Resources

Private Equity and Entrepreneurship Glossary

Narrow-based weighted average anti-dilution

A type of anti-dilution mechanism. A weighted average ratchet adjusts downward the 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 weighted average price.

NDA

See Non-disclosure agreement.

Negative pledge

A contractual obligation given by a borrower to its lender not to do something, such as using an asset for security for any further loans.

Net operating income (NOI)

A measure of cash flow that excludes the effects of financing decisions. NOI is calculated as earnings before interest and taxes multiplied by one minus the tax rate. Also known as Net operating profit after taxes.

Net operating profit after taxes (NOPAT)

See Net operating income.

Non-compete

An agreement often signed by employees and management whereby they agree not to work for competitor companies or form a new competitor company within a certain time period after termination of employment.

Non-cumulative dividends

Dividends that are payable to owners of preferred stock at a specific point in time only if there is sufficient cash flow available after all company expenses have been paid. If cash flow is insufficient, the owners of the preferred stock will not receive the dividends owed for that time period and will have to wait until the board of directors declares another set of dividends.

Non-disclosure agreement (NDA)

An agreement issued by entrepreneurs to protect the privacy of their ideas when disclosing those ideas to third parties.

Non-interference

An agreement often signed by employees and management whereby they agree not to interfere with the company’s relationships with employees, clients, suppliers and sub-contractors within a certain time period after termination of employment.

Non-solicitation

An agreement often signed by employees and management whereby they agree not to solicit other employees of the company regarding job opportunities.

No-shop clause

A section of an agreement to purchase a company whereby the seller agrees not to market the company to other potential buyers for a specific time period.

NVCA

National Venture Capital Association, the trade organization that tracks venture capital activity in the United States.