identifying and ensuring that the entity complies with applicable laws and regulations.
  3. Remote access and email communication: The Company agrees to provide ScaleFactor with remote access, when necessary, to Company’s accounting and bank feed system to perform the Selected Services. Company agrees to maintain sole responsibility for the adequacy of its security measures for remote access users.
  4. Additional Terms and Conditions: In addition to the terms of the Agreement, if the Selected Services include tax or 1099 services, then the terms and conditions set forth in Exhibit A shall also apply to such tax services.
  5. Document retention: All files, records, documents, information, notebooks, and similar items constituting records of the business of the Company (collectively, the “Business Documents”), whether prepared by ScaleFactor or otherwise coming into its possession, shall remain the exclusive property of the Company. ScaleFactor may retain copies of all Business Documents that it needs for record-keeping, legal or administrative reasons. Subject to the foregoing, upon the expiration or earlier termination of this Agreement, or whenever requested by the Company, ScaleFactor shall promptly deliver to the Company all such Business Documents in its possession or under its control (but excluding the copies that it retains for record-keeping, legal or administrative reasons). Any other documents in the engagement file are ScaleFactor’s property; provided that ScaleFactor will provide copies of any such documents at the written request of the Company, subject to ScaleFactor’s discretion, if compensated for its time and the costs associated with providing such documents. Notwithstanding the foregoing, both the Company and ScaleFactor will have access to any Business Documents and other information and data that are stored in the Company portal (collectively, “Stored Data”). Stored Data is currently stored in SSL encrypted folders through Amazon Web Services; provided that we reserve the right to change where the Stored Data is stored in our sole discretion without notice. ScaleFactor’s policy is to retain engagement documentation for five years, after which time ScaleFactor may destroy engagement files (whether tangible or electronic) in its sole discretion. Any original remaining records from the Company retained by ScaleFactor will be returned to the Company.
  6. Subpoena, court order or other legal process: In the event ScaleFactor is required to respond to a subpoena, court order or other legal process for the production of documents and/or testimony relative to information ScaleFactor obtained and/or prepared during the course of this engagement, the Company shall compensate ScaleFactor at its standard hourly rates.
  7. Indemnity: The Company hereby indemnifies and holds harmless ScaleFactor, and each of its officers, directors, agents, contractors, subcontractors, licensees and employees (collectively referred to as the “ScaleFactor Indemnitees”), and each of them, against and from any and all allegations, demands, claims, liabilities, damages, fines, penalties or costs of whatever nature (including reasonable attorneys’ fees) from any third party, (“ScaleFactor Claims”), arising out of or in any way connected with (a) the provision of the Selected Services except to the extant arising from Scale Factor’s gross negligence or willful misconduct, (b) the Company’s actual or alleged breach of any of the terms and conditions of this Agreement or (c) any inaccurate, incomplete, or misleading information that the Company provided to ScaleFactor during the course of this engagement (with or without Company’s knowledge or intent). If any ScaleFactor Claim is made or any action or proceeding is brought against any ScaleFactor Indemnitees, any such ScaleFactor Indemnitee may, by notice to the Company, require the Company, at the Company’s expense, to resist such ScaleFactor Claim or take over the defense of any such action or proceeding and employ counsel for such purpose, such counsel to be subject to the prior approval of such ScaleFactor Indemnitee. The reimbursement, indemnity and contribution obligations of the Company under this Section 7 shall be in addition to any liability that the Company may otherwise have, and shall extend upon the same terms and conditions to the ScaleFactor Indemnitees.
  8. Term: If the engagement is a recurring project under this Agreement, then the engagement will proceed on a monthly basis and shall continue in full force until the applicable Selected Services or this Agreement is terminated in accordance with the terms of this Section 8. If the engagement is not a recurring project, then the engagement will proceed for the period agreed in writing by the parties unless the applicable Selected Services or this Agreement is terminated earlier in accordance with the terms of this Section 8. The Company or ScaleFactor may terminate any affected Specific Services or this Agreement (a) without cause at any time upon 30 days’ prior written notice and (b) with cause if the other party breaches the terms of this Agreement and fails to cure the breach within ten (10) days for a payment breach and thirty (30) days for any other breach after notice of such breach from the non-breaching party.In addition, a party may immediately terminate this Agreement if the other party (i) becomes insolvent or is generally unable to pay, or fails to pay, its debts as they become due, (ii) files or has filed against it, a petition for voluntary or involuntary bankruptcy or otherwise becomes subject, voluntarily or involuntarily, to any proceeding under any domestic or foreign bankruptcy or insolvency, (iii) makes or seeks to make a general assignment for the benefit of its creditors, or (iv) applies for or has appointed a receiver, trustee, custodian or similar agent appointed by order of any court of competent jurisdiction to take charge of or sell any material portion of its property or business.If ScaleFactor elects to terminate any specific Selected Services or this Agreement for nonpayment, or for any other reason, ScaleFactor’s engagement will be deemed to have been completed upon written notification of termination, even if ScaleFactor has not in fact completed such Selected Services. The Company will be obligated to compensate ScaleFactor through the date of termination.
  9. Compensation and Payment: As base compensation for the Selected Services, the Company shall pay ScaleFactor the applicable fees (as modified from time to time, the “Fees”) in accordance with this Section 9. The current Fees are set forth in the Market Place or as otherwise agreed in writing by the parties (including on an hourly-basis depending on the nature of the project). The Company shall pay the Fees to ScaleFactor, via ACH on the 1st of every engagement month or as otherwise provided with respect to the applicable Fees. The Company will file Form 1099 with the IRS reporting on fee payments. The parties agree that if the scope of services listed in Schedule A are increased, they will negotiate in good faith for an additional fee to be paid to ScaleFactor. The Company shall reimburse ScaleFactor for all out of pocket costs and for reasonable travel expenses for travel authorized in advance by the Company.Our Fees and expenses shall be billed on a regular basis. Each invoice is payable upon receipt of the invoice. If you believe in good faith that any invoice is incorrect or if you wish to dispute any invoice, you must notify us in writing within 10 days of your receipt of the invoice. We reserve the right to charge interest on any invoice that is not paid within 15 days of the invoice date.ScaleFactor reserves the right to suspend performance of any of the Selected Services if you fail to pay any invoice when due, until your account is paid in full or you have made other payment arrangements satisfactory to us. Our suspension of services will not affect your obligations to us under this Agreement. In the event that any collection action is required to collect unpaid balances due, the Company shall reimburse ScaleFactor for its costs of collection, including attorneys’ fees.
  10. Confidentiality: ScaleFactor acknowledges that during the engagement it will have access to the confidential and proprietary information of the Company (“Confidential Information”). To protect your Confidential Information, you agree that you will not disclose any Confidential Information to us except as we request or as necessary for us to provide the particular Selected Services.A majority of our clients choose to communicate with us by email, and we will use email unless you direct otherwise. Because email is not secure, however, it may not be an appropriate means for sending certain confidential or sensitive data. If you are concerned about the security of particular information, please contact us to discuss alternative arrangements.ScaleFactor agrees that it will not disclose any Confidential Information, directly or indirectly, or use any Confidential Information in any manner, either during the term of this Agreement or at any time thereafter, except as required in the course of this engagement. Without limiting the foregoing, we may in certain circumstances disclose your Confidential Information to software vendors for the purpose of obtaining technical support in the course of providing services to you, but it is our policy to require these vendors to maintain the confidentiality of Confidential Information disclosed to them.In certain circumstances, information that you disclose to us could be the subject of a claim of privilege, but you must generally assert and maintain the privilege claim. You should contact your legal counsel if you have questions concerning the availability of any privilege or how and whether to assert a privilege.Confidential Information shall not, however, include any information that (i) was publicly known and made generally available in the public domain prior to the time of disclosure by the Company; (ii) becomes publicly known and made generally available after disclosure by the Company to ScaleFactor through no action or inaction of ScaleFactor; (iii) is already in the possession of ScaleFactor at the time of disclosure by the Company as shown by ScaleFactor’s files, documents, records and other competent evidence immediately prior to the time of disclosure; (iv) is obtained by ScaleFactor from a third party without a breach of such third party’s obligations of confidentiality; or (v) is independently developed by ScaleFactor without use of or reference to the Company’s Confidential Information, as shown by ScaleFactor’s files, documents, records and other competent evidence. Further, ScaleFactor may disclose Confidential Information pursuant to a valid order issued by a court or government agency or as otherwise required by law, provided that (a) ScaleFactor provides the Company with prior written notice of such obligation and the opportunity to oppose such disclosure or obtain a protective order and (b) ScaleFactor only discloses such Confidential Information as is required to comply with such order or law.
  11. Conflicts of Interest: ScaleFactor represents that it is free to enter into this Agreement and that this engagement does not violate the terms of any agreement between ScaleFactor and any third party. During the term of this Agreement, ScaleFactor shall devote as much of its productive time, energy and abilities to the performance of the services hereunder as is reasonably necessary to perform the Selected Services in a timely and productive manner. ScaleFactor is expressly free to perform services for other parties while performing services for the Company provided that the performances of services for other parties does not hinder or interfere with the performance of ScaleFactor’s services under this Agreement.
  12. Independent Contractor: ScaleFactor is an independent contractor of the Company. Nothing in this Agreement is intended to constitute ScaleFactor as an agent, legal representative, joint-venture, partner, employee, or servant of the Company for any purpose whatsoever. ScaleFactor acknowledges and agrees that it is not authorized to enter into or make any representation, warranty, agreement, or debt on behalf of the Company without the express written authorization of the Company.
  13. Choice of Law; Dispute Resolution: The laws of the State of Texas shall govern the validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties hereto without regard to its conflict of laws provisions. Each party agrees that any dispute (other than our efforts to collect an outstanding invoice) that may arise regarding the meaning, performance or enforcement of this Agreement or any prior engagement that ScaleFactor has performed for the Company (a “Dispute”), will, prior to resorting to litigation, be submitted to non-binding mediation, and that the parties will engage in the mediation process in good faith once a written request to mediate has been given by either the Company or ScaleFactor. The costs of any mediation proceeding shall be shared equally by the participating parties; provided that each party shall be solely responsible for its legal fees.Any litigation arising out of any Selected Services (other than tax services) or this Agreement, except actions by ScaleFactor to enforce payment of any invoices, must be filed no later than the earlier of one year from the completion of the applicable Selected Services or the termination of the applicable Selected Services, notwithstanding any applicable statute of limitation to the contrary.The Company and ScaleFactor both agree that any Dispute that is not resolved through mediation or otherwise shall be exclusively resolved by binding arbitration in accordance with the then-current Commercial Arbitration Rules of the American Arbitration Association. The parties shall select a mutually acceptable arbitrator knowledgeable about issues relating to the subject matter of this Agreement. In the event the parties are unable to agree to such a selection, each party will select an arbitrator and the two arbitrators in turn shall select a third arbitrator, all three of whom shall preside jointly over the matter. The arbitration shall take place in Austin, Texas, or as otherwise mutually agreed upon by the parties. All documents, materials, and information in the possession of each party that are in any way relevant to the dispute shall be made available to the other party for review and copying no later than 30 days after the notice of arbitration is served. The arbitrator(s) shall not have the authority to modify any provision of this Agreement or to award punitive damages. The arbitrator(s) shall have the power to issue mandatory orders and restraint orders in connection with the arbitration. The decision rendered by the arbitrator(s) shall be final and binding on the parties, and judgment may be entered in conformity with the decision in any court having jurisdiction. The agreement to arbitration shall be specifically enforceable under the prevailing arbitration law. IN AGREEING TO ARBITRATION, WE BOTH ACKNOWLEDGE THAT, IN THE EVENT OF A DISPUTE, EACH OF US IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO HAVE THE DISPUTE DECIDED IN A COURT OF LAW BEFORE A JUDGE OR JURY AND INSTEAD WE ARE ACCEPTING THE USE OF ARBITRATION FOR RESOLUTION OF ANY DISPUTE OR OTHERWISE IN CONNECTION WITH THIS AGREEMENT OR THE SELECTED SERVICES. The parties hereby irrevocably and unconditionally agree that service of process in any such Dispute may be effected by mailing a copy of such process by certified mail, postage prepaid, to such party at the address provided by such party. The party prevailing in any Dispute shall be entitled, in addition to any other relief that may be granted, to be awarded costs, including its reasonable attorneys’ fees and the cost of arbitration.Notwithstanding the foregoing, each of Company and ScaleFactor agrees that any fee or other dispute related to any Selected Services for tax and/or 1099 services shall be resolved in accordance with Section 4.10 of Exhibit A.No claim or action by either party, regardless of whether the claim is in contract in tort, at law or in equity, arising out of or relating to any matter under these Terms relating to any of the Selected Services or this Agreement (including any tax or 1099 services) may be brought by either party (i) more than 24 months after the party first knows or has reason to know that the claim or cause of action has accrued or (ii) more than 60 months following the completion of the related services under this Agreement. This provision may shorten, but in no event will it extend, any statute of limitation on actions otherwise provided by applicable law.
  14. Liability: ScaleFactor’s liability relating to the performance of the Selected Services and this Agreement is limited solely to direct damages sustained by the Company. IN NO EVENT SHALL SCALEFACTOR BE LIABLE UNDER ANY THEORY OF LIABILITY, WHETHER IN AN EQUITABLE, LEGAL, OR COMMON LAW ACTION ARISING HEREUNDER FOR CONTRACT, STRICT LIABILITY, INDEMNITY, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, FOR DAMAGES WHICH, EXCEED THE FEES THAT SCALEFACTOR HAS BEEN PAID HEREUNDER DURING THE SIX (6) MONTH PERIOD PRECEDING THE CLAIM AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY REMEDY. IN NO EVENT SHALL SCALEFACTOR BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES OF ANY KIND AND HOWEVER CAUSED, INCLUDING BUT NOT LIMITED TO BUSINESS INTERRUPTION OR LOSS OF PROFITS, BUSINESS OPPORTUNITIES, OR GOOD WILL EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGE AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY REMEDY. The provisions set forth in this Section 14 shall survive the completion of the engagement or termination of this Agreement.
  15. Assignment: ScaleFactor shall not assign any of its rights under this Agreement, or delegate the performance of any duties hereunder, without the prior consent of the Company, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, ScaleFactor may in its sole discretion and without notice use independent subcontractors to perform some or all of the Selected Services; provided that the use of any such subcontractors shall not affect our obligations or responsibilities to you.
  16. Entire Understanding: This document, together with the exhibits, constitutes the entire understanding and agreement of the parties, and any and all prior agreements, understandings, and representations are hereby terminated and canceled in their entirety and are of no further force and effect.
  17. Severability: Each provision of this Agreement is a separately enforceable provision. If any provision of this Agreement is determined to be or becomes unenforceable or illegal, such provision shall be reformed to the minimum extent necessary in order for this Agreement to remain in effect in accordance with its terms as modified by such reformation.
  18. Warranty: ScaleFactor represents and warrants that all services performed under this Agreement shall be performed in a workmanlike and professional manner. EXCEPT AS OTHERWISE STATED IN THIS SECTION 18, SCALEFACTOR MAKES NO OTHER WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHER INCLUDING EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. WITHOUT LIMITING THE FOREGOING, SCALEFACTOR MAKES NO WARRANTY OF ANY KIND THAT THE SELECTED SERVICES WILL MEET THE COMPANY’S REQUIREMENTS OR ACHIEVE ANY INTENDED RESULT.
  19. Survival: The following sections of this Agreement shall survive the expiration or termination of this Agreement: Sections 4 – 8, Section 10, Sections 13 – 14 and Sections 16 – 19.
  20. Bill Payment: In order to use the payment functionality of our application, you must open a “Access API” account provided by Dwolla, Inc. (“Dwolla”) and you must accept the Dwolla Terms of Service and Privacy Policy . Any funds held in the Dwolla account are held by Dwolla’s financial institution partners as set out in the Dwolla Terms of Service . You authorize us to share your identity and account data with Dwolla for the purposes of opening and supporting your Dwolla account, and you are responsible for the accuracy and completeness of that data. You understand that you will access and manage your Dwolla account through our application, and Dwolla account notifications will be sent by us, not Dwolla. We will provide customer support for your Dwolla account activity, and can be reached at https://scalefactor.com, [email protected] and/or 512-593-2999.

© 2017 ScaleFactor, Inc.

Exhibit A

Tax and 1099 Terms and Conditions

These Tax and 1099 Terms and Conditions (the “Terms”) are pursuant to and in accordance with the Engagement Agreement to which this Exhibit A is attached (the “Agreement”). Except as specifically set forth in these Terms, the terms and conditions of the Agreement shall apply fully to the provision of the Selected Services for tax or 1099 services. If there is any conflict between the terms of the Agreement and these Terms, however, the Terms shall apply.

In the course of delivering services relating to tax return preparation, tax advisory, assistance in tax controversy matters and 1099 matters, ScaleFactor applies customary practices intended to provide these services in a cost-effective manner. The Terms describe certain of these customary practices, as well as other standard terms, conditions, and limitations relating to our provision of tax and 1099 services. Except to the extent we expressly agree in a written instrument signed by our authorized representative that specifically refers to the engagement covered by the Agreement and these Terms, all Selected Services that we provide to you relating to tax return preparation, tax consultation and advice, representation in any tax controversy matter, any 1099 matter or any other federal, state, local, or foreign tax matter, are subject to the Agreement and these Terms. References to the “Code” mean the Internal Revenue Code of 1986, as amended.

1. Terms Regarding Tax Return Preparation

  1. Scope of Return Preparation Services. Our services in preparing your tax returns are limited to tax return preparation, and our preparation of a return should not be viewed as assurance that any particular reported position is correct. If we become aware of a return position for which we believe a penalty under the Code is likely to apply, we will bring that position to your attention. If you would like us to advise you concerning any specific matter on your tax return, please contact us to discuss expanding the scope of our services. Any Tax Advice rendered in connection with the preparation of any tax return is subject to the provisions described under Section 2 “Terms Regarding Tax Advice” below.We will prepare the tax returns and other tax related filings and documents and schedules as agreed in writing with you. It is your responsibility to carefully examine and approve the completed tax returns before signing and mailing them to the tax authorities.
  2. Reliance on Information. We will rely on the financial statements or other financial information that you provide. We will not investigate or verify any facts underlying the transactions reported on your tax return. If the actual facts differ from the facts represented to or understood by us, or if there are related facts of which we are not aware, the reporting of the transactions could be materially different than that reported on the returns prepared by us.
  3. Our and Your Respective Responsibility for Accuracy. We will exercise due professional care and judgment to include all required information in your tax returns. The Code provides that by signing your returns, you are verifying that they are true, correct and complete. Accordingly, you should review each tax return carefully before signing it, and bring any questionable items or omissions to our attention.
  4. Jurisdictions for Returns. We will prepare tax returns for those federal, state, and local jurisdictions requested by you in writing. We will advise you if we believe, based on the information that you provide us, that a tax return should be filed in any other jurisdiction, but we will not prepare any such tax return without your approval of the expansion of our scope of services.
  5. Level of Assurance and Return Disclosures. The Code prohibits tax preparers from signing any tax return known to report any position (i) that is not supported by “substantial authority” unless certain disclosures are made concerning the position or (ii) attributable to certain “tax shelters” that the preparer does not reasonably believe is more likely than not correct. Because of the limited scope of analysis in evaluating a reporting position, a conclusion that disclosure is not required to enable us to sign a return may not be sufficient to avoid the application of tax penalties under the Code. Except as expressly agreed separately in writing, we will not review any reporting position or perform any tax research for the purpose of either (i) determining whether a position can be reported without disclosure or (ii) determining whether tax penalties may apply. If you wish to report a position without disclosure on the return, or if you are concerned about the potential application of tax penalties, please contact us to discuss expanding the scope of our services to include rendering Tax Advice intended to address your concerns.
  6. Disclosure of Reportable Transactions. The Code and certain state laws require that you disclose on your tax return certain “reportable transactions” or “listed transactions.” There are significant financial penalties for failure to disclose these transactions, and these penalties may apply even if the transaction does not lead to an understatement of tax. Our tax return preparation services do not include any investigation to evaluate whether there are any reportable transactions that are required to be disclosed on your returns, but we will advise you if we conclude that any such disclosure is required. If you would like us to specifically review any potentially “reportable transaction” or “listed transaction,” please contact us to discuss expanding the scope of our services.
  7. Unclear Tax Laws or Conflicting Interpretations. There may be instances where the tax law is unclear, or where there may be conflicts between the taxing authorities’ interpretations of the law and other supportable positions. In those instances, we will outline each of the reasonable alternative courses of action, including the risks and consequences of each such alternative. In the end, we will adopt, on your behalf, the alternative you select after having considered the information provided by us.
  8. Reasonable Beliefs. Without disclosure in the return itself of the specific position taken on a given issue, we must have a reasonable belief that the position(s) satisfies the substantial authority standard and that the position will be held to be the correct position upon examination by taxing authorities. If we do not have that reasonable belief, it must be satisfied that there is at least a reasonable basis for the position, and in such a case the position must be formally disclosed on Form 8275 or 8275-R, which form would be filed as part of the return. If we do not believe there is a reasonable basis for the position, either the position cannot be taken or the return will not be signed.
  9. Penalties and Interest. The law provides various penalties and interest that may be imposed when taxpayers underestimate their tax liability. You acknowledge and agree that any such understated tax, and any imposed interest and penalties, are your sole responsibility.
  10. Foreign Accounts. Note that any person or entity subject to the jurisdiction of the United States (includes individuals, corporations, partnerships, trusts, and estates) having a financial interest in, or signature or other authority over, bank accounts, securities, or other financial accounts having a value exceeding $10,000 in a foreign country, shall report such a relationship. Although there are some limited exceptions, filing requirements also apply to taxpayers that have direct or indirect control over a foreign or domestic entity with foreign financial accounts, even if the taxpayer does not have foreign account(s). For example, a corporate-owned foreign account would require filings by the corporation and by the individual corporate officers with signature authority. Failure to disclose the required information to the U.S. Department of the Treasury may result in substantial civil and/or criminal penalties.If you have a financial interest in any foreign accounts, you are responsible for providing us with all the information necessary to prepare Form TD-F-90-22.1 required by the U.S. Department of the Treasury on or before June 30th of each tax year. If you do not provide us with information regarding any interest in a foreign account, we will not be able to prepare any of the required disclosure statements.
  11. Review. Your returns may be selected for review by one or more taxing authorities. Any proposed adjustments by the examining agent are subject to certain rights of appeal. In the event of such government tax examination, ScaleFactor will be available upon Company’s written request to represent Company during the examination and/or during any appeal. Any such representation will be the subject of, and governed by, the Agreement and any additional terms and conditions as agreed in writing between the parties.
  12. Substantiation. ScaleFactor relies on the Company for compliance with all Internal Revenue Service substantiation requirements. ScaleFactor shall not be responsible for the disallowance of doubtful deductions or inadequately supported deductions, nor any resulting additional tax, penalties and interest. In the event ScaleFactor or the Company are assessed additional tax, penalties and interest due to ScaleFactor’s reliance on inaccurate, incomplete or misleading information provided to ScaleFactor (with or without the Company’s knowledge or intent). The Company will indemnify and defend ScaleFactor and hold ScaleFactor harmless as to any additional tax, penalties and interest.

2. Terms Regarding Tax Advice

  1. Limitations on Oral, Messaging and Email Communication.We may discuss with you our views regarding the tax treatment of certain items. We may also provide you with tax information in the body of an email. Any advice or information delivered orally or in the body of an email (as opposed to a memorandum delivered as an email attachment) will be based upon limited tax research and limited discussion and analysis of the underlying facts. Additional research or more complete review of the facts could affect our analysis and conclusions. Because of these limitations and the related risks, it may not be appropriate to proceed with any transaction or any tax return reporting position solely on the basis of any oral, messaging or email communication. You accept all responsibility for any loss, cost, or expenses resulting from your decision (i) not to have us perform the research and analysis necessary to reach a more definitive conclusion and (ii) to instead rely on an oral or email communication. The limitation in this Section 2.1 will not apply to an item of written Tax Advice that is delivered to you as a document attached to an email.
  2. Facts and Assumptions. Our investigation to confirm or verify any facts described in any letter, memorandum, or opinion addressing the application of tax laws to a particular situation (“Tax Advice”) will be limited to the investigation described in the body of the Tax Advice, and we will rely on the assumptions and representations described in the Tax Advice. Any change in or addition to these facts, assumptions, or representations could materially and adversely affect our analysis and conclusions. If you for any reason believe that any facts, assumptions, or representations in any Tax Advice are incorrect or incomplete, you must notify us immediately to discuss the impact on our analysis and conclusions. You should not rely upon any item of Tax Advice that is based on facts, assumptions, or representations that you believe to be incorrect or incomplete.
  3. Applicable Law. Unless expressly stated in our Tax Advice, our analysis and conclusions will relate solely to federal income tax consequences under the Code as of the date of our Tax Advice. If you would like us to address tax consequences to you under any other applicable tax law, please contact us to discuss expanding the scope of our services.
  4. Issues Addressed. Each item of Tax Advice will be limited to advice concerning the tax issues described in the Tax Advice, and it may not consider all of the issues that may arise in connection with the transaction. Except as expressly stated in an item of Tax Advice, our advice is not an endorsement of any particular transaction structure, nor is it a recommendation that any addressee proceed with the transaction structure described in the Tax Advice.
  5. Reportable Transactions. As noted earlier, the Code and certain state laws require that you disclose on your tax return certain “reportable transactions” or “listed transactions.” We will not review any transaction to determine whether it is a “reportable transaction” or a “listed transaction” except as expressly provided in the Tax Advice. If you would like us to review any transaction to determine whether it is a “reportable transaction” or “listed transaction,” please contact us to discuss expanding the scope of our services.
  6. Level of Assurance for Tax Advice; No Guarantee. Many areas of tax law are unclear, and the application of the tax law to any particular facts may be subject to more than one interpretation. Our Tax Advice will be based upon our interpretation of applicable law and regulations, and certain case and ruling authority as of the date of the Tax Advice. The level of assurance for any particular item of Tax Advice will depend on the underlying facts, the clarity of applicable law, regulations, rulings, and court cases, and the extent of factual due diligence and tax research performed. The conclusions in our Tax Advice will be based on our good faith belief that they meet the level of assurance stated in the Tax Advice. Obtaining Tax Advice at a particular level of assurance may in some cases provide a defense to certain tax penalties, but you should not assume that an item of Tax Advice will offer you protection from penalties except as expressly stated in the Tax Advice. Our analysis and conclusions will be based upon our professional judgment, will not be a guarantee of the ultimate tax consequences of the transactions described in the Tax Advice, and will not be binding on the IRS or any tax authority, or any court. If you would like greater certainty regarding the tax treatment of any particular transaction, please contact us to discuss the possibility of obtaining a ruling from the appropriate tax authority.
  7. Reliance and Distribution. Each item of Tax Advice is rendered only for the benefit of the named addressee(s), and does not address the tax consequences to any other person or entity that is not an addressee. No person or entity other than the named addressee(s) may rely on the Tax Advice. To avoid confusion regarding matters of reliance, our Tax Advice may not be delivered to any other party unless you advise the recipient of these limitations on reliance. Unless expressly provided in an item of Tax Advice, but subject to the limitation in the preceding sentence, you are free to share the Tax Advice with any third party. You may deliver a copy of any Tax Advice to the IRS or any tax authority for the purpose of demonstrating good faith and reliance on the analysis and conclusions expressed therein. You should be aware that the delivery of any item of Tax Advice to a third party may act as a waiver of any otherwise available claim of privilege. Before delivering an item of Tax Advice to a third party, we recommend that you consult with legal counsel to assess the matters relating to claims of privilege.

3. Terms Applicable to All Tax and 1099 Services

  1. Scope of Services. Our services will be limited to the Selected Services and other services specifically agreed to in writing by us. Services in providing Tax Advice or in preparing a tax return do not include representation in the event of an examination by the IRS or other tax authorities. If you need tax services beyond those specifically described in this Engagement Letter, these additional services would constitute either a separate engagement or an expansion of an existing engagement at an additional cost. Our agreement to provide services for one engagement does not obligate us to accept any other engagement.
  2. Your Responsibilities. In order for us to provide effective services, you must cooperate with us and provide us with any information that we request, all on a timely basis. You must cause your employees and contractors to cooperate fully and timely with us. You must designate for us a person authorized to make or obtain all management decisions with respect to our services on a timely basis. We will rely in good faith on all information and management decisions communicated to us by you, your employees, or your contractors, and we will not be responsible for any loss or other obligation arising from our reliance. Any failure to fulfill your responsibilities will be grounds for our suspending or terminating the applicable Selected Services or other services or the Agreement.
  3. Decisions. While we will provide you with advice concerning tax return reporting and the tax consequences of certain transactions, you will retain all authority and responsibility for any decisions based on our advice.
  4. Independent Contractor. For all tax services that we perform, we will be an independent contractor and not your employee, agent, or partner, and we will determine the method, details and means of performing our services. We assume full and sole responsibility for the payment of all compensation and expenses of our employees and for all of their applicable employee withholdings.
  5. Confidentiality. We will maintain the confidentiality of your Confidential Information in accordance with Section 10 of the Agreement.
  6. Engagement of Other Parties. In performing any tax services, we may engage the services of seasonal preparers, independent contractors, or other third party personnel. By engaging us, you have authorized us to allow employees, partners and subcontractors of ScaleFactor, Inc. and such other third parties access to your files, financial information and other confidential information. Our engagement of any third party does not affect our obligations to you.
  7. Changes in Law. Subsequent changes to applicable law or regulations, or the issuance of new case or ruling authority, could materially and adversely affect the analysis and conclusions in an item of Tax Advice or a position reported on a tax return. Neither the delivery of any Tax Advice nor the preparation of a tax return is an undertaking on our part to advise you of any changes in law.
  8. Possibility of Litigation. If the IRS or another tax authority adopts a position contrary to any analysis or conclusions in our Tax Advice or to any position reported on a tax return, it might be necessary to pursue administrative appeals or litigation. Decisions of whether and how to pursue administrative appeals or litigation may be based on considerations of cost, publicity, and other matters unrelated to the technical merits of a tax position. In some cases, taxpayers elect not to pursue appeals or litigation even though a reported position may ultimately be sustained on appeal or in litigation.
  9. Disclaimer of Legal and Investment Advice. Our services under the Agreement and these Terms do not constitute legal or investment advice. We recommend that you retain competent legal counsel and investment advisers.
  10. Record Retention. Notwithstanding the terms of Section 5 of the Agreement, Federal tax law requires us to retain either copies of tax returns we prepare or specified information relating to those returns, as well as certain other documents related to our tax services for varying time periods. Our current policy (which we may revise at any time and in our sole discretion) is to retain copies of tax returns and certain related workpapers for seven years after the return is filed, subject to casualties beyond our control. We provide our clients with a file copy of each federal income tax return for which we are a signing preparer, and we recommend that you retain this copy for at least seven years. Although taxpayers are not required to retain their tax records for longer than our seven-year recommendation, there are situations in which tax returns older than seven years may contain information useful in future tax planning. For example, prior year returns may contain information relating to the basis of assets for gain/loss calculations, and corporations may use tax return information in calculating “earnings and profits” for corporate tax planning. We recommend that taxpayers consider maintaining separate accounting records or work papers with this information. If you would like us to assist you in developing these separate records, please call us to discuss the scope of such a project. It may also be advisable to retain accounting or tax records for longer than seven years for reasons Unrelated to taxes. Decisions regarding document retention may involve a variety of legal considerations (e.g., statutes of limitations, rules of evidence), so you may wish to consult your legal counsel to address these legal considerations.

4. General Business Terms

  1. Termination. Termination for any reason will not affect your obligation to pay us for fees and expenses incurred prior to termination or in transferring files to and otherwise cooperating with any successor tax preparer or tax advisor. If you terminate any Selected Services for tax or 1099 services or this Agreement after we have commenced performing services under a fixed fee arrangement, you will be obligated to pay us the entire fixed fee upon termination.
  2. Survival of Provisions. All provisions of these Terms will survive the termination or cancellation of the Engagement, except that (i) we will not have any obligation to provide services after termination and (ii) except as provided in Section 19 of the Agreement and Section 4.1 hereof, you will not have any obligation to pay us for any services that we perform after termination.
  3. Opportunity to Cure. Notwithstanding Section 8 of the Agreement and subject to Section 14 of the Agreement, in the event that we fail to meet our obligations under the Agreement or these Terms with respect to any Selected Services for tax or 1099 services, you shall notify us in writing and provide us with the opportunity to re-perform the services. If the services cannot be re-performed, or if re-performance will not cure the breach in a reasonable period of time, then your sole remedy will be for us to refund the Fees relating to the specific Selected Services as agreed in writing and terminate the relevant Selected Services or this Agreement.
  4. Fee Disputes. The Company and ScaleFactor both agree that any dispute over Fees charged by us to you or any other matter with respect to any Selected Services for any tax or 1099 services that is not resolved through mediation or otherwise in accordance with Section 13 of the Agreement will be resolved exclusively by arbitration in accordance with the Rules for Professional Accounting and Related Services Disputes of the American Arbitration Association. The parties shall select a mutually acceptable arbitrator knowledgeable about issues relating to the applicable tax or 1099 services. In the event the parties are unable to agree to such a selection, each party will select an arbitrator and the two arbitrators in turn shall select a third arbitrator, all three of whom shall preside jointly over the matter. The arbitration shall take place in Austin, Texas, or as otherwise mutually agreed upon by the parties. All documents, materials, and information in the possession of each party that are in any way relevant to the dispute shall be made available to the other party for review and copying no later than 30 days after the notice of arbitration is served. The arbitrator(s) shall not have the authority to modify any provision of this Agreement or to award punitive damages. The arbitrator(s) shall have the power to issue mandatory orders and restraint orders in connection with the arbitration. The decision rendered by the arbitrator(s) shall be final and binding on the parties, and judgment may be entered in conformity with the decision in any court having jurisdiction. The agreement to arbitration shall be specifically enforceable under the prevailing arbitration law. IN AGREEING TO ARBITRATION, WE BOTH ACKNOWLEDGE THAT, IN THE EVENT OF A DISPUTE, EACH OF US IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO HAVE THE DISPUTE DECIDED IN A COURT OF LAW BEFORE A JUDGE OR JURY AND INSTEAD WE ARE ACCEPTING THE USE OF ARBITRATION FOR RESOLUTION OF ANY DISPUTE OR OTHERWISE IN CONNECTION WITH FEES CHARGED BY SCALEFACTOR OR ANY TAX OR 1099 SERVICES. The parties hereby irrevocably and unconditionally agree that service of process in any such Dispute may be effected by mailing a copy of such process by certified mail, postage prepaid, to such party at the address provided by such party. The party prevailing in any Dispute shall be entitled, in addition to any other relief that may be granted, to be awarded costs, including its reasonable attorneys’ fees and the cost of arbitration.
  5. Newsletters and Similar Communications. We may from time to time send newsletters, mails, explanations of tax law developments, or similar communications to selected clients, former clients, or other interested parties. These communications are of a general nature and are not definitive advice. We do not send all such communications to all clients, former clients, or interested parties. These newsletters do not establish or continue a client relationship with any person, and they do not constitute an undertaking on our part to monitor tax or other issues for you or for any other parties.

5. Savings

  1. Savings Clause. In the event any provision herein violates a tax jurisdiction’s Standard of Conduct specifically applicable to a client, as to that client, such provision shall be (i) modified to the extent necessary to be in compliance with that specific standard, or (ii) rendered void if modifying the provision cannot result in compliance with the specifically applicable standard. In the event any portion of the Agreement, including these Terms, is found to be void, illegal or unenforceable, all remaining provisions shall remain in full force and effect.