Finance Arian Foster Convertible Tracking Stock Fantex, Inc. filed a form S-1 with the SEC on October 17, 2013, for an initial public offering of Fantex Series Arian Foster Convertible Tracking Stock. Arian Foster is a running back for the Texans, an NFL team, and Fantex proposes to acquire a 20% stake in the gross monies that Arian Foster will earn beginning from February 28, 2013, as a result of his activities in the NFL and related fields (including activities in a non-NFL football league), such as broadcasting and coaching. As consideration for this interest under the brand contract, Fantex will pay Arian Foster a one-time cash amount of $10 million contingent upon obtaining financing. In the IPO, Fantex is offering 1,055,000 shares of Series Arian Foster at $10.00 per share on a best efforts, all or none basis Arian Foster attended the University of Tennessee, where he was the starting running back for three seasons. Arian Foster went undrafted in the 2009 draft and signed with the Texans as an undrafted free agent. Arian Foster was born on August 24, 1986 and is 27 years old as of October 17, 2013. During the 2010 NFL season, Arian Foster was the leading rusher in the NFL with 1,616 rushing yards. Arian Foster was named First Team All Pro in 2010 and Second Team All Pro in 2011. Arian Foster has also been selected to three Pro Bowl appearances, in each of the 2010, 2011 and 2012 seasons. In addition, Arian Foster led the NFL in carries in 2012, with 351 (405, including post-season games), and was in the top six in regular season carries in 2011 and 2010 with 278 and 327 carries, respectively. Arian Foster is reported to have experienced an irregular heartbeat on numerous occasions since he was 12 years old, and in one instance he was reported to have left a regular season NFL game early due to this condition. In addition, Arian Foster played with a tom meniscus, or cartilage in his knee, during the 2010 NFL season, without publicly disclosing the injury until after the season when he underwent surgery to repair the injury. Arian Foster's playing status was questionable for two games during the 2011 NFL season, and he missed three games due to hamstring issues. A knee injury during the 2012 pre-season also made his season debut questionable. In addition, Arian Foster recently underwent an MRI on his right calf that was strained during off-season practice in May 2013 and has missed most of training camp due to a lingering back pain. Arian Foster has experienced these and other instances of normal wear and tear as an athlete in the NFL and we expect that Arian Foster will continue to experience such wear and tear. Any worsening of these conditions, or re-injury or new injury, could materially and adversely affect Arian Foster's playing performance and the value of the Arian Foster Brand. (S-1, October 13, 2013. p. 6) Finance NFL Player Contract Arian Foster is in the second year of a five year player contract with the Texans, pursuant to which he is eligible to receive for the 2013 season through the 2016 season a salary of up to an aggregate of $23.5 million ($5.25 million in 2013, $3.25 million of which is guaranteed), other than if, prior to or during the 2013 season, he either fails or refuses to report, practice or play for the team for any reason other than injury (or death) suffered while performing services under the contract or is in material breach of his NFL player contract, (non-guaranteed salary of $5.75 million in 2014, S6,0 million in 2015 and $6.5 million in 2016), plus bonuses of up to an aggregate of $2.0 million (up to $500,000 per season). Each of these payments would be considered brand income when received by Arian Foster, and thus we would be entitled to 20% of these amounts when paid. The Texans may terminate Arian Foster's player contract at any time, in the sole judgment of the Texans, if Arian Foster's skill or performance has been unsatisfactory as compared with that of other players competing for positions on the Texans' roster, or if Arian Foster has engaged in personal conduct reasonably judged by the Texans to adversely affect or reflect on the Texans. The Texans may also terminate the player contract if Arian Foster fails to establish or maintain his excellent physical condition to the satisfaction of the Texans' physician, or make the required full and completo disclosure and good faith responses to the Texans' physician of any physical or mental condition known to him which might impair his performance under this contract and to respond fully and in good faith when questioned by the Texans' physician about such condition. (S-1, October 13, 2013. p. 7) Typically, when a player's contract is terminated, he is entitled to only the guaranteed portion of the contract Other Contracts Arian Foster currently has ongoing endorsement contracts or license agreements with Under Armour, Inc., Kroger Texas LP, Gamebreaker Sports LLC, Health Warrior, Inc., Pro Player Merch LLC and ProCamps, Ltd. These endorsement contracts generally have terms that end in 2014 (with one agreement terminating in the first quarter of 2015) and require Arian Foster to exclusively endorse certain categories of products, make certain appearances, participate in the production of promotional materials and social media activities and sign autographs. Arian Foster is entitled to total compensation under these agreements of up to approximately 5687,750, $265,000 of which is contingent on achieving certain milestones, including playing in post-season games, caring individual honors such as rushing 2,000 yards in a season, scoring 10 touchdowns in a season, playing in the Pro Bowl, being the NFL rushing leader or Super Bowl Most Valuable Player or breaking the NFL single season rushing record. Finance These contracts may be terminated in the event of breach of contract by Arian Foster or if Arian Foster fails to play in the NFL, is charged with criminal behavior or engages in conduct that adversely reflects on the sponsor. In addition, certain endorsement contracts may be terminated due to changes to NFL rules preventing reasonable use of the endorsement product. (S-1, October 13, 2013, p. 7-8) Information on Arian Foster's NFL contract and endorsement is summarized below. Endorsements Total Comp Incentive Year 2013 2014 2015 2016 NFL Compensation Structure Guaranteed Non-Guaranteed $3,250,000 $2,000,000 $5,750,000 $6,000,000 $6,500,000 $687,750 $265,000 Management Fees Fantex will provide management services for which it will charge a 5% fee on any cash flow received. Underwriting Fees Fantex Brokerage Services will charge a $0.50 per share fee to sell the 1,055,000 shares. Bond Yields Maturity 3-month t-bill 1-year note 3-year note 5-year note 10-year note 30-year bond Barclays Capital Intermediate Corporate Index Merrill Lynch CCC-rated Index Source: Wall Street Journal, 10/23/2013 Yield (% 0.036 0.104 0.599 1.288 2.504 3.597 2.400 8.997 Historical Stock Market Geometric Average Return (1926-2010) Annual Return Stock Type (%) Mid-cap stock ($1.77b