Broad-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 (a "down round"). Investor A's preferred stock is repriced to a weighted average of Investor A's price and Investor B's price, taking into account the significance of the new round and it dilutive impact. A broad-based ratchet uses all common stock outstanding on a fully diluted basis (including all convertible securities, warrants, and options) in the denominator of the formula for determining the new weighted average price.