Narrow-Based Weighted Average Anti-dilution Protection

A type of anti-dilution mechanism. A weighted average ratchet adjusts downward the conversion price per share of the preferred stock of Investor A due to the issuance of new preferred shares to new Investor B at a price lower than the price Investor A originally received. Investor A's preferred stock is repriced to a weighed average of Investor A's price and Investor B's price. A narrow-based ratchet uses only common stock outstanding in the denominator of the formula for determining the new weighed average price.