1. (a) Unless exempted by the Act, §9, subsection (e), a registrant or its assignee or agent that accepts prepayments for its membership shall deposit all of the funds in an escrow account established with a financial institution whose accounts are insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, which shall hold the funds as escrow agent for the benefit of the members that prepay.
2. (b) The registrant shall deposit prepayments received as often as biweekly and shall make the first deposit not later than the 14th day after the day on which the registrant or its agent accepts the first payment.
3. (c) Not later than the 14th day after the day on which the first prepayment is received, the registrant shall give the secretary a notarized statement that identifies the financial institution in which the prepayments are held in escrow and the name in which the account is held, together with a signed statement on a form approved by the secretary of state which authorizes the secretary of state to make inquiries of the financial institution regarding the funds in escrow.

4. (d) The escrow agreement must contain the following provisions.

   1. (1) Prepayments must be deposited at least biweekly.
   2. (2) The secretary must be named as fiduciary for the prepayment members.
   3. (3) The prepayments shall remain in escrow until the 30th day after the date that the health spa fully opens for business.
   4. (4) If the health spa does not fully open for business before the 181st day after the registrant first sells a membership in the health spa, or if the health spa does not remain open for 30 days, the escrow agreement shall terminate and all prepayment deposits shall be refunded to the members.
   5. (5) If another health spa is operated by the same seller and is located not more than 10 miles from the proposed location of the new health spa and the person purchasing the membership is authorized to use these other facilities, then the member of the new spa whose fees are held in escrow is entitled to receive a full refund of the membership fees from the escrow agent if the new health spa does not open before the 361st day after the date on which the new spa first sells a membership or if the new spa does not remain open for 30 days.
   6. (6) The registrant must provide the escrow agent proof that it has filed an affidavit with the secretary of state which certified that all obligations of the registrant for which a lien could be filed under the Property Code, Chapter 53, have been paid and whether any person is eligible to claim a lien under that chapter during the period the registrant or its agent accepts payments.
5. (e) The escrow agreement shall identify the escrow officer, style of the deposit account, the financial institution, and any other information which will identify the escrow account into which the prepayments have been deposited.
6. (f) The registrant shall file a copy of the escrow agreement with the secretary.

Source Note:The provisions of this §102.20 adopted to be effective January 18, 1993, 18 TexReg 61.