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.