1-1     By:  Carona                                           S.B. No. 1485
 1-2           (In the Senate - Filed March 9, 2001; March 13, 2001, read
 1-3     first time and referred to Committee on Business and Commerce;
 1-4     April 26, 2001, reported adversely, with favorable Committee
 1-5     Substitute by the following vote:  Yeas 4, Nays 0; April 26, 2001,
 1-6     sent to printer.)
 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 1485                  By:  Carona
 1-8                            A BILL TO BE ENTITLED
 1-9                                   AN ACT
1-10     relating to state financing of the development and production of
1-11     Texas biotechnological and biomedical products and small
1-12     businesses; providing for the issuance of bonds.
1-13           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-14           SECTION 1.  Chapter 403, Government Code, is amended by
1-15     adding Subchapter P to read as follows:
1-16       SUBCHAPTER P. PRODUCT DEVELOPMENT AND SMALL BUSINESS INCUBATORS
1-17           Sec. 403.401.  DEFINITIONS.  In this subchapter:
1-18                 (1)  "Board" means the Product Development and Small
1-19     Business Incubator Board.
1-20                 (2)  "Comptroller" includes the designee of the
1-21     comptroller.
1-22                 (3)  "Financing" means a loan, loan guarantee, or
1-23     equity investment from the product fund to a person for use in the
1-24     development and production of a product in this state, or a grant,
1-25     loan, or loan guarantee from the small business fund to a person
1-26     for use in the development of a small business in this state.
1-27                 (4)  "Office" means the office of the comptroller.
1-28                 (5)  "Product" includes an invention, device,
1-29     technique, or process, without regard to whether a patent has been
1-30     or could be granted, that has advanced beyond the theoretical stage
1-31     and has or is readily capable of having a commercial application.
1-32     The term does not include pure research.
1-33                 (6)  "Product fund" means the Texas product development
1-34     fund.
1-35                 (7)  "Program" means the product development program or
1-36     the small business incubator program.
1-37                 (8)  "Small business fund" means the Texas small
1-38     business incubator fund.
1-39           Sec. 403.402.  PRODUCT DEVELOPMENT AND SMALL BUSINESS
1-40     INCUBATOR BOARD.  (a)  The Product Development and Small Business
1-41     Incubator Board is created in the office.
1-42           (b)  The board shall administer the programs, the product
1-43     fund, and the small business fund.
1-44           Sec. 403.403.  MEMBERS OF THE BOARD; APPOINTMENT; TERMS OF
1-45     OFFICE.  (a)  The board consists of the comptroller and six persons
1-46     appointed by the governor.
1-47           (b)  In appointing members of the board, the governor shall
1-48     appoint:
1-49                 (1)  two persons having significant business leadership
1-50     experience in technology, particularly experience with the transfer
1-51     of research results into commercial applications;
1-52                 (2)  two persons employed by institutions of higher
1-53     education of this state who have experience in technological
1-54     research and its commercial applications; and
1-55                 (3)  two persons experienced and knowledgeable in
1-56     structuring and providing financing for technological products or
1-57     businesses.
1-58           (c)  Appointed members of the board serve two-year staggered
1-59     terms with the terms of three members expiring February 1 of each
1-60     odd-numbered year and the terms of three members expiring February
1-61     1 of each even-numbered year.
1-62           (d)  The comptroller is the presiding officer of the board.
1-63           (e)  The board shall appoint a secretary of the board whose
1-64     duties may be prescribed by law and by the board.
 2-1           (f)  Appointed members of the board serve without pay but are
 2-2     entitled to reimbursement for their actual expenses incurred in
 2-3     attending meetings of the board or in performing other work of the
 2-4     board if that work is approved by the comptroller.
 2-5           Sec. 403.404.  REMOVAL OF BOARD MEMBER.  (a)  It is a ground
 2-6     for removal from the board if an appointed member:
 2-7                 (1)  cannot because of illness or disability discharge
 2-8     the member's duties for a substantial part of the term for which
 2-9     the member is appointed; or
2-10                 (2)  is absent from more than half of the regularly
2-11     scheduled board meetings that the member is eligible to attend
2-12     during a calendar year unless the absence is excused by majority
2-13     vote of the board.
2-14           (b)  The validity of an action of the board is not affected
2-15     by the fact that the action was taken when a ground for removal of
2-16     a board member existed.
2-17           Sec. 403.405.  TRAINING OF BOARD MEMBERS.  (a)  Before an
2-18     appointed member of the board may assume the member's duties, the
2-19     member must complete at least one course of the training program
2-20     established under this section.
2-21           (b)  A training program established under this section shall
2-22     provide information to the member regarding:
2-23                 (1)  the enabling legislation that created the board;
2-24                 (2)  the programs operated by the board;
2-25                 (3)  the role and functions of the board;
2-26                 (4)  the rules of the board, with an emphasis on the
2-27     rules that relate to disciplinary and investigatory authority;
2-28                 (5)  the current budget for the board;
2-29                 (6)  the results of the most recent formal audit of the
2-30     board;
2-31                 (7)  the requirements of the:
2-32                       (A)  open meetings law, Chapter 551;
2-33                       (B)  open records law, Chapter 552; and
2-34                       (C)  administrative procedure law, Chapter 2001;
2-35                 (8)  the requirements of the conflict of interest laws
2-36     and other laws relating to public officials; and
2-37                 (9)  any applicable ethics policies adopted by the
2-38     board or the Texas Ethics Commission.
2-39           Sec. 403.406.  MEETINGS.  (a)  The board shall hold regular
2-40     meetings in Austin and other meetings at places and times scheduled
2-41     by the board in formal sessions and called by the comptroller.
2-42           (b)  The board shall develop and implement policies that
2-43     provide the public with a reasonable opportunity to appear before
2-44     the board and to speak on any issue under the jurisdiction of the
2-45     board.
2-46           (c)  The board shall make minutes of all meetings available
2-47     in the board's office for public inspection.
2-48           Sec. 403.407.  APPLICABILITY OF OPEN MEETINGS LAW AND
2-49     ADMINISTRATIVE PROCEDURE LAW.  The board is subject to the open
2-50     meetings law, Chapter 551, and the administrative procedure law,
2-51     Chapter 2001.
2-52           Sec. 403.408.  STAFF.  (a)  The employees of the comptroller
2-53     selected by the comptroller for that purpose serve as the staff of
2-54     the board.
2-55           (b)  The comptroller shall select and supervise the staff of
2-56     the board and perform other duties delegated to the comptroller by
2-57     the board.
2-58           (c)  The comptroller shall provide to members of the board
2-59     and to board staff, as often as necessary, information regarding
2-60     their qualifications for office or employment under this subchapter
2-61     and their responsibilities under applicable laws relating to
2-62     standards of conduct for state officers or employees.
2-63           (d)  The board shall develop and implement policies that
2-64     clearly separate the policy-making responsibilities of the board
2-65     and the management responsibilities of the comptroller and the
2-66     office.
2-67           Sec. 403.409.  PROGRAM AND FACILITY ACCESSIBILITY.  (a)  The
2-68     board shall comply with federal and state laws related to program
2-69     and facility accessibility.
 3-1           (b)  The board shall prepare and maintain a written plan that
 3-2     describes how a person who does not speak English can be provided
 3-3     reasonable access to the board's programs and services.
 3-4           Sec. 403.410.  POWERS OF THE BOARD; BONDS.  (a)  The board
 3-5     has the powers necessary and reasonable to carry out this
 3-6     subchapter and may adopt rules, policies, and procedures necessary
 3-7     or reasonable to implement this subchapter.
 3-8           (b)  The board may issue general obligation bonds, up to the
 3-9     amounts authorized and as provided by Section 71, Article XVI,
3-10     Texas Constitution, to fund the program.
3-11           (c)  Not more than an amount equal to five percent of the
3-12     total amount of bonds issued may be used to pay administrative fees
3-13     involved in selling the bonds.
3-14           Sec. 403.411.  TEXAS PRODUCT DEVELOPMENT FUND.  (a)  The
3-15     Texas product development fund is a revolving fund in the state
3-16     treasury.
3-17           (b)  The product fund is composed of proceeds of bonds issued
3-18     under this subchapter, financing application fees, loan repayments,
3-19     guarantee fees, royalty receipts, dividend income, money
3-20     appropriated by the legislature for authorized purposes of the
3-21     product fund, amounts received by the state from loans, loan
3-22     guarantees, and equity investments made under this subchapter,
3-23     amounts received by the state from federal grants or other sources,
3-24     and any other amounts received under this subchapter and required
3-25     by resolution of the board to be deposited in the product fund.
3-26     The product fund contains a program account, an interest and
3-27     sinking account, and other accounts that the board authorizes to be
3-28     created and maintained.  Money in the product fund is available for
3-29     use by the board under this subchapter.  Notwithstanding any other
3-30     provision of this subchapter, any money in the product fund may be
3-31     used for debt service.
3-32           (c)  Money in the program account of the product fund, minus
3-33     the costs of issuance of bonds under this subchapter and necessary
3-34     costs of administering the product fund, may be used only to
3-35     provide financing to aid in the development and production,
3-36     including the commercialization, of new or improved products in
3-37     this state.  The board shall provide financing from the product
3-38     fund on the terms and conditions that the board determines to be
3-39     reasonable, appropriate, and consistent with the purposes and
3-40     objectives of the product fund and this subchapter, for the purpose
3-41     of aiding in the development and production of new or improved
3-42     products in this state.
3-43           Sec. 403.412.  SMALL BUSINESS INCUBATOR FUND.  (a)  The Texas
3-44     small business incubator fund is a revolving fund in the state
3-45     treasury.
3-46           (b)  The small business fund is composed of proceeds of bonds
3-47     issued under this subchapter, financing application fees, loan
3-48     repayments, guarantee fees, royalty receipts, dividend income,
3-49     money appropriated by the legislature for authorized purposes of
3-50     the small business fund, amounts received by the state from loans,
3-51     loan guarantees, and equity investments made under this subchapter,
3-52     amounts received by the state from federal grants or other sources,
3-53     and any other amounts received under this subchapter and required
3-54     by resolution of the board to be deposited in the small business
3-55     fund.  The small business fund contains a project account, an
3-56     interest and sinking account, and other accounts that the board
3-57     authorizes to be created and maintained.  Money in the small
3-58     business fund is available for use by the board under this
3-59     subchapter.  Notwithstanding any other provision of this
3-60     subchapter, any money in the small business fund may be used for
3-61     debt service.
3-62           (c)  Money in the project account of the small business fund,
3-63     minus the costs of issuance of bonds under this subchapter and
3-64     necessary costs of administering the small business fund, may be
3-65     used only to provide financing to foster and stimulate the
3-66     development of small businesses in this state.  The board shall
3-67     provide financing from the small business fund on the terms and
3-68     conditions that the board determines to be reasonable, appropriate,
3-69     and consistent with the purposes and objectives of the small
 4-1     business fund and this subchapter, for the purpose of fostering and
 4-2     stimulating the development of new or existing small businesses in
 4-3     this state.
 4-4           Sec. 403.413.  ELIGIBLE PRODUCTS AND BUSINESSES; FINANCING.
 4-5     (a)  Financing may be made under this subchapter only for a product
 4-6     or small business approved by the board.
 4-7           (b)  In determining eligible products and small businesses,
 4-8     the board shall give special preference to products or businesses
 4-9     in the areas of biotechnology and biomedicine that have the
4-10     greatest likelihood of commercial success, job creation, and job
4-11     retention in this state.  The board shall give further preference
4-12     to providing financing to projects or businesses that are:
4-13                 (1)  grantees under the small business innovation
4-14     research program established under 15 U.S.C. Section 638, as
4-15     amended;
4-16                 (2)  companies formed in this state to commercialize
4-17     research funded at least in part with state funds;
4-18                 (3)  applicants that have acquired other sources of
4-19     financing;
4-20                 (4)  companies formed in this state and receiving
4-21     assistance from designated state small business development
4-22     centers; or
4-23                 (5)  applicants who are residents of this state doing
4-24     business in this state and performing financed activities
4-25     predominantly in this state.
4-26           (c)  The board shall adopt rules governing the terms and
4-27     conditions of the financing, specifically including requirements
4-28     for appropriate security or collateral, equity interest, and the
4-29     rights and remedies of the board and office in the event of a
4-30     default on the loan.  The rules must include a requirement that
4-31     applicants report to the board on the use of money distributed
4-32     through either fund.
4-33           (d)  Before approving the provision of financing to a person,
4-34     the board shall enter into an agreement with the person under which
4-35     the board will obtain an appropriate portion of royalties, patent
4-36     rights, equitable interests, or a combination of those royalties,
4-37     rights, and interests from or in the product or proceeds of the
4-38     product for which financing is requested.  Contracts executed under
4-39     this subchapter must include agreements to ensure proper use of
4-40     funds and the receipt of royalties, patent rights, or equity
4-41     interest, as appropriate.
4-42           (e)  The board may appoint an advisory committee of experts
4-43     in the areas of biotechnology and biomedicine to review projects
4-44     and businesses seeking financing from the board.
4-45           (f)  The amount of financing provided to a single recipient
4-46     may not exceed 10 percent of the total amount of bonds issued.
4-47           (g)  A claim of the state for a payment owed to the state
4-48     under this subchapter by a person who has been provided financing
4-49     has priority over all other claims against the person.
4-50           Sec. 403.414.  APPLICATION PROCESS.  (a)  To apply for
4-51     financing from the board, an applicant shall submit to the board:
4-52                 (1)  an application for financing on a form prescribed
4-53     by the board; and
4-54                 (2)  a reasonable application fee set by the board.
4-55           (b)  The application must include a business plan, containing
4-56     the information required by the board, including at a minimum:
4-57                 (1)  information regarding:
4-58                       (A)  the history and financial condition of the
4-59     applicant, including the applicant's income statement;
4-60                       (B)  the applicant's present markets and market
4-61     prospects; and
4-62                       (C)  the integrity of the applicant's management;
4-63                 (2)  a statement of the feasibility of the product for
4-64     which financing is requested, including the state of development of
4-65     any product to be developed and the proposed schedule of its
4-66     commercialization; and
4-67                 (3)  if applicable, documentation of attempts to obtain
4-68     private financing.
4-69           (c)  The board shall determine, with respect to each
 5-1     application for financing, whether:
 5-2                 (1)  the product or business for which financing is
 5-3     requested is economically sound;
 5-4                 (2)  there is a reasonable expectation that the product
 5-5     or business will be successful;
 5-6                 (3)  the product or business will create or preserve
 5-7     jobs and otherwise benefit the economy of the state;
 5-8                 (4)  the applicant has the management resources and
 5-9     other funding to complete the project;
5-10                 (5)  financing is necessary because full financing is
5-11     unavailable in traditional capital markets or credit has been
5-12     offered on terms that would preclude the success of the project;
5-13     and
5-14                 (6)  there is reasonable assurance that the potential
5-15     revenues to be derived from the sale of the product will be
5-16     sufficient to repay any financing approved by the board.
5-17           (d)  After considering the application and all other
5-18     information it considers relevant, the board shall approve or deny
5-19     the application and promptly notify the applicant of its decision.
5-20           Sec. 403.415.  INFORMATION CONFIDENTIAL.  (a)  Information
5-21     described by Subsection (b) collected, assembled, or maintained by
5-22     or for the board is confidential and may not be disclosed by the
5-23     board, the comptroller, or the office.
5-24           (b)  This section applies to information in any form provided
5-25     by or on behalf of an applicant for financing or a recipient of
5-26     financing under this subchapter, including information contained
5-27     in, accompanying, or derived from any application or report, that
5-28     relates to a product, to the development, application, manufacture,
5-29     or use of a product, or to the markets, market prospects, or
5-30     marketing of a product, and that is proprietary information of
5-31     actual or potential commercial value to the applicant or recipient
5-32     that has not been disclosed to the public.  Confidential
5-33     information includes scientific and technological information,
5-34     including computer programs and software, and marketing and
5-35     business operation information, regardless of whether the product
5-36     to which the information relates is patentable or capable of being
5-37     registered under copyright or trademark laws or has a potential for
5-38     being sold, traded, or licensed for a fee.  This section does not
5-39     make confidential information in an account, voucher, or contract
5-40     relating to the receipt or expenditure of public funds by the board
5-41     or the comptroller under this subchapter.
5-42           (c)  Any application for financing that is withdrawn by the
5-43     applicant before approval or funding or that is denied by the board
5-44     shall be returned to the applicant promptly on request, together
5-45     with all materials submitted by or on behalf of the applicant that
5-46     relate to the application, except that the board may retain a
5-47     record of the submission and disposition of the application that
5-48     does not include any information described by Subsection (b).
5-49           Sec. 403.416.  PROGRAM COORDINATION.  The board and office
5-50     shall coordinate the administration and funding of the programs.
5-51           SECTION 2.  This Act takes effect immediately if it receives
5-52     a vote of two-thirds of all the members elected to each house, as
5-53     provided by Section 39, Article III, Texas Constitution.  If this
5-54     Act does not receive the vote necessary for immediate effect, this
5-55     Act takes effect September 1, 2001.
5-56                                  * * * * *