HARRY HUGHES, Governor                                       3311

(II) IF A REGISTRANT'S OUTSTANDING LIABILITIES
TO THE MEMBERS EXCEED THE AMOUNT OF THE BOND, AND THE REGISTRANT
HAS FAILED TO INCREASE THE BOND, THEN THE REGISTRANT SHALL
IMMEDIATELY STOP SELLING HEALTH CLUB SERVICES AGREEMENTS AND
SHALL REFRAIN FROM SELLING HEALTH CLUB SERVICES AGREEMENTS UNTIL
THE REQUIREMENTS OF THIS SUBSECTION HAVE BEEN SATISFIED.

(3) (I) AN IRREVOCABLE LETTER OF CREDIT IN A FORM
ACCEPTABLE TO THE DIVISION, OR CASH, MAY BE FILED WITH THE
DIVISION INSTEAD OF A SURETY BOND.

(II) NOTWITHSTANDING ANY OTHER PROVISION OF
THIS SUBTITLE, A SELLER OF HEALTH CLUB SERVICES AGREEMENTS DOES
NOT HAVE TO FILE OR MAINTAIN A BOND, LETTER OF CREDIT, OR CASH IN
EXCESS OF $200,000 PER HEALTH CLUB SERVICES FACILITY. THE BONDING

REQUIREMENT OF THIS SUBSECTION APPLIES TO EACH LOCATION AT WHICH
HEALTH CLUB SERVICES ARE SOLD IN ANY CASE WHERE A PERSON OPERATES
OR PLANS TO OPERATE MORE THAN ONE FACILITY WITHIN THE STATE.

[(2)] (F) (1) A buyer of health club services who
suffers or sustains any loss or damage by reason of breach of
contract THE CLOSING OF A FACILITY or bankruptcy by the seller of
the health club services agreement SHALL FILE A CLAIM WITH THE
SURETY AND, IF THE CLAIM IS NOT PAID, may bring an action based
on the bond and recover against the surety. IN THE CASE OF A
LETTER OF CREDIT OR CASH DEPOSIT THAT HAS BEEN FILED WITH THE
DIVISION, THE BUYER MAY FILE A CLAIM WITH THE DIVISION.

(2)  ANY CLAIM UNDER PARAGRAPH (1) OF THIS SUBSECTION
SHALL BE FILED NO LATER THAN 1 YEAR FROM THE DATE ON WHICH THE
BREACH OF CONTRACT OCCURRED FACILITY CLOSED OR BANKRUPTCY WAS
FILED.

(3)  THE DIVISION MAY FILE A CLAIM WITH THE SURETY ON
BEHALF OF ANY BUYER IN PARAGRAPH (1) OF THIS SUBSECTION. THE
SURETY SHALL PAY THE AMOUNT OF THE CLAIMS TO THE DIVISION FOR
DISTRIBUTION TO CLAIMANTS ENTITLED TO RESTITUTION AND SHALL BE
RELIEVED OF LIABILITY TO THAT EXTENT.

[(3)] (4) The liability of the surety under any bond
may not exceed the aggregate amount of the bond, regardless of
the number or amount of claims filed.

[(4)] (5) If the claims filed should exceed the
amount of the bond, the surety shall pay the amount of the bond
to the Division for distribution to claimants entitled to
restitution and shall be relieved of all liability under the
bond.

[(e)] (G) (1) Any person or business bonded under this
section shall maintain accurate records of the bond and of
premium payments on it. These records shall be open to
inspection by the Division at any time during normal business
hours.