Vassal Coupon Contract Proposal

Excerpt:

New Security Proposal: Vassal Coupon Contract

From the desk of Texarch Eridanus Pecunia Samson 04.22.3200

This proposal is to establish a new financial derivative that will put a monetary value on the future Gross Domestic Product of a sovereign entity as a function of its subjects. The derivative itself is a contract for the right, but not the obligation to purchase a set number of human assets at an agreed price and before a predetermined future date. These contracts can be made freely and be traded on the noble financial markets.

Introduction

Economies throughout the sector are falling stagnant in the absence of synthetic labor. While it is within the purview of House Eridanus to provide economic stimulus, adjusting fiscal policy will not address the supply of labor. Any efforts to incentivise propagation will have an adverse effect, increasing the demand for goods over the current supply that can be produced at the current population. This historically leads to civil unrest.

What is needed is a way to more efficiently allocate human assets as well as provide a method to raise capital without hampering the economy. This paper proposes a solution to the production shortage by creating a new derivative on top of the standard exchange of human subjects that creates a promise to exchange vassals at a predetermined price at a later date.

Specifications

The creation of Vassal Coupon Contracts (VCC or coupon) is an agreement between two parties to facilitate a potential transaction of the lordship over human assets (the deliverable) at a preset price, referred to as the strike price, prior to the expiration date. The seller, referred to as a Writer, is the creator of the coupon who owns the deliverable. The Purchaser is the party that buys the coupon.

In the transaction, the Writer is paid a premium to assume the obligation of either selling or buying the deliverable at the strike price. The Purchaser has the right to redeem (call on) the coupon to purchase or sell the deliverable at the agreed upon strike price. Should the coupon expire before the coupon is called on, the contract is void and the Writer is no longer under obligation to sell or buy the deliverable.

If the Writer is to agree to sell the deliverable to the Purchaser, the coupon is called a Coupon Call. If the Writer is to agree to buy the deliverable from the Purchaser, it is called a Coupon Put.

The coupon shall within state (i) the Writer who either creates a call or put,(ii) the strike price at which the deliverable will be purchased at, (iii) the expiration date at which the coupon is null and void, (ix) the amount of the deliverable to be purchased, and (x) the verified signature of both parties to be legal and binding. The Writer or Purchaser may also request of each other any additional clause or addendum to the coupon that is within the reasonable boundaries of the law.

The Writer is under strict contractual obligation to sell the deliverable in the case of a call or to buy the deliverable in the case of a put at the strike price when the coupon is called on. The Writer is allowed the option to buy back the contract at any time before the expiration date at the current market price if the Purchaser is willing. The Writer may also buy another coupon from another Writer, effectively reducing the obligation to deliver by whatever amount of deliverable the purchased coupon is written for. Due to the complexity of multiple parties involved, Writers that reduce their obligations by purchasing coupons will require the adjustments to be submitted to a contract court.

Should the Writer be unable to fulfill either in full or in part the sale or purchase of the deliverable at the time the coupon is called on the Purchaser has the right and due cause to sue the Writer as liable for assets lost.

The Purchaser has the right, but not the obligation to purchase the deliverable in the case of a call or to sell the deliverable in the case of a put at any time before the coupon expiration date. The Purchaser is free to sell or transfer ownership of the coupon to any noble that would purchase it.

In short:

• The Coupon is the agreement of the Writer to sell or buy the human assets from the holder of the coupon in return for a fee.
• The Coupon Call gives the right to the holder to buy the human assets at the agreed price before a certain time.
• The Coupon Put gives the right to the holder to sell the human asset at the agreed price before a certain time.

Price Discovery

The going market rate of VCCs at any time is determined by (i) the amount of time before expiration, (ii) the GDP per capita of the sovereign entity, (iii) the difference between strike price and the underlying deliverables’ market price, and (ix) the rating of human capital.

• The further from expiration, the higher the premium.
• The higher GDP per capita, the higher the premium.
• The higher rating of human capital, the higher the premium.
• The lower the strike price is on a coupon call compared to market price, the higher the premium.
• The higher the strike price is on a coupon put compared to market price, the higher the premium.

These will be openly monitored and the premiums will be determined on the open market at the Eridanus Board of Securities Exchange (EBSE), however, any two legal entities can create their own private VCC. Any contract made off of the EBSE must be drafted and approved at a contract court.

Benefits

• Landed nobles that require additional labor can purchase a VCC Call to “lock in” a set price for a certain time, allowing them to defer the purchase until they can afford it without worrying about rising prices.
• Landed Nobles that would like to insure their production capabilities from stagnating or falling can purchase a VCC Put to recuperate lost capital if such an occurrence happens.
• Landed nobles that are looking to raise finances for investments in industry or infrastructure can write VCC Calls in order to collect premiums. The premium is theirs to keep, free and clear regardless if the coupon is called on or not.
• Landed nobles that would like to wait to purchase labor for a certain cost average they can afford may write VCC Puts. They collect a premium for keeping the market flushed with buyers.
• VCCs will encourage Landed nobles to work towards raising their GDP to receive higher premiums.
• In theory, the open market will help move labor from where it is least efficient to where it is most needed.
• In theory, the open market will evenly distribute the quality of laborers across the empire and push the price per head to a more stable level, reducing market volatility.

Example

Consider Yakiyah and it’s population of laborers: Assuming the Estimated GDP per capita of Yakiyah is projected at 100 credits a head today.

Coupon Call

Assuming Noble A would like to acquire more laborers from Noble B at a later time, but would like to lock in the rate of 100 credits per head.

Noble B will write a VCC Call to Noble A that grants them the right to purchase from Noble B the lordship of 100,000 vassals at 100 credits per head at or before six months from today’s date for a premium of 10 credits per head. Noble pays the premium and now Noble B is obligated to sell to Noble A the lordship of up to 100,000 vassals at the strike price (100 credits) before the agreed expiration date.

Scenario 1:

The GDP per capita on Yakiyah rises to 150 credits per head, and Noble A wishes to call on his coupon. Noble B must now sell to Noble A the lordship of 100,000 vassals at the agreed strike price of 100 credits a head, regardless of the current market price of 150 per head.

Scenario 2:

The GDP per capita on Yakiyah falls to 80 credits per head. Noble A decides not to call on the coupon and six months pass. The coupon expires and Noble B is no longer obligated to sell to Noble A at the strike price.

In both scenarios, Noble B will keep the premium of 10 credits per head collected from Noble A.

Coupon Put

Assuming a Landed Noble wants to buy human assets from Noble B but can wait for a certain price to fit their budget, and Noble B is willing to sell their human assets at a price that will protect them from financial loss in case of a failing economy. Noble A will write a VCC Put to Noble B that grants them the right to sell to Noble A the lordship of 100,000 vassals at 100 credits per head at or before six months from today’s date for a premium of 10 credits per head. Noble B pays the premium and now Noble A is obligated to buy from Noble B the lordship of up to 100,000 vassals at the strike price (100 credits) before the agreed expiration date.

Scenario 1:

The GDP per capita on Yakiyah falls to 80 credits per head, and Noble B wishes to call on their coupon. Noble A must now buy from Noble B the lordship of 100,000 vassals at the agreed strike price of 100 credits a head, regardless of the current market price of 80 credits per head.

Scenario 2:

The GDP per capita on Yakiyah rises to 150 credits per head. Noble B decides not to call on the coupon and six months pass. The coupon expires and Noble A is no longer obligated to buy from Noble B at the strike price.

In both scenarios, Noble A will keep the premium of 10 credits per head collected from Noble B.

[Contract]

VASSAL COUPON CONTRACT AGREEMENT FOR PURCHASE OF LABOR ASSETS (“COUPON CALL”)
THIS VASSAL COUPON CONTRACT AGREEMENT ("Agreement") made and entered into this _________(1)_______ day of ____(2)_____, _______(3)_____, by and between _______(4)______, whose principal address is _______(5)_________, hereinafter referred to as "Writer" and ________(6)_______, whose principal address is _______(7)________, hereinafter referred to as "Purchaser": W I T N E S S E T H: WHEREAS, Writer is the fee simple owner of certain Labor Assets being, lying and situated in the Province of ___________(8)_____________, celestial body of ______________(9)_______, in the sector of ___________(10)_____________ ("Premises") and such property being more particularly described as follows: (Insert Legal Description) and, WHEREAS, Purchaser desires to procure a Coupon to purchase the Labor Assets upon the terms and provisions as hereinafter set forth; NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged by the parties hereto and for the mutual covenants contained herein, Writer and Purchaser hereby agree as follows:
1. DEFINITIONS. For the purposes of this Agreement, the following terms shall have the following meanings: (a) "Expiration Date" shall mean the day upon which the last party to this Agreement shall duly execute this Agreement; (b) "Premium" shall mean the total sum of a Writers fee of ______(11)_________.
2. GRANT OF COUPON. For and in consideration of the Premium payable to Writer as set forth herein, Writer does hereby grant to Purchaser the exclusive right to purchase the Labor Assets upon the terms and conditions as set forth herein.
3. PAYMENT OF PREMIUM. Purchaser agrees to pay the Writer a Premium of ____________(12)________ of the total purchase price of the Labor Assets.
4. EXERCISE OF COUPON. Purchaser may exercise its exclusive right to purchase the Labor Assets pursuant to the Coupon, at any time during the Coupon Term, by giving written notice thereof to Writer. In the event the Purchaser does not exercise its exclusive right to purchase the Labor Assets granted by the Coupon during the Coupon Term, Writer shall be entitled to retain the Premium, and this agreement shall become absolutely null and void and neither party hereto shall have any other liability, obligation or duty hereinunder or pursuant to this Agreement.
5. CONTRACT FOR PURCHASE & SALE OF LABOR ASSETS. In the event that the Purchaser exercises its exclusive Coupon as provided for in the preceding paragraph, Writer agrees to sell and Purchaser agrees to buy the Labour Assets and both parties agree to execute a contract for such purchase and sale of the Labor Assets in accordance with the following terms and conditions: (a) Purchase Price. The purchase price for the Labor Assets shall be the sum of _____________(13)______________ ($_________________). (b) Closing Date. The closing date shall be on _______(14)______, _____(15)______ or at any other date during the Coupon Term as may be selected by Purchaser; (d) Default by Purchaser; Remedies of Writer. In the event Purchaser, after exercise of the Coupon, fails to proceed with the closing of the purchase of the Labor Assets pursuant to the terms and provisions as contained herein and/or under the Contract, Writer shall be entitled to retain the Premium as liquidated damages and shall have no further recourse against Purchaser; (e) Default by Writer; Remedies of Purchaser. In the event Writer fails to close the sale of the Labor Assets pursuant to the terms and provisions of this Agreement and/or under the Contract, Purchaser shall be entitled to either sue for specific performance of the real estate purchase and sale contract or terminate such Contract and sue for money damages.
6. MISCELLANEOUS. (a) Execution by Both Parties. This Agreement shall not become effective and binding until fully executed by both Purchaser and Writer. (b) Notice. All notices, demands and/or consents provided for in this Agreement shall be in writing and shall be delivered to the parties hereto. Such notices shall be deemed to have been served on the date sent. All such notices and communications shall be addressed to the Writer at __________(16)_________ and to Purchaser at ________(17)________ or at such other address as either may specify to the other in writing.(c) Fee Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the ______(18)_____. (d) Successors and Assigns. This Agreement shall apply to, inure to the benefit of and be binding upon and enforceable against the parties hereto and their respective heirs, successors, and or assigns, to the extent as if specified at length throughout this Agreement.
(e) Time. Time is of the essence of this Agreement. (f) Headings. The headings inserted at the beginning of each paragraph and/or subparagraph are for convenience of reference only and shall not limit or otherwise affect or be used in the construction of any terms or provisions hereof. (g) Cost of this Agreement. Any cost and/or fees incurred by the Purchaser or Writer in executing this Agreement shall be borne by the respective party incurring such cost and/or fee. (h) Entire Agreement. This Agreement contains all of the terms, promises, covenants, conditions and representations made or entered into by or between Writer and Purchaser and supersedes all prior discussions and agreements whether written or oral between Writer and Purchaser with respect to the Coupon and all other matters contained herein and constitutes the sole and entire agreement between Writer and Purchaser with respect thereto. This Agreement may not be modified or amended unless such amendment is set forth in writing and executed by both Writer and Purchaser with the formalities hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under proper authority: As to Purchaser this _______(19)____ day of ______(20)_____, __________(21)_. Witnesses: "Purchaser" ____________(22)_______________ ____________(23)______________ ____________(22)_______________ As to Writer this _______(24)___________ day of ________(25)______, ________(26)_. Witnesses: "Writer" ___________(22)_______________ ____________(27)______________ ___________(22)_______________