Ann: Revenue Stream from Commsys Agreement Commences, page-41

I think you need to get in the shoes of the underwriter and not a shareholder. The underwriter gets paid 7% regardless. So even if they have to fulfil no underwriting obligation they still get $144K. This is their IDEAL situation.

In the event that the SP goes to 2.5c say and NOR looks like a good deal then it is likely they will have no underwriting to do as (a) the majority of shareholders will take up their allocation, and (b) there is a Shortfall Offer where shareholders can apply for additional shares. Again, there will be no need for any underwriting and they still get their $144K.

In the event that the entitlements are not filled due to the price staying at 1.6c or thereabouts, the order is entitlement shares, then the Shortfall shares are allocated, then the sub-underwriter allocations, then Grange comes in at the end. They try and assume as little risk as possible.

In the scenario you talk about above, Mr Yogi gets his $100K regardless as that it is his entitlement and cannot be taken away. Even if the shares go up to 5c before hand. He still has $117k he is entitled to claim.

Paul still has his $422k entitlement too so he may opt for more than $40K if the price rockets. Grange only underwrites what doesn't get filled at the end. It may end up being zero in this case but they get their $144K still.

The sub-underwriting allocations are just guarantees to Grange. The (subtle) point of this occurring, and not just having standard entitlements is that I don't think Grange would agree to underwriting unless there was binding sub-underwriting agreements in place to reduce their risk and ensure the majors have skin in the game.