(a) Prior to the saleof any prepaid entertainment contract for services which are available on theday of sale, the seller shall purchase a surety bond issued by a surety companyauthorized to do business in this State, as follows:
(1) The amount of thesurety bond shall be equal to the aggregate value of outstanding liabilities tobuyers, or ten thousand dollars ($10,000), whichever is greater. For purposesof this section, "liabilities" means the moneys actually received inadvance from the buyer on or after January 1, 1993, for contract costs, lessthe prorated value of services rendered by the seller. The bond shall be infavor of the State of North Carolina and in a form approved by the AttorneyGeneral. The surety company shall have a duty to disclose the amount and statusof the bond to the public upon request. Any person who is damaged by reason ofthe closing of a facility or bankruptcy of the seller, may bring an actionagainst the bond to recover damages suffered; provided, however, that theaggregate liability of the surety shall be only for actual damages and in noevent shall exceed the amount of the bond.
(2) The amount of thebond shall be based upon a written sworn statement by the seller under penaltyof perjury stating the seller's outstanding liabilities to buyers. A corporateseller's statement shall be signed by the president of the corporation; thestatement of a partnership shall be signed by a general partner; and thestatement of a sole proprietorship shall be signed by the sole proprietor. Thestatement and a copy of the bond shall be filed with the Attorney Generalwithin 90 days after the first contract is sold and at 180‑day intervalsthereafter.
(3) The amount of thebond shall be increased or may be decreased, as necessary, to take into accountchanges in the seller's outstanding liabilities to buyers on a semiannualbasis.
(4) The bondingrequirement of this section applies to each location of the seller in any casewhere a seller operates or plans to operate more than one facility in theState. A separate bond for each separately located facility shall be filed withthe Attorney General.
(5) Notwithstanding anyother provision of this section, no seller is required to purchase a bond inexcess of two hundred fifty thousand dollars ($250,000) per facility.
(6) A change inownership shall not release, cancel, or terminate liability under any bondpreviously established unless the Attorney General agrees in writing to therelease, cancellation, or termination because the new owner has established anew bond for the benefit of the previous owner's members, or because the formerowner has paid the required funds to its members.
(7) In lieu ofpurchasing the bond required by subdivision (1), an irrevocable letter ofcredit from a bank insured by the Federal Deposit Insurance Corporation, in aform acceptable to the Attorney General, may be filed with the AttorneyGeneral.
(8) Claims and actionsby a buyer of prepaid entertainment contract services:
a. A buyer of prepaidentertainment contract services who suffers or sustains any loss or damage byreason of the closing of a facility or bankruptcy of the seller shall file aclaim with the surety, and, if the claim is not paid, may bring an action basedon the bond and recover against the surety. In the case of a letter of creditthat has been filed with the Attorney General, the buyer may file a claim withthe Attorney General;
b. Any claim underparagraph a. of this subdivision shall be filed no later than one year from thedate on which the facility closed or bankruptcy was filed;
c. The Attorney Generalmay file a claim with the surety on behalf of any buyer in paragraph a. of thissubdivision. The surety shall pay the amount of the claims to the AttorneyGeneral for distribution to claimants entitled to restitution and shall berelieved of liability to that extent;
d. The liability of thesurety under any bond may not exceed the aggregate amount of the bond,regardless of the number or amount of claims filed;
e. If the claims filedshould exceed the amount of the bond, the surety shall pay the amount of thebond to the Attorney General for distribution to claimants entitled torestitution and shall be relieved of all liability under the bond.
(9) The seller shall beexempt from the bonding requirement if all of its unexpired contracts andpresent membership plans meet the following criteria: (i) no initiation fee orsimilar nonrecurring fee is charged, and (ii) at no time is any member chargedto pay for the use of facilities or services more than 31 days in advance.
(b) If, for any reason,services under a prepaid entertainment contract are not available to the buyeron the date of sale, then:
(1) The seller shallestablish a surety bond issued by a surety company authorized to do business inthe State or shall establish an escrow account with a licensed and insured bankor savings institution located in this State. The surety bond or escrow accountshall be in the amount of ten thousand dollars ($10,000) per location or in anamount equal to all contract costs received from the buyer, whichever isgreater. The bond or escrow account shall be in favor of the State of NorthCarolina and a copy of the bond or escrow agreement shall be filed with the AttorneyGeneral prior to the sale of any prepaid entertainment contracts. The bond orescrow account shall remain in force until 60 days after all services of theseller are available to the buyer, at which time the seller shall comply withthe bonding requirement of subsection (a) of this section. The escrow accountshall be established and maintained only in a financial institution whichagrees in writing with the Attorney General to hold all funds deposited and notto release such funds until receipt of written authorization from the AttorneyGeneral. The funds deposited will be eligible for withdrawal by the depositorafter the facility has been open and providing services for 60 days and theAttorney General gives written authorization for withdrawal. Any person who isdamaged by any violation of this Article, or by the seller's breach of thecontract for sale or any obligation arising therefrom may bring an actionagainst the bond or escrow account to recover damages suffered; provided,however, that the aggregate liability of the surety or escrow agent shall befor actual damages only and in no event shall exceed the amount of the bond orescrow account.
(2) The buyer's right tocancel the contract pursuant to G.S. 66‑121 shall be extended untilmidnight of the third business day after the date upon which the servicesbecome available and the buyer is notified that the services are available. (1979,c. 833, s. 1; 1991 (Reg. Sess., 1992), c. 1009, s. 2.)
(a) Prior to the saleof any prepaid entertainment contract for services which are available on theday of sale, the seller shall purchase a surety bond issued by a surety companyauthorized to do business in this State, as follows:
(1) The amount of thesurety bond shall be equal to the aggregate value of outstanding liabilities tobuyers, or ten thousand dollars ($10,000), whichever is greater. For purposesof this section, "liabilities" means the moneys actually received inadvance from the buyer on or after January 1, 1993, for contract costs, lessthe prorated value of services rendered by the seller. The bond shall be infavor of the State of North Carolina and in a form approved by the AttorneyGeneral. The surety company shall have a duty to disclose the amount and statusof the bond to the public upon request. Any person who is damaged by reason ofthe closing of a facility or bankruptcy of the seller, may bring an actionagainst the bond to recover damages suffered; provided, however, that theaggregate liability of the surety shall be only for actual damages and in noevent shall exceed the amount of the bond.
(2) The amount of thebond shall be based upon a written sworn statement by the seller under penaltyof perjury stating the seller's outstanding liabilities to buyers. A corporateseller's statement shall be signed by the president of the corporation; thestatement of a partnership shall be signed by a general partner; and thestatement of a sole proprietorship shall be signed by the sole proprietor. Thestatement and a copy of the bond shall be filed with the Attorney Generalwithin 90 days after the first contract is sold and at 180‑day intervalsthereafter.
(3) The amount of thebond shall be increased or may be decreased, as necessary, to take into accountchanges in the seller's outstanding liabilities to buyers on a semiannualbasis.
(4) The bondingrequirement of this section applies to each location of the seller in any casewhere a seller operates or plans to operate more than one facility in theState. A separate bond for each separately located facility shall be filed withthe Attorney General.
(5) Notwithstanding anyother provision of this section, no seller is required to purchase a bond inexcess of two hundred fifty thousand dollars ($250,000) per facility.
(6) A change inownership shall not release, cancel, or terminate liability under any bondpreviously established unless the Attorney General agrees in writing to therelease, cancellation, or termination because the new owner has established anew bond for the benefit of the previous owner's members, or because the formerowner has paid the required funds to its members.
(7) In lieu ofpurchasing the bond required by subdivision (1), an irrevocable letter ofcredit from a bank insured by the Federal Deposit Insurance Corporation, in aform acceptable to the Attorney General, may be filed with the AttorneyGeneral.
(8) Claims and actionsby a buyer of prepaid entertainment contract services:
a. A buyer of prepaidentertainment contract services who suffers or sustains any loss or damage byreason of the closing of a facility or bankruptcy of the seller shall file aclaim with the surety, and, if the claim is not paid, may bring an action basedon the bond and recover against the surety. In the case of a letter of creditthat has been filed with the Attorney General, the buyer may file a claim withthe Attorney General;
b. Any claim underparagraph a. of this subdivision shall be filed no later than one year from thedate on which the facility closed or bankruptcy was filed;
c. The Attorney Generalmay file a claim with the surety on behalf of any buyer in paragraph a. of thissubdivision. The surety shall pay the amount of the claims to the AttorneyGeneral for distribution to claimants entitled to restitution and shall berelieved of liability to that extent;
d. The liability of thesurety under any bond may not exceed the aggregate amount of the bond,regardless of the number or amount of claims filed;
e. If the claims filedshould exceed the amount of the bond, the surety shall pay the amount of thebond to the Attorney General for distribution to claimants entitled torestitution and shall be relieved of all liability under the bond.
(9) The seller shall beexempt from the bonding requirement if all of its unexpired contracts andpresent membership plans meet the following criteria: (i) no initiation fee orsimilar nonrecurring fee is charged, and (ii) at no time is any member chargedto pay for the use of facilities or services more than 31 days in advance.
(b) If, for any reason,services under a prepaid entertainment contract are not available to the buyeron the date of sale, then:
(1) The seller shallestablish a surety bond issued by a surety company authorized to do business inthe State or shall establish an escrow account with a licensed and insured bankor savings institution located in this State. The surety bond or escrow accountshall be in the amount of ten thousand dollars ($10,000) per location or in anamount equal to all contract costs received from the buyer, whichever isgreater. The bond or escrow account shall be in favor of the State of NorthCarolina and a copy of the bond or escrow agreement shall be filed with the AttorneyGeneral prior to the sale of any prepaid entertainment contracts. The bond orescrow account shall remain in force until 60 days after all services of theseller are available to the buyer, at which time the seller shall comply withthe bonding requirement of subsection (a) of this section. The escrow accountshall be established and maintained only in a financial institution whichagrees in writing with the Attorney General to hold all funds deposited and notto release such funds until receipt of written authorization from the AttorneyGeneral. The funds deposited will be eligible for withdrawal by the depositorafter the facility has been open and providing services for 60 days and theAttorney General gives written authorization for withdrawal. Any person who isdamaged by any violation of this Article, or by the seller's breach of thecontract for sale or any obligation arising therefrom may bring an actionagainst the bond or escrow account to recover damages suffered; provided,however, that the aggregate liability of the surety or escrow agent shall befor actual damages only and in no event shall exceed the amount of the bond orescrow account.
(2) The buyer's right tocancel the contract pursuant to G.S. 66‑121 shall be extended untilmidnight of the third business day after the date upon which the servicesbecome available and the buyer is notified that the services are available. (1979,c. 833, s. 1; 1991 (Reg. Sess., 1992), c. 1009, s. 2.)
(a) Prior to the saleof any prepaid entertainment contract for services which are available on theday of sale, the seller shall purchase a surety bond issued by a surety companyauthorized to do business in this State, as follows:
(1) The amount of thesurety bond shall be equal to the aggregate value of outstanding liabilities tobuyers, or ten thousand dollars ($10,000), whichever is greater. For purposesof this section, "liabilities" means the moneys actually received inadvance from the buyer on or after January 1, 1993, for contract costs, lessthe prorated value of services rendered by the seller. The bond shall be infavor of the State of North Carolina and in a form approved by the AttorneyGeneral. The surety company shall have a duty to disclose the amount and statusof the bond to the public upon request. Any person who is damaged by reason ofthe closing of a facility or bankruptcy of the seller, may bring an actionagainst the bond to recover damages suffered; provided, however, that theaggregate liability of the surety shall be only for actual damages and in noevent shall exceed the amount of the bond.
(2) The amount of thebond shall be based upon a written sworn statement by the seller under penaltyof perjury stating the seller's outstanding liabilities to buyers. A corporateseller's statement shall be signed by the president of the corporation; thestatement of a partnership shall be signed by a general partner; and thestatement of a sole proprietorship shall be signed by the sole proprietor. Thestatement and a copy of the bond shall be filed with the Attorney Generalwithin 90 days after the first contract is sold and at 180‑day intervalsthereafter.
(3) The amount of thebond shall be increased or may be decreased, as necessary, to take into accountchanges in the seller's outstanding liabilities to buyers on a semiannualbasis.
(4) The bondingrequirement of this section applies to each location of the seller in any casewhere a seller operates or plans to operate more than one facility in theState. A separate bond for each separately located facility shall be filed withthe Attorney General.
(5) Notwithstanding anyother provision of this section, no seller is required to purchase a bond inexcess of two hundred fifty thousand dollars ($250,000) per facility.
(6) A change inownership shall not release, cancel, or terminate liability under any bondpreviously established unless the Attorney General agrees in writing to therelease, cancellation, or termination because the new owner has established anew bond for the benefit of the previous owner's members, or because the formerowner has paid the required funds to its members.
(7) In lieu ofpurchasing the bond required by subdivision (1), an irrevocable letter ofcredit from a bank insured by the Federal Deposit Insurance Corporation, in aform acceptable to the Attorney General, may be filed with the AttorneyGeneral.
(8) Claims and actionsby a buyer of prepaid entertainment contract services:
a. A buyer of prepaidentertainment contract services who suffers or sustains any loss or damage byreason of the closing of a facility or bankruptcy of the seller shall file aclaim with the surety, and, if the claim is not paid, may bring an action basedon the bond and recover against the surety. In the case of a letter of creditthat has been filed with the Attorney General, the buyer may file a claim withthe Attorney General;
b. Any claim underparagraph a. of this subdivision shall be filed no later than one year from thedate on which the facility closed or bankruptcy was filed;
c. The Attorney Generalmay file a claim with the surety on behalf of any buyer in paragraph a. of thissubdivision. The surety shall pay the amount of the claims to the AttorneyGeneral for distribution to claimants entitled to restitution and shall berelieved of liability to that extent;
d. The liability of thesurety under any bond may not exceed the aggregate amount of the bond,regardless of the number or amount of claims filed;
e. If the claims filedshould exceed the amount of the bond, the surety shall pay the amount of thebond to the Attorney General for distribution to claimants entitled torestitution and shall be relieved of all liability under the bond.
(9) The seller shall beexempt from the bonding requirement if all of its unexpired contracts andpresent membership plans meet the following criteria: (i) no initiation fee orsimilar nonrecurring fee is charged, and (ii) at no time is any member chargedto pay for the use of facilities or services more than 31 days in advance.
(b) If, for any reason,services under a prepaid entertainment contract are not available to the buyeron the date of sale, then:
(1) The seller shallestablish a surety bond issued by a surety company authorized to do business inthe State or shall establish an escrow account with a licensed and insured bankor savings institution located in this State. The surety bond or escrow accountshall be in the amount of ten thousand dollars ($10,000) per location or in anamount equal to all contract costs received from the buyer, whichever isgreater. The bond or escrow account shall be in favor of the State of NorthCarolina and a copy of the bond or escrow agreement shall be filed with the AttorneyGeneral prior to the sale of any prepaid entertainment contracts. The bond orescrow account shall remain in force until 60 days after all services of theseller are available to the buyer, at which time the seller shall comply withthe bonding requirement of subsection (a) of this section. The escrow accountshall be established and maintained only in a financial institution whichagrees in writing with the Attorney General to hold all funds deposited and notto release such funds until receipt of written authorization from the AttorneyGeneral. The funds deposited will be eligible for withdrawal by the depositorafter the facility has been open and providing services for 60 days and theAttorney General gives written authorization for withdrawal. Any person who isdamaged by any violation of this Article, or by the seller's breach of thecontract for sale or any obligation arising therefrom may bring an actionagainst the bond or escrow account to recover damages suffered; provided,however, that the aggregate liability of the surety or escrow agent shall befor actual damages only and in no event shall exceed the amount of the bond orescrow account.
(2) The buyer's right tocancel the contract pursuant to G.S. 66‑121 shall be extended untilmidnight of the third business day after the date upon which the servicesbecome available and the buyer is notified that the services are available. (1979,c. 833, s. 1; 1991 (Reg. Sess., 1992), c. 1009, s. 2.)
