16. SERIES A PREFERRED STOCK

On January 27, 2014, Crocs issued 200,000 shares of Series A preferred stock to Blackstone Capital Partners VI L.P. (“Blackstone”) and certain of its permitted transferees, for an aggregate purchase price of $198.0 million, or $990.00 per share, pursuant to an Investment Agreement between Crocs and Blackstone, dated December 28, 2013 (as amended, the “Investment Agreement”). In connection with the issuance of the Series A preferred stock, Crocs received proceeds of $182.2 million after deducting the issuance discount of $2.0 million and direct and incremental expenses of $15.8 million including financial advisory fees, closing costs, legal expenses, and other offering-related expenses.

Participation Rights and Dividends

The Series A preferred stock ranks senior to the Company’s common stock with respect to dividend rights and rights on liquidation, winding-up, and dissolution. The Series A preferred stock has a stated value of $1,000 per share, and holders of Series A preferred stock are entitled to cumulative dividends payable quarterly in cash at a rate of 6% per annum. If Crocs fails to make timely dividend payments, the dividend rate will increase to 8% per annum until such time as all accrued but unpaid dividends have been paid in full. Holders of Series A preferred stock are entitled to receive dividends declared or paid on the Company’s common stock and are entitled to vote together with the holders of the Company’s common stock as a single class, in each case, on an as-converted basis. As of December 31, 2015 and 2014, Crocs had accrued dividends of $3.0 million and $3.1 million, respectively on the consolidated balance sheets, which were paid in cash to holders of the Series A preferred stock on January 4, 2016 and January 2, 2015, respectively. Holders of Series A preferred stock have certain limited special approval rights, including with respect to the issuance of pari passu or senior equity securities of the Company.

Conversion Features

The Series A preferred stock is convertible at the option of the holders at any time after the closing into shares of common stock at an implied conversion price of $14.50 per share, subject to adjustment. At the Company’s election, all or a portion of the Series A preferred stock will be convertible into the relevant number of shares of common stock on or after the third anniversary of the closing, if the closing price of the common stock equals or exceeds $29.00 for 20 consecutive trading days. The Series A preferred stock is convertible into 13,793,100 shares of common stock based on the conversion rate in place as of December 31, 2015. The conversion rate is subject to the following customary anti-dilution and other adjustments:

(1)

The occurrence of common stock dividends or distributions, stock splits or combinations, and equity reclassifications.

(2)

The distribution of rights, options, or warrants to all holders of common stock entitling them to purchase shares of common stock at a price per share that is less than the closing price of the Company’s common stock.

(3)

Pursuant to a tender offer or exchange offer to purchase outstanding shares of common stock for consideration valued at an amount greater than the closing price of the Company’s common stock.

(4)

If the Company distributes evidences of its indebtedness, assets, other property or securities or rights, options or warrants to acquire its capital stock.

(5)

If the Company has any stockholder rights plan in effect with respect to the common stock on the date of conversion, upon conversion of the Series A preferred stock, the holder will also receive (in addition to the common stock pursuant to the conversion) the rights under such rights plan, unless those rights (a) become exercisable before the conversion of the Series A preferred stock, or (b) are separated from the common stock (each a “Trigger Event”). Upon the occurrence of a Trigger Event, the Series A preferred stock conversion rate will be adjusted in accordance with (1) or (2) described above.

(6)

If the Company issues shares of common stock (or other instruments convertible into common stock) for valuable consideration, the conversion price is adjusted if (a) the offering price is less than the conversion price and (b) if the offering is at a price less than the fair market value of the Company’s common stock on the date of issuance.

Redemption Features

At any time after the eighth anniversary of the closing, Crocs will have the right to redeem and the holders of the Series A preferred stock will have the right to require Crocs to repurchase all or any portion of the Series A preferred stock at 100% of the stated value thereof plus all accrued and unpaid dividends. Upon certain change of control events involving the Company, the holders can require Crocs to repurchase the Series A preferred stock at 101% of the stated value thereof plus all accrued and unpaid dividends.

In accordance with FASB ASC Topic 480-10-S99-3A, SEC Staff Announcement: Classification and Measurement of Redeemable Securities, redemption features, which are not solely within the control of the issuer, are required to be presented outside of permanent equity on the consolidated balance sheets. Under the Investment Agreement and as noted above, the holder has the option to redeem the Series A preferred stock any time after January 27, 2022 or upon a change in control. As such, the Series A preferred stock is presented in temporary or mezzanine equity on the consolidated balance sheets and will be accreted up to the stated redemption value of $203.0 million using an appropriate accretion method over a redemption period of eight years, as this represents the earliest probable date at which the Series A preferred stock will become redeemable.