Residual and Funding Policy

1. Overview

This Residual and Funding Policy ("Policy") outlines the financial mechanics, calculation methodologies, and reporting standards for the partnership between Constellation Payment Processing Inc. ("Constellation") and its Partners. This Policy is incorporated by reference into the Partner Terms of Service.

2. Calculation Methodology

Residual Payments are calculated based on the net revenue generated by the Sub-merchants associated with the Partner.

Gross Revenue

The total fees collected from Sub-merchants for credit card and ACH processing services.

Net Revenue

The amount remaining after the following "Total Pass-Through Costs" and deductions are subtracted from Gross Revenue:

• Network Costs: Interchange fees, dues, and assessments determined by the Card Brands.
• Regulatory & Compliance Fees: Costs associated with AML (Anti-Money Laundering) monitoring, PCI compliance, and mandatory regulatory filings.
• Operational Fees: Underwriting, merchant boarding, and specific platform access fees.
• Losses & Liabilities: Any unrecovered merchant losses, chargebacks, or fines/penalties assessed by a payment network, sponsor bank, or regulatory authority.
• Bad Debt Provision: In order to account for anticipated merchant non-payment risk, Constellation shall apply a monthly Bad Debt Provision to Net Revenue attributable to each Partner. The Bad Debt Provision shall be calculated as a fixed percentage (the "Provision Rate") determined individually for each Partner. The Provision Rate shall be based on the Partner's historical uncollectable merchant balances during the prior calendar year, expressed as a percentage of applicable Net Revenue, as determined by Constellation in its reasonable discretion. The Bad Debt Provision:
  • Shall be calculated monthly.
  • Shall be deducted prior to the calculation and disbursement of Residual Payments.
  • Is intended to estimate anticipated future uncollectable merchant balances.
  • Does not represent an actual write-off at the time of deduction.

  Constellation reserves the right to review and adjust the Provision Rate periodically based on updated performance data.

3. Payment Timing and Logistics

Payout Deadline

Residual Payments earned in a particular calendar month shall be issued no later than the last business day of the following calendar month.

Distribution Method

Payments may be facilitated via internal corporate ledger transfer or other established intercompany accounting methods.

External Partners

Payments are issued via ACH transfer to the bank account on file.

Tax Documentation

All Partners—including affiliated or internal entities—must provide a completed and executed W-9 Request for Taxpayer Identification Number and Certification form (or applicable international tax equivalent) prior to the release of any Residual Payments.

Bad Debt True-Up and Write-Off Reconciliation

Merchant balances that remain unpaid for ninety (90) days from the period of initial delinquency shall be deemed eligible for write-off consideration. On a monthly rolling basis, Constellation shall perform a reconciliation ("True-Up") comparing:

• The cumulative Bad Debt Provision previously withheld for the applicable period; and
• The actual uncollectable merchant balances attributable to the Partner that have reached ninety (90) days delinquent and are determined to be uncollectable.

Following such reconciliation:

• If actual uncollectable balances exceed the cumulative Bad Debt Provision, the shortfall may be deducted from future Residual Payments.
• If actual uncollectable balances are less than the cumulative Bad Debt Provision, the excess provision amount may be credited back to the Partner through an adjustment to future Residual Payments.
• Adjustments shall be reflected in the Residual reporting for the applicable month in which the True-Up is performed.

4. Minimum Payout Thresholds

Threshold Amount

A minimum threshold of $100.00 must be earned before a Residual Payment is triggered.

Rollover Provision

If earned residuals for a calendar month are less than $100.00, the balance will carry over to the subsequent month. Payments will remain in a "pending" status until the cumulative total exceeds the threshold.

5. Reporting and Dispute Resolution

Monthly Reporting

Constellation will provide a monthly report detailing the processing volume and the specific data used to calculate the Residual Payment.

Review Period

Partner is granted ninety (90) days from the date of the report to verify the calculations and notify Constellation of any suspected errors or discrepancies.

Finality

If no written dispute is received within the ninety (90) day window, the report and the corresponding payment shall be deemed final, accurate, and accepted by the Partner.

6. Policy Updates

Constellation reserves the right to modify this Policy to reflect changes in Card Brand Rules, Sponsor Bank requirements, or internal operational shifts. Partners will be notified of material changes to this Policy in accordance with the notice of provisions of the Partner Terms of Service.