3310                                          LAWS OF MARYLAND                                      Ch. 838

[(b)] (C) At least one member of the board of directors of
each seller of health club services in this State shall be a
resident of a county where a club of the seller is located and
shall serve as a resident agent for receipt of service of
process.

[(c)] (D) The Division may bring an action for mandamus
against a health club to require the club to register or to have
and maintain the surety required by this section.

[(d)] (E) (1) (I) [A] SUBJECT TO THE PROVISIONS OF
PARAGRAPH (3) OF THIS SUBSECTION, A person who sells health club
services agreements shall purchase a surety bond in an amount not
less than [$50,000, or shall file with the Division an
irrevocable letter of credit or cash] THE AGGREGATE VALUE OF
OUTSTANDING LIABILITIES TO MEMBERS, INCLUDING ALL PREPAID FEES,
MEMBERSHIP FEES, DUES, DEPOSITS, INITIATION FEES, AND FEES FOR
HEALTH CLUB SERVICES. FOR THE PURPOSES OF THIS SECTION,
"LIABILITIES" MEANS THE MONEYS ACTUALLY RECEIVED IN ADVANCE FROM
THE MEMBERS LESS THE PRORATED VALUE OF SERVICES RENDERED BY THE
HEALTH CLUB FACILITY. IN THE CASE OF A LIFETIME CONTRACT. THE
LIABILITIES SHALL BE CALCULATED ON A PRORATED BASIS FOR NOT MORE
THAN 36 MONTHS.

(II) THE AMOUNT OF THE BOND SHALL BE BASED ON A
REPORT PREPARED BY AN ACCOUNTANT DESCRIBING THE HEALTH CLUB'S
OUTSTANDING LIABILITIES TO MEMBERS.

(II) THE AMOUNT OF THE BOND SHALL BE BASED UPON
A REPORT PREPARED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
DESCRIBING THE HEALTH CLUB'S OUTSTANDING LIABILITIES TO THE
MEMBERS USING ACCEPTED STANDARD ACCOUNTING PRINCIPLES. IN THIS
SECTION "OUTSTANDING LIABILITIES" INCLUDES ALL AMOUNTS THAT WOULD
BE REQUIRED TO BE REFUNDED TO MEMBERS IF THE HEALTH CLUB FACILITY
CEASES OPERATIONS.

(III)  THE REPORT SHALL BE SUBMITTED AT THE TIME
OF INITIAL REGISTRATION AND UPDATED AT EACH RENEWAL UNDER
SUBSECTION (B) OF THIS SECTION.

(2)(I) THE AMOUNT OF THE BOND SHALL BE INCREASED AS
NECESSARY TO TAKE INTO ACCOUNT CHANGES IN THE HEALTH CLUB'S
OUTSTANDING LIABILITIES.

(2) (I) THE AMOUNT OF THE BOND SHALL BE INCREASED. OR
MAY BE DECREASED, AS NECESSARY TO TAKE INTO ACCOUNT CHANGES IN
THE HEALTH CLUB FACILITY'S OUTSTANDING LIABILITIES TO MEMBERS IN
THE FOLLOWING CASES. WHICHEVER COMES FIRST:

1. WHEN THE HEALTH CLUE FACILITY'S
OUTSTANDING LIABILITIES TO MEMBERS INCREASE OR DECREASE BY
$10,000; OR

2. ON A QUARTERLY BASIS.