S-4 1 d808039ds4.htm S-4 S-4
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As filed with the Securities and Exchange Commission on September 24, 2019

Registration No. 333-        

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

MOSAIC ACQUISITION CORP.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware    6770    98-1380306

(State or other jurisdiction of

incorporation or organization)

  

(Primary Standard Industrial

Classification Code Number)

  

(I.R.S. Employer

Identification Number)

375 Park Avenue

New York, NY 10152

Telephone: (212) 763-0153

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

David M. Maura

c/o Mosaic Acquisition Corp.

375 Park Avenue

New York, NY 10152

Telephone: (212) 763-0153

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Ross A. Fieldston

Jeffrey D. Marell

Raphael M. Russo

Paul, Weiss, Rifkind, Wharton &

Garrison LLP

1285 Avenue of the Americas

New York, NY 10019

Telephone: (212) 373-3000

 

Shawn J. Lindquist

Chief Legal Officer

Vivint Smart Home, Inc.

4931 North 300 West

Provo, UT 84604

 

Elizabeth A. Cooper

Igor Fert

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

Telephone: (212) 455-2000

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and upon completion of the merger.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an ☒ in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of

securities to be registered

  

Amount     

to be     

registered     

  

Proposed     

maximum     

offering price     

per unit     

   Proposed     
maximum     
aggregate     
offering price      
  

Amount of     

registration fee     

Mosaic Class A Common Stock, par value $0.0001 per share

   252,274,856(1)         N/A         $2,604,737,888.20(2)         $315,694.24(3)     

Mosaic Class A Common Stock, par value $0.0001 per share

   16,549,716(4)         N/A         N/A         N/A     

 

 

(1)

Based on the maximum number of common stock, par value $0.0001 per share (“Mosaic Class A common stock”), of the registrant (“Mosaic”) estimated to be issued in connection with the merger described herein (the “merger”). This number is based on the sum of (a) the product of (i) 1,088,935.0852, the aggregate number of shares of common stock, par value $0.01 per share (“Vivint Smart Home common stock”), of Vivint Smart Home, Inc. (“Vivint”), outstanding as of September 15, 2019, which number excludes shares of Vivint Smart Home common stock owned by Mosaic or Vivint Smart Home (as treasury stock or otherwise) and includes 79,791.0648 shares of preferred stock, par value $0.01 per share (“Vivint Smart Home preferred stock”), of Vivint that will be automatically converted into Vivint Smart Home common stock immediately prior to the merger and (ii) an exchange ratio of 209.6849221312 shares of Mosaic Class A common stock for each share of Vivint Smart Home common stock; (b) 25,000,000 shares of Mosaic Class A common stock that may be issued as contingent consideration in the merger pursuant to the merger agreement; and (c) the product of (i) 115,270,804, the aggregate number of shares of common stock, par value $0.01 per share (“VGI common stock”), of Vivint Group, Inc. (“VGI”) reserved for issuance upon the settlement of VGI restricted stock unit awards, stock appreciation right awards and long-term incentive plan awards outstanding as of September 15, 2019 and that may be issued after such date pursuant to the terms of the merger agreement described herein and (ii) an exchange ratio of 0.2076986176 shares of Mosaic Class A common stock for each share of VGI common stock.

(2)

Pursuant to Rules 457(c) and 457(f)(1) promulgated under the Securities Act and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is an amount equal to $2,604,737,888.20, calculated as the product of (i) 252,274,856 shares of Mosaic Class A common stock, the estimated maximum number of shares of Mosaic Class A common stock that may be issued in the merger in exchange for cancelled shares of Vivint Smart Home common stock and awards (calculated as shown in subsection (a) of note (1) above) and (ii) $10.325, the average of the high and low trading prices of Mosaic Class A common stock on September 19, 2019 (within five business days prior to the date of this Registration Statement).

(3)

Calculated pursuant to Rule 457 of the Securities Act by multiplying the proposed maximum aggregate offering price of securities to be registered by 0.0001212.

(4)

Relates to the reoffering from time to time of up to 16,549,716 shares of Mosaic Class A common stock to be received in the merger by certain holders of Vivint Smart Home common stock.

 

 

 


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The information in this preliminary proxy statement/consent solicitation/prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary proxy statement/consent solicitation/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROXY STATEMENT/CONSENT SOLICITATION STATEMENT/PROSPECTUS DATED SEPTEMBER 24, 2019, SUBJECT TO COMPLETION

 

 

LOGO

Dear Stockholder:

On September 15, 2019, Mosaic Acquisition Corp. (“Mosaic”), and Maiden Merger Sub, Inc. (“Merger Sub”), a wholly owned subsidiary of Mosaic, entered into an Agreement and Plan of Merger (as it may be amended and/or restated from time to time, the “merger agreement”) with Vivint Smart Home, Inc. (“Vivint Smart Home”). If the merger agreement is adopted by Vivint Smart Home’s stockholders, the merger agreement and the transactions contemplated thereby, including the issuance of Mosaic Class A common stock to be issued as the merger consideration, is approved by Mosaic’s stockholders, and the merger is subsequently completed, Merger Sub will merge with and into Vivint Smart Home with Vivint Smart Home surviving the merger as a wholly owned subsidiary of Mosaic (the “merger”).

Immediately prior to the effective time of the merger, each outstanding share of Vivint Smart Home preferred stock (other than shares owned by Vivint Smart Home as treasury stock) will be converted to shares of Vivint Smart Home common stock, in accordance with the certificate of designation of the Vivint Smart Home preferred stock, and at the effective time of the merger, each outstanding share of Vivint Smart Home common stock (other than shares owned by Vivint Smart Home as treasury stock or dissenting shares) will be converted into the right to receive 209.6849221312 shares of Mosaic Class A common stock, except for any fractional shares of Mosaic Class A common stock which would result (which will instead be paid out in cash in accordance with the merger agreement).

Based on the number of shares of Vivint Smart Home preferred stock outstanding, the number of shares of Vivint Smart Home common stock outstanding and the number of outstanding Vivint Group, Inc. stock appreciation rights, restricted stock unit awards and long-term incentive plan awards, in each case as of [            ], 2019, the total number of shares of Mosaic Class A common stock expected to be issued in connection with the merger is approximately [            ], and holders of shares of Vivint Smart Home common stock as of immediately prior to the closing of the merger will hold, in the aggregate, approximately [    ]% of the issued and outstanding shares of Mosaic Class A common stock immediately following the closing of the merger. Mosaic’s units, Class A common stock and public warrants are publicly traded on the New York Stock Exchange (the “NYSE”). We intend to apply to list the New Vivint Parent Class A common stock and public warrants on the NYSE under the symbols “VVNT” and “[            ]”, respectively, upon the closing of the merger. New Vivint Parent will not have units traded following closing of the merger.

Mosaic will hold a special meeting of stockholders (the “Mosaic Special Meeting”) to consider matters relating to the proposed merger. Mosaic and Vivint Smart Home cannot complete the merger unless Mosaic’s stockholders consent to the approval of the merger agreement and the transactions contemplated thereby, including the issuance of Mosaic Class A common stock to be issued as the merger consideration, and Vivint Smart Home’s stockholders consent to adoption and approval of the merger agreement and the transactions contemplated thereby. Mosaic and Vivint Smart Home are sending you this proxy statement/consent solicitation


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statement/prospectus to ask you to vote in favor of these and the other matters described in this proxy statement/consent solicitation statement/prospectus.

The Mosaic Special Meeting will be held on [            ], at [            ] local time, at [            ].

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF MOSAIC COMMON STOCK YOU OWN. To ensure your representation at the Mosaic Special Meeting, please complete and return the enclosed proxy card or submit your proxy by following the instructions contained in this proxy statement/consent solicitation statement/prospectus and on your proxy card. Please submit your proxy promptly whether or not you expect to attend the meeting. Submitting a proxy now will NOT prevent you from being able to vote in person at the meeting. If you hold your shares in “street name”, you should instruct your broker, bank or other nominee how to vote in accordance with the voting instruction form you receive from your broker, bank or other nominee.

The Mosaic board of directors has unanimously approved the merger agreement and the transactions contemplated thereby and recommends that Mosaic stockholders vote “FOR” the approval of the merger agreement, “FOR” the issuance of Mosaic Class A common stock to be issued as the merger consideration and “FOR” the other matters to be considered at the Mosaic Special Meeting.

The Vivint Smart Home board of directors has unanimously approved the merger agreement and the transactions contemplated thereby and recommends that Vivint Smart Home stockholders consent to adopt and approve in all respects the merger agreement and the transactions contemplated thereby (the “Vivint Merger Proposal”) and approve, on a non-binding advisory basis, the amendments to Mosaic’s existing charter as set forth in Mosaic’s proposed charter (the “Vivint Charter Amendment Proposals”).

This proxy statement/consent solicitation statement/prospectus provides you with detailed information about the proposed merger. It also contains or references information about Mosaic and Vivint Smart Home and certain related matters. You are encouraged to read this proxy statement/consent solicitation statement/prospectus carefully. In particular, you should read the “Risk Factors” section beginning on page [31] for a discussion of the risks you should consider in evaluating the proposed merger and how it will affect you.

If you have any questions regarding the accompanying proxy statement/consent solicitation statement/prospectus, you may contact Morrow Sodali, Mosaic’s proxy solicitor, at (800) 662-5200 or email Morrow Sodali at MOSC.info@morrowsodali.com.

Sincerely,

David M. Maura

Chief Executive Officer and President

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the merger, the issuance of shares of Mosaic Class A common stock in connection with the merger or the other transactions described in this proxy statement/consent solicitation statement/prospectus, or passed upon the adequacy or accuracy of the disclosure in this proxy statement/consent solicitation statement/prospectus. Any representation to the contrary is a criminal offense.

This proxy statement/consent solicitation statement/prospectus is dated [            ], 2019, and is first being mailed to stockholders of Mosaic on or about [            ].


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Mosaic Acquisition Corp.

NOTICE OF THE SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [                    ], 2019

NOTICE IS HEREBY GIVEN that a special meeting of the stockholders (the “Mosaic Special Meeting”), of Mosaic Acquisition Corp., a Delaware corporation (which is referred to as “Mosaic”) will be held on [                    ], 2019, at [                    ] local time, at [                    ]. You are cordially invited to attend the Mosaic Special Meeting for the following purposes:

 

  1.

The Business Combination Proposal—To consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of September 15, 2019 (as it may be amended and/or restated from time to time, the “merger agreement”), by and among Vivint Smart Home, Inc. (“Vivint Smart Home”), Mosaic and Maiden Merger Sub, Inc. (“Merger Sub”) and the transactions contemplated thereby, pursuant to which Merger Sub will merge with and into Vivint Smart Home with Vivint Smart Home surviving the merger as a wholly owned subsidiary of Mosaic (the “merger”). A copy of the merger agreement is attached to this proxy statement/consent solicitation statement/prospectus as Annex A (Proposal No. 1);

 

  2.

The Charter Proposals—To consider and vote upon:

 

  a.

separate proposals to approve the following material differences between the proposed amended and restated certificate of incorporation of Mosaic (the “proposed charter”) that will be in effect upon the closing of the merger and Mosaic’s current certificate of incorporation (the “existing charter”), a copy of which is attached to this proxy statement/consent solicitation statement/prospectus as Annex B:

 

  i.

to increase the number of authorized shares of capital stock of Mosaic and eliminate the Class F common stock classification (Proposal No. 2);

 

  ii.

to require an affirmative vote of holders of at least 66.67% of the outstanding shares of Mosaic Class A common stock to amend, alter, repeal or rescind certain provisions of the proposed charter for so long as the Stockholder Parties (as defined in the proposed charter) beneficially own, in the aggregate, less than 30% of the total voting power of the outstanding shares of Mosaic Class A common stock (Proposal No. 3);

 

  iii.

to require an affirmative vote of holders of at least 66.67% of the outstanding shares of Mosaic Class A common stock to amend, alter, repeal or rescind the bylaws of Mosaic for so long as the Stockholder Parties beneficially own, in the aggregate, less than 30% of the outstanding shares of Mosaic Class A common stock (Proposal No. 4);

 

  iv.

to provide for (i) the election of directors by the affirmative vote of majority of the shares of Mosaic Class A common stock that are entitled to vote and are voted, and (ii) the filling of newly-created directorships or any vacancy on the board of directors by a majority vote of the remaining directors then in office, even if less than a quorum, by the sole remaining director, or by the stockholders; provided that if the Stockholder Parties beneficially own, in the aggregate, less than 30% of the total voting power of the outstanding shares of Mosaic Class A common stock, newly-created directorships or any vacancy on the board of directors may only be filled by the remaining directors then in office, even if less than a quorum, or by the sole remaining director (Proposal No. 5);

 

  v.

to provide for the removal of directors with or without cause by stockholders voting a majority of the outstanding shares of Mosaic Class A common stock; provided that if Stockholder Parties beneficially own, in the aggregate, less than 30% of the total voting power of the outstanding shares of Mosaic Class A common stock, directors may be removed from office only for cause and only by the affirmative vote of holders of at least 66.67% of the outstanding shares of Mosaic Class A common stock (Proposal No. 6);


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  vi.

to provide special meetings may be called only by the chairman or the board of directors; provide that so long as the Stockholder Parties beneficially own, in the aggregate, at least 30% of the total voting power of the outstanding shares of Mosaic Class A common stock, a special meeting can be called for any purposes at the request of any Stockholder Party that is an affiliate of the Blackstone Group Inc. (Proposal No. 7);

 

  vii.

to provide for the classification of Mosaic’s board of directors into three classes of directors with staggered three-year terms of office and to make certain related changes (Proposal No. 8);

 

  viii.

to elect not to be governed by Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”) and, instead, be governed by a provision substantially similar to Section 203 of the DGCL, except that such provision excludes Blackstone, any Blackstone Direct Transferee, and any Blackstone Indirect Transferee (each as defined in the proposed charter), or any of their respective affiliates or successors or any “group”, or any member of any such group, to which such persons are a party, from the definition of “interested stockholder”, and to make certain related changes (Proposal No. 9);

 

  ix.

to provide that the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, another state or federal court located within the State of Delaware, shall be the exclusive forum for certain actions and claims (Proposal No. 10); and

 

  x.

to eliminate various provisions applicable only to blank check companies (Proposal No. 11); and

 

  b.

conditioned upon the approval of Proposals No. 2 through 11, a proposal to approve the proposed charter, which includes the approval of all other changes in the proposed charter in connection with replacing the existing charter with the proposed charter as of the closing of the merger (Proposal No. 12);

 

  3.

The Fortress Issuance Proposal—To consider and vote upon a proposal to approve, for purposes of complying with applicable listing rules of the New York Stock Exchange (the “NYSE”), the issuance of shares of Mosaic Class A common stock pursuant to the Fortress Subscription Agreement (as defined herein) (Proposal No. 13);

 

  4.

The Blackstone Issuance Proposal—To consider and vote upon a proposal to approve, for purposes of complying with applicable listing rules of the NYSE, the issuance of shares of Mosaic Class A common stock pursuant to the Blackstone Subscription Agreements (as defined herein) (Proposal No. 14);

 

  5.

The Merger Issuance Proposal—To consider and vote upon a proposal to approve, for purposes of complying with applicable listing rules of the NYSE, the issuance of shares of common stock pursuant to the merger agreement (Proposal No. 15);

 

  6.

The Incentive Plan Proposal—to consider and vote upon a proposal to approve and adopt the 2019 Omnibus Plan (as defined herein) (Proposal No. 16); and

 

  7.

The Adjournment Proposal— to consider and vote upon a proposal to adjourn the Mosaic Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Mosaic Special Meeting, there are not sufficient votes to approve the Business Combination Proposal, the Charter Proposals, the Fortress Issuance Proposal, the Blackstone Issuance Proposal, the Merger Issuance Proposal or the Incentive Plan Proposal, or holders of Mosaic’s public shares (as defined below) have elected to redeem an amount of public shares such that Mosaic would have less than $5,000,001 of net tangible assets or the Maximum Redemption Condition (as defined below) would not be satisfied (Proposal No. 17).

Only holders of record of Mosaic common stock at the close of business on [                    ], 2019 are entitled to notice of the Mosaic Special Meeting and to vote at the Mosaic Special Meeting and any adjournments or postponements of the Mosaic Special Meeting. A complete list of Mosaic stockholders of record entitled to vote at the Mosaic Special Meeting will be available for 10 days before the Mosaic Special Meeting at the principal executive offices of Mosaic for inspection by stockholders during ordinary business hours for any purpose germane to the Mosaic Special Meeting.


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Pursuant to Mosaic’s existing charter, Mosaic will provide holders (“public stockholders”) of its Class A common stock (“public shares”) with the opportunity to redeem their public shares for cash equal to their pro rata share of the aggregate amount on deposit in the Trust Account (as defined below), which holds the proceeds of Mosaic’s initial public offering (“Mosaic’s IPO”) as of two business days prior to the consummation of the transactions contemplated by the Business Combination Proposal (including interest earned on the funds held in the Trust Account and not previously released to Mosaic to fund its working capital requirements and/or pay taxes) upon the closing of the transactions contemplated by the merger agreement. For illustrative purposes, based on funds in the Trust Account of approximately $353.3 million on June 30, 2019, the estimated per share redemption price would have been approximately $10.24, excluding additional interest earned on the funds held in the Trust Account and not previously released to Mosaic to fund its working capital requirements and/or pay taxes. Public stockholders may elect to redeem their shares even if they vote for the Business Combination Proposal. A public stockholder, together with any of his, her or its affiliates or any other person with whom he, she or it is acting in concert or as a “group” (as defined in Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the public shares. Mosaic Sponsor, LLC, a Delaware limited liability company, and Fortress Mosaic Sponsor LLC, a Delaware limited liability company (together with Mosaic Sponsor, LLC, the “Sponsors”), and Mosaic’s officers and directors have agreed to waive their redemption rights in connection with the consummation of the merger with respect to any shares of Mosaic common stock they may hold. Currently, the Sponsors own approximately 20% of Mosaic common stock, consisting of Class F common stock (“Founder Shares”). Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. The Sponsors and Mosaic’s directors and officers have agreed to vote any shares of common stock owned by them in favor of the Business Combination Proposal.

Approval of the Business Combination Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Mosaic common stock, voting together as a single class. Approval of the Charter Proposals requires the affirmative vote of (i) the holders of at least two-thirds of the Founder Shares then outstanding, voting separately as a single class and (ii) the holders of a majority of the outstanding shares of Mosaic common stock, voting together as a single class. Approval of the Fortress Issuance Proposal, the Blackstone Issuance Proposal, the Merger Issuance Proposal, the Incentive Plan Proposal and the Adjournment Proposal (if necessary) each require the majority of the votes cast by the Mosaic stockholders present in person or represented by proxy at the Mosaic Special Meeting. The Mosaic board of directors has already approved each of the proposals.

As of June 30, 2019, there was approximately $353.3 million in the Trust Account, which Mosaic intends to use for the purposes of consummating a business combination within the time period described in this proxy statement/consent solicitation statement/prospectus and to pay approximately $12.1 million in deferred underwriting commissions to the underwriters of Mosaic’s IPO. Each redemption of public shares by its public stockholders will decrease the amount in the Trust Account. Mosaic will not consummate the merger if the redemption of public shares would result in (i) Mosaic’s failure to have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) (or any successor rule)) or (ii) the merger agreement condition that public stockholders shall have requested redemptions for fewer than 10,350,000 shares in the aggregate of public shares following the date of the merger agreement (the “Maximum Redemption Condition”) would not to be satisfied.

If Mosaic stockholders fail to approve the Business Combination Proposal, the merger will not occur. The proxy statement/consent solicitation statement/prospectus accompanying this notice explains the merger agreement and the transactions contemplated thereby, as well as the proposals to be considered at the Mosaic Special Meeting. Please review the proxy statement/consent solicitation statement/prospectus carefully.

The Mosaic board of directors has set [                    ], 2019 as the record date for the Mosaic Special Meeting. Only holders of record of shares of Mosaic common stock at the close of business on [                    ], 2019 will be entitled to notice of and to vote at the Mosaic Special Meeting and any adjournments or postponements thereof. Any stockholder entitled to attend and vote at the Mosaic Special Meeting is entitled to appoint a proxy to attend and vote on such stockholder’s behalf. Such proxy need not be a holder of shares of Mosaic common stock.


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YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF MOSAIC COMMON STOCK OWN. Whether or not you plan to attend the Mosaic Special Meeting, please complete, sign, date and mail the enclosed proxy card in the postage-paid envelope provided at your earliest convenience. You may also submit a proxy by telephone or via the Internet by following the instructions printed on your proxy card. If you hold your shares through a broker, bank or other nominee, you should direct the vote of your shares in accordance with the voting instruction form received from your broker, bank or other nominee.

The Mosaic board of directors has unanimously approved the merger agreement and the transactions contemplated thereby and recommends that you vote “FOR” the Business Combination Proposal, “FOR” the Charter Proposals, “FOR” the Fortress Issuance Proposal, “FOR” the Blackstone Issuance Proposal, “FOR” the Merger Issuance Proposal, “FOR” the Incentive Plan Proposal and “FOR” the Adjournment Proposal (if necessary).

If you have any questions or need assistance with voting, please contact Mosaic’s proxy solicitor, Morrow Sodali, at (800) 662-5200 or email Morrow Sodali at MOSC.info@morrowsodali.com.

If you plan to attend the Mosaic Special Meeting, you will be required to bring certain documents with you to be admitted to the meeting. Please read carefully the sections in the proxy statement/consent solicitation statement/prospectus regarding attending and voting at the annual meeting to ensure that you comply with these requirements.

 

    BY ORDER OF THE BOARD OF DIRECTORS
   

 

   

David M. Maura

[                    ], 2019     Chairman of the Board of Directors


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LOGO

Vivint Smart Home, Inc.

4931 North 300 West

Provo, UT 84604

NOTICE OF SOLICITATION OF WRITTEN CONSENT

To Stockholders of Vivint Smart Home, Inc.:

Pursuant to an Agreement and Plan of Merger, dated as of September 15, 2019 (as it may be amended and/or restated from time to time, the “merger agreement”), by and among Vivint Smart Home, Inc. (“Vivint Smart Home”), Mosaic Acquisition Corp. (“Mosaic”), and Maiden Merger Sub, Inc., a wholly owned subsidiary of Mosaic (“Merger Sub”), Merger Sub will merge with and into Vivint Smart Home with Vivint Smart Home surviving the merger as a wholly owned subsidiary of Mosaic (the “merger”).

This proxy statement/consent solicitation statement/prospectus is being delivered to you on behalf of the Vivint Smart Home board of directors to request that holders of Vivint Smart Home common stock or preferred stock as of the record date of [                    ], 2019 execute and return written consents to (i) adopt and approve the merger agreement and the merger and (ii) approve, on a non-binding advisory basis, the amendments to Mosaic’s existing charter as set forth in Mosaic’s proposed charter.

This proxy statement/consent solicitation statement/prospectus describes the proposed merger and the actions to be taken in connection with the merger and provides additional information about the parties involved. Please give this information your careful attention. A copy of the merger agreement is attached as Annex A to this proxy statement/consent solicitation statement/prospectus.

A summary of the appraisal rights that may be available to you is described in “Appraisal Rights”. Please note that if you wish to exercise appraisal rights you must not sign and return a written consent adopting the merger agreement. However, so long as you do not return a consent form at all, it is not necessary to affirmatively vote against or disapprove the merger. In addition, you must take all other steps necessary to perfect your appraisal rights.

The Vivint Smart Home board of directors has considered the merger and the terms of the merger agreement and has unanimously determined that the merger and the merger agreement are advisable, fair to and in the best interests of Vivint Smart Home and its stockholders and recommends that Vivint Smart Home stockholders adopt the merger agreement by submitting a written consent.

Please complete, date and sign the written consent furnished with this proxy statement/consent solicitation statement/prospectus and return it promptly to Vivint Smart Home by one of the means described in “Vivint Smart Home’s Solicitation of Written Consents”.

 

By Order of the Board of Directors,

Shawn J. Lindquist

Chief Legal Officer and Secretary


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS

     iii  

SUMMARY

     1  

SUMMARY HISTORICAL FINANCIAL DATA FOR MOSAIC

     20  

SUMMARY HISTORICAL FINANCIAL AND OTHER DATA FOR VIVINT SMART HOME

     21  

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     23  

UNAUDITED HISTORICAL COMPARATIVE AND PRO FORMA COMBINED PER SHARE DATA OF MOSAIC AND VIVINT SMART HOME

     25  

FORWARD-LOOKING STATEMENTS; MARKET, RANKING AND OTHER INDUSTRY DATA

     28  

RISK FACTORS

     31  

Risks Relating to Vivint Smart Home’s Business and Industry

     31  

Risks Relating to Vivint Smart Home’s Indebtedness

     53  

Risks Related to the Merger

     56  

Additional Risks Relating to Ownership of New Vivint Common Stock Following the Merger

     62  

Risks Relating to Redemption

     68  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     70  

VIVINT SMART HOME’S SOLICITATION OF WRITTEN CONSENTS

     83  

Purpose of the Consent Solicitation

     83  

Record Date

     83  

Vivint Smart Home Stockholders Entitled to Consent

     83  

Consents; Required Consents

     83  

Submission of Consents

     84  

Executing Consents; Revocation of Consents

     84  

Solicitation of Consents; Expenses

     85  

MOSAIC SPECIAL MEETING OF STOCKHOLDERS

     86  

General

     86  

Date, Time and Place

     86  

Purpose of Mosaic Special Meeting

     86  

Recommendation of the Mosaic Board of Directors

     86  

Voting Power; Record Date

     86  

Vote of the Sponsor and Mosaic’s Directors and Officers

     87  

Quorum and Required Vote for Proposals for the Mosaic Special Meeting

     87  

Recommendation of the Mosaic Board of Directors

     88  

Abstentions and Broker Non-Votes

     89  

Voting Your Shares

     89  

Revoking Your Proxy

     89  

No Additional Matters May be Presented at the Mosaic Special Meeting

     89  

Who Can Answer Your Questions About Voting

     90  

Redemption Rights

     90  

Appraisal Rights

     91  

Proxy Solicitation Costs

     91  

The Sponsors

     92  

MOSAIC PROPOSALS

     93  

PROPOSAL NO. 1—THE BUSINESS COMBINATION PROPOSAL

     93  

PROPOSALS NO. 2 THROUGH NO. 12—THE CHARTER PROPOSALS

     94  

PROPOSAL NO. 13—THE FORTRESS ISSUANCE PROPOSAL

     102  

 

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PROPOSAL NO. 14—THE BLACKSTONE ISSUANCE PROPOSAL

     103  

PROPOSAL NO. 15—THE MERGER ISSUANCE PROPOSAL

     104  

PROPOSAL NO. 16—THE INCENTIVE PLAN PROPOSAL

     105  

PROPOSAL NO. 17—THE ADJOURNMENT PROPOSAL

     113  

INFORMATION ABOUT MOSAIC

     114  

General

     114  

Initial Public Offering and Private Placement

     114  

Fair Market Value of Target Business

     114  

Stockholder Approval of Merger and Redemptions

     115  

Voting Restrictions in Connection with  Stockholder Meeting

     115  

Liquidation if No Initial Business Combination

     115  

Facilities

     118  

Employees

     118  

Periodic Reporting and Financial Information

     118  

Legal Proceedings

     118  

MANAGEMENT OF MOSAIC

     119  

Directors and Executive Officers

     119  

Management Compensation

     121  

Summary Compensation Table

     121  

SELECTED HISTORICAL FINANCIAL INFORMATION OF MOSAIC

     123  

MOSAIC’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     124  

Overview

     124  

Recent Developments

     125  

Results of Operations

     126  

Going Concern

     127  

Related Party Transactions

     127  

Critical Accounting Policies and Estimates

     129  

Off-Balance Sheet Arrangements

     130  

JOBS Act

     130  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF MOSAIC

     131  

INFORMATION ABOUT VIVINT SMART HOME

     134  

Our Industry

     136  

Our Smart Home Platform

     137  

High-Performing Scalable Economic Model

     140  

Our Customers

     140  

Sales and Marketing

     142  

Research and Development

     144  

Intellectual Property

     145  

Competition

     145  

Government Regulations

     146  

Seasonality

     147  

Employees

     147  

Properties

     147  

Legal Proceedings

     148  

MANAGEMENT OF VIVINT SMART HOME

     149  

Non-Employee Directors

     151  

Executive Compensation

     152  

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF VIVINT SMART HOME

     180  

VIVINT SMART HOME’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     182  

Business Overview

     182  

Key Performance Measures

     182  

Recent Developments

     184  

Key Factors Affecting Operating Results

     185  

Basis of Presentation

     187  

Components of Results of Operations

     188  

Total Revenues

     188  

Total Costs and Expenses

     188  

Critical Accounting Policies and Estimates

     189  

Results of Operations

     193  

Key Performance Measures

     194  

Liquidity and Capital Resources

     201  

Off Balance Sheet Arrangements

     214  

Contractual Obligations

     215  

Quantitative and Qualitative Disclosures About Market Risk

     215  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF VIVINT SMART HOME

     217  

MANAGEMENT OF NEW VIVINT AFTER THE MERGER

     220  

Management and Board of Directors

     220  

Corporate Governance

     220  

Role of Board in Risk Oversight

     221  

Controlled Company Exception

     221  

Composition of the New Vivint Parent Board of Directors After the Merger

     221  

Board Committees

     221  

Code of Business Conduct

     222  

Compensation Committee Interlocks and Insider Participation

     223  

Compensation of Directors and Officers

     223  

THE MERGER

     225  

Terms of the Merger

     225  

Conversion of Shares; Exchange Procedures

     225  

Unaudited Prospective Financial Information of Vivint Smart Home

     226  

Background of the Merger

     227  

Recommendation of the Vivint Smart Home Board of Directors and Reasons for the Merger

     235  

Recommendation of the Mosaic Board of Directors and Reasons for the Merger

     238  

Interests of Mosaic’s Directors and Officers in the Merger

     240  

Interests of Vivint Smart Home Directors and Executive Officers in the Merger

     241  

REGULATORY APPROVALS REQUIRED FOR THE MERGER

     244  

ACCOUNTING TREATMENT

     245  

PUBLIC TRADING MARKETS

     246  

SELLING STOCKHOLDERS

     247  

PLAN OF DISTRIBUTION

     248  

Selling Stockholders

     248  

Underwriting Compensation

     248  

Indemnification; Other Relationships

     249  

Market Making, Stabilization and Other Transactions

     249  

 

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THE MERGER AGREEMENT

     250  

Effects of the Merger

     250  

Merger Consideration

     250  

Closing and Effective Time of the Merger

     251  

Treatment of Company Group Equity Awards

     251  

Covenants and Agreements

     253  

Representations and Warranties

     266  

Conditions to the Merger

     269  

Termination

     270  

Effect of Termination

     271  

Amendments

     271  

Specific Performance

     271  

Stock Market Listing

     272  

Fees and Expenses

     272  

OTHER AGREEMENTS

     273  

Mosaic Letter Agreement

     273  

Sponsor Agreement

     273  

Vivint Smart Home Support Agreement

     274  

Subscription Agreements

     275  

Stockholders Agreement

     275  

Confidentiality and Lockup Agreements

     276  

Registration Rights Agreement

     276  

Support and Services Agreement

     276  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

     279  

Tax Consequences of the Merger to Holders of Vivint Smart Home Common Stock

     280  

Tax Consequences of a Redemption of Mosaic Public Shares

     282  

Information Reporting and Backup Withholding

     285  

COMPARISON OF STOCKHOLDERS’ RIGHTS

     286  

General

     286  

Comparison of Stockholders’ Rights

     286  

DESCRIPTION OF NEW VIVINT CAPITAL STOCK

     303  

Common Stock

     303  

Preferred Stock

     303  

Dividends

     304  

Annual Stockholder Meetings

     305  

Dissenters’ Rights of Appraisal and Payment

     309  

Stockholders’ Derivative Actions

     309  

Exclusive Forum

     309  

Conflicts of Interest

     310  

Limitations on Liability and Indemnification of Officers and Directors

     310  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     312  

Certain Relationships and Related Person Transactions—New Vivint

     312  

Certain Relationships and Related Person Transactions—Vivint Smart Home

     313  

Certain Relationships and Related Person Transactions—Mosaic

     315  

PRICE RANGE OF SECURITIES AND DIVIDENDS

     316  

EXPERTS

     317  

LEGAL MATTERS

     317  

OTHER MATTERS

     317  

APPRAISAL RIGHTS

     318  

 

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BASIS OF PRESENTATION AND GLOSSARY

As used in this proxy statement/consent solicitation statement/prospectus, unless otherwise noted or the context otherwise requires:

 

   

references to “2GIG” are to 2GIG Technologies, Inc., Vivint Smart Home’s affiliate;

 

   

references to “313 Acquisition” are to 313 Acquisition LLC, a parent entity of Vivint Smart Home, Inc.;

 

   

references to “AMRU” are to average monthly revenue per user, which consists of Total MR divided by average monthly Total Subscribers (as defined below) during a given period;

 

   

references to “AMSRU” are to average monthly service revenue per user, which consists of Total MSR divided by Total Subscribers (defined below) at the end of a given period;

 

   

references to “APX” are to APX Group, Inc., an indirect wholly-owned subsidiary of Vivint Smart Home, Inc.;

 

   

references to the “Consumer Financing Program” or “CFP” are to the program, launched in the first quarter of 2017 under the Vivint Flex Pay plan, pursuant to which Vivint Smart Home offers to qualified subscribers in the United States an opportunity to finance the purchase of products and installation fees in connection with the services through a third-party financing provider;

 

   

references to “effective time” are to the time at which the merger becomes effective;

 

   

references to “Holdings” and “Parent Guarantor” are to APX Group Holdings, Inc., a wholly-owned subsidiary of Vivint Smart Home, Inc.;

 

   

references to “merger” are to the proposed merger of Vivint Smart Home, Inc. with and into Merger Sub;

 

   

references to “Mosaic” are to Mosaic Acquisition Corp. before giving effect to the merger;

 

   

references to “Mosaic common stock” are to, prior to the effective time, collectively, Mosaic Class A common stock and Mosaic Class F common stock, and at and after the effective time, Mosaic Class A common stock;

 

   

references to “New Vivint” are to Vivint Smart Home, Inc. (f/k/a Mosaic Acquisition Corp. as of immediately following the effective time) and its consolidated subsidiaries, and references to “New Vivint Parent” refer only to Vivint Smart Home, Inc. (f/k/a Mosaic Acquisition Corp. as of immediately following the effective time), exclusive of its subsidiaries, in each case, after giving effect to the merger; and

 

   

references to “the notes” are to the 8.75% Senior Notes due 2020 (“2020 notes”), 8.875% Senior Secured Notes due 2022 (“2022 private placement notes”), 7.875% Senior Secured Notes due 2022 (“2022 notes”), 7.625% Senior Notes due 2023 (“2023 notes”) and 8.500% Senior Secured Notes due 2024 (“2024 notes”) issued by APX. See “Vivint Smart Home’s Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”;

 

   

references to “Products” are to Vivint Smart Home’s offering of smart home equipment including a proprietary control panel, door and window sensors, door locks, security cameras, smoke alarms and other equipment;

 

   

references to “Revolving Credit Facility” are to Vivint Smart Home’s senior secured revolving credit facility. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Revolving Credit Facility”;

 

   

references to “RICs” are to retail installment contracts offered under the Vivint Flex Pay plan with respect to the purchase of products and installation fees to certain of Vivint Smart Home’s subscribers who do not qualify for the CFP but qualify under Vivint Smart Home’s historical underwriting criteria;

 

   

references to “Services” are to Vivint Smart Home’s offering of smart home and security services;

 

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references to “Smart Home Services” are to Vivint Smart Home’s offering of smart home services combining Products and related installation, Services and Vivint Smart Home’s proprietary back-end cloud platform software;

 

   

references to “Solar” are to Vivint Solar, Inc., Vivint Smart Home’s affiliate;

 

   

references to “2024 Term Loan B Agreement” refers to the credit agreement (the “Term Loan Agreement”), dated as of September 6, 2018, among certain of Vivint Smart Home’s subsidiaries, certain lenders party thereto and Bank of America, N.A., as administrative agent;

 

   

references to “Total MR” are to the aggregate, contracted recurring monthly service billings to Vivint Smart Home’s smart home and security subscribers, based on the Total Subscribers number as of the end of a given period, plus deferred product and interest revenue recognized during the last month of the period;

 

   

references to “Total MSR” are to the contracted recurring monthly service billings to Vivint Smart Home’s smart home and security subscribers, based on the Total Subscribers number as of the end of a given period;

 

   

references to “Total Subscribers” are to the aggregate number of active smart home and security subscribers at the end of a given period, excluding subscribers acquired under pilot programs; and

 

   

references to the “Vivint Flex Pay” plan are to the plan, introduced in January 2017, under which Vivint Smart Home launched the Consumer Financing Program and began to offer RICs as well as the option to pay in full at the time of purchase; and

 

   

references to “Vivint Smart Home” are to Vivint Smart Home, Inc. and its consolidated subsidiaries; and

Unless specified otherwise, amounts in this proxy statement/consent solicitation statement/prospectus are presented in United States (“U.S.”) dollars.

Defined terms in the financial statements contained in this proxy statement/consent solicitation statement/prospectus have the meanings ascribed to them in the financial statements.

 

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QUESTIONS AND ANSWERS

The following are answers to certain questions that you may have regarding the merger, the stockholder meeting and the consent solicitation. We urge you to read carefully the remainder of this proxy statement/consent solicitation statement/prospectus because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the annexes to this proxy statement/consent solicitation statement/prospectus.

QUESTIONS AND ANSWERS ABOUT THE MERGER

 

Q:

WHAT IS THE MERGER?

 

A:

Mosaic, Merger Sub, a wholly owned subsidiary of Mosaic, and Vivint Smart Home have entered into an Agreement and Plan of Merger, dated as of September 15, 2019, (as it may be amended and/or restated from time to time, the “merger agreement”), pursuant to which Merger Sub will merge with and into Vivint Smart Home with Vivint Smart Home surviving the merger as a wholly owned subsidiary of Mosaic.

Mosaic will hold the Mosaic Special Meeting to, among other things, obtain the approvals required for the merger and the other transactions contemplated by the merger agreement and you are receiving this proxy statement/consent solicitation statement/prospectus in connection with such meeting. Vivint Smart Home is also providing these consent solicitation materials to the holders of Vivint Smart Home common stock and preferred stock, to solicit, among other things, the required written consent to adopt and approve in all respects the merger agreement and the transactions contemplated thereby (the “Vivint Merger Proposal”) and to approve, on a non-binding advisory basis, the amendments to Mosaic’s existing charter as set forth in Mosaic’s proposed charter (the “Vivint Charter Amendment Proposals”). See “The Merger Agreement” beginning on page [●]. In addition, a copy of the merger agreement is attached to this proxy statement/consent solicitation statement/prospectus as Annex A. We urge you to read carefully this proxy statement/consent solicitation statement/prospectus and the merger agreement in their entirety.

 

Q:

WHY AM I RECEIVING THIS DOCUMENT?

 

A:

Mosaic is sending this proxy statement/consent solicitation statement/prospectus to its stockholders to help them decide how to vote their shares of Mosaic common stock with respect to the matters to be considered at the Mosaic Special Meeting. Vivint Smart Home is also providing these consent solicitation materials to the holders of Vivint Smart Home common stock and preferred stock in order to solicit such holders’ written consent to the Vivint Merger Proposal and the Vivint Charter Amendments Proposals.

The merger cannot be completed unless Mosaic’s stockholders approve the Business Combination Proposal, the Charter Proposals, the Fortress Issuance Proposal, the Blackstone Issuance Proposal, the Merger Issuance Proposal and the Incentive Plan Proposal set forth in this proxy statement/consent solicitation statement/prospectus for their approval and Vivint Smart Home’s stockholders approve the Vivint Merger Proposal. Information about the Mosaic Special Meeting, the consent solicitation, the merger and the other business to be considered by stockholders at the Mosaic Special Meeting is contained in this proxy statement/consent solicitation statement/prospectus.

This document constitutes a proxy statement of Mosaic, a consent solicitation statement of Vivint Smart Home and a prospectus of Mosaic. It is a proxy statement because the board of directors of Mosaic is soliciting proxies using this proxy statement/consent solicitation statement/prospectus from its stockholders. It is a consent solicitation statement because the board of directors of Vivint Smart Home is soliciting written consent using this proxy statement/consent solicitation statement/prospectus from its stockholders. It is a prospectus because Mosaic, in connection with the merger, is offering shares of Mosaic Class A common stock in exchange for the outstanding shares of Vivint Smart Home common stock. See “The Merger Agreement—Merger Consideration”.

 

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Q:

WHAT WILL VIVINT SMART HOME STOCKHOLDERS RECEIVE IN THE MERGER?

 

A:

If the merger is completed, each share of Vivint Smart Home preferred stock issued and outstanding immediately prior to the effective time of the merger (other than shares owned by Vivint Smart Home as treasury stock) will be converted into a number of shares of Vivint Smart Home common stock in accordance with the certificate of designation of the Vivint Smart Home preferred stock.

At the effective time, each share of Vivint Smart Home common stock issued and outstanding immediately prior to the effective time of the merger (other than shares owned by Vivint Smart Home as treasury stock or dissenting shares) will convert into the right to receive 209.6849221312 shares of Mosaic Class A common stock (such number of shares, the “exchange ratio”), except for any fractional shares of Mosaic Class A common stock which would result (which will instead be paid out in cash in accordance with the merger agreement). The shares of Mosaic Class A common stock to be issued in the merger are referred to collectively as the “merger consideration”.

 

Q:

WHEN WILL THE MERGER BE COMPLETED?

 

A:

The parties currently expect that the merger will be completed during the fourth quarter of 2019 or the first quarter of 2020. However, neither Mosaic nor Vivint Smart Home can assure you of when or if the merger will be completed and it is possible that factors outside of the control of both companies could result in the merger being completed at a different time or not at all. Mosaic must first obtain the approval of Mosaic stockholders for each of the proposals set forth in this proxy statement/consent solicitation statement/prospectus for their approval (other than the Adjournment Proposal), Vivint Smart Home must first obtain the written consent of Vivint Smart Home stockholders for the merger and Mosaic and Vivint Smart Home must also first obtain certain necessary regulatory approvals and satisfy other closing conditions. See “The Merger Agreement—Conditions to the Merger” beginning on page [●].

 

Q:

WHAT HAPPENS IF THE MERGER IS NOT COMPLETED?

 

A:

If the merger is not completed, Vivint Smart Home stockholders will not receive any consideration for their shares of Vivint Smart Home common stock and Vivint Smart Home preferred stock will not be converted into Vivint Smart Home common stock. Instead, Vivint Smart Home will remain an independent company. Under specified circumstances, Vivint Smart Home will be required to pay to Mosaic a fee with respect to the termination of the merger agreement. See “The Merger Agreement—Termination; Company Termination Fee” and “Risk Factors” beginning on page [●] and page [●], respectively.

QUESTIONS AND ANSWERS ABOUT MOSAIC’S SPECIAL STOCKHOLDER MEETING

 

Q:

WHAT AM I BEING ASKED TO VOTE ON AND WHY IS THIS APPROVAL NECESSARY?

 

A:

Mosaic stockholders are being asked to vote on the following proposals:

 

  1.

the Business Combination Proposal;

 

  2.

the Charter Proposals;

 

  3.

the Fortress Issuance Proposal;

 

  4.

the Blackstone Issuance Proposal;

 

  5.

the Merger Issuance Proposal;

 

  6.

the Incentive Plan Proposal; and

 

  7.

the Adjournment Proposal.

The merger is conditioned upon the approval of the Business Combination Proposal, the Charter Proposals, the Fortress Issuance Proposal, the Blackstone Issuance Proposal, the Merger Issuance Proposal and the Incentive Plan Proposal, subject to the terms of the merger agreement. The merger is not conditioned on the Adjournment Proposal. If the Business Combination Proposal is not approved, the other proposals (except the Adjournment Proposal) will not be presented to the stockholders for a vote.

 

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Q:

WHY IS MOSAIC PROPOSING THE MERGER?

 

A:

Mosaic was organized to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses or entities (collectively, a “business combination”).

On October 23, 2017, Mosaic completed its initial public offering, generating gross proceeds of $345,000,000. Since Mosaic’s IPO, Mosaic’s activity has been limited to the evaluation of business combination candidates.

Vivint is one of the largest smart home companies in North America, delivering integrated smart home products and services to more than 1.5 million subscribers. Vivint manages over 20 million in-home devices, processing over 1.5 billion home activity events each day.

The Vivint Smart Home board of directors believes that the proposed merger represents the best potential transaction for Vivint Smart Home to create greater value for Vivint Smart Home’s stockholders, while also providing greater liquidity by owning stock in a public company.

Based on its due diligence investigations of Vivint Smart Home and the industry in which it operates, including the financial and other information provided by Vivint Smart Home in the course of their negotiations in connection with the merger agreement, Mosaic believes that Vivint Smart Home has a leading position in global markets, diversified product lines, longstanding customer relationships and a management team with skills that are complementary to those of Mosaic’s co-founder David M. Maura, who will become a director of New Vivint Parent immediately following the merger. As a result, Mosaic believes that a merger with Vivint Smart Home will provide Mosaic stockholders with an opportunity to participate in the ownership of a company with significant growth potential. See the section entitled “The Merger—Recommendation of the Mosaic Board of Directors and Reasons for the Merger”.

 

Q:

DID THE MOSAIC BOARD OBTAIN A THIRD-PARTY VALUATION OR FAIRNESS OPINION IN DETERMINING WHETHER OR NOT TO PROCEED WITH THE MERGER?

 

A:

Mosaic’s board of directors did not obtain a third-party valuation or fairness opinion in connection with their determination to approve the merger. Mosaic’s officers, directors and advisors have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and backgrounds, together with the experience and sector expertise of Mosaic’s financial advisors, enabled them to make the necessary analyses and determinations regarding the merger. In addition, Mosaic’s officers, directors and advisors have substantial experience with mergers and acquisitions. Accordingly, investors will be relying solely on the judgment of Mosaic’s board of directors and advisors in valuing Vivint Smart Home’s business.

 

Q:

DO I HAVE REDEMPTION RIGHTS?

 

A:

If you are a holder of public shares, you have the right to demand that Mosaic redeem such shares for a pro rata portion of the cash held in the Trust Account provided that you vote either for or against the Business Combination Proposal (such rights, “redemption rights”).

Notwithstanding the foregoing, a holder of public shares, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemption with respect to more than 15% of the public shares. Accordingly, all public shares in excess of 15% held by a public stockholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group”, will not be redeemed.

Under Mosaic’s existing charter, the merger may be consummated only if Mosaic has at least $5,000,001 of net tangible assets after giving effect to all holders of public shares that properly demand redemption of their shares for cash. Additionally, Vivint Smart Home will not be required to consummate the merger if the Maximum Redemption Condition is not satisfied.

 

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Q:

HOW DO I EXERCISE MY REDEMPTION RIGHTS?

 

A:

If you are a holder of public shares and wish to exercise your redemption rights, you must (i) demand that Mosaic redeem your shares for cash no later than the second business day preceding the vote on the Business Combination Proposal by delivering your stock to Mosaic’s transfer agent physically or electronically using Depository Trust Company’s DWAC (Deposit and Withdrawal at Custodian) system prior to the vote at the Mosaic Special Meeting. Any holder of public shares will be entitled to demand that such holder’s shares be redeemed for a full pro rata portion of the amount then in the Trust Account (which, for illustrative purposes, was $[            ] [    ], or $[            ] [            ] per share, as of [                    ] [    ], 2019, the record date). Such amount, including interest earned on the funds held in the Trust Account and not previously released to Mosaic to fund its working capital requirements, subject to an annual limit of $750,000, and/or to pay its taxes, will be paid promptly upon consummation of the merger. However, under Delaware law, the proceeds held in the Trust Account could be subject to claims which could take priority over those of Mosaic’s public stockholders exercising redemption rights, regardless of whether such holders vote for or against the Business Combination Proposal. Therefore, the per-share distribution from the Trust Account in such a situation may be less than originally anticipated due to such claims. Your vote on any proposal other than the Business Combination Proposal will have no impact on the amount you will receive upon exercise of your redemption rights.

Any request for redemption, once made by a holder of public shares, may be withdrawn at any time up to the time the vote is taken with respect to the Business Combination Proposal at the Mosaic Special Meeting. If you deliver your shares for redemption to Mosaic’s transfer agent and later decide prior to the Mosaic Special Meeting not to elect redemption, you may request that Mosaic’s transfer agent return the shares (physically or electronically).

Any corrected or changed proxy card or written demand of redemption rights must be received by Mosaic’s transfer agent prior to the vote taken on the Business Combination Proposal at the Mosaic Special Meeting. No demand for redemption will be honored unless the holder’s stock has been delivered (either physically or electronically) to the transfer agent prior to the vote at the Mosaic Special Meeting.

If a holder of public shares votes for or against the Business Combination Proposal and demand is properly made as described above, then, if the merger is consummated, Mosaic will redeem these shares for a pro rata portion of funds deposited in the Trust Account. If you exercise your redemption rights, then you will be exchanging your public shares for cash.

For a discussion of the material U.S. federal income tax considerations for holders of public shares with respect to the exercise of these redemption rights, see “Material U.S. Federal Income Tax Consequences—Tax Consequences of a Redemption of Mosaic public shares” beginning on page [●]

 

Q:

WHAT HAPPENS TO THE FUNDS DEPOSITED IN THE TRUST ACCOUNT AFTER CONSUMMATION OF THE MERGER?

 

A:

The net proceeds of Mosaic’s IPO, together with funds raised from the private sale of warrants simultaneously with the consummation of Mosaic’s IPO, was placed in the Trust Account immediately following Mosaic’s IPO. After consummation of the merger, the funds in the Trust Account will be used to pay holders of the public shares who exercise redemption rights, to pay fees and expenses incurred in connection with the merger (including aggregate fees of approximately $12,075,000 as deferred underwriting commissions related to Mosaic’s IPO) and for New Vivint’s working capital and general corporate purposes, including to pay down a portion of the Vivint Smart Home’s debt.

 

Q:

WHAT HAPPENS IF A SUBSTANTIAL NUMBER OF PUBLIC STOCKHOLDERS VOTE IN FAVOR OF THE MOSAIC MERGER PROPOSAL AND EXERCISE THEIR REDEMPTION RIGHTS?

 

A:

Mosaic’s public stockholders may vote in favor of the merger and still exercise their redemption rights. Accordingly, the merger may be consummated even though the funds available from the Trust Account and

 

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  the number of public stockholders are substantially reduced as a result of redemptions by public stockholders. However, Vivint Smart Home will not be required to consummate the merger if the Maximum Redemption Condition is not met. Also, with fewer public shares and public stockholders, the trading market for Mosaic Class A common stock may be less liquid than the market for Mosaic Class A common stock prior to the merger and Mosaic may not be able to meet the listing standards of a national securities exchange. In addition, with fewer funds available from the Trust Account, the capital infusion from the Trust Account into Vivint Smart Home’s business will be reduced and New Vivint may not be able to reduce its outstanding indebtedness as currently contemplated.

 

Q:

WHAT HAPPENS IF THE MERGER IS NOT CONSUMMATED?

 

A:

If Mosaic does not complete the merger with Vivint Smart Home for any reason, Mosaic would search for another target business with which to complete a business combination. If Mosaic does not complete the merger with Vivint Smart Home or another target business by January 23, 2020, Mosaic must redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the amount then held in the Trust Account divided by the number of outstanding public shares. The Sponsors have no redemption rights in the event a business combination is not effected in the required time period and, accordingly, their Founder Shares will be worthless. Additionally, in the event of such liquidation, there will be no distribution with respect to Mosaic’s outstanding warrants. Accordingly, such warrants will expire worthless.

 

Q:

HOW DO THE SPONSORS INTEND TO VOTE ON THE PROPOSALS?

 

A:

The Sponsors own of record and are entitled to vote an aggregate of 20% of the outstanding shares of Mosaic common stock. The Sponsors have agreed to vote any Founder Shares and any public shares held by them as of the record date, in favor of the proposals. See “Other Agreements—Sponsor Agreement”.

 

Q:

WHAT CONSTITUTES A QUORUM AT THE MOSAIC SPECIAL MEETING?

 

A:

A majority of the voting power of the issued and outstanding Mosaic common stock entitled to vote at the Mosaic Special Meeting must be present, in person or represented by proxy, at the Mosaic Special Meeting to constitute a quorum and in order to conduct business at the Mosaic Special Meeting. Abstentions and broker non-votes will be counted as present for the purpose of determining a quorum. The holders of the Founder Shares, who currently own approximately 20% of the issued and outstanding shares of Mosaic common stock, will count towards this quorum. In the absence of a quorum, the chairman of the Mosaic Special Meeting has power to adjourn the Mosaic Special Meeting. As of the record date for the Mosaic Special Meeting, 21,562,501 shares of Mosaic common stock would be required to achieve a quorum.

 

Q:

WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL AT THE MOSAIC SPECIAL MEETING?

 

A:

The Business Combination Proposal: The affirmative vote of the holders of a majority of the outstanding shares of Mosaic common stock, voting together as a single class, is required to approve the Business Combination Proposal. Mosaic stockholders must approve the Business Combination Proposal in order for the merger to occur. If Mosaic stockholders fail to approve the Business Combination Proposal, the merger will not occur. As further discussed in the section entitled “Other Agreements—Mosaic letter agreement” and “—Sponsor Agreement” beginning on page [●] of this proxy statement/consent solicitation statement/prospectus, the Sponsors and Mosaic’s officers and directors have entered into an agreement with Mosaic (the “Mosaic letter agreement”) pursuant to which the Sponsors and Mosaic’s officers and directors have agreed to vote shares representing approximately 20% of the aggregate voting power of the Mosaic common stock in favor of the Business Combination Proposal.

The Charter Proposals: The affirmative vote of (i) the holders of at least two-thirds of the Founder Shares then outstanding, voting separately as a single class, and (ii) the holders of a majority of the outstanding

 

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shares of Mosaic common stock, voting together as a single class, is required to approve each Charter Proposal. The merger is conditioned upon the approval of the Charter Proposals, subject to the terms of the merger agreement. Notwithstanding the approval of the Charter Proposals, if the merger is not consummated for any reason, the actions contemplated by the Charter Proposals will not be effected.

The Fortress Issuance Proposal: The majority of the votes cast by the Mosaic stockholders present in person or represented by proxy at the Mosaic Special Meeting is required to approve the Fortress Issuance Proposal. The merger is conditioned upon the approval of the Fortress Issuance Proposal, subject to the terms of the merger agreement. Notwithstanding the approval of the Fortress Issuance Proposal, if the merger is not consummated for any reason, the actions contemplated by the Fortress Issuance Proposal will not be effected.

The Blackstone Issuance Proposal: The majority of the votes cast by the Mosaic stockholders present in person or represented by proxy at the Mosaic Special Meeting is required to approve the Blackstone Issuance Proposal. The merger is conditioned upon the approval of the Blackstone Issuance Proposal, subject to the terms of the merger agreement. Notwithstanding the approval of the Blackstone Issuance Proposal, if the merger is not consummated for any reason, the actions contemplated by the Blackstone Issuance Proposal will not be effected.

The Merger Issuance Proposal: The majority of the votes cast by the Mosaic stockholders present in person or represented by proxy at the Mosaic Special Meeting is required to approve the Merger Issuance Proposal. The merger is conditioned upon the approval of the Merger Issuance Proposal, subject to the terms of the merger agreement. Notwithstanding the approval of the Merger Issuance Proposal, if the merger is not consummated for any reason, the actions contemplated by the Merger Issuance Proposal will not be effected.

The Incentive Plan Proposal: The majority of the votes cast by the Mosaic stockholders present in person or represented by proxy at the Mosaic Special Meeting is required to approve the Incentive Plan Proposal. The merger is conditioned upon the approval of the Incentive Plan Proposal, subject to the terms of the merger agreement. Notwithstanding the approval of the Incentive Plan Proposal, if the merger is not consummated for any reason, the actions contemplated by the Incentive Plan Proposal will not be effected.

The Adjournment Proposal: The majority of the votes cast by the Mosaic stockholders present in person or represented by proxy at the Mosaic Special Meeting shall be required to approve the Adjournment Proposal. The merger is not conditioned upon the approval of the Adjournment Proposal.

 

Q:

DO ANY OF MOSAIC’S DIRECTORS OR OFFICERS HAVE INTERESTS IN THE MERGER THAT MAY DIFFER FROM OR BE IN ADDITION TO THE INTERESTS OF MOSAIC STOCKHOLDERS?

 

A:

Mosaic’s executive officers and certain non-employee directors may have interests in the merger that may be different from, or in addition to, the interests of Mosaic stockholders generally. The Mosaic board of directors was aware of and considered these interests to the extent such interests existed at the time, among other matters, in approving the merger agreement and in recommending that the merger agreement and the transactions contemplated thereby be approved by the stockholders of Mosaic. See “The Merger—Interests of Mosaic’s Directors and Officers in the Merger” beginning on page [●] of this proxy statement/consent solicitation statement/prospectus.

 

Q:

WHAT DO I NEED TO DO NOW?

 

A:

After carefully reading and considering the information contained in this proxy statement/consent solicitation statement/prospectus, please submit your proxies as soon as possible so that your shares will be represented at the Mosaic Special Meeting. Please follow the instructions set forth on the proxy card or on the voting instruction form provided by your broker, bank or other nominee if your shares are held in the name of your broker, bank or other nominee.

 

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Q:

HOW DO I VOTE?

 

A:

If you are a stockholder of record of Mosaic as of [●], 2019 (the “Mosaic record date”) you may submit your proxy before the Mosaic Special Meeting in any of the following ways:

 

   

use the toll-free number shown on your proxy card;

 

   

visit the website shown on your proxy card to vote via the Internet; or

 

   

complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.

If you are a stockholder of record of Mosaic as of the Mosaic record date, you may also cast your vote in person at the Mosaic Special Meeting.

If your shares are held in “street name” through a broker, bank or other nominee, your broker, bank or other nominee will send you separate instructions describing the procedure for voting your shares. “Street name” stockholders who wish to vote at the Mosaic Special Meeting will need to obtain a proxy form from their broker, bank or other nominee.

 

Q:

WHEN AND WHERE IS THE MOSAIC SPECIAL MEETING?

 

A:

The Mosaic Special Meeting stockholders will be held on [                    ], at [                    ] local time, at [                    ]. All Mosaic stockholders as of the Mosaic record date, or their duly appointed proxies, may attend the Mosaic Special Meeting. Since seating is limited, admission to the Mosaic Special Meeting will be on a first-come, first-served basis. Registration and seating will begin at [                    ] local time.

 

Q:

IF MY SHARES ARE HELD IN “STREET NAME” BY A BROKER, BANK OR OTHER NOMINEE, WILL MY BROKER, BANK OR OTHER NOMINEE VOTE MY SHARES FOR ME?

 

A:

If your shares are held in “street name” in a stock brokerage account or by a broker, bank or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card directly to Mosaic or by voting in person at the Mosaic Special Meeting unless you provide a “legal proxy”, which you must obtain from your broker, bank or other nominee. In addition to such legal proxy, if you plan to attend the Mosaic Special Meeting, but are not a stockholder of record because you hold your shares in “street name”, please bring evidence of your beneficial ownership of your shares (e.g., a copy of a recent brokerage statement showing the shares) and valid photo identification with you to the Mosaic Special Meeting.

Under the rules of the NYSE, brokers who hold shares in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are not permitted to exercise their voting discretion with respect to the approval of matters that the NYSE determines to be “non-routine” without specific instructions from the beneficial owner. It is expected that all proposals to be voted on at the Mosaic Special Meeting are “non-routine” matters. Broker non-votes occur when a broker or nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the broker does not have discretionary voting power.

If you are a Mosaic stockholder holding your shares in “street name” and you do not instruct your broker, bank or other nominee on how to vote your shares, your broker, bank or other nominee will not vote your shares on the Business Combination Proposal, the Charter Proposals, the Fortress Issuance Proposal, the Blackstone Issuance Proposal, the Merger Issuance Proposal, the Incentive Plan Proposal or the Adjournment Proposal. Such broker non-votes will be the equivalent of a vote “AGAINST” the Business Combination Proposal and the Charter Proposals, but will have no effect on the vote count for such other proposals.

 

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Q:

WHAT IF I ATTEND THE MOSAIC SPECIAL MEETING AND ABSTAIN OR DO NOT VOTE?

 

A:

For purposes of the Mosaic Special Meeting, an abstention occurs when a stockholder attends the meeting in person and does not vote or returns a proxy with an “abstain” vote.

If you are a Mosaic stockholder that attends the Mosaic Special Meeting in person and fails to vote on the Business Combination Proposal or the Charter Proposals, or if you respond to such proposals with an “abstain” vote, your failure to vote or “abstain” vote in each case will have the same effect as a vote “AGAINST” such proposals.

If you are a Mosaic stockholder that attends the Mosaic Special Meeting in person and fails to vote on the Fortress Issuance Proposal, the Blackstone Issuance Proposal, the Merger Issuance Proposal, the Incentive Plan Proposal or the Adjournment Proposal, or if respond to such proposals with an “abstain” vote, your failure to vote or “abstain” vote in each case will have no effect on the vote count for such proposals.

 

Q:

WHAT WILL HAPPEN IF I RETURN MY PROXY CARD WITHOUT INDICATING HOW TO VOTE?

 

A:

If you sign and return your proxy card without indicating how to vote on any particular proposal, the Mosaic stock represented by your proxy will be voted as recommended by the Mosaic board of directors with respect to that proposal.

 

Q:

MAY I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY OR VOTING INSTRUCTION CARD?

 

A:

Yes. You may change your vote at any time before your proxy is voted at the Mosaic Special Meeting. You may do this in one of three ways:

 

   

filing a notice with the corporate secretary of Mosaic;

 

   

mailing a new, subsequently dated proxy card; or

 

   

by attending the Mosaic Special Meeting and electing to vote your shares in person.

If you are a stockholder of record of Mosaic and you choose to send a written notice or to mail a new proxy, you must submit your notice of revocation or your new proxy to Mosaic, 375 Park Avenue, New York, NY, 10152 and it must be received at any time before the vote is taken at the Mosaic Special Meeting. Any proxy that you submitted may also be revoked by submitting a new proxy by mail, or online or by telephone, not later than [            ] on [            ], or by voting in person at the Mosaic Special Meeting. Simply attending the Mosaic Special Meeting will not revoke your proxy. If you have instructed a broker, bank or other nominee to vote your shares of Mosaic common stock, you must follow the directions you receive from your broker, bank or other nominee in order to change or revoke your vote.

 

Q:

WHAT HAPPENS IF I FAIL TO TAKE ANY ACTION WITH RESPECT TO THE MOSAIC SPECIAL MEETING?

 

A:

If you fail to take any action with respect to the Mosaic Special Meeting and the merger is approved by stockholders and consummated, you will continue to be a stockholder of Mosaic. As a corollary, failure to vote either for or against the Business Combination Proposal means you will not have any redemption rights in connection with the merger to exchange your public shares for a pro rata share of the funds held in the Trust Account. If you fail to take any action with respect to the Mosaic Special Meeting and the merger is not approved, you will continue to be a stockholder of Mosaic while Mosaic searches for another target business with which to complete a business combination.

 

Q:

WHAT SHOULD I DO IF I RECEIVE MORE THAN ONE SET OF VOTING MATERIALS?

 

A:

Stockholders may receive more than one set of voting materials, including multiple copies of this proxy statement/consent solicitation statement/prospectus and multiple proxy cards or voting instruction cards. For

 

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  example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered under more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your shares.

 

Q:

WHOM SHOULD I CONTACT IF I HAVE ANY QUESTIONS ABOUT THE PROXY MATERIALS OR VOTING?

 

A:

If you have any questions about the proxy materials, need assistance submitting your proxy or voting your shares or need additional copies of this proxy statement/consent solicitation statement/prospectus or the enclosed proxy card, you should contact [●], the proxy solicitation agent for Mosaic, toll-free at [●].

QUESTIONS AND ANSWERS ABOUT VIVINT SMART HOME’S CONSENT SOLICITATION

 

Q:

WHO IS ENTITLED TO GIVE A WRITTEN CONSENT FOR VIVINT SMART HOME?

 

A:

The Vivint Smart Home board of directors has set [                    ], 2019 as the record date (the “Vivint Smart Home record date”) for determining Vivint Smart Home stockholders entitled to sign and deliver written consents with respect to this consent solicitation. Holders of outstanding shares of Vivint Smart Home common stock or preferred stock as of the close of business on the Vivint Smart Home record date will be entitled to give a consent using the form of written consent furnished with this proxy statement/consent solicitation statement/prospectus.

 

Q:

WHAT APPROVAL IS REQUIRED BY VIVINT SMART HOME STOCKHOLDERS TO ADOPT THE MERGER AGREEMENT?

 

A:

The merger cannot be completed unless stockholders of Vivint Smart Home adopt the merger agreement and thereby approve the merger and the other transactions contemplated by the merger agreement. Adoption of the merger agreement requires the approval of the written consent of the holders of a majority of the outstanding shares of Vivint Smart Home common stock and preferred stock entitled to vote. As of the close of business on the Vivint Smart Home record date, there were [●] shares of Vivint Smart Home common stock outstanding and entitled to vote and [●] shares of Vivint Smart Home preferred stock outstanding and entitled to vote.

 

Q:

DO ANY OF VIVINT SMART HOME’S DIRECTORS OR OFFICERS HAVE INTERESTS IN THE MERGER THAT MAY DIFFER FROM OR BE IN ADDITION TO THE INTERESTS OF VIVINT SMART HOME STOCKHOLDERS?

 

A:

Vivint Smart Home’s executive officers and certain non-employee directors may have interests in the merger that may be different from, or in addition to, the interests of Vivint Smart Home stockholders generally. The Vivint Smart Home board of directors was aware of and considered these interests to the extent such interests existed at the time, among other matters, in approving the merger agreement and in recommending that the merger agreement be approved by the stockholders of Vivint Smart Home. See “The Merger—Interests of Vivint Smart Home Directors and Executive Officers in the Merger” beginning on page [●] of this proxy statement/consent solicitation statement/prospectus.

 

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Q:

I AM AN EMPLOYEE OF VIVINT SMART HOME WHO HOLDS EQUITY AWARDS OF 313 ACQUISITION LLC, THE PARENT OF VIVINT SMART HOME AND/OR VIVINT GROUP, INC., A SUBSIDIARY OF VIVINT SMART HOME. HOW WILL MY EQUITY AWARDS BE TREATED IN THE MERGER?

 

A:

As described in more detail in “The Merger Agreement—Treatment of Company Group Equity Awards” beginning on page [●] of this proxy statement/consent solicitation statement/prospectus, immediately prior to the effective time:

 

   

holders of vested Company Group Class B Units (as defined in the merger agreement) as of immediately prior to the effective time, other than Todd Pedersen, Alex Dunn or any of their affiliated entities who hold interests in 313 Acquisition LLC (collectively, the “Holdback Executives”), will have each such Company Group Class B Unit redeemed by 313 Acquisition LLC (“313 Acquisition”) immediately prior to the effective time for shares of common stock of Vivint Solar, Inc. (“VSLR common stock”) and Vivint Smart Home common stock as described below, with an equivalent value as the Company Group Class B Unit so redeemed, in a manner determined by the board of managers of 313 Acquisition (the “313 Board”), pursuant to the terms and conditions of the Company Group Stock Plans (as defined in the merger agreement) and the limited liability company agreement of 313 Acquisition (the “313 LLCA”), assuming a hypothetical liquidation of 313 Acquisition. The number of shares of VSLR common stock and Vivint Smart Home common stock issued with respect to each vested Company Group Class B Unit, in such redemptions, shall be determined on a pro rata basis using the relative value of the shares of VSLR common stock and Vivint Smart Home common stock held by 313 Acquisition as of the effective time. Holders of shares of Vivint Smart Home common stock received in such redemptions will be entitled to receive the merger consideration in accordance with the merger agreement as described below;

 

   

holders of unvested Company Group Class B Units as of immediately prior to the effective time, other than the Holdback Executives, will have each such unvested Company Group Class B Unit redeemed by 313 Acquisition immediately prior to the effective time for a number of shares of Company Restricted Stock (as defined in the merger agreement), with an equivalent value as the Company Group Class B Units so redeemed, in a manner determined by the 313 Board in accordance with the terms of the Company Group Stock Plans and the 313 LLCA, assuming a hypothetical liquidation of 313 Acquisition. Such shares of Company Restricted Stock shall be subject to the same vesting terms and conditions as the corresponding Company Group Class B Units, as modified pursuant to the 2.0x Modification (as defined below);

 

   

the vesting schedule for each Company Group Class B Unit and Company Group SAR (as defined in the merger agreement) that would currently vest if Blackstone receives cash proceeds in respect of its Class A Units in 313 Acquisition equal to 2.0x Blackstone’s cumulative invested capital in respect of the Class A Units at such time (the “2.0x Company Group Equity Awards”), will be modified such that each 2.0x Company Group Equity Award will instead vest, subject to the holder’s continued employment on the applicable vesting date (or event), (i) in equal 25% annual installments on each of the first four anniversaries of the closing date of the merger or (ii) if earlier, in full upon either (x) a Change of Control (as defined in the applicable Company Group Stock Plan) or (y) Blackstone receiving cash proceeds in respect of its Class A Units in 313 Acquisition equal to 2.0x Blackstone’s cumulative invested capital in respect of the Class A Units at such time (the “2.0x Modification”); and

 

   

the distribution schedule for any shares of common stock of Vivint Group, Inc. (“VGI common stock”) issuable pursuant to the Company Group LTIP Plans (as defined in the merger agreement) upon Blackstone’s achievement of certain performance hurdles (the “MOIC LTIP Shares”) will instead be delivered, in accordance with the terms thereof, on each of the 24-, 36- and 48-month anniversaries of the closing date of the merger; provided, that (i) on the date of a Change of Control (as defined in the applicable Company Group LTIP Plan) 100% of the then-undelivered MOIC LTIP Shares will be distributed to participants in the applicable Company Group LTIP Plan and (ii) on the date that

 

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Blackstone receives cash proceeds in respect of its Class A Units in 313 Acquisition equal to 2.0x Blackstone’s cumulative invested capital in respect of the Class A Units at such time, 50% of the then-undelivered MOIC LTIP Shares will be distributed to participants in the applicable Company Group LTIP Plan, in accordance with the terms thereof; provided, further, that notwithstanding the foregoing, no MOIC LTIP Shares may be distributed prior to the six-month anniversary an event similar to a “Public Offering” for purposes of the Company Group LTIP Plans (the “LTIP Modification”).

Effective as of the effective time:

 

   

each Company Group RSU (as defined in the merger agreement), to the extent then outstanding and unsettled, without any action on the part of the holder thereof, will automatically be cancelled and converted into and thereafter evidence a New Vivint Parent restricted stock unit entitling the holder thereof to receive upon settlement a number of shares of New Vivint Parent Class A common stock equal to the product of (x) the number of shares of VGI common stock subject to such Company Group RSU as of immediately prior to the effective time, multiplied by (y) 0.2076986176 (the “VGI exchange ratio”), rounded down to the nearest whole number of shares of New Vivint Parent Class A common stock (after such conversion, “Rollover RSUs”);

 

   

each Company Group SAR, to the extent then outstanding and unexercised, without any action on the part of the holder thereof, will automatically be cancelled and converted into and thereafter evidence a New Vivint Parent stock appreciation right with respect to a number of shares of New Vivint Parent Class A common stock equal to the product of (x) the number of shares of VGI common stock subject to such Company Group SAR as of immediately prior to the effective time, multiplied by (y) the VGI exchange ratio, rounded down to the nearest whole number of shares of New Vivint Parent Class A common stock (after such conversion, “Rollover SARs”), with a strike price per share of New Vivint Parent Class A common stock equal to the quotient obtained by dividing (i) the per share strike price of such Company Group SAR as of immediately prior to the effective time by (ii) the VGI exchange ratio, rounded up to the nearest whole cent;

 

   

New Vivint Parent will assume the Company Group LTIP Plans, including any liabilities and obligations associated therewith and make adjustments such that awards under the Company Group LTIP Plans will be settled in a number of shares of New Vivint Parent Class A common stock with a fair market value equal to a number of hypothetical Rollover SARs with respect to (a) the number of shares of VGI common stock subject to the hypothetical Company Group SARs underlying such Company Group LTIP Plan as of immediately prior to the effective time, multiplied by (b) the VGI exchange ratio, rounded down to the nearest whole number of shares of New Vivint Parent Class A common stock, with a strike price per share of New Vivint Parent Class A common stock equal to the quotient obtained by dividing (x) the per share strike price of such hypothetical Company Group SARs as of immediately prior to the effective time by (y) the VGI exchange ratio, rounded up to the nearest whole cent (such assumed and adjusted plans, the “Rollover LTIP Plans”) as if the consummation of the merger constituted an event similar to a “Public Offering” for purposes of the Company Group LTIP Plans; and

 

   

each share of Company Restricted Stock, to the extent then unvested and outstanding, will automatically, without any action on the part of the holder thereof, be cancelled and converted into a number of shares of restricted New Vivint Parent Class A common stock equal to the exchange ratio, rounded to the nearest whole share of New Vivint Parent Class A common stock (after such conversion, “Rollover Restricted Stock” and together with the Rollover RSUs, the Rollover SARs and the hypothetical Rollover SARs under the Rollover LTIP Plans, the “Rollover Equity Awards”).

Any shares of New Vivint Parent Class A common stock issuable under Rollover Equity Awards, other than the awards granted under the Rollover LTIP Plans or held by the Holdback Executives, will be subject to restrictions on transfer until the first anniversary of the closing date of the merger, unless otherwise agreed to by Vivint Smart Home and the applicable holder. Following the effective time, each Rollover Equity Award will be subject to the 2019 Omnibus Plan (as defined below) and to the same terms and conditions,

 

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including, without limitation, any vesting conditions (as modified by the 2.0x Modification or the LTIP Modification, as applicable), as had applied to the corresponding Company Group Equity Award as of immediately prior to the effective time, except for such terms rendered inoperative by reason of the merger, subject to such adjustments as reasonably determined by the New Vivint Parent board of directors to be necessary or appropriate to give effect to the conversion or the merger. After the consummation of the merger, holders of outstanding Rollover Equity Awards will have the contingent right to receive earnout shares if, from the consummation of the merger until the fifth anniversary thereof, the volume-weighted average price of New Vivint Parent Class A common stock exceeds certain thresholds as described below.

 

Q:

HOW CAN I RETURN MY WRITTEN CONSENT?

 

A:

If you hold shares of Vivint Smart Home common stock or preferred stock as of the close of business on the Vivint Smart Home record date and you wish to submit your consent, you must fill out the enclosed written consent, date and sign it, and promptly return it to Vivint Smart Home. Once you have completed, dated and signed your written consent, deliver it to Vivint Smart Home by faxing your written consent to Vivint Smart Home, Attention: [●], by emailing a .pdf copy of your written consent to [●] or by mailing your written consent to Vivint Smart Home at [●]. Vivint Smart Home does not intend to hold a stockholders’ meeting to consider the Vivint Merger Proposal or the Vivint Charter Amendments Proposals, and, unless Vivint Smart Home decides to hold a stockholders’ meeting for such purposes, you will be unable to vote in person by attending a stockholders’ meeting.

 

Q:

WHAT IS THE DEADLINE FOR RETURNING MY WRITTEN CONSENT?

 

A:

The Vivint Smart Home board of directors has set [●], on [●], 2019 as the targeted final date for the receipt of written consents (the “target date”). 313 Acquisition entered into a support agreement with Mosaic (the “Vivint Smart Home support agreement”). Under the Vivint Smart Home support agreement, 313 Acquisition agreed, promptly following the SEC declaring this proxy statement/consent solicitation statement/prospectus effective, to execute and deliver a written consent with respect to the outstanding shares of Vivint Smart Home common stock and preferred stock held by 313 Acquisition, which represent approximately 92% of the outstanding voting power of Vivint Smart Home common stock and preferred stock (on an as converted basis), adopting the merger agreement and approving the merger, subject to certain exceptions. For a more detailed description of the Vivint Smart Home support agreement, see the section titled “Other Agreements—Vivint Smart Home Support Agreement” beginning on page [●] of this proxy statement/consent solicitation statement/prospectus. The target date is the date on which Vivint Smart Home expects to receive the written consents of 313 Acquisition under the Vivint Smart Home support agreement. Vivint Smart Home reserves the right to extend the final date for the receipt of written consents beyond [●], 2019. Any such extension may be made without notice to Vivint Smart Home stockholders. Once a sufficient number of consents to adopt the merger agreement have been received, the consent solicitation will conclude.

 

Q:

WHAT OPTIONS DO I HAVE WITH RESPECT TO THE PROPOSED MERGER?

 

A:

With respect to the shares of Vivint Smart Home common stock and preferred stock that you hold, you may execute a written consent to approve the Vivint Merger Proposal or the Vivint Charter Amendments Proposal (which is equivalent to a vote for the proposals). If you fail to execute and return your written consent, or otherwise withhold your written consent, it has the same effect as voting against the Vivint Merger Proposal or the Vivint Charter Amendments Proposals.

 

Q:

CAN I DISSENT AND REQUIRE APPRAISAL OF MY SHARES?

 

A:

If you are a Vivint Smart Home stockholder who does not approve the merger by delivering a written consent adopting the merger agreement, you will, by complying with Section 262 of the General

 

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  Corporation Law of the State of Delaware (the “DGCL”), be entitled to appraisal rights. Section 262 of the DGCL is attached to this proxy statement/consent solicitation statement/prospectus as Annex C. Failure to follow any of the statutory procedures set forth in Annex C may result in the loss or waiver of appraisal rights under Delaware law. Delaware law requires that, among other things, you send a written demand for appraisal to Vivint Smart Home after receiving a notice that appraisal rights are available to you, which notice will be sent to non-consenting Vivint Smart Home stockholders in the future. This proxy statement/consent solicitation statement/prospectus is not intended to constitute such a notice. Do not send in your demand before the date of such notice because any demand for appraisal made prior to your receipt of such notice may not be effective to perfect your rights. See the section titled “Appraisal Rights” beginning on page [●] of this proxy statement/consent solicitation statement/prospectus.

 

Q:

WHAT ARE THE MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO VIVINT SMART HOME STOCKHOLDERS?

 

A:

Vivint Smart Home and Mosaic intend the merger to qualify as a “reorganization” within the meaning of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) and/or a transaction governed by Section 351 of the Code for U.S. federal income tax purposes. If the merger so qualifies, then a U.S. holder of Vivint Smart Home common stock (including the shares of Vivint Smart Home common stock resulting from the conversion of Vivint Smart Home preferred stock described under “The Merger AgreementMerger Consideration”) generally will not recognize any gain or loss as a result of the merger.

The obligations of Vivint Smart Home and Mosaic to complete the merger are not conditioned on the receipt of opinions from Simpson Thacher & Bartlett LLP (“STB”), counsel to Vivint Smart Home, or Paul, Weiss, Rifkind, Wharton & Garrison LLP (“Paul, Weiss”), counsel to Mosaic, to the effect that the merger will qualify as a reorganization and/or a transaction governed by Section 351 of the Code for U.S. federal income tax purposes. If the merger does not qualify as a reorganization, and does not otherwise qualify for tax-free treatment under Section 351 of the Code, it will be treated as a taxable stock sale.

For a more detailed discussion of the material U.S. federal income tax consequences of the merger, see “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page [●].

The consequences of the merger to any particular stockholder will depend on that stockholder’s particular facts and circumstances. Accordingly, you are urged to consult your tax advisor to determine your tax consequences from the merger, including the applicability and effect of U.S. federal, state, local and non-U.S. income and other tax laws in light of your particular circumstances.

 

Q:

SHOULD VIVINT SMART HOME STOCKHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?

 

A:

No. Vivint Smart Home stockholders SHOULD NOT send in any stock certificates now. If the merger agreement is adopted and the merger is consummated, transmittal materials, with instructions for their completion, will be provided under separate cover to Vivint Smart Home stockholders who hold physical stock certificates and the stock certificates should be sent at that time in accordance with such instructions.

 

Q:

WHOM SHOULD I CONTACT IF I HAVE ANY QUESTIONS ABOUT THE CONSENT SOLICITATION?

 

A:

If you have any questions about the merger or how to return your written consent or letter of transmittal, or if you need additional copies of this proxy statement/consent solicitation statement/prospectus or a replacement written consent or letter of transmittal, you should contact [●].

 

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SUMMARY

This summary highlights selected information included in this proxy statement/consent solicitation statement/prospectus and does not contain all of the information that may be important to you. You should read this entire document and its annexes and the other documents to which we refer before you decide how to vote. Each item in this summary includes a page reference directing you to a more complete description of that item.

The Merger and the Merger Agreement (page [])

The terms and conditions of the merger are contained in the merger agreement, which is attached as Annex A to this proxy statement/consent solicitation statement/prospectus. We encourage you to read the merger agreement carefully, as it is the legal document that governs the merger.

If the merger agreement is approved and adopted and the merger is subsequently completed, Merger Sub will merge with and into Vivint Smart Home with Vivint Smart Home surviving the merger as a wholly owned subsidiary of Mosaic.

Merger Consideration (page [])

Immediately prior to the effective time, each share of Vivint Smart Home preferred stock issued and outstanding will be converted into a number of shares of Vivint Smart Home common stock in accordance with the certificate of designation of the Vivint Smart Home preferred stock.

At the effective time of the merger, each share of Vivint Smart Home common stock issued and outstanding immediately prior to the effective time of the merger (other than shares owned by Vivint Smart Home as treasury stock or dissenting shares) will convert into the right to receive 209.6849221312 shares of Mosaic Class A common stock (such number of shares, the “exchange ratio”), except for any fractional shares of Mosaic Class A common stock which would result (which will instead be paid out in cash in accordance with the merger agreement). The shares of Mosaic Class A common stock to be issued in the merger are referred to collectively as the “merger consideration”.

Recommendation of the Vivint Smart Home Board of Directors (page [])

After consideration, the Vivint Smart Home board of directors adopted resolutions, determining that the merger agreement, the merger contemplated by the merger agreement and the other transactions contemplated by the merger agreement were advisable, fair to and in the best interests of Vivint Smart Home and its stockholders, adopting and approving the merger agreement and the transactions contemplated thereby, including the merger and directing that the merger agreement be submitted to the holders of Vivint Smart Home common stock and preferred stock for consideration. The Vivint Smart Home board of directors recommends that Vivint Smart Home stockholders adopt the merger agreement by submitting a written consent and thereby approve the merger and the transactions contemplated by the merger agreement by executing and delivering the written consent furnished with this proxy statement/consent solicitation statement/prospectus.

For a description of various factors considered by the Vivint Smart Home board of directors in reaching its decision to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement, see the section titled “The Merger—Recommendation of the Vivint Smart Home Board of Directors and Reasons for the Merger” beginning on page [●].

Recommendation of the Mosaic Board of Directors (page [])

The Mosaic board of directors has unanimously determined that the merger, on the terms and conditions set forth in the merger agreement, is advisable and in the best interests of Mosaic and its stockholders and has



 

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directed that the proposals set forth in this proxy statement/consent solicitation statement/prospectus be submitted to its stockholders for approval at the Mosaic Special Meeting on the date and at the time and place set forth in this proxy statement/consent solicitation statement/prospectus. The Mosaic board of directors unanimously recommends that Mosaic’s stockholders vote “FOR” the Business Combination Proposal, “FOR” the Charter Proposals, “FOR” the Fortress Issuance Proposal, “FOR” the Blackstone Issuance Proposal, “FOR” the Merger Issuance Proposal, “FOR” the Incentive Plan Proposal and “FOR” the Adjournment Proposal (if necessary). See “The Merger—Recommendation of the Mosaic Board of Directors and Reasons for the Merger” beginning on page [●].

Vivint Smart Home Solicitation of Written Consents (page [])

Record Date; Vivint Smart Home Stockholders Entitled to Consent

The Vivint Smart Home board of directors has set [●], 2019 (the “Vivint Smart Home record date”) as the record date for determining the Vivint Smart Home stockholders entitled to sign and deliver written consent to adopt and approve in all respects the merger agreement and the transactions contemplated thereby (the “Vivint Merger Proposal”), and to approve, on a non-binding advisory basis, the amendments to Mosaic’s existing charter as set forth in Mosaic’s proposed charter (the “Vivint Charter Amendment Proposals”).

Only Vivint Smart Home stockholders of record holding shares of common stock or preferred stock outstanding as of the close of business on the Vivint Smart Home record date are entitled to sign and deliver written consents with respect to the Vivint Merger Proposal and the Vivint Charter Amendment Proposals. As of the close of business on the Vivint Smart Home record date, there were [●] shares of Vivint Smart Home common stock and [●] shares of Vivint Smart Home preferred stock outstanding and entitled to sign and deliver written consents with respect to the Vivint Merger Proposal and the Vivint Charter Amendment Proposals. You are urged to return a completed, dated and signed written consent by 12:00 noon, New York City time on [●], 2019.

Consents; Required Consents

Written consents from the holders of at least a majority of the voting power of the outstanding shares of Vivint Smart Home common stock and preferred stock entitled to vote are required to adopt the merger agreement and to approve, on a non-binding advisory basis, the amendments to Mosaic’s existing charter as set forth in Mosaic’s proposed charter.

Following entry by the parties into the merger agreement, 313 Acquisition entered into the Vivint Smart Home support agreement with Mosaic. Under the Vivint Smart Home support agreement, 313 Acquisition agreed, promptly following the SEC declaring this proxy statement/consent solicitation statement/prospectus effective, to execute and deliver a written consent with respect to the outstanding shares of Vivint Smart Home common stock and preferred stock held by 313 Acquisition adopting the merger agreement and approving the merger unless the merger is no longer recommended by the Vivint Smart Home board of directors in accordance with the merger agreement, in which case, 313 Acquisition would vote 35% of the shares of Vivint Smart Home stock adopting the merger agreement and would be entitled, in its sole discretion, to vote its remaining shares in any manner. The shares of Vivint Smart Home common stock that are owned by 313 Acquisition and subject to the Vivint Smart Home support agreement represent approximately 92% of the outstanding voting power of Vivint Smart Home common stock and preferred stock (on an as converted basis). The delivery of the written consent by 313 Acquisition pursuant to the Vivint Smart Home support agreement with respect to the shares of Vivint Smart Home common stock that are owned by 313 Acquisition adopting the merger agreement will be sufficient to adopt the merger agreement and thereby approve the merger and the other transactions contemplated by the merger agreement, except in the event of a change of recommendation by the Vivint Smart Home board of directors in accordance with the merger agreement.



 

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Submission of Consents

You may consent to the Vivint Merger Proposal and the Vivint Charter Amendment Proposals with respect to your shares of Vivint Smart Home common stock or preferred stock by completing, dating and signing the written consent enclosed with this proxy statement/consent solicitation statement/prospectus and returning it to Vivint Smart Home.

If you hold shares of Vivint Smart Home common stock or preferred stock as of the close of business on the Vivint Smart Home record date and you wish to give your written consent, you must fill out the enclosed written consent, date and sign it, and promptly return it to Vivint Smart Home. Once you have completed, dated and signed the written consent, you may deliver it to Vivint Smart Home by faxing it to Vivint Smart Home, Attention: Secretary, at [●], by emailing a .pdf copy to [●] or by mailing it to Vivint Smart Home at [●], Attention: [●].

The Vivint Smart Home board of directors has set 12:00 noon, New York City time, on [●], 2019 as the target date for the receipt of written consents, which is the date on which Vivint Smart Home expects to receive the written consents of 313 Acquisition under the Vivint Smart Home support agreement. Vivint Smart Home reserves the right to extend the final date for the receipt of written consents beyond [●], 2019. Any such extension may be made without notice to Vivint Smart Home stockholders. Once a sufficient number of consents to adopt the merger agreement has been received, the consent solicitation will conclude. The delivery of the written consent by 313 Acquisition pursuant to the Vivint Smart Home support agreement with respect to the shares of Vivint Smart Home common stock that are owned by 313 Acquisition adopting the merger agreement will be sufficient to adopt the merger agreement and thereby approve the merger and the other transactions contemplated by the merger agreement, except in the event of a change of recommendation by the Vivint Smart Home board of directors in accordance with the merger agreement.

Executing Consents; Revocation of Consents

You may execute a written consent only to approve the Vivint Merger Proposal and the Vivint Charter Amendment Proposals. A written consent to approve the Vivint Merger Proposal or the Vivint Charter Amendment Proposals is equivalent to a vote for such proposals.

If you do not return your written consent, it will have the same effect as a vote against the Vivint Merger Proposal and the Vivint Charter Amendment Proposals. If you are a record holder of shares of Vivint Smart Home common stock or preferred stock and you return a signed written consent, you will have consented to the proposals.

If you are a record holder of shares of Vivint Smart Home common stock or preferred stock as of the close of business on the Vivint Smart Home record date, you may revoke your written consent (subject to any contractual obligations you may otherwise have) at any time prior to [●] local time, on [●], 2019 (or, if earlier, before the consents of a sufficient number of shares to approve the Vivint Merger Proposal have been delivered to the Secretary of Vivint Smart Home). If you wish to revoke your consent before that time, you may do so by delivering a notice of revocation by faxing it to [●] by emailing a .pdf copy to [●] or by mailing it to [●]. However, pursuant to the Vivint Smart Home support agreement, the written consent to be received by Vivint Smart Home from 313 Acquisition will be irrevocable.

Solicitation of Consents; Expenses

The expense of preparing, printing and mailing these consent solicitation materials to Vivint Smart Home stockholders is being borne by Vivint Smart Home. Officers and employees of Vivint Smart Home may solicit consents by telephone and personally, in addition to solicitation by mail. These persons will receive their regular salaries but no special compensation for soliciting consents.



 

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Stock Ownership of Vivint Smart Home and Executive Officers

As of the close of business on the record date, excluding shares of Vivint Smart Home common stock held by 313 Acquisition, the directors and executive officers of Vivint Smart Home collectively beneficially owned and were entitled to vote (i) [●] shares of Vivint Smart Home common stock, which represent, in the aggregate, approximately [●]% of Vivint Smart Home common stock outstanding on that date and (ii) [●] shares of Vivint Smart Home preferred stock, which represent, in the aggregate, approximately [●]% of Vivint Smart Home preferred stock outstanding on that date.

Mosaic Special Meeting of Stockholders (page [])

The special meeting of Mosaic stockholders (the “Mosaic Special Meeting”) will be held on [●], 2019, at [●] local time, at the [●]. At the Mosaic Special Meeting, Mosaic stockholders will be asked to approve the Business Combination Proposal, the Charter Proposal, the Fortress Issuance Proposal, the Blackstone Issuance Proposal, the Merger Issuance Proposal, the Incentive Plan Proposal and the Adjournment Proposal (if necessary).

The Mosaic board of directors has fixed the close of business on [●], 2019 (“Mosaic record date”) as the record date for determining the holders of Mosaic common stock entitled to receive notice of and to vote at the Mosaic Special Meeting. As of the Mosaic record date, there were [34,500,000] shares of Mosaic Class A common stock and [8,625,000] shares of Mosaic Class F common stock outstanding and entitled to vote at the Mosaic Special Meeting held by [●] holders of record. Each share of Mosaic common stock entitles the holder to one vote at the Mosaic Special Meeting on each proposal to be considered at the Mosaic Special Meeting. As of the Mosaic record date, the Sponsors and Mosaic’s directors and executive officers and their affiliates owned and were entitled to vote [8,655,000] shares of Mosaic common stock, representing approximately 20% of the shares of Mosaic common stock outstanding on that date. Mosaic currently expects that the Sponsors and its directors and officers will vote their shares in favor of the proposals set forth in this proxy statement/consent solicitation statement/prospectus, and, pursuant to the Sponsor Agreement, the Sponsors and one of Mosaic’s independent directors have agreed to do so. As of the Mosaic record date, Vivint Smart Home did not beneficially hold any shares of Mosaic common stock.

A majority of the voting power of the issued and outstanding Mosaic common stock entitled to vote at the Mosaic Special Meeting must be present, in person or represented by proxy, at the Mosaic Special Meeting to constitute a quorum and in order to conduct business at the Mosaic Special Meeting.

Approval of the Business Combination Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Mosaic common stock, voting together as a single class. Approval of the Charter Proposals requires the affirmative vote of (i) the holders of at least two-thirds of the Founder Shares then outstanding, voting separately as a single class and (ii) the holders of a majority of the outstanding shares of Mosaic common stock, voting together as a single class. Approval of the Fortress Issuance Proposal, the Blackstone Issuance Proposal, the Merger Issuance Proposal, the Incentive Plan Proposal and the Adjournment Proposal (if necessary) each require the majority of the votes cast by the Mosaic stockholders present in person or represented by proxy at the Mosaic Special Meeting.

The merger is conditioned upon the approval of the Business Combination Proposal, the Charter Proposals, the Fortress Issuance Proposal, the Blackstone Issuance Proposal, the Merger Issuance Proposal and the Incentive Plan Proposal, subject to the terms of the merger agreement. The merger is not conditioned on the Adjournment Proposal. If the Business Combination Proposal is not approved, the other proposals (except the Adjournment Proposal) will not be presented to the stockholders for a vote.



 

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Vivint Smart Home’s Directors and Executive Officers Have Financial Interests in the Merger (page [])

Certain of Vivint Smart Home’s executive officers and directors may have interests in the merger that may be different from, or in addition to, the interests of Vivint Smart Home’s stockholders. The members of the Vivint Smart Home board of directors were aware of and considered these interests to the extent that such interests existed at the time, among other matters, when they approved the merger agreement and recommended that Vivint Smart Home stockholders approve the Vivint Merger Proposal and the Vivint Charter Amendment Proposals. See “The Merger—Interests of Vivint Smart Home Directors and Executive Officers in the Merger” beginning on page [●].

Mosaic’s Directors and Executive Officers Have Financial Interests in the Merger (page [])

Certain of Mosaic’s executive officers and directors may have interests in the merger that may be different from, or in addition to, the interests of Mosaic’s stockholders. The members of the Mosaic board of directors were aware of and considered these interests, among other matters, when they approved the merger agreement and recommended that Mosaic stockholders approve the proposals required to effect the merger. See “The Merger—Interests of Mosaic’s Directors and Officers in the Merger” beginning on page [●].

Treatment of Company Group Equity Awards (page [])

Vesting/Distribution Modifications

As of immediately prior to the effective time, 313 Acquisition and Vivint Smart Home will take all actions necessary to modify the vesting schedule for the 2.0x Company Group Equity Awards in accordance with the 2.0x Modification and the distribution schedule of the MOIC LTIP Shares in accordance with the LTIP Modification.

Vested Company Group Class B Units

As of immediately prior to the effective time, each vested Company Group Class B Unit (other than those held by the Holdback Executives) will be redeemed by 313 Acquisition for shares of VSLR common stock and Vivint Smart Home common stock, with an equivalent value as the Company Group Class B Unit so redeemed, in a manner determined by the 313 Board, pursuant to the terms and conditions of the Company Group Stock Plans and the 313 LLCA, assuming a hypothetical liquidation of 313 Acquisition. The number of shares of VSLR common stock and Vivint Smart Home common stock issued with respect to each vested Company Group Class B Unit in such redemptions shall be determined on a pro rata basis using the relative value of the shares of VSLR common stock and Vivint Smart Home common stock held by 313 Acquisition as of the effective time. Holders of shares of Vivint Smart Home common stock received in such redemptions will be entitled to receive the merger consideration in accordance with the merger agreement as described above.

Unvested Company Group Class B Units

As of immediately prior to the effective time, each unvested Company Group Class B Unit (other than those held by the Holdback Executives) will be redeemed by 313 Acquisition for a number of shares of Company Restricted Stock, with an equivalent value as the Company Group Class B Units so redeemed, in a manner determined by the 313 Board in accordance with the terms of the Company Group Stock Plans and the 313 LLCA, assuming a hypothetical liquidation of 313 Acquisition. Such shares of Company Restricted Stock shall be subject to the same vesting terms and conditions as the corresponding Company Group Class B Units, as modified pursuant to the 2.0x Modification. As of the effective time, each such share of Company Restricted Stock will automatically, without any action on the part of the holder thereof, be cancelled and converted into a number of shares of Rollover Restricted Stock equal to the exchange ratio, rounded to the nearest whole share of New Vivint Parent Class A common stock.



 

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Company Group RSUs

As of the effective time, each Company Group RSU, to the extent then outstanding and unsettled, without any action on the part of the holder thereof, will automatically be cancelled and converted into, and thereafter evidence, a Rollover RSU entitling the holder thereof to receive upon settlement a number of shares of New Vivint Parent Class A common stock equal to the product of (x) the number of shares of VGI common stock subject to such Company Group RSU as of immediately prior to the effective time, multiplied by (y) the VGI exchange ratio, rounded down to the nearest whole number of shares of New Vivint Parent Class A common stock.

Company Group SARs

As of the effective time, each Company Group SAR, to the extent then outstanding and unexercised, without any action on the part of the holder thereof, will automatically be cancelled and converted into and thereafter evidence a Rollover SAR with respect to a number of shares of New Vivint Parent Class A common stock equal to the product of (x) the number of shares of VGI common stock subject to such Company Group SAR as of immediately prior to the effective time, multiplied by (y) the VGI exchange ratio, rounded down to the nearest whole number of shares of New Vivint Parent Class A common stock, with a strike price per share of New Vivint Parent Class A common stock equal to the quotient obtained by dividing (i) the per share strike price of such Company Group SAR as of immediately prior to the effective time by (ii) the VGI exchange ratio, rounded up to the nearest whole cent.

Company Group LTIP Plans

As of the effective time, New Vivint Parent will assume the Company Group LTIP Plans, including any liabilities and obligations associated therewith and make adjustments such that awards under the Company Group LTIP Plans will be settled in a number of shares of New Vivint Parent Class A common stock with a fair market value equal to a number of hypothetical Rollover SARs with respect to (a) the number of shares of VGI common stock subject to the hypothetical Company Group SARs underlying such Company Group LTIP Plan as of immediately prior to the effective time, multiplied by (b) the VGI exchange ratio, rounded down to the nearest whole number of shares of New Vivint Parent Class A common stock, with a strike price per share of New Vivint Parent Class A common stock equal to the quotient obtained by dividing (x) the per share strike price of such hypothetical Company Group SARs as of immediately prior to the effective time by (y) the VGI exchange ratio, rounded up to the nearest whole cent as if the consummation of the merger constituted an event similar to a “Public Offering” for purposes of the Company Group LTIP Plans.

Rollover Equity Awards

Any shares of New Vivint Parent Class A common stock issuable under Rollover Equity Awards, other than the awards granted under the Rollover LTIP Plans or held by the Holdback Executives, will be subject to restrictions on transfer until the first anniversary of the closing date of the merger, unless otherwise agreed to by Vivint Smart Home and the applicable holder. Following the effective time, each Rollover Equity Award will be subject to the 2019 Omnibus Plan and to the same terms and conditions, including, without limitation, any vesting conditions (as modified by the 2.0x Modification or the LTIP Modification, as applicable), as had applied to the corresponding Company Group Equity Award as of immediately prior to the effective time, except for such terms rendered inoperative by reason of the merger, subject to such adjustments as reasonably determined by the New Vivint Parent board of directors to be necessary or appropriate to give effect to the conversion or the merger. After the consummation of the merger, holders of outstanding Rollover Equity Awards will have the contingent right to receive earnout shares if, from the consummation of the merger until the fifth anniversary thereof, the volume-weighted average price of New Vivint Parent Class A common stock exceeds certain thresholds as described below.



 

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Treatment of Holdback Executives

As of immediately prior to the effective time, the Company Group Class B Units, whether or not vested, held by the Holdback Executives will be converted into a number of Class A Units in 313 Acquisition (the “Converted Class A Units”), in accordance with the terms and conditions of the Company Group Stock Plans and the 313 LLCA, with an equivalent value and subject to the same vesting terms and conditions as the corresponding Company Group Class B Units (as modified pursuant to the 2.0x Modification). As of immediately following the effective time, the Converted Class A Units held by the Holdback Executives (in addition to any other Class A Units held by the Holdback Executives) will be automatically reclassified into a number of vested and unvested units designed to track 313 Acquisition’s interests in the VSLR common stock, New Vivint Parent Class A common stock, common stock of Vivint Wireless, Inc. (“VW”) and its other property, in each case held as of the effective time, subject to the same vesting terms and conditions as the corresponding Converted Class A Units, as applicable (the “tracking units”). The number of each class of tracking unit to be issued to the Holdback Executives will be determined on a pro rata basis using the relative value of the shares of VSLR common stock, New Vivint Parent Class A common stock, VW common stock and other property held by 313 Acquisition as of immediately following the effective time. On the first anniversary of the closing date of the merger, 10% of any then-vested tracking units held by the Holdback Executives (other than other property tracking units), less any amounts previously sold by, or distributed to, Holdback Executives in connection sales of shares of VSLR common stock, New Vivint Parent Class A common stock and VW common stock by 313 Acquisition, will be redeemed by 313 Acquisition for the shares of VSLR common stock, New Vivint Parent Class A common stock and VW common stock underlying such tracking units in accordance with the terms and conditions of the 313 LLCA. Following the second anniversary of the closing date of the merger, upon written request to 313 Acquisition by a Holdback Executive, 313 Acquisition will promptly redeem all (or any portion) of the then-vested tracking units (other than other property tracking units) held by the Holdback Executives for the shares of VSLR common stock, New Vivint Parent Class A common stock and VW common stock underlying such tracking units in accordance with the terms and conditions of the 313 LLCA. 313 Acquisition will have no obligation to redeem any other property tracking units at any time and may redeem such tracking units, in its sole discretion, in accordance with the terms and conditions of the 313 LLCA. No unvested tracking units held by the Holdback Executives will be redeemed.

Vivint Smart Home Common Stock. At the effective time of the merger, each share of Vivint Smart Home common stock issued and outstanding immediately prior to the effective time of the merger (other than shares owned by Vivint Smart Home as treasury stock or dissenting shares) will convert into the right to receive 209.6849221312 shares of Mosaic Class A common stock (such number of shares, the “exchange ratio”), except for any fractional shares of Mosaic Class A common stock which would result (which will instead be paid out in cash in accordance with the merger agreement).

Regulatory Approvals Required for the Merger (page [])

Completion of the merger is subject to approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). Mosaic has agreed to use its reasonable best efforts to obtain all required regulatory approvals and Vivint Smart Home has agreed to request early termination of any waiting period under the HSR Act. Mosaic is in the process of filing notices and applications to obtain the necessary regulatory approvals. Although we currently believe we should be able to obtain all required regulatory approvals in a timely manner, we cannot be certain when or if we will obtain them or, if obtained, whether they will contain terms, conditions or restrictions not currently contemplated. The regulatory approvals to which completion of the merger are subject are described in more detail in the section of this proxy statement/consent solicitation statement/prospectus entitled “Regulatory Approvals Required for the Merger” beginning on page [●].



 

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Material United States Federal Income Tax Consequences of the Merger (page [])

Vivint Smart Home and Mosaic intend the merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code and/or a transaction governed by Section 351 of the Code for U.S. federal income tax purposes. If the transactions so qualify, then a U.S. holder of Vivint Smart Home common stock (including the shares of Vivint Smart Home common stock resulting from the conversion of Vivint Smart Home preferred stock described below) generally will not recognize any gain or loss as a result of the transactions.

The tax consequences of the transactions to each Vivint Smart Home stockholder may depend on such holder’s particular facts and circumstances. Vivint Smart Home stockholders are urged to consult their tax advisors to understand fully the consequences to them of the transactions in their specific circumstances. For more information, see “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page [●].

Appraisal Rights (page [])

Under Section 262 of the DGCL, holders of shares of Vivint Smart Home common stock who do not consent to the adoption of the merger agreement and who otherwise follow the procedures set forth in Section 262 of the DGCL will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid on the amount determined to be “fair value”. Vivint Smart Home stockholders considering seeking appraisal should be aware that the “fair value” of their shares as so determined could be more than, the same as or less than the consideration they would receive pursuant to the merger agreement if they did not seek appraisal of their shares.

Any holder of shares of Vivint Smart Home common stock wishing to exercise appraisal rights must, within 20 days after the date of mailing of the notice of their right to demand appraisal, make a written demand for the appraisal of the stockholder’s shares to Vivint Smart Home (as the surviving corporation in the merger), and that stockholder must not submit a written consent approving the adoption of the merger agreement. Failure to follow the procedures specified under Section 262 of the DGCL may result in the loss of appraisal rights. See “Appraisal Rights” beginning on page [●] and Section 262 of the DGCL attached to this proxy statement/consent solicitation statement/prospectus as Annex C.

Conditions to the Merger (page [])

Conditions to Each Party’s Obligations

The respective obligations of each of Vivint Smart Home and Mosaic to complete the merger are subject to the satisfaction of the following conditions:

 

   

the applicable waiting period(s) under the HSR Act in respect of the transactions contemplated by the merger agreement shall have expired or been terminated;

 

   

there shall not have been enacted or promulgated any governmental order, statute, rule or regulation enjoining or prohibiting the consummation of the transactions contemplated by the merger agreement;

 

   

the redemption offer in relation to the public shares shall have been completed in accordance with the terms of the merger agreement and this proxy statement/consent solicitation statement/prospectus;

 

   

Mosaic shall have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) remaining after the closing;

 

   

the approval by Mosaic stockholders of the Business Combination Proposal, the Charter Proposals, the Fortress Issuance Proposal, the Blackstone Issuance Proposal and the Incentive Plan Proposal shall have been obtained;



 

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the Mosaic Class A common stock to be issued in connection with the merger (including the Mosaic Class A common stock to be issued pursuant to payment of the earnout consideration) shall have been approved for listing on the NYSE, subject only to official notice of issuance thereof; and

 

   

Vivint Smart Home shall have solicited and obtained consent for the adoption of the merger agreement by holders of a majority of the voting power of the outstanding shares of Vivint Smart Home common stock and preferred stock (the “company approval”).

Conditions to Obligations of Mosaic

The obligation of Mosaic to complete the merger is also subject to the satisfaction, or waiver by Mosaic, of the following conditions:

 

   

the accuracy of the representations and warranties of Vivint Smart Home as of the date of the merger agreement and as of the closing date of the merger, other than, in most cases, those failures to be true and correct that would not reasonably be likely to have a material adverse effect on Vivint Smart Home;

 

   

each of the covenants of Vivint Smart Home to be performed or complied with as of or prior to the closing shall have been performed or complied with in all material respects;

 

   

the receipt of a certificate signed by an officer of Vivint Smart Home certifying that the two preceding conditions have been satisfied; and

 

   

the transactions contemplated by the Blackstone Subscription Agreements have been consummated concurrently with the closing.

Conditions to Obligations of Vivint Smart Home

The obligation of Vivint Smart Home to complete the merger is also subject to the satisfaction or waiver by Vivint Smart Home of the following conditions:

 

   

the accuracy of the representations and warranties of Mosaic as of the date of the merger agreement and as of the closing date of the merger;

 

   

each of the covenants of Mosaic to be performed or complied with as of or prior to the closing shall have been performed or complied with in all material respects;

 

   

the receipt of a certificate signed by an executive officer of Mosaic certifying that the two preceding conditions have been satisfied;

 

   

the existing charter of Mosaic shall be amended and restated in the form attached to the merger agreement as Exhibit A;

 

   

the transactions contemplated by the Fortress Subscription Agreement have been consummated concurrently with the closing;

 

   

the transactions contemplated by the forward purchase agreements (as defined below) have been consummated concurrently with the closing;

 

   

the transactions contemplated by the Sponsor Agreement (as defined below) between Mosaic and the Sponsors have been consummated concurrently with or prior to the closing; and

 

   

the public stockholders shall have requested redemptions for fewer than 10,350,000 shares in the aggregate of Mosaic Class A common stock following the date of the merger agreement.



 

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No Solicitation (page [])

Under the terms of the merger agreement, Vivint Smart Home has agreed not to (i) initiate, solicit or knowingly encourage or knowingly facilitate any inquiries or requests for information with respect to, or the making of, any inquiry regarding, or any proposal or offer that constitutes, or could reasonably be expected to result in or lead to, any acquisition proposal, (ii) engage in, continue or otherwise participate in any negotiations or discussions concerning, or provide access to its properties, books and records or any confidential information or data to, any person or entity relating to any proposal, offer, inquiry or request for information that constitutes, or could reasonably be expected to result in or lead to, any acquisition proposal, (iii) approve, endorse or recommend, or propose publicly to approve, endorse or recommend, any acquisition proposal, (iv) execute or enter into any letter of intent, memorandum of understanding, agreement in principle, confidentiality agreement (other than an acceptable confidentiality agreement executed in accordance with the no solicitation provisions), merger agreement, acquisition agreement, exchange agreement, joint venture agreement, partnership agreement, option agreement or other similar agreement for or relating to any acquisition proposal or (v) resolve or agree to do any of the foregoing.

Vivint Smart Home also agreed that immediately following the execution of the merger agreement it shall use its reasonable best efforts to cause its representatives to cease any solicitations, discussions or negotiations with any person or entity conducted prior to the merger agreement in connection with an acquisition proposal or any inquiry or request for information that could reasonably be expected to lead to, or result in, an acquisition proposal. Vivint Smart Home also agreed that within 3 business days of the execution of the merger agreement, Vivint Smart Home shall request each person and entity that has prior to the date of the merger agreement executed a confidentiality agreement in connection with its consideration of acquiring Vivint Smart Home (and with whom Vivint Smart Home has had contact in 12 months prior to the date of the merger agreement regarding the acquisition of Vivint Smart Home) to return or destroy all confidential information furnished to such person or entity prior to the date of the merger agreement and terminate access to any physical or electronic data room maintained by or on behalf of Vivint Smart Home.

Vivint Smart Home has agreed to promptly (and in any event within one business day) notify, in writing, Mosaic of the receipt of any inquiry, proposal, offer or request for information received after the date of the merger agreement that constitutes, or could reasonably be expected to result in or lead to, any acquisition. Vivint Smart Home shall promptly (and in any event within one business day) keep Mosaic reasonably informed of any material developments with respect to any such inquiry, proposal, offer or request for information or acquisition.

Notwithstanding the restrictions set forth above, the merger agreement provides that, under specified circumstances, in response to a bona fide written acquisition proposal that did not result from a material breach of the no solicitation provisions that the Vivint Smart Home board of directors determines in good faith (after consultation with its outside financial advisors and outside legal counsel), to be a superior proposal and failure to take such action would reasonably be expected to be inconsistent with its fiduciary duties under applicable law, Vivint Smart Home may make a company change in recommendation or terminate the merger agreement to enter a definitive agreement with respect to such superior proposal, subject to complying with Mosaic’s rights under the merger agreement, including the payment of a termination payment by Vivint Smart Home to Mosaic.

Additionally, notwithstanding the restrictions set forth above, if, at any time prior to obtaining the company approval, the Vivint Smart Home board determines in good faith, in response to an intervening event, after consultation with its outside legal counsel, that the failure to make a company change in recommendation would be inconsistent with its fiduciary duties under applicable law, the Vivint Smart Home board of directors may, prior to obtaining the company approval, make a company change in recommendation, subject to complying with Mosaic’s rights under the merger agreement, including the payment of a termination payment by Vivint Smart Home to Mosaic.



 

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Mosaic has agreed not to take, to the extent not inconsistent with the fiduciary duties of the Mosaic board of directors, nor permit any of its affiliates or representatives to take, whether directly or indirectly, any action to solicit, initiate, continue or engage in discussions or negotiations with, enter into any agreement with or encourage, respond, provide information to or commence due diligence with respect to, any person or entity (other than Vivint Smart Home, its stockholders and/or any of their affiliates or representatives), concerning, relating to or which is intended or is reasonably likely to give rise to or result in, any offer, inquiry, proposal or indication of interest, written or oral relating to any business combination other than with Vivint Smart Home, its stockholders and their respective affiliates and representatives. Mosaic has agreed to, and cause its affiliates and representatives to, immediately cease any and all existing discussions or negotiations with any person or entity conducted prior to the date of the merger agreement with respect to, or which is reasonably likely to give rise to or result in, a proposal for a business combination.

Termination; Company Termination Fee (page [])

The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after adoption of the merger agreement by Vivint Smart Home’s stockholders or approval of the proposals required to effect the merger by Mosaic’s stockholders.

Mutual termination rights.

The merger agreement may be terminated and the transactions contemplated thereby abandoned:

 

   

by written consent of Vivint Smart Home and Mosaic; or

 

   

by written notice from either Vivint Smart Home or Mosaic to the other if the approval of Mosaic stockholders to the Business Combination Proposal, the Charter Proposals, the Fortress Issuance Proposal, the Blackstone Issuance Proposal and the Incentive Plan Proposal are not obtained at the Mosaic Special Meeting (subject to any adjournment or recess of the Mosaic Special Meeting).

Vivint Smart Home termination rights.

The merger agreement may be terminated and the transactions contemplated thereby abandoned:

 

   

prior to the closing, by written notice to Mosaic from Vivint Smart Home if (i) there is any breach of any representation, warranty, covenant or agreement on the part of Mosaic set forth in the merger agreement, such that the conditions described in the first two bullet points under the heading “The Merger AgreementConditions to the Merger; Conditions to Obligations of Vivint Smart Home” would not be satisfied at the closing (a “terminating Mosaic breach”), except that, if any such terminating Mosaic breach is curable by Mosaic through the exercise of its commercially reasonable efforts, then, for a period of up to 30 days (or any shorter period of the time that remains between the date Vivint Smart Home provides written notice of such violation or breach and the termination date) after receipt by Mosaic of notice from Vivint Smart Home of such breach, but only as long as Mosaic continues to exercise such commercially reasonable efforts to cure such terminating Mosaic breach (the “Mosaic cure period”), such termination shall not be effective, and such termination shall become effective only if the terminating Mosaic breach is not cured within the Mosaic cure period, (ii) the closing has not occurred on or before the termination date (as defined below), or (iii) the consummation of the merger is permanently enjoined or prohibited by the terms of a final, non-appealable governmental order or a statute, rule or regulation; provided, that the right to terminate the merger agreement under this paragraph shall not be available if Vivint Smart Home’s failure to fulfill any obligation under the merger agreement has been the primary cause of, or primarily resulted in, the failure of the closing to occur on or before such date; or



 

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by written notice from Vivint Smart Home prior to obtaining the company approval, in order to enter into a definitive agreement with respect to a superior proposal, subject to the terms and conditions described under the heading “The Merger AgreementNo Solicitation”.

Mosaic termination rights. The merger agreement may be terminated and the transactions contemplated thereby abandoned:

 

   

prior to the closing, by written notice to Vivint Smart Home from Mosaic if (i) there is any breach of any representation, warranty, covenant or agreement on the part of Vivint Smart Home set forth in the merger agreement or 313 Acquisition commits certain breaches of the Support and Services Agreement (as defined below), in each case, such that the conditions described in the first two bullet points under the heading “The Merger AgreementConditions to the Merger; Conditions to Obligations of Mosaic” would not be satisfied at the closing (a “terminating company breach”), except that, if such terminating company breach is curable by Vivint Smart Home through the exercise of its commercially reasonable efforts, then, for a period of up to 30 days (or any shorter period of the time that remains between the date Mosaic provides written notice of such violation or breach and the termination date) after receipt by Vivint Smart Home of notice from Mosaic of such breach, but only as long as Vivint Smart Home continues to use its commercially reasonable efforts to cure such terminating company breach (the “company cure period”), such termination shall not be effective, and such termination shall become effective only if the terminating company breach is not cured within the company cure period, (ii) the closing has not occurred on or before the termination date, or (iii) the consummation of the merger is permanently enjoined or prohibited by the terms of a final, non-appealable governmental order or a statute, rule or regulation; provided, that the right to terminate the merger agreement under this paragraph shall not be available if Mosaic’s failure to fulfill any obligation under the merger agreement has been the primary cause of, or primarily resulted in, the failure of the closing to occur on or before such date; or

 

   

by written notice from Mosaic if the Vivint Smart Home board of directors (A) shall have made, prior to obtaining the company approval, a company change in recommendation or (B) shall have failed to include the company board recommendation in the consent solicitation statement distributed to stockholders.

Vivint Smart Home must pay Mosaic a termination fee of $81,060,000 if the merger agreement is terminated under either of the following circumstances:

 

   

prior to obtaining the company approval, Vivint Smart Home terminates the merger agreement in order to enter into a definitive agreement with respect to a superior proposal, subject to the terms and conditions described under the heading “The Merger AgreementNo Solicitation”; or

 

   

Mosaic terminates the merger agreement as a result of the Vivint Smart Home board of directors (A) prior to obtaining the company approval, a company change in recommendation or (B) failure to include the company board recommendation in the consent solicitation statement distributed to stockholders.

See “The Merger Agreement—Termination; Company Termination Fee” beginning on page [●].

Mosaic Letter Agreement (page [])

Pursuant to the terms of a letter agreement (the “Mosaic letter agreement”) entered into with Mosaic, the Sponsors and Mosaic’s officers and directors have agreed to vote any Founder Shares held by them and any public shares purchased during or after Mosaic’s IPO in favor of an initial business combination. The Sponsors, Mosaic’s officers and directors and their permitted transferees own at least 20% of its outstanding common stock



 

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entitled to vote thereon. The quorum and voting thresholds at the Mosaic Special Meeting and the Mosaic letter agreement may make it more likely that Mosaic will consummate the merger. In addition, pursuant to the terms of the Mosaic letter agreement, the Sponsors and Mosaic’s officers and directors have agreed to waive their redemption rights with respect to any Founder Shares and any public shares held by them in connection with the completion of a business combination.

See “Other Agreements—Mosaic Letter Agreement”.

Sponsor Agreement (page [])

Pursuant to the terms of a sponsor agreement (the “Sponsor Agreement”) entered into with Mosaic and Vivint Smart Home, the Sponsors and one of Mosaic’s independent directors have also agreed to vote any Founder Shares held by them and any public shares purchased during or after Mosaic’s IPO in favor of all of the proposals set forth in this proxy statement/consent solicitation statement/prospectus. The Sponsors, such director and their permitted transferees own at least 20% of Mosaic’s outstanding common stock entitled to vote thereon. The quorum and voting thresholds at the Mosaic Special Meeting and the Sponsor Agreement may make it more likely that Mosaic will consummate the merger. In addition, pursuant to the terms of the Sponsor Agreement, the Sponsors and such director have agreed to waive their redemption rights with respect to any Founder Shares and any public shares held by them in connection with the completion of a business combination.

See “Other Agreements—Sponsor Agreement”.

Other Agreements (page [])

Subscription Agreements

In connection with the execution of the merger agreement, each of an investment fund managed by affiliates of Fortress Investment Group LLC (the “Fortress Subscribers”) and certain investment funds affiliated with The Blackstone Group Inc. (the “Blackstone Subscribers”) entered into subscription agreements (the “Fortress Subscription Agreement” and the “Blackstone Subscription Agreements”, respectively) pursuant to which each of the Fortress Subscribers and the Blackstone Subscribers have respectively subscribed for 12,500,000 and 10,000,000 newly-issued shares of Mosaic Class A common stock to be issued at the closing of the merger. The obligations to consummate the subscriptions contemplated by the Fortress Subscription Agreement and the Blackstone Subscription Agreements are conditioned upon, among other things, customary closing conditions and the consummation of the transactions contemplated by the merger agreement.

Stockholders Agreement

In connection with the execution of the merger agreement, New Vivint entered into a Stockholders Agreement with the Stockholder Parties, which provides for certain rights, including director appointment and board observer rights, for certain stockholders. The Stockholders Agreement will become effective upon the consummation of the merger. See “Other Agreements—Stockholders Agreement”.

Registration Rights Agreement

In connection with the execution of the merger agreement, New Vivint entered into a registration rights agreement with the Investors and certain other stockholders of New Vivint, which provides for customary “demand” and “piggyback” registration rights for certain stockholders. The registration rights agreement will become effective upon the consummation of the merger. See “Other Agreements—Registration Rights Agreement”.



 

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Amended and Restated Support and Services Agreement

In connection with the execution of the merger agreement, Mosaic, BMP and certain subsidiaries of Vivint Smart Home who were parties to the Support and Services Agreement entered into in connection with the 2012 Blackstone Acquisition entered into an amended and restated support and services agreement, which provides that BMP shall make available to New Vivint certain support services in exchange for a fee of 1% of New Vivint’s Covenant Adjusted EBITDA (which measure is defined as “Consolidated EBITDA” in the credit agreements governing the revolving credit facility and 2024 Term Loan B and “EBITDA” in the debt agreements governing the existing notes) until the Post-Merger Exit Date. The amended and restated support and services agreement will become effective upon the consummation of the merger. See “Other Agreements—Support and Services Agreement—Amended and Restated Support and Services Agreement”.

Listing (page [])

Mosaic Class A common stock is listed on the NYSE under the symbol “MOSC”. Following the merger, New Vivint Parent Class A common stock (including common stock issuable in the merger) will be listed on the NYSE under the symbol “VVNT”.

Comparison of Stockholders’ Rights (page [])

Following the merger, the rights of Vivint Smart Home stockholders who become New Vivint Parent stockholders in the merger will no longer be governed by Vivint Smart Home’s amended and restated certificate of incorporation (“Vivint Smart Home’s charter”) and Vivint Smart Home’s amended and restated bylaws (“Vivint Smart Home’s bylaws”) and instead will be governed by New Vivint Parent’s amended and restated certificate of incorporation (“New Vivint Parent’s charter”) and New Vivint Parent’s amended and restated bylaws (“New Vivint Parent’s bylaws”). See “Comparison of Stockholders’ Rights” beginning on page [●].

Risk Factors (page [])

You should consider all the information contained in this proxy statement/consent solicitation statement/prospectus in deciding how to vote for the proposals presented in the proxy statement/consent solicitation statement/prospectus. In particular, you should consider the factors described under “Risk Factors” beginning on page [●].

Information about Mosaic (page [])

Mosaic is a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Mosaic’s Class A common stock, units and warrants are currently listed on the NYSE under the symbols “MOSC”, “MOSC.U” and “MOSC WC”, respectively. The mailing address of Mosaic’s principal executive office is 375 Park Avenue, New York, NY 10152 and the telephone number of Mosaic’s principal executive office is (212) 763-0153.

Information about Vivint Smart Home (page [])

Vivint Smart Home is a smart home technology company. Vivint Smart Home’s mission is to redefine the home experience through intelligently designed cloud-enabled solutions delivered to every home by people who care. Vivint Smart Home’s brand name, Vivint, represents “to live intelligently”, and Vivint Smart Home’s solutions help Vivint Smart Home’s subscribers do just that.



 

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Creating a true smart home experience requires an end-to-end platform designed to drive broad consumer adoption. Vivint Smart Home’s smart home platform is comprised of the following five pillars: (1) Vivint Smart Home’s Smart Home Operating System, (2) Vivint Smart Home’s AI-driven smart home automation and assistance software, Vivint Assist, (3) Vivint Smart Home’s portfolio of proprietary, internally developed smart devices, (4) Vivint Smart Home’s curated yet extensible partner-neutral ecosystem, and (5) Vivint Smart Home’s people delivering tech-enabled premium services, including consultative selling, professional installation, and support.

Vivint Smart Home’s leading smart home platform had over 1.5 million subscribers and managed over 20 million in-home devices, processing over 1.5 billion home activity events each day, as of June 30, 2019. Using Vivint Smart Home’s solution, subscribers are able to interact with all aspects of their home with their voice or any mobile device, anytime, anywhere. They can engage with people at their front door; view live and recorded video inside and outside their home; control thermostats, locks, lights, and garage doors; and proactively manage the comings and goings of family, friends, and strangers. Vivint Smart Home’s subscribers engage with Vivint Smart Home’s smart home apps approximately seven times per day on average.

Vivint Smart Home was incorporated under the laws of the State of Delaware on April 5, 2006. Vivint Smart Home’s principal executive offices are located at 4931 North 300 West, Provo, Utah 84604, and Vivint Smart Home’s telephone number is (801) 377-9111.

Summary of the Transactions

Set forth below is a summary of transactions that are contemplated to occur in connection with following the merger.

Conversion of Equity Interests

Immediately prior to the effective time, (i) each share of Vivint Smart Home preferred stock issued and outstanding (other than shares owned by Vivint Smart Home as treasury stock), will be converted into one share of Vivint Smart Home common stock in accordance with the certificate of designations of the Vivint Smart Home preferred stock and (ii) equity awards outstanding at 313 Acquisition (the majority holder of outstanding of Vivint Smart Home common stock) and Vivint Group, Inc., a subsidiary of Vivint Smart Home, will be converted, cancelled or adjusted as described in “The Merger—Treatment of Company Group Equity Awards”.

At the effective time, each share of Vivint Smart Home common stock issued and outstanding immediately prior to the effective time (other than shares owned by Vivint Smart Home as treasury stock or dissenting shares), including the Vivint Smart Home preferred stock converted above, will convert into the right to receive 209.6849221312 shares of Mosaic Class A common stock. The right to receive shares of Vivint Smart Home common stock for any outstanding equity awards will be converted into the right to receive Mosaic Class A common stock in accordance with the terms of the merger agreement. For more information see “—Merger Consideration”.

Upon the closing of the merger, all Founder Shares will automatically convert, in accordance with Mosaic’s existing charter, to Mosaic Class A common stock, and 50% of such shares will be subject to vesting provisions set forth in the Sponsor Agreement, as described in “Other Agreements—Sponsor Agreement”.

We refer these transactions, together with the merger and the other transactions contemplated by the merger agreement as the “merger transactions”.



 

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Blackstone Investment

Immediately prior to the closing of the merger, Blackstone (such purchasing entities, the “Blackstone Subscribers”) will purchase 10,000,000 shares of Mosaic Class A common stock in a private placement at a price of $10.00 per share (the “Blackstone Investment”). The Blackstone Investment is in addition to the existing investment held by Blackstone in Vivint Smart Home common stock, which will be converted at the effective time into the right to receive Mosaic Class A common stock. For more information, see “Mosaic Proposals—Proposal No. 14—The Blackstone Issuance Proposal”.

Fortress Investment

Immediately prior to the closing of the merger, certain investment funds managed by affiliates of Fortress Investment Group LLC (such purchasing entities, the “Fortress Subscriber”) will purchase 12,500,000 shares of Mosaic Class A common stock in a private placement at a price of $10.00 per share (the “Fortress Investment”). The Fortress Investment is in addition to the existing investments in Mosaic held by affiliates of Fortress Investment Group LLC (“Fortress”). For more information, see “Mosaic Proposals—Proposal No. 13—The Fortress Issuance Proposal”.

Forward Purchaser Investment

Concurrently with the closing of the merger, certain investors (including an affiliate of Fortress) will purchase approximately 15,789,474 shares of Class A common stock in a private placement at a price of $9.50 per share (the “Forward Purchaser Investment” and together with the Blackstone Investment and the Fortress Investment, the “Private Placements”) pursuant to the terms of the forward purchase agreements Mosaic entered into in connection with Mosaic’s initial public offering. For more information, see “Mosaic’s Management’s Discussion and Analysis of Financial Condition and Results of Operations—Related Party Transactions—Forward Purchase Agreements”.

Debt Repayment

Following the merger, New Vivint intends to use the net cash proceeds from Mosaic’s initial public offering (less any amounts redeemed by public shareholders) and the Private Placements to (i) redeem or repurchase all of the 2020 notes issued by APX, an indirect subsidiary of Vivint Smart Home, (ii) redeem, repurchase or repay other existing indebtedness of Vivint Smart Home, which may include any borrowings outstanding under the revolving credit facility, and (iii) pay fees and expenses relating to the transactions and the foregoing clauses (i) and (ii). For more information, see “Vivint Smart Home’s Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”.

We refer to the debt repayment, together with the merger transactions and the Private Placements, as the “transactions”.



 

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Organizational Structure

The following diagram illustrates, in a simplified form, the ownership structure of Vivint Smart Home and Mosaic as of the date of this proxy statement/consent solicitation statement/prospectus.

 

 

LOGO

 

(1)

Minority holders of 313 Acquisition include certain funds affiliated with Summit Partners, L.P., Alex Dunn, the President of Vivint Smart Home, Todd R. Peterson, the CEO of Vivint Smart Home, and certain employee equity award holders.

(2)

Minority holders of Vivint Smart Home, Inc. include certain current and former employees of Vivint Smart Home and holders of Vivint Smart Home preferred stock, including an affiliate of Solamere Capital, LLC.

(3)

Only certain subsidiaries illustrated.



 

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The following diagram illustrates, in a simplified form, the ownership structure of New Vivint immediately following consummation of the merger.

 

LOGO

 

(1)

Only certain subsidiaries illustrated

Ownership of New Vivint Parent

As of the date of this proxy statement/consent solicitation statement/prospectus, there are [●] shares of Mosaic common stock issued and outstanding, including [●] shares of Mosaic Class F common stock, which will be converted into one share of Class A common stock. As of the date of this proxy statement/consent solicitation statement/prospectus, there are an aggregate of [●] warrants outstanding. Each whole warrant entitles the holder thereof to purchase one share of Class A common stock. Therefore, as of the date of this proxy statement/consent solicitation statement/prospectus (without giving effect to the merger and assuming no redemptions), assuming that each outstanding warrant is exercised and one Class A ordinary share is issued as a result of such exercise, the Mosaic fully-diluted stock capital would be [●] common stock.

The following table illustrates varying ownership levels in New Vivint Parent immediately following the consummation of the transactions assuming the levels of redemptions by the public shareholders indicated:

 

     Share Ownership in New Vivint (1)  
     No redemptions      Maximum redemption condition (2)  
     Number of
Shares
     Percentage of
Outstanding
Shares
       Number of  
Shares
     Percentage of
Outstanding
Shares
 

Former equityholders of Vivint Smart Home

                                                     

Mosaic’s public shareholders

           

Forward Purchasers

           

Fortress Subscriber

           

Blackstone Subscribers

           
  

 

 

       

 

 

    

Total

           
  

 

 

       

 

 

    


 

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(1)

These figures exclude the earnout shares and the 5,933,334 shares issuable pursuant to Mosaic’s outstanding warrants.

(2)

Assumes that 10,349,999 public shares (the maximum number of public shares that could be redeemed in connection with the merger in order to satisfy the Maximum Redemption Condition) are redeemed in connection with the merger.



 

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Summary Historical Financial Data For Mosaic

The following table summarizes financial results achieved by Mosaic for the periods and at the dates indicated and should be read in conjunction with Mosaic’s consolidated financial statements and the notes to the consolidated financial statements contained in reports that Mosaic has previously filed with the SEC. Historical financial information for Mosaic can be found in its Annual Report on Form 10-K for the year ended December 31, 2018. You should not assume the results of operations for past periods indicate results for any future period.

 

     For the
period from
July 26, 2017
(inception)
through
December 31,

2017
   

 

For the
year ended
December 31,

2018

   

 

For the six months
ended June 30,

 
  2018     2019  

Statements of Operations Data:

        

Total interest income

   $ —       $ 6,187,823     $ 2,608,916     $ 4,166,596  

Total expenses

     (216,687     (921,021     (361,948     (1,312,708
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (216,687   $ 5,266,802     $ 2,246,968     $ 2,853,888  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding of Class A common stock

     34,500,000       34,500,000       34,500,000       34,500,000  

Basic and diluted net income per share, Class A

   $ 0.00       0.16       0.07     $ 0.08  

Weighted average shares outstanding of Class F common stock

     8,625,000       8,625,000       8,625,000       8,625,000  

Basic and diluted net (loss) income per share, Class F

     (0.03     (0.01     0.00       0.00  

 

     December 31,     June 30,  
     2017     2018     2018     2019  

Balance Sheets Data (end of period):

        

Cash

   $ 928,388     $ 892,518     $ 895,671     $ 927,290  

Cash and investments held in Trust Account

     345,000,000       350,437,823       347,233,916       353,324,452  

Total assets

     346,221,811       351,443,016       348,369,377       354,356,987  

Class A common stock, $0.0001 par value; 33,712,570 and 33,427,182 shares subject to possible redemption at June 30, 2019 and December 31, 2018, respectively

     329,005,010       334,271,820       331,251,980       337,125,700  

Total liabilities

     12,216,791       12,171,194       12,117,389       12,231,277  

Total stockholders’ equity

     5,000,010       5,000,002       5,000,008       5,000,010  

Cash Flow Data:

        

Net cash used in operating activities

     (368,319     (785,870     (407,717     (1,245,195

Net cash (used in) provided by investing activities

     (345,000,000     750,000       375,000       1,279,967  

Net cash provided by financing activities

     346,296,707       —         —         —    


 

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Summary Historical Financial and other Data For Vivint Smart Home

The summary historical consolidated financial information and other data for Vivint Smart Home presented below for the years ended December 31, 2016, 2017 and 2018, and the summary consolidated balance sheet and other data as of December 31, 2017 and 2018 have been derived from Vivint Smart Home’s audited consolidated financial statements included in this proxy statement/consent solicitation statement/prospectus. The summary consolidated balance sheet and other data as of December 31, 2016 have been derived from Vivint Smart Home’s consolidated financial statements not included in this proxy statement/consent solicitation statement/prospectus.

The summary historical consolidated financial information presented below as of June 30, 2019 and for each of the six month periods ended June 30, 2018 and June 30, 2019 have been derived from Vivint Smart Home’s unaudited condensed consolidated financial statements included in this proxy statement/consent solicitation statement/prospectus. The unaudited financial data presented have been prepared on a basis consistent with Vivint Smart Home’s audited consolidated financial statements. In the opinion of Vivint Smart Home’s management, such unaudited financial data reflect all adjustments, consisting only of normal and recurring adjustments necessary for a fair presentation of the results for those periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or any future period.

The summary information in the following tables should be read in conjunction with “Selected Historical Consolidated Financial of Vivint Smart Home”, “Vivint Smart Home’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Vivint Smart Home’s consolidated financial statements and related notes thereto included elsewhere in this proxy statement/consent solicitation statement/prospectus.

 

     Year Ended December 31,     Six Months Ended
June 30,
 
     2016     2017     2018     2018     2019  
     (in thousands)  

Statement of Operations Data:

          

Total revenue

   $ 757,907     $ 881,983     $ 1,050,441     $ 501,564     $ 557,302  

Total costs and expenses

     829,009       1,037,476       1,297,221       656,948       636,109  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (71,102     (155,493     (246,780     (155,384     (78,807

Other expenses:

          

Interest expense

     (197,965     (225,772     (245,214     (119,117     (129,565

Interest income

     432       130       425       31       23  

Gain on sale of Spectrum

     —         —         50,389       50,389       —    

Other (expense) income

     (7,255     (27,986     (33,066     (9,880     2,444  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations before income taxes

     (275,890     (409,121     (474,246     (233,961     (205,905

Income tax expense (benefit)

     67       1,078       (1,611     (1,339     (853
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (275,957   $ (410,199   $ (472,635   $ (232,622   $ (205,052
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


 

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     As of December 31,     As of June 30,
2019
 
     2016     2017     2018     Actual  
     (in thousands)  

Balance Sheet Data:

        

Cash and cash equivalents

   $ 43,520     $ 3,872     $ 12,773     $ 3,133  

Working capital deficit

     (80,170     (161,255     (340,478     (358,955

Adjusted working capital deficit (excluding cash and capital/finance lease obligation)

     (113,893     (154,513     (345,508     (355,104

Total assets

     2,547,662       2,872,206       2,524,491       2,712,975  

Total debt

     2,486,700       2,820,297       3,037,095       3,164,749  

Total stockholders’ deficit

     (245,182     (652,375     (1,397,041     (1,599,103

 

     Year Ended December 31,     Six Months Ended
June 30,
 
     2016     2017     2018     2018     2019  
     (in thousands)  

Statement of Cash Flows Data:

          

Net cash used in operating activities

   $ (365,706   $ (309,332   $ (220,499   $ (130,989   $ (130,990

Net cash (used in) provided by investing activities

     (15,147     (21,661     32,922       40,703       128  

Net cash provided by financing activities

     401,171       291,213       196,407       90,996       121,210  

 

     Year Ended December 31,      As of June 30,  
     2016      2017      2018      2018      2019  

Other Data: (1)

              

Total subscribers, (in thousands)

     1,146.7        1,292.7        1,444.8        1,393.6        1507.7  

Total MSR (in thousands)

   $ 65,633      $ 70,992      $ 76,103      $ 73,326      $ 79,345  

AMSRU

   $ 57.23      $ 54.92      $ 52.67      $ 52.61      $ 52.63  

Net subscriber acquisition costs per new subscriber

   $ 1,996      $ 1,594      $ 1,189      $ 1,375      $ 1,064  

 

     Year Ended December 31,     Six Months Ended
June 30,
 
     2016     2017     2018      2018     2018     2019  
                 as adjusted (2)      (as reported)              

Total MR (in thousands)

   $ 63,159     $ 73,499     $ 83,879      $ 87,537     $ 83,594     $ 92,884  

AMRU

   $ 58.04     $ 60.21     $ 60.47      $ 63.11     $ 62.73     $ 63.56  

Net service cost per subscriber

   $ 14.72     $ 15.69       N/A      $ 16.27     $ 16.87     $ 13.48  

Net service margin

     74     72     N/A        69     69     75

 

(1)

All subscriber data presented excludes wireless internet business and pilot programs.

(2)

As adjusted excludes the impact of adopting Topic 606 associated with total revenues recognized. See Note 3 to Vivint Smart Home’s consolidated financial statements included elsewhere in this proxy statement/consent solicitation statement/prospectus for additional information related to the impact of adopting this standard and a discussion of Vivint Smart Home’s updated policies related to revenue recognition and accounting for costs to obtain and fulfill a subscriber contract.



 

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Summary Unaudited Pro Forma

Condensed Combined Financial Information

The following summary unaudited pro forma condensed combined financial data (the “summary pro forma data”) gives effect to the merger and the other transactions contemplated by the merger agreement described in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information”. The merger will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with U.S. generally accepted accounting principles (“GAAP”). Under this method of accounting, Mosaic will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the merger will be treated as the equivalent of Vivint Smart Home issuing stock for the net assets of Mosaic, accompanied by a recapitalization. The net assets of Mosaic will be stated at historical cost, with no goodwill or other intangible assets recorded. The summary unaudited pro forma condensed combined balance sheet data as of June 30, 2019 gives pro forma effect to the merger and the other transactions contemplated by the merger agreement as if they had occurred on June 30, 2019. The summary unaudited pro forma condensed combined statement of operations data for the six months ended June 30, 2019 and year ended December 31, 2018 give pro forma effect to the merger and the other transactions contemplated by the merger agreement as if they had occurred on January 1, 2018.

The summary pro forma data have been derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information of the combined company appearing elsewhere in this proxy statement/consent solicitation statement/prospectus and the accompanying notes. The unaudited pro forma condensed combined financial information is based upon, and should be read in conjunction with, the historical consolidated financial statements of Mosaic and Vivint Smart Home and related notes included in this proxy statement/consent solicitation statement/prospectus. The summary pro forma data have been presented for informational purposes only and are not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the merger and the other transactions contemplated by the merger agreement been completed as of the dates indicated. In addition, the summary pro forma data do not purport to project the future financial position or operating results of the combined company.

The following table presents summary pro forma data after giving effect to the merger and the other transactions contemplated by the merger agreement, assuming two redemption scenarios as follows:

 

   

Assuming No Redemption: This scenario assumes that no shares of Mosaic Class A common stock are redeemed; and

 

   

Assuming Maximum Redemption: This scenario assumes that 10,349,999 shares of Mosaic Class A common stock are redeemed for an aggregate payment of approximately $106.0 million from the Trust Account, which is the maximum amount of redemptions that would satisfy the Maximum Redemption Condition set forth in the merger agreement.



 

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     Pro Forma
Combined
(Assuming No
Redemption)
    Pro Forma
Combined
(Assuming
Maximum
Redemption)
 
     (in thousands, except share and
per share data)
 
Summary Unaudited Pro Forma Condensed Combined     

Statement of Operations Data

    

Six Months Ended June 30, 2019

    

Revenue

   $ 557,302     $ 557,302  

Net loss per share—basic and diluted

   $ (0.61   $ (0.64

Weighted-average shares outstanding—basic and diluted

     306,312,435       295,962,435  
Summary Unaudited Pro Forma Condensed Combined     

Statement of Operations Data

    

Year Ended December 31, 2018

    

Revenue

   $ 1,050,441     $ 1,050,441  

Net loss per share—basic and diluted

   $ (1.37   $ (1.42

Weighted-average shares outstanding—basic and diluted

     306,312,435       295,962,435  
Summary Unaudited Pro Forma Condensed Combined     

Balance Sheet Data as of June 30, 2019

    

Total assets

   $ 2,818,997     $ 2,713,000  

Total liabilities

   $ 3,727,958     $ 3,727,958  

Total deficit

   $ (908,961   $ (1,014,958


 

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Unaudited Historical Comparative and Pro Forma Combined Per Share Data of Mosaic and Vivint Smart Home

The following table sets forth selected historical comparative share information for Mosaic and Vivint Smart Home and unaudited pro forma condensed combined per share information of New Vivint after giving effect to the merger, assuming two redemption scenarios as follows:

 

   

Assuming No Redemption—this scenario assumes that no shares of Mosaic Class A common stock are redeemed; and

 

   

Assuming Maximum Redemption—this scenario assumes that 10,349,999 shares of Mosaic Class A common stock are redeemed for an aggregate payment of approximately $106.0 million (based on the estimated per share redemption price of approximately $10.24 per share based on the fair value of marketable securities held in the Trust Account as of June 30, 2019 of approximately $353.3 million) from the Trust Account, which is the maximum amount of redemptions that would satisfy the Maximum Redemption Condition set forth in the merger agreement.

The pro forma book value information reflects the merger as if it had occurred on June 30, 2019. The weighted average shares outstanding and net earnings per share information give pro forma effect to the merger and the other transactions contemplated by the merger agreement as if they had occurred on January 1, 2018.

This information is only a summary and should be read together with the selected historical financial information included elsewhere in this proxy statement/consent solicitation statement/prospectus, and the historical financial statements of Mosaic and Vivint Smart Home and related notes that are included elsewhere in this proxy statement/consent solicitation statement/prospectus. The unaudited pro forma combined per share information of Mosaic and Vivint Smart Home is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes included elsewhere in this proxy statement/consent solicitation statement/prospectus.



 

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The unaudited pro forma combined earnings per share information below does not purport to represent the earnings per share which would have occurred had the companies been combined during the periods presented, nor earnings per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of Mosaic and Vivint Smart Home would have been had the companies been combined during the periods presented.

 

                 Combined Pro Forma  
     Mosaic
(Historical)
    Vivint Smart
Home
(Historical)
    Pro Forma
Combined
(Assuming No
Redemption)
    Pro Forma
Combined
(Assuming
Maximum
Redemption)
 

As of and for the Six Months Ended June 30, 2019

        

Book value per share (1)

   $ 0.14     $ (1,588.92   $ (2.97   $ (3.43

Weighted average shares outstanding of Mosaic Class A common stock—basic and diluted

     34,500,000         306,312,435       295,962,435  

Weighted average shares outstanding of Mosaic Class F common stock—basic and diluted

     8,625,000        

Weighted average shares outstanding of Vivint Smart Home common stock—basic and diluted

       1,006,409      

Net income (loss) per share of Mosaic Class A common stock—basic and diluted

   $ 0.08       $ (0.61   $ (0.64

Net income per share of Mosaic Class F common stock—basic and diluted

   $ 0.00        

Net loss per share of Vivint Smart Home common stock—basic and diluted

     $ (203.75    

As of and for the Year Ended December 31, 2018

        

Book value per share (1)

   $ 0.14       (1,391.07     N/A (2)      N/A (2) 

Weighted average shares outstanding of Mosaic Class A common stock—basic and diluted

     34,500,000         306,312,435       295,962,435  

Weighted average shares outstanding of Mosaic Class F common stock—basic and diluted

     8,625,000        

Weighted average shares outstanding of Vivint Smart Home common stock—basic and diluted

       1,004,295      

Net income (loss) per share of Mosaic Class A common stock—basic and diluted

   $ 0.16       $ (1.37   $ (1.42

Net loss per share of Mosaic Class F common stock—basic and diluted

   $ (0.01      

Net loss per share of Vivint Smart Home common stock—basic and diluted

     $ (470.61    

 

(1)

Book value per share = (Total equity excluding preferred shares)/shares outstanding.

(2)

Pro forma balance sheet for year ended December 31, 2018 not required and as such, no such calculation included in this table.



 

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MARKET PRICE AND DIVIDEND INFORMATION

Mosaic

Mosaic’s units, Class A common stock and public warrants are currently listed on the NYSE under the symbols “MOSC.U”, “MOSC” and “MOSC.WS”, respectively.

The closing price of the units, Class A common stock and public warrants on September 13, 2019, the last trading day before announcement of the execution of the merger agreement, was $10.30, $10.55 and $1.10, respectively. As of [            ], 2019 the record date for the Mosaic Special Meeting, the most recent closing price for each unit, Class A common stock and public warrant was $[            ], $ [            ] and $[            ], respectively.

Holders of the units, Class A common stock and public warrants should obtain current market quotations for their securities. The market price of Mosaic’s securities could vary at any time before the merger.

Holders

As of [            ] , 2019, there were [            ] holders of record of Mosaic’s units, [            ] holders of record of our Class A common stock,             holders of record of our Class F common stock and [            ] holders of record of our public warrants. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose units, public shares and public warrants are held of record by banks, brokers and other financial institutions.

Dividend Policy

Mosaic has not paid any cash dividends on its common stock to date and does not intend to pay cash dividends prior to the completion of the merger. The payment of cash dividends in the future will be dependent upon New Vivint Parent’s revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of the merger. The payment of any cash dividends subsequent to the merger will be within the discretion of New Vivint Parent’s board of directors at such time. New Vivint Parent’s ability to declare dividends will also be limited by restrictive covenants pursuant to any debt financing.

Vivint Smart Home

Historical market price information for Vivint Smart Home’s capital stock is not provided because there is no public market for Vivint Smart Home’s capital stock. See “Vivint Smart Home’s Management’s Discussion and Analysis of Financial Condition and Results of Operations”.



 

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FORWARD-LOOKING STATEMENTS; MARKET, RANKING AND

OTHER INDUSTRY DATA

This proxy statement/consent solicitation statement/prospectus includes forward-looking statements regarding, among other things, the plans, strategies and prospects, both business and financial of Mosaic and Vivint Smart Home. These statements are based on the beliefs and assumptions of the management of Mosaic and Vivint Smart Home. Although Mosaic and Vivint Smart Home believe that their respective plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, neither Mosaic nor Vivint Smart Home can assure you that either will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes”, “estimates”, “expects”, “projects”, “forecasts”, “may”, “will”, “should”, “seeks”, “plans”, “scheduled”, “anticipates” or “intends” or similar expressions. Forward-looking statements contained in this proxy statement/consent solicitation statement/prospectus include, but are not limited to, statements about the ability of Mosaic and Vivint Smart Home prior to the merger, and New Vivint following the merger, to:

 

   

meet the closing conditions to the merger, including approval by stockholders of Mosaic and Vivint Smart Home on the expected terms and schedule;

 

   

realize the benefits expected from the proposed merger;

 

   

accelerate adoption of smart home solutions;

 

   

establish and grow its business through new subscriber acquisition channels;

 

   

increase brand awareness;

 

   

meet subscriber expectations and address key friction points for smart home adoption and use;

 

   

expand its ecosystem with third-party and proprietary devices;

 

   

reduce subscriber attrition;

 

   

lower net subscriber acquisition costs;

 

   

improve unit economics and grow subscription revenues per subscriber over time;

 

   

increase new subscriber originations, subscriber usage, and subscriber satisfaction;

 

   

develop, design, and sell smart home services that are differentiated from those of competitors;

 

   

attract, train and retain an effective sales force and other key personnel;

 

   

upgrade and maintain information technology systems;

 

   

acquire and protect intellectual property;

 

   

meet future liquidity requirements and comply with restrictive covenants related to long-term indebtedness;

 

   

enhance future operating and financial results;

 

   

comply with laws and regulations applicable to its business;

 

   

successfully defend litigation; and

 

   

successfully deploy the proceeds from the merger.

Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements which speak only as of the date hereof. You should understand that the following important factors, in

 

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addition to those discussed under the heading “Risk Factors” and elsewhere in this proxy statement/consent solicitation statement/prospectus, could affect the future results of Mosaic and Vivint Smart Home prior to the merger, and New Vivint following the merger, and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements in this proxy statement/consent solicitation statement/prospectus:

 

   

any delay in closing of the merger;

 

   

risks related to disruption of management’s time from ongoing business operations due to the proposed transactions;

 

   

risks of the smart home and security industry, including risks of and publicity surrounding the sales, subscriber origination and retention process;

 

   

the highly competitive nature of the smart home and security industry and product introductions and promotional activity by competitors;

 

   

litigation, complaints, product liability claims and/or adverse publicity;

 

   

the impact of changes in consumer spending patterns, consumer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability;

 

   

increases and/or decreases in utility and other energy costs, increased costs related to utility or governmental requirements;

 

   

cost increases or shortages in smart home and security technology products or components;

 

   

the introduction of unsuccessful new smart home services;

 

   

privacy and data protection laws, privacy or data breaches, or the loss of data; and

 

   

the impact to business, results of operations, financial condition, regulatory compliance and subscriber experience of the Vivint Flex Pay plan and ability to successfully compete in retail sales channels.

In addition, the origination and retention of new subscribers will depend on various factors, including, but not limited to, market availability, subscriber interest, the availability of suitable components, the negotiation of acceptable contract terms with subscribers, local permitting, licensing and regulatory compliance and the ability of Vivint Smart Home prior to the merger, and New Vivint following the merger, to manage anticipated expansion and to hire, train and retain personnel, the financial viability of subscribers and general economic conditions.

These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this proxy statement/consent solicitation statement/prospectus are more fully described under the heading “Risk Factors” and elsewhere in this proxy statement/consent solicitation statement/prospectus. The risks described under the heading “Risk Factors” are not exhaustive. Other sections of this proxy statement/consent solicitation statement/prospectus describe additional factors that could adversely affect the business, financial condition or results of operations of Mosaic and Vivint Smart Home prior to the merger, and New Vivint following the merger. New risk factors emerge from time to time and it is not possible to predict all such risk factors, nor can Mosaic or Vivint Smart Home assess the impact of all such risk factors on the business of Mosaic and Vivint Smart Home prior to the merger, and New Vivint following the merger, or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements attributable to Mosaic or Vivint Smart Home or persons acting on their behalf are expressly qualified in their entirety by the foregoing cautionary statements. Mosaic and Vivint Smart Home prior to the merger, and New Vivint following the merger, undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

In addition, statements of belief and similar statements reflect the beliefs and opinions of Mosaic or Vivint Smart Home, as applicable, on the relevant subject. These statements are based upon information available to

 

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Mosaic or Vivint Smart Home, as applicable, as of the date of this proxy statement/consent solicitation statement/prospectus, and while such party believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and statements should not be read to indicate that Mosaic or Vivint Smart Home, as applicable, has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

Market, ranking and industry data used throughout this proxy statement/consent solicitation statement/prospectus, including statements regarding subscriber acquisition costs, attrition and adoption rates, is based on the good faith estimates of Vivint Smart Home’s management, which in turn are based upon Vivint Smart Home’s management’s review of internal surveys, independent industry surveys and publications, including reports by Strategy Analytics and other third party research and publicly available information. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While Vivint Smart Home is not aware of any misstatements regarding the industry data presented herein, its estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” and “Vivint Smart Home’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this proxy statement/consent solicitation statement/prospectus.

 

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RISK FACTORS

In addition to the other information contained in this proxy statement/consent solicitation statement/prospectus, including the matters addressed under the heading “Forward-Looking Statements”, you should carefully consider the following risk factors in deciding how to vote on the proposals presented in this proxy statement/consent solicitation statement/prospectus.

Risks Relating to Vivint Smart Home’s Business and Industry

Vivint Smart Home’s industry is highly competitive.

Vivint Smart Home operates in a highly competitive industry. Vivint Smart Home faces, and may in the future face, competition from other providers of information and communication products and services, including cable and telecommunications companies, Internet service providers, large technology companies, singular experience companies, industrial and smart hardware companies, and others that may have greater capital and resources than Vivint Smart Home does. Vivint Smart Home also faces competition from large residential security companies that have or may have greater capital and other resources than Vivint Smart Home. Competitors that are larger in scale and have greater resources may benefit from greater economies of scale and other lower costs that permit them to offer more favorable terms to consumers (including lower service costs) than Vivint Smart Home offers, causing such consumers to choose to enter into contracts with such competitors. For instance, cable and telecommunications companies are expanding into the smart home and security industries and are bundling their existing offerings with automation and monitored security services. In some instances, it appears that certain components of such bundled offerings are significantly underpriced and, in effect, subsidized by the rates charged for the other product or services offered by these companies. These bundled pricing alternatives may influence subscribers’ desire to subscribe to Vivint Smart Home’s services at rates and fees Vivint Smart Home considers appropriate. These competitors may also benefit from greater name recognition and superior advertising, marketing, promotional and other resources. To the extent that such competitors utilize any competitive advantages in markets where Vivint Smart Home’s business is more highly concentrated, the negative impact on Vivint Smart Home’s business may increase over time. In addition to potentially reducing the number of new subscribers Vivint Smart Home is able to originate, increased competition could also result in increased subscriber acquisition costs and higher attrition rates that would negatively impact Vivint Smart Home over time. The benefit offered to larger competitors from economies of scale and other lower costs may be magnified by an economic downturn in which subscribers put a greater emphasis on lower cost products or services. In addition, Vivint Smart Home faces competition from regional competitors that concentrate their capital and other resources in targeting local markets.

Vivint Smart Home also faces potential competition from do-it-yourself, or DIY, systems, which enable consumers to install their own systems and monitor and control their home over the Internet without the need for a subscription agreement with a service provider. Improvements in these systems may result in more subscribers choosing to take on the responsibility for installation, maintenance, and management of connected home systems themselves. In addition, consumers may prefer individual device solutions that provide more narrowly targeted functionality instead of a more comprehensive integrated smart home solution. Pricing pressure or improvements in technology and shifts in consumer preferences towards DIY and/or individual solutions could adversely impact Vivint Smart Home’s subscriber base or pricing structure and have a material and adverse effect on Vivint Smart Home’s business, financial condition, results of operations and cash flows.

Cable and telecommunications companies actively targeting the smart home market and expanding into the monitored security space, and large technology companies expanding into the smart home market could result in pricing pressure, a shift in subscriber preferences towards the services of these companies and a reduction in Vivint Smart Home’s market share. Continued pricing pressure from these competitors or failure to achieve pricing based on the competitive advantages previously identified above could prevent Vivint Smart Home from maintaining competitive price points for Vivint Smart Home’s products and services, resulting in lost subscribers

 

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or in Vivint Smart Home’s inability to attract new subscribers, and have an adverse effect on Vivint Smart Home’s business, financial condition, results of operations and cash flows.

Vivint Smart Home relies on long-term retention of subscribers, and subscriber attrition can have a material adverse effect on Vivint Smart Home’s results.

Vivint Smart Home incurs significant upfront costs to originate new subscribers. Accordingly, Vivint Smart Home’s long-term performance is dependent on Vivint Smart Home’s subscribers remaining with Vivint Smart Home for several years after the initial term of their contracts. One reason for attrition occurs when subscribers move and do not reconnect. Subscriber moves are impacted by changes in the housing market. See “ —Vivint Smart Home’s business is subject to macroeconomic, microeconomic and demographic factors that may negatively impact Vivint Smart Home’s results of operations”. Some other factors that can increase subscriber attrition include problems experienced with the quality of Vivint Smart Home’s products or services, unfavorable general economic conditions, adverse publicity and the preference for lower pricing of competitors’ products and services. In addition, Vivint Smart Home generally experiences an increased level of subscriber cancellations in the months surrounding the expiration of such subscribers’ initial contract term. If Vivint Smart Home fails to retain Vivint Smart Home’s subscribers for a sufficient period of time, Vivint Smart Home’s profitability, business, financial condition, results of operations and cash flows could be materially and adversely affected. Vivint Smart Home’s inability to retain subscribers for a long term could materially and adversely affect Vivint Smart Home’s business, financial condition, cash flows or results of operations.

Litigation, complaints or adverse publicity or unauthorized use of Vivint Smart Home’s brand name could negatively impact Vivint Smart Home’s business, financial condition and results of operations.

From time to time, Vivint Smart Home engages in the defense of, and may in the future be subject to, certain investigations, claims and lawsuits arising in the ordinary course of Vivint Smart Home’s business. For example, Vivint Smart Home has been named as defendants in putative class actions alleging violations of wage and hour laws, the Telephone Consumer Protection Act, common law privacy and consumer protection laws. From time to time Vivint Smart Home’s subscribers have communicated and may in the future communicate complaints to organizations such as the Better Business Bureau, regulators, law enforcement or the media. Any resulting actions or negative subscriber sentiment or publicity could reduce the volume of Vivint Smart Home’s new subscriber originations or increase attrition of existing subscribers. Any of the foregoing may materially and adversely affect Vivint Smart Home’s business, financial condition, cash flows or results of operations.

Given Vivint Smart Home’s relationship with Vivint Solar, Inc. (“Vivint Solar”) and the fact that Vivint Solar uses Vivint Smart Home’s registered trademark, “Vivint”, in its name pursuant to a licensing agreement, Vivint Smart Home’s subscribers and potential subscribers may associate Vivint Smart Home with any problems experienced with Vivint Solar or adverse publicity related to Vivint Solar’s business. Vivint Smart Home may not be able to take remedial action to cure any issues Vivint Solar has with its subscribers, and Vivint Smart Home’s trademark, brand and reputation may be adversely affected.

Unauthorized use of Vivint Smart Home’s brand name by third parties may also adversely affect Vivint Smart Home’s business and reputation, including the perceived quality and reliability of Vivint Smart Home’s products and services. Vivint Smart Home relies on trademark law, internal policies and agreements with Vivint Smart Home’s employees, subscribers, business partners and others to protect the value of Vivint Smart Home’s brand name. Despite Vivint Smart Home’s precautions, Vivint Smart Home cannot provide assurance that those procedures are sufficiently effective to protect against unauthorized third-party use of Vivint Smart Home’s brand name. Vivint Smart Home may not be successful in investigating, preventing or prosecuting all unauthorized third-party use of Vivint Smart Home’s brand name. Future litigation with respect to such unauthorized use could also result in substantial costs and diversion of Vivint Smart Home’s resources. These factors could adversely affect Vivint Smart Home’s reputation, business, financial condition, results of operations and cash flows.

 

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Vivint Smart Home is highly dependent on Vivint Smart Home’s ability to attract, train and retain an effective sales force and other key personnel.

Vivint Smart Home’s business is highly dependent on Vivint Smart Home’s ability to attract, train and retain an effective sales force, especially for Vivint Smart Home’s peak April through August sales season. In addition, because sales representatives become more productive as they gain experience, retaining those individuals is very important for Vivint Smart Home’s success. If Vivint Smart Home is unable to attract, train and retain an effective sales force, Vivint Smart Home’s business, financial condition, cash flows or results of operations could be adversely affected. In addition, Vivint Smart Home’s business is dependent on Vivint Smart Home’s ability to attract and retain other key personnel in other critical areas of Vivint Smart Home’s business. If Vivint Smart Home is unable to attract and retain key personnel in Vivint Smart Home’s business, it could adversely affect Vivint Smart Home’s business, financial condition, cash flows and results of operations.

Vivint Smart Home’s operations depend upon third-party providers of telecommunication technologies and services.

Vivint Smart Home’s operations depend upon third-party cellular and other telecommunications providers to communicate signals to and from Vivint Smart Home’s subscribers in a timely, cost-efficient and consistent manner. The failure of one or more of these providers to transmit and communicate signals in a timely manner could affect Vivint Smart Home’s ability to provide services to Vivint Smart Home’s subscribers. There can be no assurance that third-party telecommunications providers and signal-processing centers will continue to transmit and communicate signals to or from Vivint Smart Home’s third-party providers and the monitoring stations without disruption. Any such disruption, particularly one of a prolonged duration, could have a material adverse effect on Vivint Smart Home’s business. In addition, failure to renew contracts with existing providers or to contract with other providers on commercially acceptable terms or at all may adversely impact Vivint Smart Home’s business.

Certain elements of Vivint Smart Home’s operating model have historically relied on Vivint Smart Home’s subscribers’ continued selection and use of traditional landline telecommunications to transmit signals to and from Vivint Smart Home’s subscribers. There is a growing trend for consumers to switch to the exclusive use of cellular, satellite or internet communication technology in their homes, and telecommunication providers may discontinue their landline services in the future. In addition, many of Vivint Smart Home’s subscribers who use cellular communication technology for their systems use products that rely on older 2G and 3G technologies, and certain telecommunication providers have discontinued 2G services in certain markets, and these and other telecommunication providers are expected to discontinue 2G and 3G services in other markets in the future. The discontinuation of landline, 2G, 3G and any other services by telecommunications providers in the future would require Vivint Smart Home’s subscriber’s system to be upgraded to alternative, and potentially more expensive, technologies. This could increase Vivint Smart Home’s subscriber attrition rates and slow Vivint Smart Home’s new subscriber originations. To maintain Vivint Smart Home’s subscriber base that uses components that are or could become obsolete, Vivint Smart Home may be required to upgrade or implement new technologies, including by offering to subsidize the replacement of subscribers’ outdated systems at Vivint Smart Home’s expense. Any such upgrades or implementations could require significant capital expenditures and also divert management’s attention and other important resources away from Vivint Smart Home’s customer service and new subscriber origination efforts.

Vivint Smart Home depends on third-party providers of internet access services that may impair, degrade or otherwise block Vivint Smart Home’s services that could lead to additional expenses or loss of users.

Vivint Smart Home’s interactive services are accessed through the internet and Vivint Smart Home’s security monitoring services are increasingly delivered using internet-based technologies. In addition, Vivint Smart Home’s distributed cloud storage solution, including the Vivint Smart Drive, is dependent upon internet services for shared storage. Some providers of broadband access may take measures that affect their subscribers’

 

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ability to use these products and services, such as degrading the quality of the data packets Vivint Smart Home transmits over their lines, giving those packets low priority, giving other packets higher priority than ours, blocking Vivint Smart Home’s packets entirely or attempting to charge their subscribers more for using Vivint Smart Home’s services or terminating the subscriber’s contract.

The Federal Communications Commission (“FCC”) released an order that became effective on June 11, 2018, that repeals most of the rules that the agency previously had in place that prevented providers of broadband internet access services from impairing, degrading or blocking services provided by third parties to Vivint Smart Home. The prior rules prohibiting impairment, degradation and blocking are commonly referred to as “network neutrality” rules. Numerous parties have appealed the FCC order which is before the U.S. Court of Appeals for the District of Columbia. Vivint Smart Home cannot predict whether the FCC order will be upheld, reversed or remanded, nor the timing of the appellate court’s resolution of the appeal.

Following the adoption of the FCC’s order reversing the network neutrality rules, a number of states have passed network neutrality laws. The laws vary by state both in substance and in scope. There is legal uncertainty as to whether states have authority to pass laws that would conflict with the recent FCC order due to the interstate nature of internet communications and for other reasons. Vivint Smart Home cannot predict whether state laws that are interpreted to conflict with the FCC’s order will survive judicial scrutiny if challenged.

The largest providers of broadband internet access services have publicly stated that network neutrality rules are not required as they would not engage in some of the practices that the rules prohibit. While it is difficult to predict what would occur in the absence of such rules, it is possible that as a result of the lack of network neutrality rules, Vivint Smart Home could incur greater operating expenses which could harm Vivint Smart Home’s results of operations. While Vivint Smart Home thinks it is unlikely and that other laws may be implicated should broadband internet access providers affirmatively interfere with the delivery of Vivint Smart Home’s services that rely on broadband internet connections, interference with Vivint Smart Home’s services by broadband internet access service providers for using Vivint Smart Home’s products and services could cause Vivint Smart Home to lose existing subscribers, impair Vivint Smart Home’s ability to attract new subscribers and materially and adversely affect Vivint Smart Home’s business, financial condition, results of operations and cash flows.

Changes in laws or regulations that impact Vivint Smart Home’s underlying providers of telecommunications services could adversely impact Vivint Smart Home’s business.

Telecommunications service providers are subject to extensive regulation in the markets where Vivint Smart Home operates or may expand in the future. Changes in the applicable laws or regulations affecting telecommunication services could require Vivint Smart Home to change the way Vivint Smart Home operates, which could increase costs or otherwise disrupt Vivint Smart Home’s operations, which in turn could adversely affect Vivint Smart Home’s business, financial condition, cash flows or results of operations.

Vivint Smart Home must successfully upgrade and maintain Vivint Smart Home’s information technology systems.

Vivint Smart Home relies on various information technology systems to manage its operations. As necessary, Vivint Smart Home implements modifications and upgrades to these systems, and replaces certain of its legacy systems with successor systems with new functionality.

There are inherent costs and risks associated with modifying or changing these systems and implementing new systems, including potential disruption of Vivint Smart Home’s internal control structure, substantial capital expenditures, additional administration and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time and other risks and costs of delays or difficulties in transitioning to new systems or of integrating new systems into Vivint Smart Home’s current

 

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systems. For example, Vivint Smart Home encountered issues associated with the implementation of Vivint Smart Home’s integrated customer resource management system (“CRM”) in 2014, which resulted in an immaterial error in Vivint Smart Home’s financial statements for the quarter ended June 30, 2014. This error was corrected during the quarter ended September 30, 2014. As a result of the issues encountered associated with the CRM implementation, Vivint Smart Home also issued a significant number of billing-related subscriber credits during the year ended December 31, 2014, which reduced Vivint Smart Home’s revenue. While management seeks to identify and remediate issues, Vivint Smart Home can provide no assurance that Vivint Smart Home’s identification and remediation efforts will be successful or that Vivint Smart Home will not encounter additional issues as Vivint Smart Home completes the implementation of these and other systems. In addition, Vivint Smart Home’s information technology system implementations may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. The implementation of new information technology systems may also cause disruptions in Vivint Smart Home’s business operations and have an adverse effect on Vivint Smart Home’s business, cash flows and operations.

Privacy and data protection concerns, laws, and regulations relating to privacy and data protection and information security could have a material adverse effect on Vivint Smart Home’s business.

In the course of Vivint Smart Home’s operations, Vivint Smart Home gathers, processes, transmits and stores subscriber information, including personal, payment, credit and other confidential and private information. Vivint Smart Home may use this information for operational and marketing purposes in the course of operating Vivint Smart Home’s business.

Vivint Smart Home’s collection, retention, transfer and use of this information are governed by U.S. and foreign laws and regulations relating to privacy, data protection and information security, industry standards and protocols, or it may be asserted that such industry standards or protocols apply to Vivint Smart Home. The regulatory framework for privacy and information security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. In North America, federal and various state and provincial governmental bodies and agencies have adopted or are considering adopting laws and regulations limiting, or laws and regulations regarding the collection, distribution, use, disclosure, storage, and security of certain categories of information. Some of these requirements include obligations of companies to notify individuals of security breaches involving particular personal information, which could result from exploitation of a vulnerability in Vivint Smart Home’s systems or services or breaches experienced by Vivint Smart Home’s service providers and/or partners. For example, the State of California recently enacted the California Consumer Privacy ACT (“CCPA”), which will be effective in January 2020. The CCPA expands the scope of what is considered “personal information” and creates new data access and opt-out rights for consumers, which may create new requirements for Vivint Smart Home and other companies that operate in California. Vivint Smart Home is also subject to state and federal laws and regulations regarding telemarketing and other telephonic communications and state and federal laws regarding unsolicited commercial emails, as well as regulations relating to automated telemarketing calls, texts or SMS messages.

Many jurisdictions have established their own data security and privacy legal and regulatory frameworks with which Vivint Smart Home or Vivint Smart Home’s vendors or partners must comply to the extent Vivint Smart Home’s operations expand into these geographies or the laws and regulations in these frameworks otherwise may be interpreted to apply to Vivint Smart Home. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of data that identifies or may be used to identify or locate an individual, such as names, email addresses and, in some jurisdictions, internet protocol addresses. Vivint Smart Home is also bound by contractual requirements relating to privacy, data protection and information security, and may agree to additional contractual requirements addressing these matters from time to time.

Vivint Smart Home’s compliance with these various requirements increases Vivint Smart Home’s operating costs, and additional laws, regulations, standards or protocols (or new interpretations of existing laws,

 

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regulations, standards or protocols) in these areas may further increase Vivint Smart Home’s operating costs and adversely affect Vivint Smart Home’s ability to effectively market Vivint Smart Home’s products and services. In view of new or modified legal obligations relating to privacy, data protection or information security, or any changes in their interpretation, Vivint Smart Home may find it necessary or desirable to fundamentally change Vivint Smart Home’s business activities and practices or to expend significant resources to modify Vivint Smart Home’s products and services and otherwise adapt to these changes. Vivint Smart Home may be unable to make such changes and modifications in a commercially reasonable manner or at all, and Vivint Smart Home’s ability to develop new services and features could be limited.

Further, Vivint Smart Home’s failure or perceived failure to comply with any of these laws, regulations, standards, protocols or other obligations could result in a loss of subscriber data, fines, sanctions and other liabilities and additional restrictions on Vivint Smart Home’s collection, transfer or use of subscriber data. In addition, Vivint Smart Home’s failure to comply with any of these laws, regulations, standards, protocols or other obligations could result in a material adverse effect on Vivint Smart Home’s reputation, subscriber attrition, new subscriber origination, financial condition, cash flows or results of operations.

If Vivint Smart Home’s security controls are breached or unauthorized or inadvertent access to subscriber information or other data are otherwise obtained, Vivint Smart Home’s services may be perceived as insecure, Vivint Smart Home may lose existing subscribers or fail to attract new subscribers, Vivint Smart Home’s business may be harmed, and Vivint Smart Home may incur significant liabilities.

Use of Vivint Smart Home’s solutions involves the storage, transmission and processing of personal, payment, credit and other confidential and private information of Vivint Smart Home’s subscribers, and may in certain cases permit access to Vivint Smart Home’s subscribers’ homes or property or help secure them. Vivint Smart Home also maintains and processes other confidential and proprietary information in Vivint Smart Home’s business, including Vivint Smart Home’s employees’ and contractors’ personal information and confidential business information. Vivint Smart Home relies on proprietary and commercially available systems, software, tools and monitoring to protect against unauthorized use or access of the information Vivint Smart Home processes and maintains. Vivint Smart Home’s services and the networks and information systems Vivint Smart Home utilizes in Vivint Smart Home’s business are at risk for breaches as a result of third-party action, employee, vendor or partner error, malfeasance, or other factors. For example, Vivint Smart Home has experienced instances of Vivint Smart Home’s employees, contractors and other third parties improperly accessing Vivint Smart Home’s and/or Vivint Smart Home’s subscribers’ systems and information in violation of Vivint Smart Home’s internal policies and procedures.

Criminals and other nefarious actors are using increasingly sophisticated methods, including cyberattacks, phishing, social engineering and other illicit acts to capture, access or alter various types of information, to engage in illegal activities such as fraud and identity theft, and to expose and exploit potential security and privacy vulnerabilities in corporate systems and websites. Unauthorized intrusion into the portions of Vivint Smart Home’s systems and networks and data storage devices that process and store subscriber confidential and private information, the loss of such information or the deployment of malware or other harmful code to Vivint Smart Home’s services or Vivint Smart Home’s networks or systems may result in negative consequences, including the actual or alleged malfunction of Vivint Smart Home’s products or services. In addition, third parties, including Vivint Smart Home’s partners and vendors, could also be sources of security risks to Vivint Smart Home in the event of a failure of their own security systems and infrastructure. The threats Vivint Smart Home and Vivint Smart Home’s partners and vendors face continue to evolve and are difficult to predict due to advances in computer capabilities, new discoveries in the field of cryptography and new and sophisticated methods used by criminals. There can be no assurances that Vivint Smart Home’s defensive measures will prevent cyber-attacks or that Vivint Smart Home will discover network or system intrusions or other breaches on a timely basis or at all. Vivint Smart Home cannot be certain that Vivint Smart Home will not suffer a compromise or breach of the technology protecting the systems or networks that house or access Vivint Smart Home’s products and services or on which Vivint Smart Home or Vivint Smart Home’s partners or vendors

 

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process or store personal information or other sensitive information or data, or that any such incident will not be believed or reported to have occurred. Any such actual or perceived compromises or breaches to systems, or unauthorized access to, or acquisition or loss of, data, whether suffered by Vivint Smart Home, Vivint Smart Home’s partners or vendors or other third parties, whether as a result of employee error or malfeasance or otherwise, could harm Vivint Smart Home’s business. They could, for example, cause interruptions in operations, loss of data, loss of confidence in Vivint Smart Home’s services and products and damage to Vivint Smart Home’s reputation, and could limit the adoption of Vivint Smart Home’s services and products. They could also subject Vivint Smart Home to costs, regulatory investigations and orders, litigation, contract damages, indemnity demands and other liabilities and materially and adversely affect Vivint Smart Home’s subscriber base, sales, revenues and profits. Any of these could, in turn, have a material adverse impact on Vivint Smart Home’s business, financial condition, cash flows or results of operations.

Further, if a high profile security breach occurs with respect to another provider of smart home solutions, Vivint Smart Home’s subscribers and potential subscribers may lose trust in the security of Vivint Smart Home’s services or in the smart home space generally, which could adversely impact Vivint Smart Home’s ability to retain existing subscribers or attract new ones. Even in the absence of any security breach, subscriber concerns about security, privacy or data protection may deter them from using Vivint Smart Home’s service. Vivint Smart Home’s insurance policies covering errors and omissions and certain security and privacy damages and claim expenses may not be sufficient to compensate for all potential liability. Although Vivint Smart Home maintains cyber liability insurance, Vivint Smart Home cannot be certain that Vivint Smart Home’s coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to Vivint Smart Home on economically reasonable terms, or at all.

Vivint Smart Home’s Vivint Flex Pay plan is a new business model that may subject Vivint Smart Home to additional risks.

In 2017, Vivint Smart Home introduced a new program (“Vivint Flex Pay”) that allowed subscribers to finance the purchase of their products and related installation through Vivint Smart Home’s Vivint Flex Pay plan. Under Vivint Flex Pay, Vivint Smart Home offers to Vivint Smart Home’s qualified U.S. subscribers an opportunity to finance through a third party the purchase of products and related installation used in connection with Vivint Smart Home’s services. Vivint Smart Home offers certain of Vivint Smart Home’s subscribers who do not qualify for third-party financing, and all Canadian subscribers the opportunity to finance their purchase of products and related installation under a retail installment contract program (an “RIC”), which is financed by Vivint Smart Home. Under Vivint Flex Pay, subscribers pay separately for the products and Vivint Smart Home’s services. As an alternative to the financing offered under these programs, subscribers are able to purchase the products by check, ACH, credit or debit card, and pay in full at the time of installation.

There can be no assurance that the Vivint Flex Pay plan will be successful. If this plan is not favorably received by subscribers or is otherwise not performing as intended by Vivint Smart Home, it could have an adverse effect on Vivint Smart Home’s business, subscriber growth rate, financial condition and results of operations. In addition, reductions in consumer lending and/or the availability of consumer credit under the Vivint Flex Pay plan could limit the number of subscribers with the financial means to purchase the products and thus limit the number of subscribers who are able to subscribe to Vivint Smart Home’s Smart Home Services. There is no assurance that Vivint Smart Home’s current providers of consumer financing, or any other companies that may in the future offer financing to Vivint Smart Home’s subscribers will continue to provide subscribers with access to credit or that credit limits under such arrangements will be sufficient. In addition, a severe disruption in the global financial markets could impact the providers of installment loans under the Vivint Flex Pay plan, and such instability could also affect the ability of subscribers to access financing under the Vivint Flex Pay plan or otherwise. Such restrictions or limitations on the availability of consumer credit or unfavorable reception of the Vivint Flex Pay plan by potential subscribers could have a material adverse impact on Vivint Smart Home’s business, results of operations, financial condition and cash flows.

 

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In addition, the Vivint Flex Pay plan subjects Vivint Smart Home to additional regulatory requirements and compliance obligations. In particular, the Vivint Flex Pay plan may require that Vivint Smart Home be licensed as a lender in certain jurisdictions in which Vivint Smart Home operates. Vivint Smart Home faces the risk of increased consumer complaints, potential supervision, examinations or enforcement actions by federal and state licensing and regulatory agencies and/or penalties for violation of financial services, consumer protections and other applicable laws and regulations. For example, in 2019, the Company received a subpoena in connection with an investigation by the U.S. Department of Justice (“DOJ”) concerning potential violations of the Financial Institutions Reform, Recovery and Enforcement Act (“FIRREA”). The Company also has received a civil investigative demand from the staff of the Federal Trade Commission (“FTC”) concerning potential violations of the Fair Credit Reporting Act (“FCRA”) and the “Red Flags Rule” thereunder, and the Federal Trade Commission Act (“FTC Act”). The Company has cooperated, and intends to continue to cooperate, with any government requests or inquiries. The outcome of these proceedings cannot be predicted at this time. If any proceedings or investigations were to be determined adversely against us or resulted in legal actions, claims, regulatory proceedings, enforcement actions, or judgments, fines, or settlements involving a payment of material amounts, or if injunctive relief were issued against us, our business, financial condition and results of operations could be materially adversely affected.

Vivint Smart Home currently offers RICs in all of the jurisdictions in which Vivint Smart Home operates and therefore is subject to regulation by state and local authorities for the use of RICs. Vivint Smart Home provides intensive training to Vivint Smart Home’s employees regarding sales practices and the content of Vivint Smart Home’s RICs and strives to comply in all material respects with these laws; however, Vivint Smart Home cannot be certain that Vivint Smart Home’s employees will abide by Vivint Smart Home’s policies and applicable laws, which violations could have a material and adverse impact on Vivint Smart Home’s business. Vivint Smart Home also offers RICs to Vivint Smart Home’s Canadian subscribers, and as a result is subject to additional regulatory requirements in Canada. In the future, Vivint Smart Home may elect to offer installment loans and other financial services products similar to the Consumer Financing Program directly to qualified subscribers. If Vivint Smart Home elects to offer such financial services directly, this may further expand Vivint Smart Home’s regulatory and compliance obligations. In addition, as Vivint Flex Pay evolves, Vivint Smart Home may become subject to additional regulatory requirements and compliance obligations.

Vivint Smart Home is subject to payment-related risks.

Vivint Smart Home accepts payments using a variety of methods, including check, credit card, debit card, direct debit from a subscriber’s bank account and consumer invoicing. For existing and future payment options that Vivint Smart Home offers to Vivint Smart Home’s subscribers, Vivint Smart Home may become subject to additional regulations, compliance requirements and fraud. For certain payment methods, including credit and debit cards, Vivint Smart Home pays interchange and other fees, which may increase over time and raise Vivint Smart Home’s operating costs and lower profitability. Vivint Smart Home relies on third parties to provide payment-processing services, including the processing of credit cards, debit cards and electronic checks, and it could disrupt Vivint Smart Home’s business if these companies become unwilling or unable to provide these services to Vivint Smart Home. Vivint Smart Home is also subject to payment card association operating rules, including data security rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for Vivint Smart Home to comply. If Vivint Smart Home fails to comply with these rules or requirements, or if Vivint Smart Home’s data security systems are breached or compromised, Vivint Smart Home may be liable for card-issuing banks’ costs, subject to fines and higher transaction fees, and lose Vivint Smart Home’s ability to accept credit and debit card payments from Vivint Smart Home’s subscribers, process electronic funds transfers, or facilitate other types of online payments, and Vivint Smart Home’s business and operating results could be adversely affected. See “—Privacy and data protection concerns, and laws and regulations relating to privacy, data protection and information security, could have a material adverse effect on Vivint Smart Home’s business” and “—If Vivint Smart Home’s security controls are breached or unauthorized or inadvertent access to subscriber information or other data is otherwise obtained, Vivint Smart Home’s services may be perceived as insecure, Vivint Smart Home may lose existing

 

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subscribers or fail to attract new subscribers, Vivint Smart Home’s business may be harmed, and Vivint Smart Home may incur significant liabilities”.

Vivint Smart Home may fail to obtain or maintain necessary licenses or otherwise fail to comply with applicable laws and regulations.

Vivint Smart Home’s business focuses on contracts and transactions with residential subscribers and therefore is subject to a variety of laws, regulations and licensing requirements that govern Vivint Smart Home’s interactions with residential consumers, including those pertaining to privacy and data security, consumer financial and credit transactions, home improvements, warranties and door-to-door solicitation. Vivint Smart Home is a licensed service provider in each market where such licensure is required, and Vivint Smart Home is responsible for every subscriber installation. Vivint Smart Home’s business may become subject to additional such requirements in the future. In certain jurisdictions, Vivint Smart Home is also required to obtain licenses or permits to comply with standards governing marketing and sales efforts, installation of equipment or servicing of subscribers, monitoring station employee selection and training and to meet certain standards in the conduct of Vivint Smart Home’s business. These laws and regulations are dynamic and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current laws or regulations or enact new laws and regulations regarding these matters. Vivint Smart Home strives to comply with all applicable laws and regulations relating to Vivint Smart Home’s interactions with residential subscribers. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or Vivint Smart Home’s practices. Vivint Smart Home’s non-compliance with any such law or regulations could also expose Vivint Smart Home to claims, proceedings, litigation and investigations by private parties and regulatory authorities, as well as substantial fines and negative publicity, each of which may materially and adversely affect Vivint Smart Home’s business. Vivint Smart Home has incurred, and will continue to incur, significant expenses to comply with such laws and regulations, and increased regulation of matters relating to Vivint Smart Home’s interactions with residential consumers could require Vivint Smart Home to modify Vivint Smart Home’s operations and incur significant additional expenses, which could have an adverse effect on Vivint Smart Home’s business, financial condition and results of operations. If Vivint Smart Home expands the scope of Vivint Smart Home’s products or services or Vivint Smart Home’s operations in new markets, Vivint Smart Home may be required to obtain additional licenses and otherwise maintain compliance with additional laws, regulations or licensing requirements.

Changes in these laws or regulations or their interpretation, as well as new laws, regulations or licensing requirements which may be enacted, could dramatically affect how Vivint Smart Home does business, acquire subscribers, and manage and use information Vivint Smart Home collects from and about current and prospective subscribers and the costs associated therewith. For example, certain U.S. municipalities have adopted, or are considering adopting, laws, regulations or policies aimed at reducing the number of false alarms, including: (1) subjecting companies to fines or penalties for transmitting false alarms, (2) imposing fines on subscribers for false alarms or (3) imposing limitations on law enforcement response. These measures could adversely affect Vivint Smart Home’s future operations and business by increasing Vivint Smart Home’s costs, reducing subscriber satisfaction or affecting the public perception of the effectiveness of Vivint Smart Home’s products and services. In addition, federal, state and local governmental authorities have considered, and may in the future consider, implementing consumer protection rules and regulations, which could impose significant constraints on Vivint Smart Home’s sales channels.

Regulations have been issued by the Federal Trade Commission (the “FTC”), Federal Communications Commission (the “FCC”), and Canadian Radio-Television and Telecommunications Commission (the “CRTC”) that place restrictions on direct-to-home marketing, telemarketing, email marketing and general sales practices. These restrictions include, but are not limited to, limitations on methods of communication, requirements to maintain a “do not call” list, cancellation rights and required training for personnel to comply with these restrictions.

 

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The FTC regulates both general sales practices and telemarketing specifically and has broad authority to prohibit a variety of advertising or marketing practices that may constitute “unfair or deceptive acts or practices”. The CRTC has enforcement authority under the Canadian Anti-Spam Law (“CASL”), which prohibits the sending of commercial emails without prior consent of the recipient or an existing business relationship and sets forth rules governing the sending of commercial emails. CASL allows for a private right of action for the recovery of damages or provides for enforcement by CRTC, permitting the recovery of significant civil penalties, costs and attorneys’ fees in the event that regulations are violated. Similarly, most of the statutes and regulations in the United States allow a private right of action for the recovery of damages or provide for enforcement by the FTC, state attorneys general or state agencies permitting the recovery of significant civil or criminal penalties, costs and attorneys’ fees in the event that regulations are violated. Any new or changed laws, regulations or licensing requirements, or the interpretation of such laws, regulations or licensing requirements could have a material adverse effect on Vivint Smart Home’s business, financial condition, cash flows or results of operations. Vivint Smart Home strives to comply with all such applicable regulations but cannot assure you that Vivint Smart Home or third parties that Vivint Smart Home may rely on for telemarketing, email marketing and other lead generation activities will be in compliance with all applicable regulations at all times. Although Vivint Smart Home’s contractual arrangements with such third parties expressly require them to comply with all such regulations and to indemnify Vivint Smart Home for their failure to do so, Vivint Smart Home cannot assure you that the FTC, FCC, CRTC, private litigants or others will not attempt to hold Vivint Smart Home responsible for any unlawful acts conducted by such third parties or that Vivint Smart Home could successfully enforce or collect upon such indemnities. Additionally, certain FCC rulings and/or FTC enforcement actions may support the legal position that Vivint Smart Home may be held vicariously liable for the actions of third parties, including any telemarketing violations by Vivint Smart Home’s independent, third-party, authorized dealers that are performed without Vivint Smart Home’s authorization or that are otherwise prohibited by Vivint Smart Home’s policies. Both the FCC and the FTC have relied on certain actions to support the notion of vicarious liability, including but not limited to, the use of the company brand or trademark, the authorization or approval of telemarketing scripts or the sharing of consumer prospect lists. Changes in such regulations or the interpretation thereof that further restricts such activities could result in a material reduction in the number of leads for Vivint Smart Home’s business and could have a material adverse effect on Vivint Smart Home’s business, financial condition, results of operations and cash flows.

The policies of the U.S. Government may adversely impact Vivint Smart Home’s business, financial condition and results of operations.

Certain changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment could adversely affect Vivint Smart Home’s business. General trade tensions between the U.S. and China escalated in 2018, with three rounds of U.S. tariffs on Chinese goods taking effect in July, August and September 2018, each followed by a round of retaliatory Chinese tariffs on U.S. goods. If duties on existing tariffs are raised or if additional tariffs are announced, many of Vivint Smart Home’s inbound products to the United States would be subject to tariffs assessed in the cost of goods as imported. If these duties are imposed on such products, Vivint Smart Home may be required to raise Vivint Smart Home’s prices, which may result in the loss of subscribers and harm Vivint Smart Home’s operating performance. Alternatively, Vivint Smart Home may seek to shift production outside of China, resulting in additional costs and disruption to Vivint Smart Home’s operations. Additionally, the current administration continues to signal that it may alter trade agreements and terms between China and the United States, including limiting trade with China, and may impose additional tariffs on imports from China.

On December 22, 2017, the U.S. President signed into law the “Tax Cuts and Jobs Act” (the “Act”). Among other changes, the Act imposes limitations on the deductibility of interest. Moreover, the effects of the Act are not yet entirely clear and will depend on, among other things, additional regulatory and administrative guidance, as well as any statutory technical corrections that are subsequently enacted, which could have an adverse effect on the U.S. federal income taxation of Vivint Smart Home’s and Vivint Smart Home’s subsidiaries’ operations.

 

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While there is currently a substantial lack of clarity and uncertainty around the likelihood, timing and details of any such policies and reforms, such policies and reforms may materially and adversely affect Vivint Smart Home’s business, financial condition and results of operations and the value of Vivint Smart Home’s securities.

Increased adoption of laws purporting to characterize certain charges in Vivint Smart Home’s subscriber contracts as unlawful, may adversely affect Vivint Smart Home’s operations.

If a subscriber cancels prior to the end of the initial term of the contract, other than in accordance with the contract, Vivint Smart Home may, under the terms of the subscriber contract, charge the subscriber the amount that would have been paid over the remaining term of the contract. Several states have adopted, or are considering adopting, laws restricting the charges that can be imposed upon contract cancellation prior to the end of the initial contract term. Such initiatives could negatively impact Vivint Smart Home’s business and have a material adverse effect on Vivint Smart Home’s business, financial condition, cash flows or results of operations. Adverse rulings regarding these matters could increase legal exposure to subscribers against whom such charges have been imposed and increase the risk that certain subscribers may seek to recover such charges from Vivint Smart Home through litigation or otherwise. In addition, the costs of defending such litigation and enforcement actions could have an adverse effect on Vivint Smart Home’s business, financial condition, cash flows or results of operations.

Vivint Smart Home’s new products and services may not be successful.

Vivint Smart Home launched Vivint Smart Home’s first smart home products and services beginning in 2010. Since that time Vivint Smart Home has launched a number of other offerings. Vivint Smart Home anticipates launching additional products and services in the future. These products and services and the new products and services Vivint Smart Home may launch in the future may not be well received by Vivint Smart Home’s subscribers, may not help Vivint Smart Home to generate new subscribers, may adversely affect the attrition rate of existing subscribers, may increase Vivint Smart Home’s subscriber acquisition costs and may increase the costs to service Vivint Smart Home’s subscribers. For example, during the year ended December 31, 2015 Vivint Smart Home recorded restructuring and asset impairment charges for Vivint Smart Home’s wireless internet business totaling $59.2 million, which resulted in $53.2 million of asset impairment charges related to write-downs of Vivint Smart Home’s network assets, subscriber acquisition costs, certain intellectual property and goodwill and $6.0 million in net restructuring charges related to employee severance and termination benefits, as well as write-offs of certain vendor contracts. Any profits Vivint Smart Home may generate from these or other new products or services may be lower than profits generated from Vivint Smart Home’s other products and services and may not be sufficient for Vivint Smart Home to recoup Vivint Smart Home’s development or subscriber acquisition costs incurred. New products and services may also have lower gross margins, particularly to the extent that they do not fully utilize Vivint Smart Home’s existing infrastructure. In addition, new products and services may require increased operational expenses or subscriber acquisition costs and present new and difficult technological and intellectual property challenges that may subject Vivint Smart Home to claims or complaints if subscribers experience service disruptions or failures or other quality issues. To the extent Vivint Smart Home’s new products and services are not successful, it could have a material adverse effect on Vivint Smart Home’s business, financial condition, cash flows or results of operations.

Vivint Smart Home’s new retail strategy may subject Vivint Smart Home to additional risks.

Historically, Vivint Smart Home has primarily originated subscribers through Vivint Smart Home’s direct-to-home and inside sales channels. However, in 2017 Vivint Smart Home developed a new strategy to enter into the retail channel in order to expand Vivint Smart Home’s reach to the broad consumer market. For example, on May 4, 2017, Vivint Smart Home announced an agreement with Best Buy, pursuant to which the parties had agreed to jointly market and sell smart home products and services. In July 2018, as part of certain cost reduction initiatives, the goal of which was to reduce certain of Vivint Smart Home’s general and administrative, subscriber service, and sales support fixed costs, Vivint Smart Home agreed in principle to end

 

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the co-branded Best Buy Smart Home by Vivint Smart Home arrangement and in December 2018 Vivint Smart Home formally terminated Vivint Smart Home’s relationship with Best Buy. Vivint Smart Home continues to explore other retail strategy opportunities and may devote significant management attention, substantial capital and other resources in connection with such efforts. However, despite these efforts and expenses, Vivint Smart Home may not be able to establish retail distribution channels for Vivint Smart Home’s products and services.

The technology Vivint Smart Home employs may become obsolete, which could require significant capital expenditures.

Vivint Smart Home’s industry is subject to continual technological innovation. Vivint Smart Home’s products and services interact with the hardware and software technology of systems and devices located at Vivint Smart Home’s subscribers’ property. Vivint Smart Home may be required to implement new technologies or adapt existing technologies in response to changing market conditions, subscriber preferences, industry standards or inability to secure necessary intellectual property licenses, which could require significant capital expenditures. It is also possible that one or more of Vivint Smart Home’s competitors could develop a significant technological advantage that allows them to provide additional or superior products or services, or to lower their price for similar products or services, that could put Vivint Smart Home at a competitive disadvantage. Vivint Smart Home’s inability to adapt to changing technologies, market conditions or subscriber preferences in a timely manner could have a material adverse effect on Vivint Smart Home’s business, financial condition, cash flows or results of operations.

Vivint Smart Home’s future operating and financial results are uncertain.

Prior growth rates in revenues and other operating and financial results should not be considered indicative of Vivint Smart Home’s future performance. Vivint Smart Home’s future performance and operating results depend on, among other things: (1) Vivint Smart Home’s ability to renew and/or upgrade contracts with existing subscribers and maintain subscriber satisfaction with existing subscribers; (2) Vivint Smart Home’s ability to generate new subscribers, including Vivint Smart Home’s ability to scale the number of new subscribers generated through inside sales and other channels; (3) Vivint Smart Home’s ability to increase the density of Vivint Smart Home’s subscriber base for existing service locations or continue to expand into new geographic markets; (4) Vivint Smart Home’s ability to successfully develop and market new and innovative products and services; (5) the level of product, service and price competition; (6) the degree of saturation in, and Vivint Smart Home’s ability to further penetrate, existing markets; (7) Vivint Smart Home’s ability to manage growth, revenues, origination or acquisition costs of new subscribers and attrition rates, the cost of servicing Vivint Smart Home’s existing subscribers and general and administrative costs; and (8) Vivint Smart Home’s ability to attract, train and retain qualified employees. If Vivint Smart Home’s future operating and financial results suffer as a result of any of the other reasons mentioned above, or any other reasons, there could be a material adverse effect on Vivint Smart Home’s business, financial condition, cash flows or results of operations.

There can be no assurance that Vivint Smart Home will be able to achieve or maintain profitability or positive cash flow from operations.

Vivint Smart Home’s ability to generate future positive operating results and cash flows depends, in part, on Vivint Smart Home’s ability to generate new subscribers in a cost-effective manner, while minimizing attrition of existing subscribers. New subscriber acquisitions play a particularly important role in Vivint Smart Home’s financial model as they not only increase Vivint Smart Home’s future operating cash flows, but also help to replace the cash flows lost as a result of subscriber attrition. If Vivint Smart Home is unable to cost-effectively generate new subscribers or retain Vivint Smart Home’s existing subscribers, Vivint Smart Home’s business, operating results and financial condition would be materially adversely affected. In addition, to drive Vivint Smart Home’s growth, Vivint Smart Home has made significant upfront investments in subscriber acquisition costs, as well as technology and infrastructure to support Vivint Smart Home’s growing subscriber base. As a result of these investments, Vivint Smart Home has incurred losses and used significant amounts of cash to fund

 

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operations. As Vivint Smart Home’s business scales, Vivint Smart Home expects recurring revenue to increase due to growth in Vivint Smart Home’s total subscribers. If such increase occurs, a greater percentage of Vivint Smart Home’s net acquisition costs for new subscribers may be funded through revenues generated by Vivint Smart Home’s existing subscriber base. Vivint Smart Home also expects the number of new subscribers to decrease as a percentage of Vivint Smart Home’s total subscribers as Vivint Smart Home’s business scales, which Vivint Smart Home believes, along with the expected growth in recurring revenue, will improve operating results and operating cash flows over time. Vivint Smart Home’s ability to improve Vivint Smart Home’s operating results and cash flows, however, is subject to a number of risks and uncertainties and there can be no assurance that Vivint Smart Home will achieve such improvements. To the extent the number of new subscribers does not decrease as a percentage of Vivint Smart Home’s total subscribers or Vivint Smart Home does not reduce the percentage of Vivint Smart Home’s revenue used to support new investments, Vivint Smart Home will continue to incur losses and require a significant amount of cash to fund Vivint Smart Home’s operations, which in turn could have a material adverse effect on Vivint Smart Home’s business, cash flows, operating results and financial condition.

Vivint Smart Home’s business is subject to economic and demographic factors that may negatively impact Vivint Smart Home’s results of operations.

Vivint Smart Home’s business is generally dependent on national, regional and local economic conditions. Historically, both the U.S. and worldwide economies have experienced cyclical economic downturns, some of which have been prolonged and severe. These economic downturns have generally coincided with, and contributed to, increased energy costs, concerns about inflation, slower economic activity, decreased consumer confidence and spending, reduced corporate profits and capital spending, adverse business conditions and liquidity concerns. These conditions and concerns result in a decline in business and consumer confidence and increased unemployment.

Where disposable income available for discretionary spending is reduced (due to, for example, higher housing, energy, interest or other costs or where the perceived wealth of subscribers has decreased) and disruptions in the financial markets adversely impact the availability and cost of credit, Vivint Smart Home’s business may experience increased attrition rates, a reduced ability to originate new subscribers and reduced consumer demand.

For instance, recoveries in the housing market increase the occurrence of relocations, which may lead to subscribers disconnecting service and not contracting with Vivint Smart Home in their new homes. Vivint Smart Home cannot predict the timing or duration of any economic slowdown or the timing or strength of a subsequent economic recovery, worldwide or in the specific markets where Vivint Smart Home’s subscribers are located.

Furthermore, any deterioration in new construction and sales of existing single-family homes could reduce opportunities to originate new subscribers and increase attrition among Vivint Smart Home’s existing subscribers. Such downturns in the economy in general, and the housing market in particular, may negatively affect Vivint Smart Home’s business.

In addition, unfavorable shifts in population and other demographic factors may cause Vivint Smart Home to lose subscribers as people migrate to markets where Vivint Smart Home has little or no presence, or if the general population shifts into a less desirable age, geographic or other demographic group from Vivint Smart Home’s business perspective.

Vivint Smart Home’s inside sales and retail channels depend on third parties and other sources that Vivint Smart Home does not control to generate leads that Vivint Smart Home then converts into subscribers. If Vivint Smart Home’s third-party partners and lead generators are not successful in generating leads for Vivint Smart Home’s inside sales and retail sales channels, if the quality of those leads deteriorates, or if Vivint Smart Home is unable to generate leads through other sources that are cost effective and can be successfully converted into

 

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subscribers, it could have a material adverse effect on Vivint Smart Home’s financial condition, cash flows or results of operations.

Also, Vivint Smart Home’s subscribers consist largely of homeowners, who are subject to economic, credit, financial and other risks, as applicable. These risks could materially and adversely affect a subscriber’s ability to make required payments to Vivint Smart Home on a timely basis. Any such decrease or delay in subscriber payments may have a material adverse effect on Vivint Smart Home. As a result of financial distress, subscribers may apply for relief under bankruptcy and other laws relating to creditors’ rights. In addition, subscribers may be subject to involuntary application of such bankruptcy and other laws relating to creditors’ rights. The bankruptcy of a subscriber could adversely affect Vivint Smart Home’s ability to collect payments, to protect Vivint Smart Home’s rights and otherwise realize the value of Vivint Smart Home’s contract with the subscriber. This may occur as a result of, among other things, application of the automatic stay, delays and uncertainty in the bankruptcy process and potential rejection of such subscriber contracts. Vivint Smart Home’s subscribers’ inability to pay, whether as a result of economic or credit issues, bankruptcy or otherwise, could have a material adverse effect on Vivint Smart Home’s financial condition, cash flows or results of operations.

Vivint Smart Home depends on a limited number of suppliers to provide Vivint Smart Home’s products and services. Vivint Smart Home’s product suppliers, in turn, rely on a limited number of suppliers to provide significant components and materials used in Vivint Smart Home’s products. A change in Vivint Smart Home’s existing preferred supply arrangements or a material interruption in supply of products or third-party services could increase Vivint Smart Home’s costs or prevent or limit Vivint Smart Home’s ability to accept and fill orders for Vivint Smart Home’s products and services.

Vivint Smart Home obtains important components of Vivint Smart Home’s systems from several suppliers. Should such suppliers cease to manufacture the products Vivint Smart Home purchase from them or become unable to timely deliver these products in accordance with Vivint Smart Home’s requirements, or should such other suppliers choose not to do business with Vivint Smart Home, Vivint Smart Home may be required to locate alternative suppliers. Vivint Smart Home also relies on a number of sole or limited source suppliers for critical components of Vivint Smart Home’s solution. In particular, Vivint Smart Home relies on Alpha Networks Inc. for Vivint Smart Home’s indoor cameras. Replacing this sole source supplier or Vivint Smart Home’s limited source suppliers could require the expenditure of significant resources and time to redesign and resource these products. In addition, any financial or other difficulties Vivint Smart Home’s suppliers face may have negative effects on Vivint Smart Home’s business. Vivint Smart Home may be unable to locate alternate suppliers on a timely basis or to negotiate the purchase of control panels or other equipment on favorable terms, if at all. In addition, Vivint Smart Home’s equipment suppliers, in turn, depend upon a limited number of outside unaffiliated suppliers for key components and materials used in Vivint Smart Home’s control panels and other equipment. If any of these suppliers cease to or are unable to provide components and materials in sufficient quantity and of the requisite quality, especially during Vivint Smart Home’s summer selling season when a large percentage of Vivint Smart Home’s new subscriber originations occur, and if there are not adequate alternative sources of supply, Vivint Smart Home could experience significant delays in the supply of equipment. Any such delay in the supply of equipment of the requisite quality could adversely affect Vivint Smart Home’s ability to originate subscribers and cause Vivint Smart Home’s subscribers not to continue, renew or upgrade their contracts or to choose not to purchase such products or services from Vivint Smart Home. This would result in delays in or loss of future revenues and could have a material adverse effect on Vivint Smart Home’s business, financial condition, cash flows or results of operations. Also, if previously installed components and materials were found to be defective, Vivint Smart Home might not be able to recover the costs associated with the recall, repair or replacement of such products, across Vivint Smart Home’s installed subscriber base, and the diversion of personnel and other resources to address such issues could have a material adverse effect on Vivint Smart Home’s financial condition, cash flows or results of operations.

 

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Currency fluctuations could materially and adversely affect Vivint Smart Home, and Vivint Smart Home has not hedged this risk.

Historically, a small portion of Vivint Smart Home’s revenue has been denominated in Canadian Dollars. For the six months ended June 30, 2019, before intercompany eliminations, approximately $35.9 million of Vivint Smart Home’s revenues were denominated in Canadian Dollars. As of June 30, 2019, $268.7 million of Vivint Smart Home’s total assets and $237.4 million of Vivint Smart Home’s total liabilities were denominated in Canadian Dollars. In the future, Vivint Smart Home expect to continue generating revenue denominated in Canadian Dollars and other foreign currencies. Accordingly, Vivint Smart Home may be materially and adversely affected by currency fluctuations in the U.S. Dollar versus these currencies. Weaker foreign currencies relative to the U.S. Dollar may result in lower levels of reported revenues with respect to foreign currency-denominated subscriber contracts, net income, assets, liabilities and accumulated other comprehensive income on Vivint Smart Home’s U.S. Dollar-denominated financial statements. Vivint Smart Home has not historically hedged against this exposure. Foreign exchange rates are influenced by many factors outside of Vivint Smart Home’s control, including but not limited to: changing supply and demand for a particular currency, monetary policies of governments (including exchange-control programs, restrictions on local exchanges or markets and limitations on foreign investment in a country or an investment by residents of a country in other countries), changes in balances of payments and trade, trade restrictions and currency devaluations and revaluations. Also, governments may from time to time intervene in the currency markets, directly and by regulation, to influence prices directly. As such, these events and actions are unpredictable. The resulting volatility in the exchange rates for the other currencies could have a material adverse effect on Vivint Smart Home’s financial condition and results of operations.

Vivint Smart Home relies on certain third-party providers of licensed software and services integral to the operations of Vivint Smart Home’s business.

Certain aspects of the operation of Vivint Smart Home’s business depend on third-party software and service providers. Vivint Smart Home relies on certain software technology that Vivint Smart Home licenses from third parties and uses in Vivint Smart Home’s products and services to perform key functions and provide critical functionality. For example, Vivint Smart Home’s subscribers with Go! Control panels utilize technology hosted by Alarm.com to access their systems remotely through a smart phone application or through a web interface. With regard to licensed software technology, Vivint Smart Home is, to a certain extent, dependent upon the ability of third parties to maintain, enhance or develop their software and services on a timely and cost-effective basis, to meet industry technological standards and innovations to deliver software and services that are free of defects or security vulnerabilities, and to ensure their software and services are free from disruptions or interruptions. Further, these third-party services and software licenses may not always be available to Vivint Smart Home on commercially reasonable terms or at all.

If Vivint Smart Home’s agreements with third-party software or services vendors are not renewed or the third-party software or services become obsolete, fail to function properly, are incompatible with future versions of Vivint Smart Home’s products or services, are defective or otherwise fail to address Vivint Smart Home’s needs, there is no assurance that Vivint Smart Home would be able to replace the functionality provided by the third-party software or services with software or services from alternative providers. Furthermore, even if Vivint Smart Home obtains licenses to alternative software or services that provide the functionality Vivint Smart Home needs, Vivint Smart Home may be required to replace hardware installed at Vivint Smart Home’s monitoring stations and at Vivint Smart Home’s subscribers’ homes, including security system control panels and peripherals, to affect Vivint Smart Home’s integration of or migration to alternative software products. Any of these factors could have a material adverse effect on Vivint Smart Home’s financial condition, cash flows or results of operations.

 

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Vivint Smart Home is highly dependent on the proper and efficient functioning of Vivint Smart Home’s computer, data backup, information technology, telecom and processing systems, platform and Vivint Smart Home’s redundant monitoring stations.

Vivint Smart Home’s ability to keep Vivint Smart Home’s business operating is highly dependent on the proper and efficient operation of Vivint Smart Home’s computer systems, information technology systems, telecom systems, data-processing systems and subscriber software platform. Although Vivint Smart Home has redundant central monitoring facilities, backup computer and power systems and disaster recovery tests, if there is a catastrophic event, natural disaster, security breach, negligent or intentional act by an employee or other extraordinary event, Vivint Smart Home may be unable to provide Vivint Smart Home’s subscribers with uninterrupted services.

Furthermore, because computer and data backup and processing systems are susceptible to malfunctions and interruptions, Vivint Smart Home cannot guarantee that Vivint Smart Home will not experience service failures in the future. A significant or large-scale malfunction or interruption of any computer or data backup and processing system could adversely affect Vivint Smart Home’s ability to keep Vivint Smart Home’s operations running efficiently and respond to alarm system signals. Vivint Smart Home does not have a backup system for Vivint Smart Home’s subscriber software platform. If a malfunction results in a wider or sustained disruption, it could have a material adverse effect on Vivint Smart Home’s reputation, business, financial condition, cash flows or results of operations.

Vivint Smart Home is subject to unionization and labor and employment laws and regulations, which could increase Vivint Smart Home’s costs and restrict Vivint Smart Home’s operations in the future.

Currently, a very small minority of Vivint Smart Home’s employees are represented by a union. As Vivint Smart Home continues to grow and enter different regions, unions may make further attempts to organize all or part of Vivint Smart Home’s employee base. If more or all of Vivint Smart Home’s workforce were to become unionized, and the terms of the collective bargaining agreement were significantly different from Vivint Smart Home’s current compensation arrangements, it could increase Vivint Smart Home’s costs and adversely impact Vivint Smart Home’s profitability. Additionally, responding to such organization attempts distracts Vivint Smart Home’s management and results in increased legal and other professional fees; and, labor union contracts could put Vivint Smart Home at increased risk of labor strikes and disruption of Vivint Smart Home’s operations.

Vivint Smart Home’s business is subject to a variety of employment laws and regulations and may become subject to additional such requirements in the future. Although Vivint Smart Home believes Vivint Smart Home is in material compliance with applicable employment laws and regulations, in the event of a change in requirements, Vivint Smart Home may be required to modify Vivint Smart Home’s operations or to utilize resources to maintain compliance with such laws and regulations. Moreover, Vivint Smart Home may be subject to various employment-related claims, such as individual or class actions or government enforcement actions relating to alleged employment discrimination, employee classification and related withholding, wage-hour disputes, labor standards or healthcare and benefit issues. Vivint Smart Home’s failure to comply with applicable employment laws and regulations and related legal actions against Vivint Smart Home may affect Vivint Smart Home’s ability to compete or have a material adverse effect on Vivint Smart Home’s business, financial condition, cash flows or results of operations.

The loss of Vivint Smart Home’s senior management could disrupt Vivint Smart Home’s business.

Vivint Smart Home’s senior management is important to the success of Vivint Smart Home’s business because there is significant competition for executive personnel with experience in the smart home and security industry and Vivint Smart Home’s sales channels. As a result of this need and the competition for a limited pool of industry-based executive experience, Vivint Smart Home may not be able to retain Vivint Smart Home’s existing senior management. In addition, Vivint Smart Home may not be able to fill new positions or vacancies

 

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created by expansion or turnover. Vivint Smart Home does not and does not currently expect to have in the future, “key person” insurance on the lives of any member of Vivint Smart Home’s senior management. The loss of any member of Vivint Smart Home’s senior management team without retaining a suitable replacement could have a material adverse effect on Vivint Smart Home’s business, financial condition, cash flows or results of operations.

If Vivint Smart Home is unable to acquire necessary intellectual property or adequately protect Vivint Smart Home’s intellectual property, Vivint Smart Home could be competitively disadvantaged.

Vivint Smart Home’s intellectual property, including Vivint Smart Home’s patents, trademarks, copyrights, trade secrets and other proprietary rights, constitutes a significant part of Vivint Smart Home’s value. Vivint Smart Home’s success depends, in part, on Vivint Smart Home’s ability to protect Vivint Smart Home’s proprietary technology, brands and other intellectual property against dilution, infringement, misappropriation and competitive pressure by defending Vivint Smart Home’s intellectual property rights. To protect Vivint Smart Home’s intellectual property rights, Vivint Smart Home relies on a combination of patent, trademark, copyright and trade secret laws of the United States, Canada and other countries and a combination of confidentiality procedures, contractual provisions and other methods, all of which offer only limited protection. In addition, Vivint Smart Home makes efforts to acquire rights to intellectual property necessary for Vivint Smart Home’s operations. However, there can be no assurance that these measures will be successful in any given case, particularly in those countries where the laws do not protect Vivint Smart Home’s proprietary rights as fully as in the United States.

Vivint Smart Home owns a portfolio of issued U.S. patents and pending U.S. and foreign patent applications that relate to a variety of smart home, security and wireless Internet technologies utilized in Vivint Smart Home’s business. Vivint Smart Home may file additional patent applications in the future in the United States and internationally. The process of obtaining patent protection is expensive and time-consuming, and Vivint Smart Home may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner all the way through to the successful issuance of a patent. Vivint Smart Home may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions. In addition, issuance of a patent does not guarantee that Vivint Smart Home has an absolute right to practice the patented invention.

If Vivint Smart Home fails to acquire the necessary intellectual property rights or adequately protect or assert Vivint Smart Home’s intellectual property rights, competitors may dilute Vivint Smart Home’s brands or manufacture and market similar products and services or convert Vivint Smart Home’s subscribers, which could adversely affect Vivint Smart Home’s market share and results of operations. Vivint Smart Home may not receive patents or trademarks for all Vivint Smart Home’s pending patent and trademark applications, and existing or future patents or licenses may not provide competitive advantages for Vivint Smart Home’s products and services. Furthermore, it is possible that Vivint Smart Home’s patent applications may not issue as granted patents, that the scope of Vivint Smart Home’s issued patents will be insufficient or not have the coverage originally sought, or that Vivint Smart Home’s issued patents will not provide Vivint Smart Home with any competitive advantages. Vivint Smart Home’s competitors may challenge, invalidate or avoid the application of Vivint Smart Home’s existing or future intellectual property rights that Vivint Smart Home obtains or licenses. In addition, patent rights may not prevent Vivint Smart Home’s competitors from developing, using or selling products or services that are similar to or address the same market as Vivint Smart Home’s products and services. The loss of protection for Vivint Smart Home’s intellectual property rights could reduce the market value of Vivint Smart Home’s brands and Vivint Smart Home’s products and services, reduce new subscriber originations or upgrade sales to existing subscribers, lower Vivint Smart Home’s profits, and could have a material adverse effect on Vivint Smart Home’s business, financial condition, cash flows or results of operations.

Vivint Smart Home’s policy is to require Vivint Smart Home’s employees that were hired to develop material intellectual property included in Vivint Smart Home’s products to execute written agreements in which

 

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they assign to Vivint Smart Home their rights in potential inventions and other intellectual property created within the scope of their employment (or, with respect to consultants and service providers, their engagement to develop such intellectual property), but Vivint Smart Home cannot assure you that Vivint Smart Home has adequately protected Vivint Smart Home’s rights in every such agreement or that Vivint Smart Home has executed an agreement with every such party. Finally, in order to benefit from the protection of patents and other intellectual property rights, Vivint Smart Home must monitor and detect infringement, misappropriation or other violations of Vivint Smart Home’s intellectual property rights and pursue infringement, misappropriation or other claims in certain circumstances in relevant jurisdictions, all of which are costly and time-consuming. As a result, Vivint Smart Home may not be able to obtain adequate protection or to effectively enforce Vivint Smart Home’s issued patents or other intellectual property rights.

In addition to patents and registered trademarks, Vivint Smart Home relies on trade secret rights, copyrights and other rights to protect Vivint Smart Home’s unpatented proprietary intellectual property and technology. Despite Vivint Smart Home’s efforts to protect Vivint Smart Home’s proprietary technologies and Vivint Smart Home’s intellectual property rights, unauthorized parties, including Vivint Smart Home’s employees, consultants, service providers or subscribers, may attempt to copy aspects of Vivint Smart Home’s products or obtain and use Vivint Smart Home’s trade secrets or other confidential information. Vivint Smart Home generally enters into confidentiality agreements with Vivint Smart Home’s employees and third parties that have access to Vivint Smart Home’s material confidential information, and generally limits access to and distribution of Vivint Smart Home’s proprietary information and proprietary technology through certain procedural safeguards. These agreements may not effectively prevent unauthorized use or disclosure of Vivint Smart Home’s intellectual property or technology, could be breached or otherwise may not provide meaningful protection for Vivint Smart Home’s trade secrets and know-how related to the design, manufacture or operation of Vivint Smart Home’s products and may not provide an adequate remedy in the event of unauthorized use or disclosure. Vivint Smart Home cannot assure you that the steps taken by Vivint Smart Home will prevent misappropriation of Vivint Smart Home’s intellectual property or technology or infringement of Vivint Smart Home’s intellectual property rights. Competitors may independently develop technologies or products that are substantially equivalent or superior to Vivint Smart Home’s solutions or that inappropriately incorporate Vivint Smart Home’s proprietary technology into their products or they may hire Vivint Smart Home’s former employees who may misappropriate Vivint Smart Home’s proprietary technology or misuse Vivint Smart Home’s confidential information. In addition, if Vivint Smart Home expands the geography of Vivint Smart Home’s service offerings, the laws of some foreign countries where Vivint Smart Home may do business in the future do not protect intellectual property rights and technology to the same extent as the laws of the United States, and these countries may not enforce these laws as diligently as government agencies and private parties in the United States.

From time to time, legal action by Vivint Smart Home may be necessary to enforce Vivint Smart Home’s patents and other intellectual property rights, to protect Vivint Smart Home’s trade secrets, to determine the validity and scope of the intellectual property rights of others or to defend against claims of infringement, misappropriation or invalidity. Such litigation could result in substantial costs and diversion of resources and could negatively affect Vivint Smart Home’s business, operating results and financial condition. If Vivint Smart Home is unable to protect Vivint Smart Home’s intellectual property and technology, Vivint Smart Home may find itself at a competitive disadvantage to others who need not incur the additional expense, time and effort required to create the innovative products that have enabled Vivint Smart Home to be successful to date.

From time to time, Vivint Smart Home is subject to claims for infringing, misappropriating or otherwise violating the intellectual property rights of others, and will be subject to such claims in the future, which could have an adverse effect on Vivint Smart Home’s business and operations.

Vivint Smart Home cannot be certain that Vivint Smart Home’s products and services or those of third parties that Vivint Smart Home incorporates into Vivint Smart Home’s offerings do not and will not infringe the intellectual property rights of others. Many of Vivint Smart Home’s competitors and others may now and in the

 

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future have significantly larger and more mature patent portfolios than Vivint Smart Home has. Vivint Smart Home has been in the past, and may be in the future, subject to claims based on allegations of infringement, misappropriation or other violations of the intellectual property rights of others, including litigation brought by special purpose or so-called “non-practicing” entities that focus solely on extracting royalties and settlements by enforcing intellectual property rights and against whom Vivint Smart Home’s patents may therefore provide little or no deterrence or protection. Regardless of their merits, intellectual property claims divert the attention of Vivint Smart Home’s personnel and are often time-consuming and expensive. In addition, to the extent claims against Vivint Smart Home are successful, Vivint Smart Home may have to pay substantial monetary damages (including, for example, treble damages if Vivint Smart Home is found to have willfully infringed patents and increased statutory damages if Vivint Smart Home is found to have willfully infringed copyrights) or discontinue or modify certain products or services that are found to infringe another party’s rights or enter into licensing agreements with costly royalty payments. Defending against claims of infringement, misappropriation or other violations or being deemed to be infringing, misappropriating or otherwise violating the intellectual property rights of others could impair Vivint Smart Home’s ability to innovate, develop, distribute and sell Vivint Smart Home’s current and planned products and services. Vivint Smart Home has in the past and will continue in the future to seek one or more licenses to continue offering certain products or services, which could have a material adverse effect on Vivint Smart Home’s business, financial condition, cash flows or results of operations.

In some cases, Vivint Smart Home indemnifies Vivint Smart Home’s channel partners against claims that Vivint Smart Home’s products infringe, misappropriate or otherwise violate the intellectual property rights of third parties. Such claims could arise out of Vivint Smart Home’s indemnification obligation with Vivint Smart Home’s channel partners and end-subscribers, whom Vivint Smart Home typically indemnifies against such claims. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of Vivint Smart Home’s confidential information could be compromised by the discovery process. Although claims of this kind have not materially affected Vivint Smart Home’s business to date, there can be no assurance material claims will not arise in the future.

Although third parties may offer a license to their technology or other intellectual property, the terms of any offered license may not be acceptable, and the failure to obtain a license or the costs associated with any license could cause Vivint Smart Home’s business, financial condition and results of operations to be materially and adversely affected. In addition, some licenses may be non-exclusive, and therefore Vivint Smart Home’s competitors may have access to the same technology licensed to Vivint Smart Home. If a third party does not offer Vivint Smart Home a license to its technology or other intellectual property on reasonable terms, or at all, Vivint Smart Home could be enjoined from continued use of such intellectual property. As a result, Vivint Smart Home may be required to develop alternative, non-infringing technology, which could require significant time (during which Vivint Smart Home could be unable to continue to offer Vivint Smart Home’s affected products, subscriptions or services), effort, and expense and may ultimately not be successful. Furthermore, a successful claimant could secure a judgment or Vivint Smart Home may agree to a settlement that prevents Vivint Smart Home from distributing certain products, providing certain subscriptions or performing certain services or that requires Vivint Smart Home to pay substantial damages, royalties or other fees. Any of these events could harm Vivint Smart Home’s business, financial condition and results of operations.

Vivint Smart Home’s solutions contain third-party open-source software components, and failure to comply with the terms of the underlying open-source software licenses could restrict Vivint Smart Home’s ability to sell Vivint Smart Home’s products and subscriptions.

Certain of Vivint Smart Home’s solutions contain software modules licensed to Vivint Smart Home by third-party authors under “open-source” licenses. The use and distribution of open-source software may entail greater risks than the use of third-party commercial software, as open-source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code.

Some open-source licenses contain requirements that Vivint Smart Home make available the source code for modifications or derivative works Vivint Smart Home creates based upon the type of open-source software

 

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Vivint Smart Home uses. If Vivint Smart Home combines Vivint Smart Home’s proprietary software with open-source software in a certain manner, Vivint Smart Home could, under certain open-source licenses, be required to release the source code of Vivint Smart Home’s proprietary software to the public. This would allow Vivint Smart Home’s competitors to create similar products with lower development effort and time and ultimately could result in a loss of sales for Vivint Smart Home.

Although Vivint Smart Home monitors Vivint Smart Home’s use of open-source software and tries to ensure that none is used in a manner that would require Vivint Smart Home to disclose Vivint Smart Home’s proprietary source code or that would otherwise breach the terms of an open-source agreement, the terms of many open-source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in ways that could impose unanticipated conditions or restrictions on Vivint Smart Home’s ability to commercialize solutions incorporating such software. Moreover, Vivint Smart Home cannot assure you that Vivint Smart Home’s processes for controlling Vivint Smart Home’s use of open-source software in Vivint Smart Home’s solutions will be effective. From time to time, Vivint Smart Home may face claims from third parties asserting ownership of, or demanding release of, the open-source software or derivative works that Vivint Smart Home developed using such software (which could include Vivint Smart Home’s proprietary source code), or otherwise seeking to enforce the terms of the applicable open-source license. These claims could result in litigation. If Vivint Smart Home is held to have breached the terms of an open-source software license, Vivint Smart Home could be required to seek licenses from third parties to continue offering Vivint Smart Home’s products on terms that are not economically feasible, to re-engineer Vivint Smart Home’s products, to discontinue the sale of Vivint Smart Home’s products if re-engineering could not be accomplished on a timely or cost-effective basis, or to make generally available, in source-code form, Vivint Smart Home’s proprietary code, any of which could adversely affect Vivint Smart Home’s business, results of operations and financial condition.

If Vivint Smart Home fails to maintain effective internal control over financial reporting at a reasonable assurance level, Vivint Smart Home may not be able to accurately report Vivint Smart Home’s financial results, which could have a material adverse effect on Vivint Smart Home’s operations, investor confidence in Vivint Smart Home’s business and the trading prices of Vivint Smart Home’s securities.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. If material weaknesses in Vivint Smart Home’s internal controls are discovered, they may adversely affect Vivint Smart Home’s ability to record, process, summarize and accurately report timely financial information and, as a result, Vivint Smart Home’s financial statements may contain material misstatements or omissions.

In addition, it is possible that control deficiencies could be identified by Vivint Smart Home’s management or by Vivint Smart Home’s independent registered public accounting firm in the future or may occur without being identified. Such a failure could result in regulatory scrutiny and cause investors to lose confidence in Vivint Smart Home’s reported financial condition, lead to a default under Vivint Smart Home’s indebtedness and otherwise have a material adverse effect on Vivint Smart Home’s business, financial condition, cash flow or results of operations.

Product or service defects or shortfalls in subscriber service could have an adverse effect on Vivint Smart Home.

Vivint Smart Home’s inability to provide products or services in a timely manner or defects in Vivint Smart Home’s products or services, including products and services of third parties that Vivint Smart Home incorporate into Vivint Smart Home’s offerings, could adversely affect Vivint Smart Home’s reputation and subject Vivint Smart Home to claims or litigation. In addition, Vivint Smart Home’s inability to meet subscribers’ expectations with respect to Vivint Smart Home’s products or services could increase attrition rates or affect Vivint Smart Home’s ability to generate new subscribers and thereby have a material adverse effect on Vivint Smart Home’s business, financial condition, cash flow or results of operations.

 

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Vivint Smart Home is exposed to greater risk of liability for employee acts or omissions or system failure than may be inherent in other businesses.

The nature of the products and services Vivint Smart Home provides potentially exposes Vivint Smart Home to greater risks of liability for employee acts or omissions or system failures than may be inherent in other businesses. If subscribers believe that they incurred losses as a result of Vivint Smart Home’s action or inaction, the subscribers (or their insurers) have and could in the future bring claims against Vivint Smart Home. Although Vivint Smart Home’s service contracts contain provisions limiting Vivint Smart Home’s liability for such claims, no assurance can be given that these limitations will be enforced, and the costs of such litigation or the related settlements or judgments could have a material adverse effect on Vivint Smart Home’s financial condition. In addition, there can be no assurance that Vivint Smart Home is adequately insured for these risks. Certain of Vivint Smart Home’s insurance policies and the laws of some states may limit or prohibit insurance coverage for punitive or certain other types of damages or liability arising from gross negligence. If significant uninsured damages are assessed against Vivint Smart Home, the resulting liability could have a material adverse effect on Vivint Smart Home’s business, financial condition, cash flows or results of operations.

Future transactions could pose risks.

Vivint Smart Home frequently evaluates strategic opportunities both within and outside Vivint Smart Home’s existing lines of business. Vivint Smart Home expects from time to time to pursue additional business opportunities and may decide to eliminate or acquire certain businesses, products or services. For example, in August 2014, Vivint Smart Home acquired Space Monkey, a distributed cloud storage technology solution company. Such acquisitions or dispositions could be material. There are various risks and uncertainties associated with potential acquisitions and divestitures, including: (1) availability of financing; (2) difficulties related to integrating previously separate businesses into a single unit, including product and service offerings, distribution and operational capabilities and business cultures; (3) general business disruption; (4) managing the integration process; (5) diversion of management’s attention from day-to-day operations, (6) assumption of costs and liabilities of an acquired business, including unforeseen or contingent liabilities or liabilities in excess of the amounts estimated; (7) failure to realize anticipated benefits and synergies, such as cost savings and revenue enhancements; (8) potentially substantial costs and expenses associated with acquisitions and dispositions; (9) failure to retain and motivate key employees; and (10) difficulties in applying Vivint Smart Home’s internal control over financial reporting and disclosure controls and procedures to an acquired business. Any or all of these risks and uncertainties, individually or collectively, could have material adverse effect on Vivint Smart Home’s business, financial condition, cash flow or results of operations. Vivint Smart Home can offer no assurance that any such strategic opportunities will prove to be successful. Among other negative effects, Vivint Smart Home’s pursuit of such opportunities could cause Vivint Smart Home’s cost of investment in new subscribers to grow at a faster rate than Vivint Smart Home’s recurring revenue and fees collected at the time of installation. Additionally, any new product or service offerings could require developmental investments or have higher cost structures than Vivint Smart Home’s current arrangements, which could reduce operating margins and require more working capital.

Goodwill and other identifiable intangible assets represent a significant portion of Vivint Smart Home’s total assets, and Vivint Smart Home may never realize the full value of Vivint Smart Home’s intangible assets.

As of June 30, 2019, Vivint Smart Home had approximately $1.1 billion of goodwill and identifiable intangible assets. Goodwill and other identifiable intangible assets are recorded at fair value on the date of acquisition. In addition, as of June 30, 2019, Vivint Smart Home had $1.2 billion of capitalized contract costs, net. Vivint Smart Home reviews such assets for impairment at least annually. Impairment may result from, among other things, deterioration in performance, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the products and services Vivint Smart Home offers, challenges to the validity of certain intellectual property, reduced sales of certain products or services incorporating intellectual property, increased attrition and a variety of other factors. The amount of any

 

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quantified impairment must be expensed immediately as a charge to results of operations. Depending on future circumstances, it is possible that Vivint Smart Home may never realize the full value of Vivint Smart Home’s intangible assets. Any future determination of impairment of goodwill or other identifiable intangible assets could have a material adverse effect on Vivint Smart Home’s financial position and results of operations.

Insurance policies may not cover all of Vivint Smart Home’s operating risks and a casualty loss beyond the limits of Vivint Smart Home’s coverage could negatively impact Vivint Smart Home’s business.

Vivint Smart Home is subject to all of the operating hazards and risks normally incidental to the provision of Vivint Smart Home’s products and services and business operations. In addition to contractual provisions limiting Vivint Smart Home’s liability to subscribers and third parties, Vivint Smart Home maintains insurance policies in such amounts and with such coverage and deductibles as required by law and that Vivint Smart Home believe are reasonable and prudent. See “—Vivint Smart Home is exposed to greater risk of liability for employee acts or omissions or system failure than may be inherent in other businesses”. Nevertheless, such insurance may not be adequate to protect Vivint Smart Home from all the liabilities and expenses that may arise from claims for personal injury, death or property damage arising in the ordinary course of Vivint Smart Home’s business and current levels of insurance may not be able to be maintained or be available at economical prices. If a significant liability claim is brought against Vivint Smart Home that is not covered by insurance, then Vivint Smart Home may have to pay the claim with Vivint Smart Home’s own funds, which could have a material adverse effect on Vivint Smart Home’s business, financial condition, cash flows or results of operations.

Vivint Smart Home’s business is concentrated in certain markets.

Vivint Smart Home’s business is concentrated in certain markets. As of June 30, 2019, subscribers in Texas and California represented approximately 19% and 9%, respectively, of Vivint Smart Home’s total subscriber base. Accordingly, Vivint Smart Home’s business and results of operations are particularly susceptible to adverse economic, weather and other conditions in such markets and in other markets that may become similarly concentrated.

Catastrophic events may disrupt Vivint Smart Home’s business.

Unforeseen events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States, Canada or elsewhere, could disrupt Vivint Smart Home’s operations, disrupt the operations of suppliers or subscribers or result in political or economic instability. These events could reduce demand for Vivint Smart Home’s products and services, make it difficult or impossible to receive equipment from suppliers or impair Vivint Smart Home’s ability to deliver products and services to subscribers on a timely basis. Any such disruption could damage Vivint Smart Home’s reputation and cause subscriber attrition. Vivint Smart Home could be subject to claims or litigation with respect to losses caused by such disruptions. Vivint Smart Home’s property and business interruption insurance may not cover a particular event at all or be sufficient to fully cover Vivint Smart Home’s losses.

If the insurance industry changes its practice of providing incentives to homeowners for the use of residential electronic security services, Vivint Smart Home may experience a reduction in new subscriber growth or an increase in Vivint Smart Home’s subscriber attrition rate.

Some insurers provide a reduction in premium rates for insurance policies written on homes that have monitored electronic security systems. There can be no assurance that insurance companies will continue to offer these rate reductions. If these incentives were reduced or eliminated, homeowners who otherwise may not feel the need for Vivint Smart Home’s products or services would be removed from Vivint Smart Home’s potential subscriber pool, which could hinder the growth of Vivint Smart Home’s business, and existing subscribers may

 

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choose to cancel or not renew their contracts, which could increase Vivint Smart Home’s attrition rates. In either case, Vivint Smart Home’s results of operations and growth prospects could be adversely affected.

Vivint Smart Home has recorded net losses in the past and Vivint Smart Home may experience net losses in the future.

Vivint Smart Home has recorded consolidated net losses in each of the six months ended June 30, 2019 and 2018, as well as each of the previous three years ended December 31, 2018, and Vivint Smart Home may likely continue to record net losses in future periods.

The nature of Vivint Smart Home’s business requires the application of complex revenue and expense recognition rules, and the current legislative and regulatory environment affecting generally accepted accounting principles is uncertain. Significant changes in current principles could affect Vivint Smart Home’s financial statements going forward and changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and harm Vivint Smart Home’s operating results.

The accounting rules and regulations that Vivint Smart Home must comply with are complex and subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. Recent actions and public comments from the FASB and the SEC have focused on the integrity of financial reporting and internal controls. In addition, many companies’ accounting policies are being subject to heightened scrutiny by regulators and the public. Further, the accounting rules and regulations are continually changing in ways that could materially impact Vivint Smart Home’s financial statements. For example, in May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended, which superseded nearly all existing revenue recognition guidance. Vivint Smart Home adopted the new standard effective January 1, 2018, utilizing a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing certain additional disclosures.

Risks Relating to Vivint Smart Home’s Indebtedness

Vivint Smart Home’s substantial indebtedness could adversely affect Vivint Smart Home’s financial condition.

Vivint Smart Home has substantial indebtedness. Net cash interest paid for the years ended December 31, 2017 and 2018, and for the six months ended June 30, 2019, related to Vivint Smart Home’s indebtedness (excluding capital leases) totaled $203.4 million, $236.7 million and $130.3 million, respectively. Vivint Smart Home’s net cash from operating activities for the years ended December 31, 2017 and 2018, and for the six months ended June 30, 2019, before these interest payments, was an outflow of $105.9 million, an inflow of $16.2 million and an outflow of $0.7 million, respectively. Accordingly, Vivint Smart Home’s net cash from operating activities for the years ended December 31, 2017 and 2018, and the six months ended June 30, 2019, was insufficient to cover these interest payments.

As of June 30, 2019, Vivint Smart Home had approximately $3.2 billion in aggregate principal amount of total debt outstanding, all of which was issued or borrowed by APX and guaranteed by APX Group Holdings, Inc. and by substantially all of APX’s domestic subsidiaries, $2.3 billion of which was secured debt, which requires significant interest and principal payments. Subject to the limits contained in the agreements governing Vivint Smart Home’s existing indebtedness, Vivint Smart Home may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If Vivint Smart Home does so, the risks related to Vivint Smart Home’s high level of debt could increase. Specifically, Vivint Smart Home’s high level of debt could have important consequences, including the following:

 

   

making it more difficult for Vivint Smart Home to satisfy Vivint Smart Home’s obligations with respect to Vivint Smart Home’s debt;

 

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limiting Vivint Smart Home’s ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

 

   

requiring a substantial portion of Vivint Smart Home’s cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows and future borrowings available for working capital, capital expenditures (including subscriber acquisition costs), acquisitions and other general corporate purposes;

 

   

increasing Vivint Smart Home’s vulnerability to general adverse economic and industry conditions;

 

   

exposing Vivint Smart Home to the risk of increased interest rates as certain of Vivint Smart Home’s borrowings are at variable rates of interest;

 

   

limiting Vivint Smart Home’s flexibility in planning for and reacting to changes in the industry in which Vivint Smart Home competes;

 

   

placing Vivint Smart Home at a disadvantage compared to other, less leveraged competitors; and

 

   

increasing Vivint Smart Home’s cost of borrowing.

Vivint Smart Home may be able to incur significant additional indebtedness in the future.

Despite Vivint Smart Home’s current level of indebtedness, Vivint Smart Home may be able to incur substantially more debt and enter into other transactions, which could further exacerbate the risks to Vivint Smart Home’s financial condition described above. As of June 30, 2019, Vivint Smart Home had $140.3 million of availability under the revolving credit facility (after giving effect to $13.9 million of letters of credit outstanding and $134.0 million of borrowings). Vivint Smart Home is still permitted to add, in addition to the revolving credit facility, incremental facilities of up to $225 million, subject to certain conditions being satisfied. Under both the Term Loan Agreement and revolving credit facility, up to $60 million may be incurred on the same “superpriority” basis as the revolving credit facility. Moreover, although the debt agreements governing Vivint Smart Home’s existing indebtedness contain restrictions on the incurrence of additional indebtedness and entering into certain types of other transactions, these restrictions are subject to a number of qualifications and exceptions. Additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also do not prevent Vivint Smart Home from incurring obligations, such as trade payables, that do not constitute indebtedness as defined under Vivint Smart Home’s debt instruments. To the extent new debt is added to Vivint Smart Home’s current debt levels, the substantial leverage risks described in the previous risk factor would increase. In addition, the exceptions to the restrictive covenants permit Vivint Smart Home to enter into certain other transactions.

Accordingly, subject to market conditions, Vivint Smart Home opportunistically seeks to access the credit and capital markets from time to time, whether to refinance or retire Vivint Smart Home’s existing indebtedness, for the investment in and operation of Vivint Smart Home’s business, or for other general corporate purposes. Such transactions may take the form of new or amended senior secured credit facilities, including term or revolving loans, secured or unsecured notes and/or other instruments or indebtedness. These transactions may result in an increase in Vivint Smart Home’s total indebtedness, secured indebtedness and/or debt service costs.

Vivint Smart Home’s variable rate indebtedness subjects Vivint Smart Home to interest rate risk, which could cause Vivint Smart Home’s indebtedness service obligations to increase significantly.

Borrowings under Vivint Smart Home’s revolving credit facility are at variable rates of interest and expose Vivint Smart Home to interest rate risk. If interest rates increase, Vivint Smart Home’s debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and Vivint Smart Home’s net income and cash flows, including cash available for servicing Vivint Smart Home’s indebtedness, would correspondingly decrease.

 

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Vivint Smart Home may be unable to service Vivint Smart Home’s indebtedness.

Vivint Smart Home’s ability to make scheduled payments on and to refinance Vivint Smart Home’s indebtedness depends on and is subject to Vivint Smart Home’s financial and operating performance, which, in turn, is affected by general and regional economic, financial, competitive, business and other factors beyond Vivint Smart Home’s control, including the availability of financing in the international banking and capital markets. Vivint Smart Home cannot assure you that Vivint Smart Home’s business will generate sufficient cash flow from operations or that future borrowings will be available to Vivint Smart Home in an amount sufficient to enable Vivint Smart Home to service Vivint Smart Home’s debt, to refinance Vivint Smart Home’s debt or to fund Vivint Smart Home’s other liquidity needs (including funding subscriber acquisition costs).

If Vivint Smart Home is unable to meet Vivint Smart Home’s debt service obligations or to fund Vivint Smart Home’s other liquidity needs, Vivint Smart Home will need to restructure or refinance all or a portion of Vivint Smart Home’s debt, which could cause Vivint Smart Home to default on Vivint Smart Home’s debt obligations and impair Vivint Smart Home’s liquidity. Any refinancing of Vivint Smart Home’s indebtedness could be at higher interest rates and may require Vivint Smart Home to comply with more onerous covenants that could further restrict Vivint Smart Home’s business operations.

Moreover, in the event of a default, the holders of Vivint Smart Home’s indebtedness could elect to declare all the funds borrowed to be due and payable, together with accrued and unpaid interest. The lenders under Vivint Smart Home’s revolving credit facility could also elect to terminate their commitments thereunder, cease making further loans, and institute foreclosure proceedings against their collateral, and Vivint Smart Home could be forced into bankruptcy or liquidation. If Vivint Smart Home breach Vivint Smart Home’s covenants under Vivint Smart Home’s revolving credit facility, Vivint Smart Home would be in default under Vivint Smart Home’s revolving credit facility. The lenders could exercise their rights, as described above, and Vivint Smart Home could be forced into bankruptcy or liquidation.

The debt agreements governing Vivint Smart Home’s existing indebtedness impose significant operating and financial restrictions on Vivint Smart Home and Vivint Smart Home’s subsidiaries, which may prevent Vivint Smart Home from capitalizing on business opportunities.

The debt agreements governing Vivint Smart Home’s existing indebtedness impose significant operating and financial restrictions on the subsidiaries of Vivint Smart Home party thereto. Following the consummation of the merger, New Vivint expects to guarantee the obligations under the credit agreement governing the revolving credit facility, the credit agreement governing the 2024 Term Loan B and the debt agreements governing the notes. These restrictions limit Vivint Smart Home’s ability to, among other things:

 

   

incur or guarantee additional debt or issue disqualified stock or preferred stock;

 

   

pay dividends and make other distributions on, or redeem or repurchase, capital stock;

 

   

make certain investments;

 

   

incur certain liens;

 

   

enter into transactions with affiliates;

 

   

merge or consolidate;

 

   

materially change the nature of Vivint Smart Home’s business;

 

   

amend, prepay, redeem or purchase certain subordinated debt;

 

   

enter into agreements that restrict the ability of certain subsidiaries to make dividends or other payments to Vivint Smart Home; and

 

   

transfer or sell assets.

 

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In addition, Vivint Smart Home’s revolving credit facility requires that Vivint Smart Home maintain a consolidated first lien net leverage ratio of not more than 5.35 to 1.0 on the last day of each applicable test period.

As a result of these restrictions, Vivint Smart Home is limited as to how Vivint Smart Home conducts Vivint Smart Home’s business and Vivint Smart Home may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness Vivint Smart Home may incur could include more restrictive covenants. Vivint Smart Home cannot assure you that Vivint Smart Home will be able to maintain compliance with these covenants in the future and, if Vivint Smart Home fails to do so, that Vivint Smart Home will be able to obtain waivers from the lenders and/or amend the covenants.

Vivint Smart Home’s failure to comply with the restrictive covenants described above as well as other terms of Vivint Smart Home’s existing indebtedness and/or the terms of any future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in Vivint Smart Home’s being required to repay these borrowings before their due date. If Vivint Smart Home is forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, Vivint Smart Home’s results of operations and financial condition could be adversely affected.

Vivint Smart Home’s failure to comply with the agreements relating to Vivint Smart Home’s outstanding indebtedness, including as a result of events beyond Vivint Smart Home’s control, could result in an event of default that could materially and adversely affect Vivint Smart Home’s results of operations and Vivint Smart Home’s financial condition.

If there were an event of default under any of the agreements relating to Vivint Smart Home’s outstanding indebtedness, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. Vivint Smart Home cannot assure you that Vivint Smart Home’s assets or cash flows would be sufficient to fully repay borrowings under Vivint Smart Home’s outstanding debt instruments if accelerated upon an event of default. Further, if Vivint Smart Home is unable to repay, refinance or restructure Vivint Smart Home’s indebtedness under Vivint Smart Home’s secured debt, the holders of such debt could proceed against the collateral securing that indebtedness. In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of Vivint Smart Home’s other debt instruments.

Risks Related to the Merger

Because the market price of shares of Mosaic Class A common stock will fluctuate, Vivint Smart Home’s stockholders cannot be sure of the value of the merger consideration they will receive.

Upon completion of the merger, each share of Vivint Smart Home preferred stock will convert into a share of Vivint Smart Home common stock and each share of Vivint Smart Home common stock will be converted into the right to receive, 209.6849221312 shares of Mosaic Class A common stock. The merger consideration that Vivint Smart Home stockholders will receive is a fixed number of shares of Mosaic Class A common stock; it is not a number of shares with a particular fixed market value. See “The Merger—Terms of the Merger” beginning on page [●]. The market value of Mosaic Class A common stock and Vivint Smart Home stock at the effective time of the merger may vary significantly from their respective values on the date the merger agreement was executed or at other dates, including the date on which Vivint Smart Home stockholders provide written consent to the adoption of the merger agreement and the transactions contemplated thereby. Because the exchange ratio is fixed at 209.6849221312 and will not be adjusted to reflect any changes in the market value of shares of Mosaic Class A common stock or Vivint Smart Home common stock, the market value of the shares of Mosaic Class A common stock issued in connection with the merger and the Vivint Smart Home common stock converted in connection with the merger may be higher or lower than the values of those shares on earlier dates,

 

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and may be higher or lower than the value used to determine the exchange ratio. Accordingly, at the time of providing written consent to the Vivint Merger Proposal, Vivint Smart Home stockholders will not know or be able to calculate the market value of the shares of Mosaic Class A common stock they would receive upon the completion of the merger. Stock price changes may result from a variety of factors, including changes in the business, operations or prospects of Mosaic or Vivint Smart Home, regulatory considerations, and general business, market, industry or economic conditions. Many of these factors are outside of the control of Mosaic and Vivint Smart Home.

Vivint Smart Home’s stockholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

Vivint Smart Home’s stockholders currently have the right to vote in the election of the Vivint Smart Home board of directors and on other matters requiring stockholder approval under Delaware law and Vivint Smart Home’s charter and bylaws. Upon the completion of the merger, Vivint Smart Home stockholders who become stockholders of New Vivint Parent will have a percentage ownership of New Vivint Parent that is smaller than such stockholders’ percentage ownership of Vivint Smart Home. Additionally, two of the expected members of the New Vivint Parent board of directors following the merger will be current directors of Mosaic or appointed by current stockholders of Mosaic. Based on the number of issued and outstanding shares of Mosaic common stock, Vivint Smart Home common stock, Vivint Smart Home preferred stock and the number of outstanding Vivint Group, Inc. stock appreciation rights, restricted stock unit awards and long-term incentive plan awards on [●], and based on the exchange ratio, stockholders of Vivint Smart Home, as a group, will receive shares in the merger constituting approximately [●]% of New Vivint’s common stock expected to be outstanding immediately after the merger (without giving effect to any shares of Mosaic common stock held by Vivint Smart Home stockholders prior to the merger). Because of this, current Vivint Smart Home stockholders, as a group, will have less influence on the board of directors, management and policies of New Vivint than they now have on the board of directors, management and policies of Vivint Smart Home.

Mosaic stockholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

Upon the issuance of the shares to Vivint Smart Home stockholders, current Mosaic stockholders’ percentage ownership will be diluted. Additionally, of the expected members of the New Vivint Parent board of directors after the completion of the merger, only two will be current directors of Mosaic or appointed by current stockholders of Mosaic and the rest will be current directors of Vivint Smart Home or appointed by current stockholders of Vivint Smart Home. Because of this, current Mosaic stockholders, as a group, will have less influence on the board of directors, management and policies of New Vivint than they now have on the board of directors, management and policies of Mosaic. See “Other AgreementsStockholders Agreement” beginning on page [●] of this proxy statement/consent solicitation statement/prospectus.

The market price of shares of New Vivint Parent Class A common stock after the merger may be affected by factors different from those currently affecting the prices of shares of Mosaic Class A common stock.

Upon completion of the merger, holders of shares of Vivint Smart Home common stock and preferred stock will become holders of shares of New Vivint Parent Class A common stock. Prior to the merger, Mosaic has had limited operations. Upon completion of the merger, New Vivint’s results of operations will depend upon the performance of Vivint Smart Home’s businesses, which are affected by factors that are different from those currently affecting the results of operations of Mosaic.

Mosaic has not obtained an opinion from an independent investment banking firm, and consequently, there is no assurance from an independent source that the merger consideration is fair to its stockholders from a financial point of view.

Mosaic is not required to, and has not, obtained an opinion from an independent investment banking firm that the merger consideration it is paying for Vivint Smart Home is fair to Mosaic’s stockholders from a financial

 

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point of view. The fair market value of Vivint Smart Home has been determined by Mosaic’s board of directors based upon standards generally accepted by the financial community, such as potential sales and the price for which comparable businesses or assets have been valued. Mosaic’s stockholders will be relying on the judgment of its board of directors with respect to such matters.

If the merger’s benefits do not meet the expectations of financial analysts, the market price of New Vivint Parent Class A common stock may decline.

The market price of the New Vivint Parent Class A common stock may decline as a result of the merger if New Vivint does not achieve the perceived benefits of the merger as rapidly, or to the extent anticipated by, financial analysts or the effect of the merger on New Vivint’s financial results is not consistent with the expectations of financial analysts. Accordingly, holders of New Vivint Parent Class A common stock may experience a loss as a result of a decline in the market price of New Vivint Parent Class A common stock. In addition, a decline in the market price of New Vivint Parent Class A common stock could adversely affect New Vivint’s ability to issue additional securities and to obtain additional financing in the future.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

Before the transactions contemplated by the merger agreement can be completed, approval must be obtained under the HSR Act. In deciding whether to grant antitrust clearance, the relevant governmental authorities will consider a variety of factors, including the effect of the merger on competition within their relevant jurisdiction. The terms and conditions of the approvals that are granted may impose requirements, limitations or costs, or place restrictions on the conduct of New Vivint’s business. The requirements, limitations or costs imposed by the relevant governmental authorities could delay the closing of the merger or diminish the anticipated benefits of the merger. Additionally, the completion of the merger is conditioned on the absence of certain orders, injunctions or decrees by any court or regulatory authority of competent jurisdiction that would prohibit or make illegal the completion of the merger. Mosaic and Vivint Smart Home believe that the merger should not raise significant regulatory concerns and that Mosaic and Vivint Smart Home will be able to obtain all requisite regulatory approvals in a timely manner. However, Mosaic and Vivint Smart Home cannot be certain when or if regulatory approvals will be obtained or, if obtained, the conditions that may imposed. In addition, neither Mosaic nor Vivint Smart Home can provide assurance that any such conditions, terms, obligations or restrictions will not result in delay. See “Regulatory Approvals Required for the Merger” beginning on page [●].

The consummation of the merger is subject to a number of conditions and if those conditions are not satisfied or waived, the merger agreement may be terminated in accordance with its terms and the merger may not be completed.

The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the merger. Those conditions include: approval of the merger agreement by Vivint Smart Home stockholders, approval of the proposals required to effect the merger by Mosaic stockholders, as well as receipt of certain requisite regulatory approvals, absence of orders prohibiting completion of the merger, effectiveness of the registration statement of which this proxy statement/consent solicitation statement/prospectus is a part, approval of the shares of Mosaic Class A common stock to be issued to Vivint Smart Home stockholders for listing on the NYSE, meeting the Maximum Redemption Condition, the accuracy of the representations and warranties by both parties (subject to the materiality standards set forth in the merger agreement) and the performance by both parties of their covenants and agreements. These conditions to the closing of the merger may not be fulfilled in a timely manner or at all, and, accordingly, the merger may not be completed. In addition, the parties can mutually decide to terminate the merger agreement at any time, before or after stockholder approval, or Mosaic or Vivint Smart Home may elect to terminate the merger agreement in certain other circumstances. See “The Merger Agreement—Termination; Company Termination Fee” beginning on page [●].

 

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Termination of the merger agreement could negatively impact Vivint Smart Home and Mosaic.

If the merger is not completed for any reason, including as a result of Vivint Smart Home stockholders declining to adopt the merger agreement or Mosaic stockholders declining to approve the proposals required to effect the merger, the ongoing businesses of Vivint Smart Home and Mosaic may be adversely impacted and, without realizing any of the anticipated benefits of completing the merger, Vivint Smart Home and Mosaic would be subject to a number of risks, including the following:

 

   

Vivint Smart Home or Mosaic may experience negative reactions from the financial markets, including negative impacts on its stock price (including to the extent that the current market price reflects a market assumption that the merger will be completed);

 

   

Vivint Smart Home may experience negative reactions from its customers, vendors and employees;

 

   

Vivint Smart Home and Mosaic will have incurred substantial expenses and will be required to pay certain costs relating to the merger, whether or not the merger is completed; and

 

   

since the merger agreement restricts the conduct of Vivint Smart Home’s and Mosaic’s businesses prior to completion of the merger, each of Vivint Smart Home and Mosaic may not have been able to take certain actions during the pendency of the merger that would have benefitted it as an independent company, and the opportunity to take such actions may no longer be available (see the section entitled “The Merger Agreement—Covenants and Agreements” beginning on page [●] of this proxy statement/consent solicitation statement/prospectus for a description of the restrictive covenants applicable to Vivint Smart Home and Mosaic).

If the merger agreement is terminated and Vivint Smart Home’s board of directors seeks another merger or business combination, Vivint Smart Home stockholders cannot be certain that Vivint Smart Home will be able to find a party willing to offer equivalent or more attractive consideration than the consideration Mosaic has agreed to provide in the merger or that such other merger or business combination is completed. If the merger agreement is terminated under certain specified circumstances, Vivint Smart Home will be required to pay a termination fee of $81,060,000 to Mosaic. If the merger agreement is terminated and Mosaic’s board of directors seeks another merger or business combination, Mosaic stockholders cannot be certain that Mosaic will be able to find another acquisition target that would constitute a business combination that such other merger or business combination will be completed. See “The Merger Agreement—Termination; Company Termination Fee” on page [●].

Vivint Smart Home will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Vivint Smart Home and consequently on Mosaic. These uncertainties may impair Vivint Smart Home’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with Vivint Smart Home to seek to change existing business relationships with Vivint Smart Home. Retention of certain employees may be challenging during the pendency of the merger, as certain employees may experience uncertainty about their future roles. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the business, New Vivint’s business following the merger could be negatively impacted. In addition, the merger agreement restricts Vivint Smart Home from making certain expenditures and taking other specified actions without the consent of Mosaic until the merger occurs. These restrictions may prevent Vivint Smart Home from pursuing attractive business opportunities that may arise prior to the completion of the merger. See “The Merger Agreement—Covenants and Agreements” beginning on page [●].

Vivint Smart Home directors and officers may have interests in the merger different from the interests of Vivint Smart Home’s stockholders.

Executive officers of Vivint Smart Home negotiated the terms of the merger agreement with their counterparts at Mosaic, and the Vivint Smart Home board of directors determined that entering into the merger

 

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agreement was in the best interests of Vivint Smart Home and its stockholders, declared the merger agreement advisable and recommended that Vivint Smart Home stockholders adopt the merger agreement. In considering these facts and the other information contained in this proxy statement/consent solicitation statement/prospectus, you should be aware that Vivint Smart Home’s executive officers and directors may have financial interests in the merger that may be different from, or in addition to, the interests of Vivint Smart Home stockholders. The Vivint Smart Home board of directors was aware of and considered these interests, among other matters, in reaching the determination to approve the terms of the merger and in recommending to Vivint Smart Home’s stockholders that they vote to approve the merger. For a detailed discussion of the special interests that Vivint Smart Home’s directors and executive officers may have in the merger, please see the section entitled “The Merger—Interests of Vivint Smart Home’s Directors and Executive Officers in the Merger” beginning on page [●].

Mosaic directors and officers may have interests in the merger different from the interests of Mosaic Stockholders.

Executive officers of Mosaic negotiated the terms of the merger agreement with their counterparts at Vivint Smart Home, and the Mosaic board of directors determined that entering into the merger agreement was in the best interests of Mosaic and its stockholders, declared the merger agreement advisable and recommended that Mosaic stockholders approve the proposals required to effect the merger. In considering these facts and the other information contained in this proxy statement/consent solicitation statement/prospectus, you should be aware that Mosaic’s executive officers and directors may have financial interests in the merger that may be different from, or in addition to, the interests of Mosaic stockholders. The Mosaic board of directors and the audit committee thereof was aware of and considered these interests, among other matters, in reaching the determination to approve the terms of the merger and in recommending to Mosaic’s stockholders that they vote to approve the merger. For a detailed discussion of the special interests that Mosaic’s directors and executive officers may have in the merger, please see the section entitled “The Merger—Merger-Related Compensation for Mosaic’s Named Executive Officers” beginning on page [●].

The merger will result in changes to the board of directors of New Vivint Parent that may affect the strategy of New Vivint.

If the parties complete the merger, the composition of New Vivint Parent board of directors will change from the current boards of directors of Mosaic and Vivint Smart Home. The board of directors of New Vivint Parent will consist of David F. D’Alessandro, Alex J. Dunn, Paul S. Galant, Bruce McEvoy, Jay D. Pauley, Todd R. Pedersen, Joseph S. Tibbetts, Peter Wallace, David M. Maura and a representative of The SoftBank Vision Fund that is expected to be designated, subject to regulatory approval, after the completion of the merger. This new composition of the New Vivint Parent board of directors may affect the business strategy and operating decisions of New Vivint upon the completion of the merger.

The merger agreement contains provisions that may discourage other companies from trying to acquire Vivint Smart Home for greater merger consideration.

The merger agreement contains provisions that may discourage a third party from submitting a business combination proposal to Vivint Smart Home that might result in greater value to Vivint Smart Home’s stockholders than the merger or may result in a potential competing acquirer proposing to pay a lower per share price to acquire Vivint Smart Home than it might otherwise have proposed to pay absent such provisions. These provisions include a general prohibition on Vivint Smart Home from soliciting, or, subject to certain exceptions relating to the exercise of fiduciary duties by Vivint Smart Home’s board of directors, entering into discussions with any third party regarding any acquisition proposal or offers for competing transactions. Vivint Smart Home also has an unqualified obligation to submit the proposal to adopt the merger agreement to a vote by its stockholders, even if Vivint Smart Home receives an alternative acquisition proposal that its board of directors believes is superior to the merger, unless the merger agreement has been terminated in accordance with its terms.

 

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In addition, Vivint Smart Home will be required to pay Mosaic a termination fee of $81,060,000 upon termination of the merger agreement in certain specified circumstances involving acquisition proposals for competing transactions. See “The Merger Agreement—Termination; Company Termination Fee” beginning on page [●].

The merger agreement contains provisions that may discourage Mosaic from seeking an alternative business combination.

The merger agreement contains provisions that prohibit Mosaic from seeking alternative business combinations during the pendency of the merger. Further, if Mosaic is unable to obtain the requisite approval of its stockholders, either party may terminate the merger agreement.

The unaudited pro forma condensed combined financial information included in this proxy statement/consent solicitation statement/prospectus is preliminary and the actual financial condition and results of operations after the merger may differ materially.

The unaudited pro forma financial information included in this proxy statement/consent solicitation statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what New Vivint’s actual financial position or results of operations would have been had the merger been completed on the date(s) indicated. The preparation of the pro forma financial information is based upon available information and certain assumptions and estimates that Mosaic and Vivint Smart Home currently believe are reasonable. The unaudited pro forma financial information reflects adjustments, which are based upon preliminary estimates, among other things, to allocate the purchase price to Vivint Smart Home’s net assets. The purchase price allocation reflected in this proxy statement/consent solicitation statement/prospectus is preliminary, and the final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of Vivint Smart Home as of the date of the completion of the merger. In addition, following the completion of the merger, there may be further refinements of the purchase price allocation as additional information becomes available. Accordingly, the final purchase accounting adjustments may differ materially from the pro forma adjustments reflected in this proxy statement/consent solicitation statement/prospectus. See “Unaudited Pro Forma Condensed Combined Financial Information Relating to the Merger” beginning on page [●].

Mosaic and Vivint Smart Home will incur transaction costs in connection with the merger.

Each of Mosaic and Vivint Smart Home has incurred and expects that it will incur significant, non-recurring costs in connection with consummating the merger. Mosaic and Vivint Smart Home may also incur additional costs to retain key employees. Mosaic and Vivint Smart Home will also incur significant legal, financial advisor, accounting, banking and consulting fees, fees relating to regulatory filings and notices, SEC filing fees, printing and mailing fees and other costs associated with the merger. Some of these costs are payable regardless of whether the merger is completed. See “The Merger Agreement—Terms of the Merger” beginning on page [●].

Vivint Smart Home’s stockholders will have their rights as stockholders governed by New Vivint Parent’s organizational documents.

As a result of the completion of the merger, holders of shares of Vivint Smart Home common stock and preferred stock may become holders of shares of New Vivint Parent Class A common stock, which will be governed by New Vivint Parent’s organizational documents. As a result, there will be differences between the rights currently enjoyed by Vivint Smart Home stockholders and the rights that Vivint Smart Home stockholders who become New Vivint Parent stockholders will have as stockholders of New Vivint Parent. See “Comparison of Stockholders’ Rights” beginning on page [●].

 

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The Sponsors have agreed to vote in favor of the proposals at the Mosaic Special Meeting, regardless of how public stockholders vote.

As of the date hereof, the Founder Shares owned by Mosaic’s Sponsors represent approximately 20% of the voting power of the outstanding Mosaic common stock. Pursuant to the Sponsor Agreement, the Sponsors have agreed to vote their Founder Shares and any public shares held by them in favor of each of the proposals at the Mosaic Special Meeting, regardless of how public stockholders vote. Accordingly, the agreement by the Sponsors to vote in favor of each of the proposals at the Mosaic Special Meeting will increase the likelihood that Mosaic will receive the requisite stockholder approval for the merger and the transactions contemplated thereby.

Vivint Smart Home’s ability to use its net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes may be limited as a result of future changes in the ownership of its stock.

As of December 31, 2018, Vivint Smart Home had U.S. federal net operating loss carryforwards (“NOLs”) of approximately $2.4 billion available to offset future taxable income. These NOLs are currently subject to an annual limitation under Section 382 of the Code, as a result of an “ownership change” (as defined in Section 382 of the Code) that occurred in 2012, (the “2012 Limitation”). Under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change federal NOLs to offset future taxable income. However, Vivint Smart Home’s NOLs are subject to a full valuation allowance, as Vivint Smart Home expects that it will not have sufficient taxable income in the future to fully utilize the NOLs before they expire. In addition, Vivint Smart Home’s ability to use its NOLs may be further limited if it undergoes a subsequent “ownership change”, including any such “ownership change” that is caused in part by the merger, that causes the NOLs to be subject to a greater limitation than the 2012 Limitation.

An ownership change could be triggered by substantial changes in the ownership of Vivint Smart Home’s outstanding stock, including as a result of the merger or subsequent changes in ownership involving the stock of New Vivint Parent. For example, an ownership change would occur if certain stockholders increase their aggregate percentage ownership of Vivint Smart Home stock by more than 50 percentage points over their lowest percentage ownership at any time during the testing period, which is generally the three-year period preceding any potential ownership change. As a result of the possibility of such an ownership change, Vivint Smart Home cannot be sure that the full amount of the existing NOLs will be available, even if Vivint Smart Home generates taxable income before their expiration.

Additional Risks Relating to Ownership of New Vivint Common Stock Following the Merger

New Vivint Parent’s stock price may change significantly following the merger and you could lose all or part of your investment as a result.

The trading price of the New Vivint Parent Class A common stock is likely to be volatile. The stock market recently has experienced extreme volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. You may not be able to resell your shares at an attractive price due to a number of factors such as those listed in “—Risks Related to Vivint Smart Home’s Business and Industry” and the following:

 

   

results of operations that vary from the expectations of securities analysts and investors;

 

   

results of operations that vary from those of New Vivint’s competitors;

 

   

changes in expectations as to New Vivint’s future financial performance, including financial estimates and investment recommendations by securities analysts and investors;

 

   

declines in the market prices of stocks generally;

 

   

strategic actions by New Vivint or its competitors;

 

   

announcements by New Vivint or its competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments;

 

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any significant change in New Vivint’s management;

 

   

changes in general economic or market conditions or trends in New Vivint’s industry or markets;

 

   

changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to New Vivint’s business;

 

   

future sales of New Vivint’s common stock or other securities;

 

   

investor perceptions or the investment opportunity associated with New Vivint’s common stock relative to other investment alternatives;

 

   

the public’s response to press releases or other public announcements by New Vivint or third parties, including New Vivint Parent’s filings with the SEC;

 

   

litigation involving New Vivint, New Vivint’s industry, or both, or investigations by regulators into New Vivint’s operations or those of New Vivint’s competitors;

 

   

guidance, if any, that New Vivint provides to the public, any changes in this guidance or New Vivint’s failure to meet this guidance;

 

   

the development and sustainability of an active trading market for New Vivint Parent’s stock;

 

   

actions by institutional or activist stockholders;

 

   

changes in accounting standards, policies, guidelines, interpretations or principles; and

 

   

other events or factors, including those resulting from natural disasters, war, acts of terrorism or responses to these events.

These broad market and industry fluctuations may adversely affect the market price of New Vivint Parent’s Class A common stock, regardless of New Vivint’s actual operating performance. In addition, price volatility may be greater if the public float and trading volume of New Vivint Parent’s Class A common stock is low.

In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If New Vivint was involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from New Vivint’s business regardless of the outcome of such litigation.

Because there are no current plans to pay cash dividends on New Vivint Parent’s Class A common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

New Vivint intends to retain future earnings, if any, for future operations, expansion and debt repayment and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of New Vivint Parent Class A common stock will be at the sole discretion of New Vivint Parent’s board of directors. New Vivint Parent’s board of directors may take into account general and economic conditions, New Vivint’s financial condition and results of operations, New Vivint’s available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by New Vivint Parent to its stockholders or by its subsidiaries to it and such other factors as New Vivint Parent’s board of directors may deem relevant. In addition, New Vivint Parent’s ability to pay dividends is limited by covenants of Vivint Smart Home’s existing and outstanding indebtedness and may be limited by covenants of any future indebtedness New Vivint incurs. As a result, you may not receive any return on an investment in New Vivint Parent’s Class A common stock unless you sell New Vivint Parent’s Class A common stock for a price greater than that which you paid for it.

 

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If securities analysts do not publish research or reports about New Vivint’s business or if they downgrade New Vivint Parent’s stock or New Vivint’s sector, New Vivint Parent’s stock price and trading volume could decline.

The trading market for New Vivint Parent’s Class A common stock will rely in part on the research and reports that industry or financial analysts publish about New Vivint or its business. New Vivint will not control these analysts. In addition, some financial analysts may have limited expertise with Vivint Smart Home’s model and operations. Furthermore, if one or more of the analysts who do cover New Vivint downgrade its stock or industry, or the stock of any of its competitors, or publish inaccurate or unfavorable research about its business, the price of New Vivint Parent’s stock could decline. If one or more of these analysts ceases coverage of New Vivint or fails to publish reports on it regularly, New Vivint could lose visibility in the market, which in turn could cause its stock price or trading volume to decline.

Future sales, or the perception of future sales, by New Vivint or its stockholders in the public market following the merger could cause the market price for New Vivint Parent’s Class A common stock to decline.

The sale of shares of New Vivint Parent’s Class A common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of New Vivint Parent’s Class A common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for New Vivint Parent to sell equity securities in the future at a time and at a price that it deems appropriate.

Upon consummation of the merger, New Vivint Parent will have a total of [●] shares of Class A common stock outstanding. All shares issued in the merger will be freely tradable without registration under the Securities Act of 1933, as amended (the “Securities Act”,) and without restriction by persons other than New Vivint’ Parent’s “affiliates” (as defined under Rule 144 of the Securities Act, “Rule 144”), including New Vivint Parent’s directors, executive officers and other affiliates (including affiliates of The Blackstone Group Inc. (together with such affiliates, “Blackstone”)).

In connection with the merger, holders of substantially all of Vivint Smart Home’s common stock and the Sponsors have each agreed with Mosaic, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of New Vivint Parent Class A common stock during the period from the date of the closing of the merger continuing through the date (i) in the case of Blackstone, six months after the closing date of the merger, (ii) in the case of the Pedersen Holders, Dunn Holders, Summit Holders and Black Horse Holders (each as defined in the Stockholders Agreement, two years after the closing date of the merger and (iii) for all other Stockholder Parties, one year after the closing date of the merger and (iii) in the case of all other applicable holders, one year from the closing of the merger. See “Other Agreements—Confidentiality and Lockup Agreements” for a description of these lock-up arrangements.

Upon the expiration or waiver of the lock-ups described above, shares held by the Investors (as defined below) and certain other stockholders of New Vivint Parent will be eligible for resale, subject to volume, manner of sale and other limitations under Rule 144. In addition, pursuant to a registration rights agreement, the Investors and certain other stockholders will have the right, subject to certain conditions, to require New Vivint Parent to register the sale of their shares of New Vivint Parent’s Class A common stock under the Securities Act. By exercising their registration rights and selling a large number of shares, these stockholders could cause the prevailing market price of New Vivint Parent’s Class A common stock to decline. Following completion of the merger, the shares covered by registration rights would represent approximately [●]% of New Vivint’s outstanding common stock.

As restrictions on resale end or if these stockholders exercise their registration rights, the market price of shares of New Vivint Parent’s Class A common stock could drop significantly if the holders of these shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for New Vivint to raise additional funds through future offerings of New Vivint Parent’s shares of Class A common stock or other securities.

 

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In addition, the shares of New Vivint Parent’s Class A common stock reserved for future issuance under New Vivint Parent’s equity incentive plans will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable. A total of [●] shares of New Vivint Parent’s Class A common stock are expected to be reserved for future issuance under its equity incentive plans. The compensation committee of New Vivint Parent’s board of directors may determine the exact number of shares to be reserved for future issuance under its equity incentive plans at its discretion. New Vivint Parent is expected to file one or more registration statements on Form S-8 under the Securities Act to register shares of New Vivint Parent’s Class A common stock or securities convertible into or exchangeable for shares of New Vivint Parent’s Class A common stock issued pursuant to New Vivint Parent’s equity incentive plans. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market. The initial registration statement on Form S-8 is expected to cover [●] shares of New Vivint Parent’s Class A common stock.

In the future, New Vivint Parent may also issue its securities in connection with investments or acquisitions. The amount of shares of New Vivint Parent’s Class A common stock issued in connection with an investment or acquisition could constitute a material portion of New Vivint Parent’s then-outstanding shares of Class A common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to New Vivint Parent’s stockholders.

Anti-takeover provisions in New Vivint Parent’s organizational documents could delay or prevent a change of control.

Certain provisions of New Vivint Parent’s amended and restated certificate of incorporation and amended and restated bylaws to become effective upon the consummation of the merger may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by New Vivint Parent’s stockholders.

These provisions provide for, among other things:

 

   

the ability of New Vivint Parent’s board of directors to issue one or more series of preferred stock;

 

   

advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at New Vivint Parent’s annual meetings;

 

   

certain limitations on convening special stockholder meetings;

 

   

limiting the ability of stockholders to act by written consent;

 

   

providing that New Vivint Parent’s board of directors is expressly authorized to make, alter or repeal New Vivint Parent’s bylaws;

 

   

the removal of directors only for cause and only upon the affirmative vote of holders of at least 66 2/3% of the shares of common stock entitled to vote generally in the election of directors if the Stockholder Parties (as defined below) and their affiliates hold less than 30% of New Vivint Parent’s outstanding shares of Class A common stock; and

 

   

that certain provisions may be amended only by the affirmative vote of at least 30% of the shares of Class A common stock entitled to vote generally in the election of directors if the Stockholder Parties and their affiliates hold less than 30% of New Vivint Parent’s outstanding shares of Class A common stock.

These anti-takeover provisions could make it more difficult for a third party to acquire New Vivint Parent, even if the third-party’s offer may be considered beneficial by many of New Vivint Parent’s stockholders. As a

 

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result, New Vivint Parent’s stockholders may be limited in their ability to obtain a premium for their shares. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause New Vivint to take other corporate actions you desire. See “Description of New Vivint Capital Stock”.

New Vivint Parent’s amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by New Vivint Parent’s stockholders, which could limit New Vivint Parent’s stockholders’ ability to obtain a favorable judicial forum for disputes with New Vivint or its directors, officers, employees or stockholders.

New Vivint Parent’s amended and restated certificate of incorporation will provide that, subject to limited exceptions, any (1) derivative action or proceeding brought on behalf of New Vivint Parent, (2) action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder or employee to New Vivint Parent or its stockholders, (3) action asserting a claim arising pursuant to any provision of the DGCL or New Vivint Parent’s amended and restated certificate of incorporation or New Vivint Parent’s amended and restated bylaws or (4) action asserting a claim governed by the internal affairs doctrine shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, another state or federal court located within the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of New Vivint Parent’s capital stock shall be deemed to have notice of and to have consented to the provisions of New Vivint Parent’s certificate of incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with New Vivint or its directors, officers or other employees, which may discourage such lawsuits against New Vivint and its directors, officers and employees. Alternatively, if a court were to find these provisions of New Vivint Parent’s amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, New Vivint may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect New Vivint’s business and financial condition.

Affiliates of Blackstone will control New Vivint, and their interests may conflict with New Vivint’s or yours in the future.

Immediately following the closing of the merger, affiliates of Blackstone will beneficially own approximately [    ]% of New Vivint Parent’s Class A common stock. For so long as Blackstone continues to own a significant percentage of New Vivint Parent’s Class A common stock, Blackstone will still be able to significantly influence the composition of New Vivint Parent’s board of directors and the approval of actions requiring stockholder approval. Accordingly, for such period of time, Blackstone will have significant influence with respect to New Vivint’s management, business plans and policies, including the appointment and removal of New Vivint’s officers. In particular, for so long as Blackstone continues to own a significant percentage of New Vivint Parent’s Class A common stock, Blackstone will be able to cause or prevent a change of control of New Vivint or a change in the composition of New Vivint Parent’s board of directors and could preclude any unsolicited acquisition of New Vivint Parent. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of common stock as part of a sale of New Vivint Parent and ultimately might affect the market price of New Vivint Parent’s Class A common stock. In addition, Blackstone may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to you. For example, Blackstone could cause New Vivint to make acquisitions that increase New Vivint’s indebtedness or cause New Vivint to sell revenue-generating assets. In certain circumstances, acquisitions of debt at a discount by purchasers that are related to a debtor can give rise to cancellation of indebtedness income to such debtor for U.S. federal income tax purposes. So long as Blackstone continues to own a significant amount of New Vivint Parent’s combined voting power, even if such amount is less than 50%, Blackstone will continue to be able to strongly influence or effectively control New Vivint’s decisions.

 

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Certain of New Vivint’s stockholders, including Blackstone, the Sponsors and affiliates of Summit Partners, L.P., may engage in business activities which compete with New Vivint or otherwise conflict with New Vivint’s interests.

Blackstone, the Sponsors, affiliates of Summit Partners, L.P. and certain other Stockholder Parties (as defined below) are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with New Vivint. New Vivint Parent’s amended and restated certificate of incorporation will provide that none of the Stockholder Parties, any of their respective affiliates or any director who is not employed by New Vivint (including any non-employee director who serves as one of New Vivint’s officers in both his director and officer capacities) or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which New Vivint operates. The Stockholder Parties also may pursue acquisition opportunities that may be complementary to New Vivint’s business and, as a result, those acquisition opportunities may not be available to New Vivint.

New Vivint Parent will be a “controlled company” within the meaning of the rules of the NYSE and the rules of the SEC. As a result, New Vivint Parent will qualify for, and intend to rely on, exemptions from certain corporate governance requirements that would otherwise provide protection to stockholders of other companies.

Immediately following the completion of the merger, Blackstone will control a majority of the voting power of New Vivint Parent’s outstanding Class A common stock. As a result, New Vivint Parent will be a “controlled company” within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

   

the requirement that a majority of New Vivint Parent’s board of directors consist of “independent directors” as defined under the rules of the NYSE;

 

   

the requirement that New Vivint Parent have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

 

   

the requirement that New Vivint Parent have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

the requirement for an annual performance evaluation of the compensation and nominating and corporate governance committees.

Following the merger, New Vivint Parent intends to utilize some or all of these exemptions. As a result, New Vivint Parent’s nominating and corporate governance committee and compensation committee may not consist entirely of independent directors and such committees will not be subject to annual performance evaluations. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

In addition, on June 20, 2012, the SEC passed final rules implementing provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 pertaining to compensation committee independence and the role and disclosure of compensation consultants and other advisers to the compensation committee. The SEC’s rules direct each of the national securities exchanges (including the NYSE on which New Vivint Parent intends to list its common stock) to develop listing standards requiring, among other things, that:

 

   

compensation committees be composed of fully independent directors, as determined pursuant to new independence requirements;

 

   

compensation committees be explicitly charged with hiring and overseeing compensation consultants, legal counsel and other committee advisors; and

 

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compensation committees be required to consider, when engaging compensation consultants, legal counsel or other advisors, certain independence factors, including factors that examine the relationship between the consultant or advisor’s employer and New Vivint Parent.

As a “controlled company”, New Vivint Parent will not be subject to these compensation committee independence requirements.

Transformation of Vivint Smart Home into a listed public company will increase its costs and may disrupt the regular operations of its business.

Vivint Smart Home has operated as a privately owned company and expects to incur additional legal, regulatory, finance, accounting, investor relations and other administrative expenses as a result of having publicly traded common stock. In addition, while Vivint Smart Home is currently in compliance with portions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), Vivint Smart Home will be required under the Sarbanes-Oxley Act, as well as rules adopted by the SEC and the NYSE, to implement specified corporate governance practices that currently do not apply to Vivint Smart Home as a private company.

New Vivint will be required to ensure that it has the ability to prepare financial statements on a timely basis that fully comply with all SEC reporting requirements and maintain effective internal controls over financial reporting.

The additional demands associated with being a public company may disrupt regular operations of New Vivint’s business by diverting the attention of some of its senior management team away from revenue producing activities to management and administrative oversight, adversely affecting New Vivint’s ability to attract and complete business opportunities and increasing the difficulty in both retaining professionals and managing and growing New Vivint’s businesses. In addition, failure to comply with any laws or regulations applicable to New Vivint Parent as a public company may result in legal proceedings and/or regulatory investigations, and may cause reputational damage. Any of these effects could harm New Vivint’s business, financial condition and results of operations.

Risks Relating to Redemption

There is no guarantee that a Mosaic public stockholder’s decision whether to redeem their shares for a pro rata portion of the Trust Account will put such stockholder in a better future economic position.

No assurance can be given as to the price at which a public stockholder may be able to sell the shares of New Vivint Parent Class A common stock in the future following the completion of the merger. Certain events following the consummation of any business combination, including the merger, may cause an increase in New Vivint Parent’s stock price, and may result in a lower value realized now than a Mosaic stockholder might realize in the future had the stockholder not elected to redeem such stockholder’s public shares. Similarly, if a Mosaic public stockholder does not redeem his, her or its shares, such stockholder will bear the risk of ownership of New Vivint Parent Class A common stock after the consummation of the merger, and there can be no assurance that a stockholder can sell his, her or its shares of New Vivint Parent Class A common stock in the future for a greater amount than the redemption price set forth in this proxy statement/consent solicitation statement/prospectus. A Mosaic public stockholder should consult his, her or its own tax and/or financial advisor for assistance on how this may affect its individual situation.

If Mosaic public stockholders fail to comply with the redemption requirements specified in this proxy statement/consent solicitation statement/prospectus, they will not be entitled to redeem their public shares for a pro rata portion of the funds held in the Trust Account.

Holders of Mosaic public shares are required to affirmatively vote either for or against the Business Combination Proposal in order to exercise their rights to redeem their public shares for a pro rata portion of the

 

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Trust Account. In addition, to exercise their redemption rights, holders are required to deliver their stock, either physically or electronically using Depository Trust Company’s DWAC System, to Mosaic’s transfer agent prior to the vote at the Mosaic Special Meeting. If a holder properly seeks redemption as described in this proxy statement/consent solicitation statement/prospectus and the merger with Vivint Smart Home is consummated, Mosaic will redeem these shares for a pro rata portion of funds deposited in the Trust Account and the holder will no longer own such shares following the merger. See the section entitled “Mosaic Special Meeting of StockholdersRedemption Rights” for additional information on how to exercise your redemption rights.

Mosaic does not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for Mosaic to complete the merger with which a substantial majority of Mosaic’s shareholders do not agree.

Mosaic’s existing charter does not provide a specified maximum redemption threshold, except that Mosaic will not redeem public shares in an amount that would cause Mosaic’s net tangible assets to be less than $5,000,001 (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act). Additionally, while Vivint Smart Home’s obligation to consummate the merger is conditioned on, among other things, the Maximum Redemption Condition. Mosaic can satisfy this condition only if fewer than 10,350,000 public shares are redeemed following the date of the merger agreement. This condition is for the sole benefit of Vivint Smart Home and may be waived by Vivint Smart Home. As a result, Mosaic may be able to complete the merger even though a substantial portion of public stockholders do not agree with the merger and have redeemed their public shares.

If you or a “group” of stockholders of which you are a part are deemed to hold an aggregate of more than 15% of the public shares, you (or, if a member of such a group, all of the members of such group in the aggregate) will lose the ability to redeem all such shares in excess of 15% of the public shares.

A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its public shares or, if part of such a group, the group’s public shares, in excess of 15% of the public shares. Your inability to redeem any such excess public shares could resulting in you suffering a material loss on your investment in Mosaic if you sell such excess public shares in open market transactions. Mosaic cannot assure you that the value of such excess public shares will appreciate over time following the merger or that the market price of the public shares will exceed the per-share redemption price.

However, Mosaic’s stockholders’ ability to vote all of their public shares (including such excess shares) for or against the Business Combination Proposal is not restricted by this limitation on redemption.

 

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UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial statements of Mosaic present the combination of the financial information of Mosaic and Vivint Smart Home adjusted to give effect to the merger and the other transactions contemplated by the merger agreement. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

The unaudited pro forma condensed combined balance sheet as of June 30, 2019 combines the historical balance sheet of Mosaic and the historical balance sheet of Vivint Smart Home on a pro forma basis as if the merger and the other transactions contemplated by the merger agreement, summarized below, had been consummated on June 30, 2019. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2019 and the year ended December 31, 2018 combine the historical statements of operations of Mosaic and Vivint Smart Home for such periods on a pro forma basis as if the merger and the other transactions contemplated by the merger agreement, summarized below, had been consummated on January 1, 2018, the beginning of the earliest period presented:

 

   

the merger of Vivint Smart Home with and into Merger Sub, a wholly owned subsidiary of Mosaic, with Vivint Smart Home surviving the merger as a wholly owned subsidiary of Mosaic;

 

   

the purchase of 15,789,474 shares of Mosaic Class A common stock at a purchase price of $9.50 per share pursuant to the forward purchase agreements that Mosaic entered into with certain investors in connection with its initial public offering;

 

   

the issuance and sale of 12,500,000 shares of Mosaic Class A common stock at a purchase price of $10.00 per share pursuant to the Fortress Subscription Agreement;

 

   

the issuance and sale of 10,000,000 shares of Mosaic Class A common stock at a purchase price of $10.00 per share pursuant to the Blackstone Subscription Agreement; and

 

   

the vesting and conversion of 5,189,693 Founder Shares owned by the Sponsors into 5,189,693 Mosaic Class A common stock pursuant to the Sponsor Agreement, which is based on 50% of 10,379,386 shares of Founder Shares (8,625,000 shares of Founder Shares issued to the Sponsors prior to Mosaic’s IPO and the additional issuance of 1,754,386 shares of Founder Shares equal to one ninth of the aggregate number of forward purchase shares sold to the anchor investors in connection with the forward purchase agreements).

Pursuant to the Sponsor Agreement, 50% of the unvested Founder Shares shall vest at the closing of the merger; 25% of the unvested Founder Shares shall vest at such time as a $12.50 Stock Price Level is achieved on or before the fifth anniversary of the closing of the merger and the remaining 25% of unvested Founder Shares shall vest at such time as a $15.00 Stock Price Level is achieved on or before the fifth anniversary of the closing of the merger. Pursuant to the Sponsor Agreement, 50% of the unvested private placement warrants shall vest at such time as a $12.50 Stock Price Level is achieved on or before the fifth anniversary of the closing of the merger and the remaining 50% of unvested private placement warrants shall vest at such time as a $15.00 Stock Price Level is achieved on or before the fifth anniversary of the closing of the merger.

After the consummation of the merger, holders of Vivint Smart Home common stock immediately prior to the merger and holders of outstanding Rollover Restricted Stock immediately following the merger will have the contingent right to receive earnout shares and holders of Rollover Equity Awards (other than Rollover Restricted Stock) immediately following the merger will be entitled to an increase in the value of their awards if, from the consummation of the merger until the fifth anniversary thereof, the volume-weighted average price of New Vivint Parent Class A common stock exceeds certain thresholds. The first issuance of earnout shares will occur if the volume-weighted average price of New Vivint Parent Class A common stock exceeds $12.50 for any 20 trading days within any 30 trading day period. The second issuance of earnout shares will occur if the volume-

 

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weighted average price of New Vivint Parent Class A common stock exceeds $15.00 for any 20 trading days within any 30 trading day period. The price targets and the number of earnout shares issued shall be equitably adjusted for any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, or any similar event affecting New Vivint Parent Class A common stock. If such targets are achieved, such holders will receive, in aggregate, 12,500,000 New Vivint Parent Class A common stock on the achievement of each target (or in the case of holders of Rollover Equity Awards, an equivalent increase in value of such awards) based on their proportional holding of such stock or awards immediately prior to the merger.

The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial statements to give pro forma effect to events that are: (i) directly attributable to the merger; (ii) factually supportable; and (iii) with respect to the statement of operations, expected to have a continuing impact on Mosaic’s results following the completion of the merger.

The unaudited pro forma condensed combined financial statements have been developed from and should be read in conjunction with:

 

   

the accompanying notes to the unaudited pro forma condensed combined financial statements;

 

   

the (i) historical audited financial statements of Mosaic as of and for the year ended December 31, 2018 and (ii) historical condensed unaudited financial statements of Mosaic as of and for the six months ended June 30, 2019 and the related notes, in each case, included elsewhere in this proxy statement/consent solicitation statement/prospectus;

 

   

the (i) historical audited consolidated financial statements of Vivint Smart Home as of and for the year ended December 31, 2018 and (ii) historical condensed unaudited combined consolidated financial statements of Vivint Smart Home as of and for the six months ended June 30, 2019 and the related notes, in each case, included elsewhere in this proxy statement/consent solicitation statement/prospectus; and

 

   

other information relating to Mosaic and Vivint Smart Home contained in this proxy statement/consent solicitation statement/prospectus, including the merger agreement and the description of certain terms thereof set forth under “The Merger.”

Pursuant to Mosaic’s existing amended and restated certificate of incorporation, public stockholders are being offered the opportunity to redeem, upon the closing of the merger, shares of Mosaic Class A common stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the closing of the merger) in the Trust Account. For illustrative purpose, based on the fair value of marketable securities held in the Trust Account as of June 30, 2019 of approximately $353.3 million, the estimated per share redemption price would have been approximately $10.24 per share.

The unaudited pro forma condensed combined financial statements present two redemption scenarios as follows:

 

   

Assuming No Redemption—this scenario assumes that no shares of Mosaic Class A common stock are redeemed; and

 

   

Assuming Maximum Redemption- this scenario assumes that 10,349,999 shares of Mosaic Class A common stock are redeemed for an aggregate payment of approximately $106.0 million (based on the estimated per share redemption price of approximately $10.24 per share based on the fair value of marketable securities held in the Trust Account as of June 30, 2019 of approximately $353.3 million) from the Trust Account, which is the maximum amount of redemptions that would satisfy the Maximum Redemption Condition set forth in the merger agreement.

Notwithstanding the legal form of the merger pursuant to the merger agreement, the merger will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Mosaic will be treated as the acquired company and Vivint Smart Home will be treated as the acquirer for financial

 

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statement reporting purposes. Vivint Smart Home has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

 

   

Vivint Smart Home’s existing shareholders will have the greatest voting interest in the combined entity under the no and maximum redemption scenarios with over 75% and 77% voting interest, respectively;

 

   

the largest individual minority shareholder of the combined entity is an existing shareholder of Vivint Smart Home;

 

   

Vivint Smart Home’s directors will represent the majority of the New Vivint Parent board of directors;

 

   

Vivint Smart Home’s senior management will be the senior management of New Vivint; and

 

   

Vivint Smart Home is the larger entity based on historical total assets and revenues.

Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the merger occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial statements do not purport to project the future operating results or financial position of Mosaic following the completion of the merger. The unaudited pro forma adjustments represent Mosaic’s management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF JUNE 30, 2019

 

    As of June 30, 2019                       As of June 30, 2019               As of
June 30, 2019
 
    Mosaic
(Historical)
    Vivint
Smart
Home
(Historical)
    Reclassification
Adjustments
(Note 2)
    Pro Forma
Adjustments
(Assuming
No
Redemption)
          Pro Forma
Combined
(Assuming No
Redemption)
    Additional
Pro Forma
Adjustments
(Assuming
Maximum
Redemption)
        Pro Forma
Combined
(Assuming
Maximum
Redemption)
 

ASSETS

                 

Current assets:

                 

Cash and cash equivalents

  $ 928     $ 3,133       $ 104,989       (A)     $ 109,050       (105,997   (Q)   $ 3,053  

Accounts receivable, net

    —         71,390         —           71,390       —           71,390  

Inventories

    —         139,350         —           139,350       —           139,350  
                 

Prepaid expenses and other current assets

    105       16,988         —           17,093       —           17,093  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total current assets

    1,033       230,861       —         104,989       $ 336,883       (105,997       230,886  

Cash and investments held in Trust Account

    353,324       —           (353,324     (B)       —         —           —    

Property, plant and equipment, net

    —         61,600         —           61,600       —           61,600  

Capitalized contract costs, net

    —         1,170,687         —           1,170,687       —           1,170,687  

Deferred financing costs, net

    —         1,572         —           1,572       —           1,572  

Intangible assets, net

    —         217,778         —           217,778       —           217,778  

Goodwill

    —         836,289         —           836,289       —           836,289  

Operating lease right-of-use assets

    —         71,557         —           71,557       —           71,557  
                 

Long-term notes receivables and other assets, net

    —         122,631         —           122,631       —           122,631  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total Assets

  $ 354,357     $ 2,712,975     $ —       $ (248,335     $ 2,818,997       (105,997     $ 2,713,000  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

                 

Current liabilities:

                 

Accounts payable

    1       143,072         —           143,073       —           143,073  

Accrued payroll and commissions

    —         69,548         —           69,548       —           69,548  

Accrued expenses and other current liabilities

    20       138,049       135       2,489       (C), (E)       140,693       —           140,693  

Deferred revenue

    —         220,105         —           220,105       —           220,105  

Current portion of operating lease liabilities

    —         12,058         —           12,058       —           12,058  

Current portion of finance lease liabilities

    —         6,984         —           6,984       —           6,984  

Accrued expenses—related parties

    35       —         (35     —           —         —           —    

Franchise tax payable

    100       —         (100     —           —         —           —    
                 

Income tax payable

    —         —           —           —         —           —    
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total current liabilities

    156       589,816       —         2,489         592,461       —           592,461  

Notes payable, net

    —         2,948,549         (452,765     (C)       2,495,784       —           2,495,784  

Notes payable, net—related party

    —         82,200         —           82,200       —           82,200  

Revolving credit facility

    —         134,000         (134,000     (C)       —         —           —    

Finance lease liabilities, net of current portion

    —         3,397         —           3,397       —           3,397  

Deferred revenue, net of current portion

    —         383,266         —           383,266       —           383,266  

Operating lease liabilities

    —         69,975         —           69,975       —           69,975  

 

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    As of June 30, 2019                       As of June 30, 2019               As of
June 30, 2019
 
    Mosaic
(Historical)
    Vivint
Smart
Home
(Historical)
    Reclassification
Adjustments
(Note 2)
    Pro Forma
Adjustments
(Assuming
No
Redemption)
          Pro Forma
Combined
(Assuming No
Redemption)
    Additional
Pro Forma
Adjustments
(Assuming
Maximum
Redemption)
        Pro Forma
Combined
(Assuming
Maximum
Redemption)
 

Other long-term obligations

    —         99,736         —           99,736       —           99,736  

Deferred income tax liabilities

    —         1,139         —           1,139       —           1,139  
                 

Deferred underwriting commissions

    12,075       —           (12,075     (D)       —         —           —    
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total liabilities

    12,231       4,312,078       —         (596,351       3,727,958       —           3,727,958  

Commitments and contingencies

                 

Class A common stock subject to possible redemption

    337,126       —           (337,126     (I)       —         —           —    

Stockholders’ equity:

                 

Preferred stock

    —         1         (1     (J)       —         —           —    

Class A common stock

    —         —           31       (K)       31       (1   (Q)     30  

Class F common stock

    1       —           (1     (L)       —         —           —    

Common stock (Vivint Smart Home)

    —         10         (10     (M)       —         —           —    

Additional paid-in capital

    —         737,798         707,356       (N)       1,445,154       (105,996   (Q)     1,339,158  

Retained Earnings (Accumulated deficit)

    4,999       (2,309,149       (22,233     (P)       (2,326,383     —           (2,326,383
                 

Accumulated other comprehensive loss

    —         (27,763       —           (27,763     —           (27,763
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total stockholders’ equity

    5,000       (1,599,103     —         685,142         (908,961     (105,997       (1,014,958
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total liabilities and stockholders’ deficit

  $ 354,357     $ 2,712,975     $ —       $ (248,335     $ 2,818,997       (105,997     $ 2,713,000  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2018

(in thousands, except share and per share data)

 

    Year Ended December 31,
2018
                Year Ended
December 31,
2018
          Year Ended
December 31,
2018
 
    Mosaic
(Historical)
    Vivint
Smart Home
(Historical)
    Pro Forma
Adjustments
(Assuming
No
Redemption)
          Pro Forma
Combined
(Assuming No
Redemption)
    Additional
Pro Forma
Adjustments
(Assuming
Maximum
Redemption)
    Pro Forma
Combined
(Assuming
Maximum
Redemption)
 

Revenues

             

Recurring and other revenue

  $ —       $ 1,050,441     $ —         $ 1,050,441     $ —       $ 1,050,441  

Costs and expenses:

             

Operating expenses

    —         355,813       784       (AA     356,597       —         356,597  

Selling expenses

    —         213,386       2,004       (AA     215,390       —         215,390  

General and administrative expenses

    871       209,257       14,353       (BB     224,481       —         224,481  

Depreciation and amortization

    —         514,082       —           514,082       —         514,082  

Restructuring expenses

    —         4,683       —           4,683       —         4,683  

Franchise tax expense

    6       —         —           6       —         6  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Total costs and expenses

    877       1,297,221       17,141         1,315,239       —         1,315,239  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Loss from operations

    (877     (246,780     (17,141       (264,798     —         (264,798

Other (expense) income

             

Interest expense

    —         245,214       (81,566     (EE     163,648       —         163,648  

Interest income

    —         (425     —           (425     —         (425

Other (income) expenses, net

    (6,188     (17,323     1,676       (FF     (21,835     —         (21,835
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    5,311       (474,246     62,749         (406,186     —         (406,186

Income tax expense (benefit)

    44       (1,611     15,587       (HH     14,020       —         14,020  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Net income (loss)

    5,267       (472,635     47,162         (420,206     —         (420,206
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding of Class A common stock

    34,500,000             306,312,435         295,962,435  

Basic and diluted net income (loss) per share—Class A

  $ 0.16           $ (1.37     $ (1.42

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2019

(in thousands, except share and per share data)

 

    Six Months Ended June 30,
2019
                Six Months
Ended
June 30, 2019
          Six Months
Ended
June 30, 2019
 
    Mosaic
(Historical)
    Vivint
Smart
Home
(Historical)
    Pro Forma
Adjustments
(Assuming
No
Redemption)
          Pro Forma
Combined
(Assuming No
Redemption)
    Additional
Pro Forma
Adjustments
(Assuming
Maximum
Redemption)
    Pro Forma
Combined
(Assuming
Maximum
Redemption)
 

Revenues

             

Recurring and other revenue

  $ —       $ 557,302     $ —         $ 557,302     $ —       $ 557,302  

Costs and expenses:

             

Operating expenses

    —         175,089       392       (AA     175,481       —         175,481  

Selling expenses

    —         101,517       1,002       (AA     102,519       —         102,519  

General and administrative expenses

    365       93,778       7,193       (BB     101,336       —         101,336  

Depreciation and amortization

    —         265,725       —           265,725       —         265,725  

Restructuring expenses

    —         —         —           —         —         —    

Franchise tax expense

    95       —         —           95       —         95  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Total operating expenses

    460       636,109       8,587         645,156       —         645,156  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Loss from operations

    (460     (78,807     (8,587       (87,854     —         (87,854

Other (expense) income

             

Interest expense

    —         129,565       (30,366     (EE     99,199       —         99,199  

Interest income

    —         (23     —           (23     —         (23

Other (income) expenses, net

    (4,167     (2,444     3,360       (FF     (3,251     —         (3,251
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    3,707       (205,905     18,419         (183,779     —         (183,779

Income tax expense (benefit)

    853       (853     4,374       (HH     4,374       —         4,374  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Net income (loss)

    2,854       (205,052     14,045         (188,153     —         (188,153
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding of Class A common stock

    34,500,000             306,312,435         295,962,435  

Basic and diluted net income (loss) per share—Class A

  $ 0.08           $ (0.61     $ (0.64

 

76


Table of Contents

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

1.

Basis of Presentation

The merger will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, Mosaic will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the merger will be treated as the equivalent of Vivint Smart Home issuing stock for the net assets of Mosaic, accompanied by a recapitalization. The net assets of Mosaic will be stated at historical cost, with no goodwill or other intangible assets recorded.

The unaudited pro forma condensed combined balance sheet as of June 30, 2019 gives pro forma effect to the merger and the other transactions contemplated by the merger agreement as if they had been consummated on June 30, 2019. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2018 and for the six months ended June 30, 2019 give pro forma effect to the merger and the other transactions contemplated by the merger agreement as if they had been consummated on January 1, 2018.

The unaudited pro forma condensed combined balance sheet as of June 30, 2019 has been prepared using, and should be read in conjunction with, the following:

 

   

Mosaic’s unaudited balance sheet as of June 30, 2019 and the related notes included elsewhere in this proxy statement/consent solicitation statement/prospectus; and

 

   

Vivint Smart Home’s unaudited balance sheet as of June 30, 2019 and the related notes included elsewhere in this proxy statement/consent solicitation statement/prospectus.

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2018 has been prepared using, and should be read in conjunction with, the following: