(Example 3)

# Residuals for basic cable reuse.

Projects made for basic cable and reused on basic cable generally fall under one of two formulas when residuals are paid: the "Sanchez Formula" and the "Hitchcock Formula." The Company may elect which formula it will use when the writer is employed.

# The Sanchez Formula

The Sanchez formula is paid similarly to products made for free television. The formula is called "Sanchez" because Sanchez of Bel Air was one of the first made-for-basic cable series for which the Guild negotiated basic cable residuals. It is run-based and calculated on the same residual base (the Other Than Network Prime Time Minimum) used for made-for-free television residuals as follows:

Writing services commenced before May 2, 2002.
Run # Percentage Due
2-5 (paid in 1 payment) 43.2%
6 5%
7, 8, 9, 10 3% each
11, 12 2% each
13+ 1% each
Writing services commenced on or after May 2, 2002.
Run # Percentage Due
2-5 (paid in 1 payment) 50%
6 6%
7, 8 4% each
9, 10 3.5% each
11 3%
12 2.5%
13+ 1.5% each

Note that payment for runs two through five is due upon the second run. Payment is due even if runs three through five never occur. Thereafter, each run is paid on a per-run basis.

The residuals are due within four months of the run date.

# The Hitchcock Formula

The Hitchcock formula is calculated in an entirely different manner. The formula is called "Hitchcock" after the 1986 made-for-basic cable series, Alfred Hitchcock Presents.

Under the Hitchcock formula, the residual covers 12 basic cable runs of a program over a five-year period. The Hitchcock formula is the only case where an initial run triggers a residual payment.

Writing services commenced before May 2, 2002.

For high budget dramatic programs on which the writer's services commenced before May 2, 2002, the residual is calculated as the difference between the applicable minimum for Network Prime Time and the Other Than Network Prime Time minimum. For other types of programs, the reuse fee is 70% of the residual base.

Writing services commenced on or after May 2, 2002.

For high budget dramatic programs on which the writer's services commenced on or after May 2, 2002, the residual is 120% of the difference between the applicable Network Prime Time Minimum and the Other Than Network Prime Time minimum. For other types of programs, the reuse fee is 84% of the residual base.

Residuals are due within 30 days of initial exhibition and may not be paid prior to the final credit determination.

# Residuals For Foreign Reuse

For foreign television reuse of made-for-basic cable projects on which the writer's services commenced before May 2, 2001, the residual is 35% of your residual base which may be allocated 15%-10%-10%. For projects on which the writer's services were commenced on or after May 2, 2001, in addition to 35% of your residual base, you will receive 1.2% of foreign gross receipts when foreign gross receipts reach certain levels.

Residuals are due within 30 days of the Company's knowledge of the foreign telecast, but no later than six months from the first foreign telecast.

# Residuals For Reuse In Other Markets

Residuals for reuse of made-for-basic cable programs in syndication are paid the same as made-for-free television programs reused in syndication, with the second run residual applying to the first syndication run, and so on. This rule applies unless your program was part of a series with 66 episodes or less when it ran on basic cable, or your program ran on basic cable more than 10 times. If either exception applies, the residual is 2% of the license fee.

Residuals for reuse of made-for-basic cable programs in all other markets, including pay television, are paid the same as reuse of made-for-free television programs.