By George H.B. No. 2369 77R7532 DWS-F A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to state financing of the development and production of 1-3 Texas biotechnological and biomedical products and small 1-4 businesses; providing for the issuance of bonds. 1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-6 SECTION 1. Chapter 403, Government Code, is amended by 1-7 adding Subchapter P to read as follows: 1-8 SUBCHAPTER P. PRODUCT DEVELOPMENT AND SMALL BUSINESS INCUBATORS 1-9 Sec. 403.401. DEFINITIONS. (1) "Board" means the Product 1-10 Development and Small Business Incubator Board. 1-11 (2) "Comptroller" includes the designee of the 1-12 comptroller. 1-13 (3) "Financing" means a loan, loan guarantee, or 1-14 equity investment from the product development fund to a person for 1-15 use in the development and production of a product in this state, 1-16 or a grant, loan, or loan guarantee from the small business 1-17 incubator fund to a person for use in the development of a small 1-18 business in this state. 1-19 (4) "Office" means the office of the comptroller. 1-20 (5) "Product" includes an invention, device, 1-21 technique, or process, without regard to whether a patent has or 1-22 could be granted, that has advanced beyond the theoretical stage 1-23 and has or is readily capable of having a commercial application. 1-24 The term does not include pure research. 2-1 (6) "Product fund" means the Texas product development 2-2 fund. 2-3 (7) "Program" means the product development program or 2-4 the small business incubator program. 2-5 (8) "Small business fund" means the Texas small 2-6 business incubator fund. 2-7 Sec. 403.402. PRODUCT DEVELOPMENT AND SMALL BUSINESS 2-8 INCUBATOR BOARD. (a) The Product Development and Small Business 2-9 Incubator Board is created in the office. 2-10 (b) The board shall administer the programs, the product 2-11 fund, and the small business fund. 2-12 Sec. 403.403. MEMBERS OF THE BOARD; APPOINTMENT; TERMS OF 2-13 OFFICE. (a) The board consists of the comptroller and six persons 2-14 appointed by the governor. 2-15 (b) In appointing members of the board, the governor shall 2-16 appoint: 2-17 (1) two persons having significant business leadership 2-18 experience in biomedicine or biotechnology, particularly experience 2-19 with the transfer of research results into commercial applications; 2-20 (2) two persons employed by institutions of higher 2-21 education of this state who have experience in biomedical or 2-22 biotechnological research and their commercial applications; and 2-23 (3) two persons experienced and knowledgeable in 2-24 structuring and providing financing for biomedical or 2-25 biotechnological products or businesses. 2-26 (c) Appointed members of the board serve two-year staggered 2-27 terms with the terms of three members expiring February 1 of each 3-1 odd-numbered year and the terms of three members expiring February 3-2 1 of each even-numbered year. 3-3 (d) The comptroller is the presiding officer of the board. 3-4 (e) The board shall appoint a secretary of the board whose 3-5 duties may be prescribed by law and by the board. 3-6 (f) Appointed members of the board serve without pay but are 3-7 entitled to reimbursement for their actual expenses incurred in 3-8 attending meetings of the board or in performing other work of the 3-9 board if that work is approved by the comptroller. 3-10 Sec. 403.404. REMOVAL OF BOARD MEMBER. (a) It is a ground 3-11 for removal from the board if an appointed member: 3-12 (1) cannot because of illness or disability discharge 3-13 the member's duties for a substantial part of the term for which 3-14 the member is appointed; or 3-15 (2) is absent from more than half of the regularly 3-16 scheduled board meetings that the member is eligible to attend 3-17 during a calendar year unless the absence is excused by majority 3-18 vote of the board. 3-19 (b) The validity of an action of the board is not affected 3-20 by the fact that the action was taken when a ground for removal of 3-21 a board member existed. 3-22 Sec. 403.405. TRAINING OF BOARD MEMBERS. (a) Before an 3-23 appointed member of the board may assume the member's duties, the 3-24 member must complete at least one course of the training program 3-25 established under this section. 3-26 (b) A training program established under this section shall 3-27 provide information to the member regarding: 4-1 (1) the enabling legislation that created the board; 4-2 (2) the programs operated by the board; 4-3 (3) the role and functions of the board; 4-4 (4) the rules of the board, with an emphasis on the 4-5 rules that relate to disciplinary and investigatory authority; 4-6 (5) the current budget for the board; 4-7 (6) the results of the most recent formal audit of the 4-8 board; 4-9 (7) the requirements of the: 4-10 (A) open meetings law, Chapter 551; 4-11 (B) open records law, Chapter 552; and 4-12 (C) administrative procedure law, Chapter 2001; 4-13 (8) the requirements of the conflict of interest laws 4-14 and other laws relating to public officials; and 4-15 (9) any applicable ethics policies adopted by the 4-16 board or the Texas Ethics Commission. 4-17 Sec. 403.406. MEETINGS. (a) The board shall hold regular 4-18 meetings in Austin and other meetings at places and times scheduled 4-19 by the board in formal sessions and called by the comptroller. 4-20 (b) The board shall develop and implement policies that 4-21 provide the public with a reasonable opportunity to appear before 4-22 the board and to speak on any issue under the jurisdiction of the 4-23 board. 4-24 (c) The board shall make minutes of all meetings available 4-25 in the board's office for public inspection. 4-26 Sec. 403.407. APPLICABILITY OF OPEN MEETINGS LAW AND 4-27 ADMINISTRATIVE PROCEDURE LAW. The board is subject to the open 5-1 meetings law, Chapter 551, and the administrative procedure law, 5-2 Chapter 2001. 5-3 Sec. 403.408. STAFF. (a) The employees of the comptroller 5-4 selected by the comptroller for that purpose serve as the staff of 5-5 the board. 5-6 (b) The comptroller shall select and supervise the staff of 5-7 the board and perform other duties delegated to the comptroller by 5-8 the board. 5-9 (c) The comptroller shall provide to members of the board 5-10 and to board staff, as often as necessary, information regarding 5-11 their qualifications for office or employment under this subchapter 5-12 and their responsibilities under applicable laws relating to 5-13 standards of conduct for state officers or employees. 5-14 (d) The board shall develop and implement policies that 5-15 clearly separate the policy-making responsibilities of the board 5-16 and the management responsibilities of the comptroller and the 5-17 office. 5-18 Sec. 403.409. PROGRAM AND FACILITY ACCESSIBILITY. (a) The 5-19 board shall comply with federal and state laws related to program 5-20 and facility accessibility. 5-21 (b) The board shall prepare and maintain a written plan that 5-22 describes how a person who does not speak English can be provided 5-23 reasonable access to the board's programs and services. 5-24 Sec. 403.410. POWERS OF THE BOARD; BONDS. (a) The board has 5-25 the powers necessary and reasonable to carry out this subchapter 5-26 and may adopt rules, policies, and procedures necessary or 5-27 reasonable to implement this subchapter. 6-1 (b) The board may issue general obligation bonds, up to the 6-2 amounts authorized and as provided by Section 71, Article XVI, 6-3 Texas Constitution, to fund the program. 6-4 Sec. 403.411. TEXAS PRODUCT DEVELOPMENT FUND. (a) The Texas 6-5 product development fund is a revolving fund in the state treasury. 6-6 (b) The product fund is composed of proceeds of bonds issued 6-7 under this subchapter, financing application fees, loan repayments, 6-8 guarantee fees, royalty receipts, dividend income, money 6-9 appropriated by the legislature for authorized purposes of the 6-10 product fund, amounts received by the state from loans, loan 6-11 guarantees, and equity investments made under this subchapter, 6-12 amounts received by the state from federal grants or other sources, 6-13 and any other amounts received under this subchapter and required 6-14 by resolution of the board to be deposited in the product fund. 6-15 The product fund contains a program account, an interest and 6-16 sinking account, and other accounts that the board authorizes to be 6-17 created and maintained. Money in the product fund is available for 6-18 use by the board under this subchapter. 6-19 (c) Money in the program account of the product fund, minus 6-20 the costs of issuance of bonds under this subchapter and necessary 6-21 costs of administering the product fund, may be used only to 6-22 provide financing to aid in the development and production, 6-23 including the commercialization, of new or improved products in 6-24 this state. The board shall provide financing from the product 6-25 fund on the terms and conditions that the board determines to be 6-26 reasonable, appropriate, and consistent with the purposes and 6-27 objectives of the product fund and this subchapter, for the purpose 7-1 of aiding in the development and production of new or improved 7-2 products in this state. 7-3 Sec. 403.412. SMALL BUSINESS INCUBATOR FUND. (a) The Texas 7-4 small business incubator fund is a revolving fund in the state 7-5 treasury. 7-6 (b) The small business fund is composed of proceeds of bonds 7-7 issued under this subchapter, financing application fees, loan 7-8 repayments, guarantee fees, royalty receipts, dividend income, 7-9 money appropriated by the legislature for authorized purposes of 7-10 the small business fund, amounts received by the state from loans, 7-11 loan guarantees, and equity investments made under this subchapter, 7-12 amounts received by the state from federal grants or other sources, 7-13 and any other amounts received under this subchapter and required 7-14 by resolution of the board to be deposited in the small business 7-15 fund. The small business fund contains a project account, an 7-16 interest and sinking account, and other accounts that the board 7-17 authorizes to be created and maintained. Money in the small 7-18 business fund is available for use by the board under this 7-19 subchapter. 7-20 (c) Money in the project account of the small business fund, 7-21 minus the costs of issuance of bonds under this subchapter and 7-22 necessary costs of administering the small business fund, may be 7-23 used only to provide financing to foster and stimulate the 7-24 development of small businesses in this state. The board shall 7-25 provide financing from the small business fund on the terms and 7-26 conditions that the board determines to be reasonable, appropriate, 7-27 and consistent with the purposes and objectives of the small 8-1 business fund and this subchapter, for the purpose of fostering and 8-2 stimulating the development of new or existing small businesses in 8-3 this state. 8-4 Sec. 403.413. ELIGIBLE PRODUCTS AND BUSINESSES; FINANCING. 8-5 (a) Financing may be made under this subchapter only for a product 8-6 or small business approved by the board. 8-7 (b) In determining eligible products and small businesses, 8-8 the board shall give special preference to products or businesses 8-9 in the areas of biotechnology and biomedicine that have the 8-10 greatest likelihood of commercial success, job creation, and job 8-11 retention in this state. The board shall give further preference 8-12 to providing financing to projects or businesses that are: 8-13 (1) grantees under the small business innovation 8-14 research program established under 15 U.S.C. Section 638, as 8-15 amended; 8-16 (2) companies formed in this state to commercialize 8-17 research funded at least in part with state funds; 8-18 (3) applicants that have acquired other sources of 8-19 financing; 8-20 (4) companies formed in this state and receiving 8-21 assistance from designated state small business development 8-22 centers; or 8-23 (5) applicants who are residents of this state doing 8-24 business in this state and performing financed activities 8-25 predominantly in this state. 8-26 (c) The board shall adopt rules establishing limits on the 8-27 amount of financing for each applicant and otherwise governing the 9-1 terms and conditions of the financing, specifically including 9-2 requirements for appropriate security or collateral, equity 9-3 interest, and the rights and remedies of the board and office in 9-4 the event of a default on the loan. The rules must include a 9-5 requirement that applicants report to the board on the use of money 9-6 distributed through either fund. 9-7 (d) Before approving the provision of financing to a person, 9-8 the board shall enter into an agreement with the person under which 9-9 the board will obtain an appropriate portion of royalties, patent 9-10 rights, equitable interests, or a combination of those royalties, 9-11 rights, and interests from or in the product or proceeds of the 9-12 product for which financing is requested. Contracts executed under 9-13 this subchapter must include agreements to ensure proper use of 9-14 funds and the receipt of royalties, patent rights, or equity 9-15 interest, as appropriate. 9-16 (e) The board may appoint an advisory committee of experts 9-17 in the areas of biotechnology and biomedicine to review projects 9-18 and businesses seeking financing from the board. 9-19 Sec. 403.414. APPLICATION PROCESS. (a) To apply for 9-20 financing from the board, an applicant shall submit to the board: 9-21 (1) an application for financing on a form prescribed 9-22 by the board; and 9-23 (2) a reasonable application fee set by the board. 9-24 (b) The application must include a business plan, containing 9-25 the information required by the board, including at a minimum: 9-26 (1) information regarding: 9-27 (A) the history and financial condition of the 10-1 applicant, including the applicant's income statement; 10-2 (B) the applicant's present markets and market 10-3 prospects; and 10-4 (C) the integrity of the applicant's management; 10-5 (2) a statement of the feasibility of the product for 10-6 which financing is requested, including the state of development of 10-7 any product to be developed and the proposed schedule of its 10-8 commercialization; and 10-9 (3) if applicable, documentation of attempts to obtain 10-10 private financing. 10-11 (c) The board shall determine, with respect to each 10-12 application for financing, whether: 10-13 (1) the product or business for which financing is 10-14 requested is economically sound; 10-15 (2) there is a reasonable expectation that the product 10-16 or business will be successful; 10-17 (3) the product or business will create or preserve 10-18 jobs and otherwise benefit the economy of the state; 10-19 (4) the applicant has the management resources and 10-20 other funding to complete the project; 10-21 (5) financing is necessary because full financing is 10-22 unavailable in traditional capital markets or credit has been 10-23 offered on terms that would preclude the success of the project; 10-24 and 10-25 (6) there is reasonable assurance that the potential 10-26 revenues to be derived from the sale of the product will be 10-27 sufficient to repay any financing approved by the board. 11-1 (d) After considering the application and all other 11-2 information it considers relevant, the board shall approve or deny 11-3 the application and promptly notify the applicant of its decision. 11-4 Sec. 403.415. INFORMATION CONFIDENTIAL. (a) Information 11-5 described by Subsection (b) collected, assembled, or maintained by 11-6 or for the board is confidential and may not be disclosed by the 11-7 board, the comptroller, or the office. 11-8 (b) This section applies to information in any form provided 11-9 by or on behalf of an applicant for financing or a recipient of 11-10 financing under this subchapter, including information contained 11-11 in, accompanying, or derived from any application or report, that 11-12 relates to a product, to the development, application, manufacture, 11-13 or use of a product, or to the markets, market prospects, or 11-14 marketing of a product, and that is proprietary information of 11-15 actual or potential commercial value to the applicant or recipient 11-16 that has not been disclosed to the public. Confidential 11-17 information includes scientific and technological information, 11-18 including computer programs and software, and marketing and 11-19 business operation information, regardless of whether the product 11-20 to which the information relates is patentable or capable of being 11-21 registered under copyright or trademark laws or has a potential for 11-22 being sold, traded, or licensed for a fee. This section does not 11-23 make confidential information in an account, voucher, or contract 11-24 relating to the receipt or expenditure of public funds by the board 11-25 or the comptroller under this subchapter. 11-26 (c) Any application for financing that is withdrawn by the 11-27 applicant before approval or funding or that is denied by the board 12-1 shall be returned to the applicant promptly on request, together 12-2 with all materials submitted by or on behalf of the applicant that 12-3 relate to the application, except that the board may retain a 12-4 record of the submission and disposition of the application that 12-5 does not include any information described by Subsection (b). 12-6 Sec. 403.416. PROGRAM COORDINATION. The board and office 12-7 shall coordinate the administration and funding of the programs. 12-8 SECTION 2. This Act takes effect immediately if it receives 12-9 a vote of two-thirds of all the members elected to each house, as 12-10 provided by Section 39, Article III, Texas Constitution. If this 12-11 Act does not receive the vote necessary for immediate effect, this 12-12 Act takes effect September 1, 2001.