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1 STATE OF FLORIDA OFFICE OF THE ATTORNEY GENERAL DEPARTMENT OF LEGAL AFFAIRS IN THE INVESTIGATION OF: AGENCY FILE NO. L SECURITY NETWORKS, LLC, RESPONDENT ~/ ASSURANCE OF VOLUNTARY COMPLIANCE FOR SECURITY NETWORKS, LLC Pursuant to the provisions of Chapter 501, Part II, Florida Statutes, the Office of the Attorney General, Department of Legal Affairs, State of Florida ("Attorney General") has investigated the business practices of SECURITY NETWORKS, LLC (hereafter corporately and alternately referred to as "RESPONDENT"). RESPONDENT agrees to enter into this Assurance of Voluntary Compliance (AVC), without an admission that it has violated the law in order to amicably resolve the Attorney General's investigation of RESPONDENT, pursuant to Agency Case No. L and Section (6) ofthe Florida Statutes. The Attorney General, by the signature of her Division Director affixed hereto, does hereby accept the instant A VC and in turn terminates the Attorney General's investigation as it ru INITIALS

2 concerns RESPONDENT by virtue of the authority vested in the Office ofthe Attorney General, pursuant to Section (6) of the Florida Statutes. I. ATTORNEY GENERAL'S ALLEGATIONS 1. Respondent, SECURITY NETWORKS, LLC, is an active State of Florida limited liability company established in or around March 10,2000. The principal office of SECURITY NETWORKS, LLC was located in West Palm Beach, Palm Beach County, Florida, from March 20, 2000 to April 1, On April 1, 2014, SECURITY NETWORKS, LLC moved its principal place of business to Dallas, Dallas County, Texas. The securities of SECURITY NETWORKS, LLC were purchased by a third party, Monitronics International, Inc. ("Monitronics"), before SECURITY NETWORKS, LLC was informed of the instant investigation. Monitronics was not a subject of the instant investigation and is not a party to this AVC. 2. SECURITY NETWORKS, LLC provides monitoring services to residential and commercial burglar alarms to consumers in Florida and elsewhere throughout the United States. SECURITY NETWORKS, LLC additionally markets and sells residential and commercial burglar alarms to consumers in Florida and elsewhere throughout the United States through independent third party sales companies. 3. Beginning in or around at least 2010, the Office of the Attorney General for the State of Florida began receiving complaints from consumers who claimed that SECURITY NETWORKS, LLC induced consumers to enter into new service contracts with SECURITY NETWORKS, LLC by falsely claiming: 1) that it represented alarm companies other than SECURITY NETWORKS, LLC; 2) that the alarm companies that it alleged that it was 2 INITIALS --rf\~/ _

3 representing were going out of business or exiting the respective consumer's local market; 3) that SECURITY NETWORKS, LLC had purchased the consumer's account from the alarm companies that it alleged that it was representing; 4) that the consumer's current alarm system was outdated, unsafe and/or incapable of protecting consumers if a burglar cut the telephone lines leading into the consumer' s home; and 5) that the consumer's system needed upgrading, which required that the consumer enter into a new service and monitoring contract with SECURITY NETWORKS, LLC. 4. The Office of the Attorney General additionally received complaints that consumers had difficulty legitimately cancelling contracts without penalties and that members of the military who received relocation orders were not allowed to cancel and/or transfer their contracts with SECURITY NETWORKS, LLC. 5. SECURITY NETWORKS, LLC disputes the allegations, contends that it does not employ a door-to-door sales force, and believes that the consumer complaints may have resulted from certain door-to-door sales representatives employed by independent third party sales companies who generate security monitoring agreements which are purchased by SECURITY NETWORKS, LLC. 6. SECURITY NETWORKS, LLC voluntarily cooperated with the Office of the Attorney General upon being informed of its investigation in approximately March, 201 4, and it continues to work with the Office of the Attorney General to address and to resolve both current and future consumer complaints lodged against it as detailed in the instant A VC. 3 INITIALS ----'{:.. l(

4 II. NON-MONETARY TERMS AND CONDITIONS 7. Respondent, SECURITY NETWORKS, LLC, agrees to refrain from violating the provisions of Chapter 501, Part II, of the Florida Statutes, the Florida Deceptive and Unfair Trade Practices Act, to conduct business in the State of Florida in compliance with the provisions of Chapter 501, Part II, of the Florida Statutes, the Florida Deceptive and Unfair Trade Practices Act, and to conduct its business practices in the following manner: A. SECURITY NETWORKS, LLC shall instruct all employees, subcontractors, third-party vendors and/or any other persons or entities marketing, offering and/or selling commercial and residential alarm services and monitoring agreements either from within the State of Florida or directly to Florida businesses and consumers on behalf of SECURITY NETWORKS, LLC that they may not dispense misleading advertisements or other marketing tools or make misleading statements to these consumers to induce them to utilize any services offered to the public by SECURITY NETWORKS, LLC. B. SECURITY NETWORKS, LLC shall further not dispense misleading advertisements or other marketing tools or make misleading statements from within the State of Florida or directly to Florida businesses and consumers to induce them to utilize any services offered to the public by the SECURITY NETWORKS, LLC., including, but not limited to, new service and/or monitoring contracts. C. SECURITY NETWORKS, LLC may not falsely state, either from within the State of Florida or directly to Florida businesses and consumers, that: a. SECURITY NETWORKS, LLC is a representative of any other alarm company and/or is acting in any manner on behalf of or with the consent or approval of any 4 INITIALS fl) -----"------

5 alarm company other than SECURITY NETWORKS, LLC; b. SECURITY NETWORKS, LLC has acquired, merged with, taken over and/or is now affiliated with, or part of, any alarm company other than SECURITY NETWORKS, LLC; c. Consumers' current alarm systems need upgrading or updating for the purpose of inducing consumers to have new alarm systems installed and to enter into new service and/or monitoring contracts with SECURITY NETWORKS, LLC. d. Consumers' current alarm systems are no longer being monitored by the company cited in the consumer's cuttent monitoring service agreement for the purpose of inducing consumers to have new alarm systems installed and to enter into new service and/or monitoring contracts with SECURITY NETWORKS, LLC. D. SECURITY NETWORKS, LLC shall permit Florida businesses and consumers who have a legitimate basis for canceling service contracts and/or monitoring agreements to cancel their service contracts and/or monitoring agreements pursuant to the terms of the service contract and/or monitoring agreement. E. SECURITY NETWORKS, LLC shall allow active military personnel who reside and/or are stationed in the State of Florida and/or members of their family who reside with them to transfer their service contracts and/or monitoring agreements upon providing SECURITY NETWORKS, LLC with thirty (30) days' notice of written verifiable proofthatthe active member of the military has been transferred and/or deployed to another military location. F. In the event SECURITY NETWORKS, LLC does not provide any comparable services and/or service rates to the area to which the active military member is transferred, then the 5 INITIALS _.!...! b'vi '-----

6 current service contract and/or monitoring agreement of the military personnel shall be canceled by SECURITY NETWORKS, LLC no later than thirty (30) days of its receipt of written verifiable proof that the active member of the military has been transferred and/or deployed to another military location. III. MONETARY TERMS AND CONDITIONS 8. Respondent, SECURITY NETWORKS, LLC, agrees to pay a total of SEVENTY THOUSAND DOLLARS AND ZERO CENTS ($70,000.00) in current and future attorneys' fees, investigative fees and/or costs via wire transfer made directly to the BNF/Ultimate Beneficiary: Department of Legal Affairs at the time upon which an individual acting within their capacity as a duly authorized representative of SECURITY NETWORKS, LLC affixes their signature to this document and returns it to the Office of the Attorney General. 9. RESPONDENT agrees to wire all monetary funds referred to herein under III. MONETARY TERMS AND CONDITIONS to the Department of Legal Affairs in accordance with the wiring instructions previously provided by the Office of the Attorney General to counsel for RESPONDENT, Scott W. Atherton. The Parties agree to cooperate in effecting the transfer, including, but not limited to, providing notice to Assistant Attorney General Carol E. A. DeGraffenreidt at the time that the wire is sent and contacting Mr. Gerald Johnson via either telephone at: (850) or electronic mail at: Gerald.Johnson@MyFioridaLegal.com to confirm the date that the funds were wired, the amount of the wire and the bank where the wire is originating. 8. Respondent, SECURITY NETWORKS, LLC, further agrees to continue its efforts to resolve the complaints of each of the 118 Florida consumers listed on the spreadsheet attached 6 INITIALS,_(_JJ _

7 hereto as "Exhibit A" who are Florida consumers who have presented complaints against RESPONDENT to various governmental entities, including, but not limited to, the Office of the Attorney General for the State of Florida, and whose complaints may remain unresolved. Some, but not all, of those Florida consumers returned consumer affidavits to the Office of Attorney General requesting payments from RESPONDENT in the aggregate amount of Nine Thousand Five Hundred Twenty Four Dollars and Zero Cents ($9,524.00), which amount does not include consumers who have not yet returned consumer affidavits to this Office. Each of the consumer complaints listed on the attached spreadsheet, whether they are currently supported by a consumer affidavit or not, shall be resolved by the RESPONDENT in full within sixty (60) days of the date upon which this document is fully executed by all required Parties. If any monies are to be paid to any of the complainants listed in Exhibit A, then those monies shall be paid by the Office of the Attorney General from the "Voluntary Contribution" fund referenced below. 9. At the end of the above-referenced 60-day period, RESPONDENT agrees to present to the Office of the Attorney General a notarized statement attesting to the fact that each of the complaints in Exhibit A were resolved and to attach to the notarized statement a revised copy of the same spreadsheet which shall be labeled "A VC Spreadsheet" and which has a new entry and/or column next to the name of each consumer which confirms that each consumer complaint listed therein has been resolved and which additionally provides a clear, explanation as to the manner in which each consumer complaint was resolved. 10. To the extent that RESPONDENT has insufficient information upon which to resolve a complaint. counsel for RE SPONDENT shall promptly. and within the above-stated period. notify Financial Investigator Randi Shapiro, at (954) and/ or 7 INITIALS ~u ~---

8 so that she may attempt to obtain additional information to assist RESPONDENT in resolving a specific consumer complaint. If sufticient information upon which to resolve a consumer complaint is lacking within the above-stated 60-day period. even after the above notice to Ms. Shapiro, then the consumer complaint shall be deemed removed from Exhibit A and RESPONDENT shall not be obligated under the A VC to take any futther steps to resolve the consumer complaint. 11. "Resolved" shall include, but not be limited to, the following: 1) cancellation of a current consumer's contract for alarm and/or monitoring services if a legitimate basis for cancellation exists; 2) full or partial payment of actual damages sustained by a customer as a result of a customer's legitimate complaint, as warranted by the circumstances; 3) a credit or charge-back to the customer's credit card, as warranted by the circumstances; and/or 4) any other alternative reasonable means of complaint resolution based upon the specific facts and circumstances of a particular complaint. The Parties acknowledge that not all consumer complaints necessarily require cancellation of the consumer's contract in order to be resolved, and that payments made to consumers to resolve complaints may be subject to appropriate reductions for the value received by the consumer as a result of the disputed transaction. 12. The Parties agree that the RESPONDENT shall not be responsible for the payment and/or resolution of any consumer complaints listed on the attached spreadsheet which are not valid complaints against the RESPONDENT, which have already been resolved as defined herein and/or which do not relate to an actual customer of the Respondent, SECURITY NETWORKS, LLC. 8 IN ITIALS -----"-[Z,_vr~--(

9 13. The Parties fmther agree that RESPONDENT shall not be responsible for any payments and/or refunds in excess of the amount actually paid by a complaining consumer to Respondent, SECURITY NETWORKS, LLC. 14. RESPONDENT'S interest in funds paid in conjunction with this AVC shall fully and completely divest when the A VC is fully executed by all Parties. 15. In order to promote consumer confidence in SECURITY NETWORKS, LLC, Respondent, SECURITY NETWORKS, LLC, further agrees to pay an additional sum of EIGHTY THOUSAND DOLLARS AND ZERO CENTS ($80,000.00) (the "Voluntary Contribution") to be used towards the resolution of any and all legitimate consumer complaints which have been presented against it, from January, 2010, to the effective date of this A VC, to various governmental entities, including, but not limited to, the Office of the Attorney General for the State of Florida, as well as any and all Florida consumer complaints which may be lodged against it in the future, for an additional twelve-month period following the full execution of this AVC by all required Parties. Thereafter, any residue from the Voluntary Contribution shall revert to the Department of Legal Mfairs Revolving Trust Fund and be utilized to defray the costs of restitution distribution and any attorneys' fees and costs incurred in this matter. 16. Respondent, SECURITY NETWORKS, LLC, shall wire the Voluntary Contribution in the sum of EIGHTY THOUSAND DOLLARS AND ZERO CENTS ($80,000.00) at the time upon which an individual acting within their capacity as a duly authorized representative of SECURITY NETWORKS, LLC affixes their signature to this document and returns it to the Office of the Attorney General, along with the above-referenced payment. 9 INITIALS,[U..:+ } _

10 17. The Parties agree that the manner in which the Voluntary Contribution is to be distributed amongst the complaining consumers shall be within the sole discretion of the Office of the Attorney General. 10. PENALTIES 18. Provided that Respondent, SECURITY NETWORKS, LLC, complies with the terms of this A VC, no civil penalties or other relief shall be sought against it or imposed hereunder for any conduct arising prior to the date of the execution of this A VC. However, in the event that RESPONDENT fails to comply with the terms and conditions ofthis A VC, and such failure is not cured within fourteen (14) days ofrespondent receiving written notice from the Office ofthe Attorney General setting forth the factual basis of the alleged violation, RESPONDENT'S subsequent failure to comply with the terms of this A VC will be prima facie evidence of a violation of Chapter 501, Part II, Florida Statutes as to RESPONDENT, pursuant to Section (6), Florida Statutes. If such a subsequent violation is proven pursuant to Section , Florida Statutes, as determined by a court of competent jurisdiction, RESPONDENT will be subject to civil penalties for such subsequent violation, in which case the Office of Attorney General shall be further entitled to recover its reasonable attorneys' fees and costs pursuant to said statute. Notwithstanding anything else contained herein, the Parties' acknowledge that if a violation of this AVC results from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid the error pursuant to Section (4), the Office of Attorney General's remedy for such a violation of this A VC is limited to the amount, if any, by which RESPONDENT was unjustly enriched by the violation. 10

11 19. In the event that Respondent, SECURITY NETWORKS, LLC, fails to make any payment(s) required by the terms of this A VC within the time period provided by the A VC, then such non-payment shall constitute a material breach and default of the terms of the AVC. 20. Respondent, SECURITY NETWORKS, LLC, moreover consents to venue and jurisdiction for the entry of a Final Judgment, or any other proceeding necessary to enforce the terms of the A VC, within the Fifteenth Judicial Circuit Court, in and for Palm Beach County, Florida. 21. The Attorney General represents and warrants that it has provided SECURITY NETWORKS, LLC with written notice of all alleged consumer complaints known to and/or within the possession of the Attorney General relating to SECURITY NETWORKS, LLC prior to the Attorney General's execution of this A VC, which such notice included, at a minimum, the name, address, and phone number of the consumer and the general substance of the consumers' complaints. V. NUSCELLANEOUSTERMS 22. Respondent, SECURITY NETWORKS, LLC, and its representatives, agents, employees, successors, assigns and/or any other person(s) acting under, by, through or on behalf of the RESPONDENT, directly or indirectly, or through any corporate or other device, shall comply with the Florida Deceptive and Unfair Trade Practices Act, Chapter 501, Part II, Florida Statutes. 23. Respondent, SECURITY NETWORKS, LLC, shall further ensure that all of the non-monetary terms and conditions of this A VC are known to its representatives, agents, employees, managers, officers, directors, assigns, successors and/or any other persons acting under, by, through or on their behalf. II INITIALS {JJ

12 24. Respondent, SECURITY NETWORKS, LLC, shall not implement any change in the form of doing business or the organizational identity of any of the existing business entities or create any new business entities for the purpose of avoiding the obligations, terms and conditions set forth in this A VC. 25. Notwithstanding anything else contained herein, the parties agree that none of the terms of this A VC shall apply to Monitronics, the third party which purchased the securities of SECURITY NETWORKS, LLC before SECURITY NETWORKS, LLC was informed of this investigation. VI. BUSINESS RECORDS RETENTION 26. The Respondent, SECURITY NETWORKS, LLC, agrees to retain all non-privileged business records in its possession at the time of the execution of this document which are related to the consumers who are the subject of the instant litigation for two (2) years from the Effective Date ofthe AVC. 27. The Respondent, SECURITY NETWORKS, LLC, further agrees for two (2) years from the Effective Date of the A VC, to preserve and retain and make available to the Attorney General upon reasonable written request, all non-privileged books, records and other documents which reflect the implementation of the terms of this AVC and compliance with its terms. 28. The Respondent, SECURITY NETWORKS, LLC, agrees to provide any such records requested by the Attorney General and/or make them available for inspection within twenty-one (2 1) calendar days of the RESPONDENT'S receipt of a request by the Attorney General. 12 INITIALS -~OV

13 29. Finally, the Respondent, SECURITY NETWORKS, LLC, agrees to honor any reasonable request by the Attorney General to provide or to make available such records without legal process. 30. Nothing herein shall be construed as a general waiver of any private right, cause of action, or remedy of any private person against the Respondent, SECURITY NETWORKS, LLC. Similarly, nothing contained herein shall constitute an admission of any kind or waive the right of the Respondent, SECURITY NETWORKS, LLC, to assert any lawful defenses in response to any action or proceeding by any private person against the Respondent, SECURITY NETWORKS, LLC. 31. Upon entry of this A VC and payment of all required current and future attorneys' fees, investigative fees and/or costs and consumer restitution (via the Voluntary Contribution), the Office of the Attorney General for the State of Florida agrees to close its civil investigation into the activities of the Respondent, SECURITY NETWORKS, LLC. 32. Notwithstanding any other provision of this A VC, the Parties acknowledge that any future violations of either this A VC or Florida law by RESPONDENT may potentially subject the RESPONDENT to additional and unrelated civil penalties and sanctions, as provided by law. 33. Although the Parties jointly participated in the negotiation of the terms articulated in this A VC, no provision herein shall be construed for or against either Party on the grounds that any one Party was more heavily involved in the preparation of the A VC and/or its terms. 34. The Parties agree that all notices, including, but not limited to, notices regarding changes to the below individuals to whom notices are to be currently provided, shall sent via Electronic mail 13 INITIALS

14 as detailed below: AS TO THE ATTORNEY GENERAL: Carol E. A. DeGraffenreidt Assistant Attorney General - Economic Crimes 1515 North Flagler Drive# 900 West Palm Beach, FL Office Telephone Number: (561) Facsimile No.: (561) Electronic Mail Address: carol.degraffenreidt@myfioridalegal.com AS TO THE RESPONDENTS: Jenny McCarley 2350 Valley View Lane Dallas, TX Telephone No. (972) Electronic Mail Address: jmccarley@securitynetworks.net VII. EFFECTIVE DATE 35. The effective date of this A VC shall be the date of its full execution by both Parties and delivery by the Department of Legal Affairs to RESPONDENT. Acceptance by the Department of Legal Affairs shall be established by the signature of the Division Director of the Consumer Protection Division. The receipt by the Department of Legal Affairs of any monies pursuant to the A VC does not constitute acceptance of the A VC by the Department of Legal Affairs, and any monies received shall be returned to RESPONDENT in the event that this A VC is not accepted and fully executed by the Department of Legal Affairs. IN WITNESS WHEREOF, Respondent, SECURITY NETWORKS, LLC, has caused this Assurance of Voluntary Compliance to be executed by an authorized representative, as a true act and deed, in the county and state listed below, as of the date affixed thereon. [PARTIES' SIGNATURES ON FOLLOWING PAGES] 14

15 SECURITY NETWORKS, LLC Agreed to and signed thi s~ day of ~...<?~ 2014, by the below-stated person who stated and affirmed as follows: BY MY SIGNATURE I hereby affirm that I am acting in my capacity and within my authority as an Officer of SECURITY NETWORKS, LLC, and that by my signature I am binding SECURITY NETWORKS, LLC, to the terms and conditions of this AVC. By: ~~ DAVID VERRET, VICE-PRESIDENT OF FINANCE SECURITY NETWORKS, LLC STATEOF T~us ) COUNTYOF_)w= ~s~\~\ ~~~s ) BEFORE ME, this ) 9. '\+... day of ~e.c.e_m\,y--, 2014, an officer duly authorized to take acknowledgments in the State of Florida, personally appeared David Verret, who acknowledged before me that he executed the foregoing instrument for the purposes therein stated. NOTARY PUBLIC (print, type or stamp commissioned name ofnotary Public) 4f!!f! _;:~ BARBARA G. WILHITE t~j'r):j MY COMMISSION EXPIRES --~:.?-,;,i\t~ September 18, 2017 Personally known I/' or Produced Identification (check one) Type of Identification Produced: 15

16 FOR THE ATTORNEY GENERAL'S OFFICE Signed this //...-day J!> o~ ~, 2015 arol E. A. DeGra~enreid) Assistant Attorney General Office of the Attorney General Florida Bar No North Flagler Drive, Suite 900 West Palm Beach, Florida, Telephone No.: (561) Facsimile No.: (561) Electronic mail: Accepted this A- 11 day of _-fc..~ L~=...-- ' 2015 ~7 t~ ~ c, Patricia A. Conners Deputy Attorney General Depatiment of Legal Affairs OFFICE OF THE ATTORNEY GENERAL 1 07 W Gaines Street Tallahassee, FL