§ 622. Escrow required. All moneys received by a seller pursuant to a
contract for services for use by a buyer of a health club prior to the
full operation of such health club shall be placed in escrow.

1. Such funds shall be kept and maintained in an account separate and
apart from any account maintained by or for the seller's personal use or
for use in the construction or operation of the health club or for the
payment or benefit of employees of the seller.

2. The escrow account shall be established in a bank or trust company
doing business in this state.

3. The escrow account shall provide that the purpose of the account is
to protect the consumer in the event that the seller fails to complete
substantially and to open the facility within one year following
establishment of the account. Any buyer who has advanced moneys on
deposit in the escrow account may maintain a representative action
pursuant to the provisions of the civil practice law and rules to close
the account and to release such moneys pro-rata to all buyers similarly
situated if such health club facility has not been substantially
completed and opened within one year of establishment of the account or
if the buyer has not had the full use of another similar facility during
this period.

4. Within three business days of a request therefor, a monthly
statement of the escrow account is to be furnished to consumers who have
advanced funds or obligation until such account is no longer required by
this article.

5. The escrow account shall provide that funds deposited therein may
be withdrawn by the seller upon the completion of the proposed
construction in the following manner: (i) one-third of the funds may be
distributed to the seller upon completion of one-half of the proposed
construction; (ii) not more than two-thirds of the funds which have been
deposited in escrow may be released upon the completion of three-fourths
of the proposed construction; (iii) the escrow agent may accept as
evidence of partial completion certification of any architect or
engineer licensed pursuant to the provisions of the education law that
the proposed construction has been completed in accordance with the
plans and specifications.

6. The escrow account shall be released by the escrow agent to the
seller not more than thirty days following full operation of the
facility and certification of completion from any architect or engineer
licensed pursuant to the provisions of the education law.

7. In lieu of the escrow provisions required by this section, the
health club may furnish information as required by the secretary,
executed under penalty of perjury by an officer or owner of the health
club which reasonably demonstrates financial responsibility that will
enable the health club to satisfy the possible claims against the escrow
required by this section. In the event the health club is controlled by,
under common control, or controls another corporation and the other
corporation agrees in writing to satisfy the claims against the escrow
required by this section, then the financial responsibility of the other
corporation shall be considered in determining the applicability of this
section. In determining whether the health club has the requisite
financial responsibility the secretary may consider the operating and
business history and reputation of the health club and its management
within and without the state as well as the operating and business
history and reputation of any business controlled by, under common
control with, or controlling the health club.