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.