80R749 YDB-F
 
  By: Flores H.B. No. 1405
 
 
 
   
 
 
A BILL TO BE ENTITLED
AN ACT
relating to the operation of video lottery games for this state to
provide additional money to fund governmental programs; the
creation, powers, and duties of the Texas Gaming and Boxing
Commission; the powers and duties of the Texas Lottery Commission,
the Texas Racing Commission, and the Texas Commission of Licensing
and Regulation, and the regulation of gambling activities in this
state; making an appropriation; providing penalties.
       BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1.  AUTHORIZATION OF VIDEO LOTTERY
       SECTION 1.01.  Section 466.002, Government Code, is amended
by amending Subdivisions (2) and (4)-(10) and adding Subdivisions
(2-a) and (11)-(35) to read as follows:
             (2)  "Communication technology" means the methods used
and the components employed to facilitate the transmission of
information, including transmission and reception systems that
transmit information through wire, cable, radio, microwave, light,
optics, or computer data networks.
             (2-a)  "Director" means a [the] director employed by
the executive director under Section 467.033 [of the division].
             (4)  "Disable" with respect to video lottery terminals
means the process that causes a video lottery terminal to cease
functioning on issuance of a shutdown command from the video
lottery central system.
             (5)  "Distribute," with respect to a video lottery
terminal, an electronic computer component of a video lottery
terminal, the cabinet in which a video lottery terminal is housed,
video lottery equipment, or video lottery game software intended
for use or play in this state, including on Indian lands in this
state, means the sale, lease, marketing, offer, or other
disposition of any of those items.
             (6)  "Electronic storage medium," with respect to video
lottery, means the electronic medium on which the operation
software for a game playable on a video lottery terminal is stored,
in the form of erasable programmable read only memory, compact
disc-read only memory, flash random access memory, or other
technology medium the commission approves for use in a video
lottery terminal.
             (7) [(4)]  "Executive director" means the executive
director of the commission.
             (8)  "Gaming agreement" means an agreement authorized
under Subchapter K between this state and a federally recognized
Indian tribe under which this state allows the tribe to conduct
limited gaming activities authorized under this chapter or
applicable federal law.
             (9)  "House-banked game" means a game of chance:
                   (A)  in which the house plays as a participant;
                   (B)  in which the house competes against all
players, collects from all losers, and pays all winners; and
                   (C)  that the house has an opportunity to win.
             (10)  "Indian lands" means land over which an Indian
tribe exercises governmental power and:
                   (A)  that was held in trust by the United States on
January 1, 1998, for the benefit of the Indian tribe or an
individual member of the Indian tribe pursuant to the Restoration
Acts (25 U.S.C. Section 731 and 25 U.S.C. Section 1300 et seq.); or
                   (B)  on which Class III gaming is permitted under
the Indian Gaming Regulatory Act (18 U.S.C. Section 1166 et seq. and
25 U.S.C. Section 2701 et seq.).
             (11)  "Institutional investor" means:
                   (A)  a state or federal government pension plan;
or
                   (B)  any of the following that meets the
requirements of a "qualified institutional buyer" as defined in
Rule 144A, Securities Act of 1933 (15 U.S.C. Sections 77a-77aa),
and the rules and regulations adopted under that rule by the United
States Securities and Exchange Commission:
                         (i)  a bank as defined by Section 3(a)(6),
Securities Exchange Act of 1934 (15 U.S.C. Sections 78a-78kk), and
the rules and regulations adopted under that act by the United
States Securities and Exchange Commission;
                         (ii)  an insurance company as defined by
Section 2(a)(17), Investment Company Act of 1940 (15 U.S.C. Section
80a-1 et seq.);
                         (iii)  an investment company registered
under Section 8, Investment Company Act of 1940 (15 U.S.C. Section
80a-1 et seq.);
                         (iv)  an employee benefit plan or pension
fund subject to the Employee Retirement Income Security Act of 1974
(29 U.S.C. Section 1001 et seq.), excluding an employee benefit
plan or pension fund sponsored by a publicly traded corporation
registered with the Securities and Exchange Commission;
                         (v)  a group composed entirely of persons
specified by this subdivision; or
                         (vi)  any other person the commission
recognizes as an institutional investor for reasons consistent with
the policies expressed in this chapter.
             (12) [(5)]  "Lottery" means the state lottery
established and operated in accordance with the Texas Constitution
under this chapter and includes the operation of a state-controlled  
and determined video lottery system [procedures operated by the
state under this chapter through which prizes are awarded or
distributed by chance among persons who have paid, or
unconditionally agreed to pay, for a chance or other opportunity to
receive a prize].
             (13) [(6)]  "Lottery game" means an activity conducted
lawfully and in accordance with the Texas Constitution and this
chapter that is controlled by this state as part of the lottery and
through which prizes are awarded or distributed by chance to
persons who have paid or unconditionally agreed to pay, or who
otherwise participate in a game, for a chance or other opportunity
to receive a prize [includes a lottery activity].
             (14) [(7)]  "Lottery operator" means a person selected
under Section 466.014(b) to operate a lottery game.
             (15)  "Manufacture," with respect to a video lottery
terminal, an electronic computer component of a video lottery
terminal, the cabinet in which a video lottery terminal is housed,
video lottery equipment, or video lottery game software intended
for use or play in this state, including on Indian lands in this
state, means to design, assemble, fabricate, produce, program, or
make modifications to any of those items.
             (16)  "Net terminal income" means the total amount of
money paid to play video lottery games less the value of all credits
redeemed for money, including any progressive prizes, by the
players of the video lottery games.  The costs associated with
progressive prizes may not be deducted from the total amount of
money paid to play the video lottery games for purposes of
determining net terminal income.  Promotional prizes offered by a
video lottery retailer or video lottery manager may not be deducted
or otherwise considered credits redeemed for money by players for
the purpose of determining net terminal income.
             (17)  "Pari-mutuel license holder" means a person
licensed to conduct wagering on a greyhound race or a horse race
under the Texas Racing Act (Article 179e, Vernon's Texas Civil
Statutes).
             (18)  "Person" means, for purposes of video lottery
operations, any natural person, corporation, association, trust,
partnership, limited partnership, joint venture, subsidiary, or
other entity, regardless of its form, structure, or nature.
             (19) [(8)]  "Player" means a person who contributes any
part of the consideration for a ticket or to play a video lottery
game under this chapter.
             (20)  "Racetrack" means a racetrack as defined by
Section 1.03(25), Texas Racing Act (Article 179e, Vernon's Texas
Civil Statutes), that is:
                   (A)  a class 1, class 2, or class 3 horse racetrack
for which a pari-mutuel license was in effect on June 1, 2005, or
for which a person by that date had applied for a pari-mutuel
license to conduct horse racing as a class 1 or class 2 racetrack;
or
                   (B)  a greyhound racetrack for which a pari-mutuel
license was in effect on June 1, 2005, or for which a person by that
date had applied for a pari-mutuel license to conduct greyhound
racing.
             (21) [(9)]  "Sales agent" or "sales agency" means a
person licensed under this chapter to sell tickets.
             (22)  "Slot machine" means a mechanical, electrical, or
other type of device, contrivance, or machine that plays or
operates on insertion of a coin, currency, token, or similar object
or on payment of any other consideration, and the play or operation
of which, through the skill of the operator, by chance, or both, may
deliver to the person playing or operating the machine, or entitle
the person to receive, cash, premiums, merchandise, tokens, or any
other thing of value, whether the payoff is made automatically from
the machine or in any other manner.  The term does not include any
equipment, machine, technological aid, or other device used or
authorized in connection with the play of bingo under Chapter 2001,
Occupations Code.
             (23)  "Substantial interest holder" means any of the
following that is not a bona fide lender, bank, or other authorized
or licensed lending institution that holds a mortgage or other lien
acquired in the ordinary course of business or a vendor of the
applicant or license holder that is not otherwise a substantial
business holder:
                   (A)  a person who directly, indirectly, or
beneficially owns any interest in a privately owned corporation,
association, trust, partnership, limited partnership, joint
venture, subsidiary, or other entity, regardless of its form,
structure, or nature;
                   (B)  a person who directly, indirectly, or
beneficially owns 10 percent or more of any publicly owned
corporation, association, trust, partnership, limited partnership,
joint venture, subsidiary, or other entity, regardless of its form,
structure, or nature;
                   (C)  a person associated with an applicant or
license holder who the commission determines has the power or
authority to:
                         (i)  control the activities of the applicant
or license holder; or
                         (ii)  elect or select the executive
director, the managers, the partners, or a majority of the board of
directors of the applicant or license holder; and
                   (D)  any key personnel of a video lottery retailer
or video lottery manager, including an executive director, officer,
director, manager, member, partner, limited partner, executive,
employee, or agent, who the commission determines has the power to
exercise significant influence over decisions concerning any part
of the applicant's or license holder's business operation.
             (24) [(10)]  "Ticket" means any tangible evidence
issued to provide participation in a lottery game authorized by
this chapter other than a video lottery game.
             (25)  "Video lottery central system" means the system
of procedures and facilities operated and controlled by the
commission that is designed to link together all video lottery
terminals operated in this state, determines the outcome of all
video lottery games, and allows the commission to continuously
monitor the activity of each video lottery terminal and to disable
any video lottery terminal in this state.
             (26)  "Video lottery central system provider" means a
person that, under a contract with the commission, provides the
video lottery central system.
             (27)  "Video lottery equipment" means:
                   (A)  a video lottery terminal;
                   (B)  equipment, a component, or a contrivance used
remotely or directly in connection with a video lottery terminal
to:
                         (i)  affect the reporting of gross revenue
and other accounting information, including a device for weighing
and counting money;
                         (ii)  connect video lottery terminals
together for accounting or wide-area prize or promotional purposes;
                         (iii)  monitor video lottery terminal
operations; and
                         (iv)  provide for the connection of video
lottery terminals to the video lottery central system; or
                   (C)  any other communications technology or
equipment necessary for the operation of a video lottery terminal.
             (28)  "Video lottery game" means an electronically
simulated game displayed on a video lottery terminal the outcome of
which is determined solely by chance based on a computer-generated
random selection of winning combinations of symbols or numbers
other than roulette, dice, or baccarat game themes associated with
casino gambling, except that game themes displaying symbols that
roll on drums to simulate a classic casino slot machine or themes of
other card games and keno may be used.
             (29)  "Video lottery manager" means a person who:
                   (A)  is licensed by the commission under this
chapter to manage a video lottery terminal establishment; or
                   (B)  provides management services for a video
lottery terminal establishment on Indian lands for an Indian tribe
that has entered into an agreement with the governor for the
operation of video lottery games.
             (30)  "Video lottery retailer" means a person licensed
to operate a video lottery terminal establishment at which video
lottery games are conducted under Subchapter K.
             (31)  "Video lottery system" means the system
authorized under Subchapter K and controlled and operated by the
commission under which individuals play lottery games on video
lottery terminals as authorized under that subchapter.
             (32)  "Video lottery terminal" means  an interactive
electronic device that is capable of displaying video lottery
games.
             (33)  "Video lottery terminal establishment" means
premises at which the operation of video lottery terminals is
authorized by the commission under this chapter in accordance with
a license or a gaming agreement.
             (34)  "Video lottery terminal provider" means a person
in the business of manufacturing or distributing video lottery
terminals in this state.
             (35)  "Video lottery ticket" means the tangible
evidence issued by a video lottery terminal to reflect winnings
from the play of a video lottery game.
       SECTION 1.02.  Section 466.003, Government Code, is amended
by amending Subsection (b) and adding Subsection (c) to read as
follows:
       (b)  Any [A] contract or authorized agreement between the
division and a lottery operator, the video lottery central system
provider, a video lottery terminal provider, or a manufacturer or
distributor of video lottery games under Section 466.014(b) must
contain a provision allowing the contract or authorized agreement 
to be terminated without penalty should the division be abolished
unless another state agency is assigned to control and supervise
all video lottery game activity as required by this chapter.
       (c)  Notwithstanding Subsection (a), if any gaming agreement
that allows video lottery is in effect, the commission or another
state agency designated by the legislature must operate, control,
and supervise video lottery games as necessary to comply with a
gaming agreement under this chapter.
       SECTION 1.03.  Section 466.004(a), Government Code, is
amended to read as follows:
       (a)  A political subdivision of this state may not impose:
             (1)  a tax on the sale of a ticket;
             (2)  a tax on the payment of a prize under this chapter;
[or]
             (3)  an ad valorem tax on tickets;
             (4)  a tax, fee, or other assessment on consideration
paid to play a video lottery game; or
             (5)  a tax or fee for attendance at or admission to a
video lottery terminal establishment or a racetrack at which a
video lottery terminal establishment is located unless
specifically authorized by statute.
       SECTION 1.04.  Section 466.014, Government Code, is amended
to read as follows:
       Sec. 466.014.  POWERS AND DUTIES OF COMMISSION AND EXECUTIVE
DIRECTOR; CONTRACT AUTHORITY.  (a)  The commission and executive
director have broad authority and shall exercise strict control and
close supervision over [all] lottery games [conducted in this
state] to promote and ensure integrity, security, honesty, and
fairness in the operation and administration of the lottery.
       (b)  The executive director may contract with or employ a
person to perform a function, activity, or service in connection
with the operation of the lottery as prescribed by the executive
director.  A contract relating to the operation of video lottery
must be consistent with Subchapter K.  Except as provided by this
subsection, a [A] person with whom the executive director contracts
to operate a lottery game must be eligible for a sales agent license
under Section 466.155.  A person with whom the executive director
contracts to provide the video lottery central system must be
eligible under the same standards as those applicable to the
registration or approval by the commission of a video lottery
terminal provider in accordance with Subchapter K.
       (c)  The executive director may award a contract for lottery
supplies, equipment, or services, including a contract under
Subsection (b), pending the completion of any investigation and
licensing, registration, or other approval authorized or required 
by this chapter.  A contract awarded under this subsection must
include a provision permitting the executive director to terminate
the contract without penalty if the investigation reveals that the
person to whom the contract is awarded would not be eligible for a
sales agent license under Section 466.155 or with regard to video
lottery does not satisfy the applicable requirements for licensing,
registration, or other approval under Subchapter K.
       (d)  In the acquisition or provision of facilities,
supplies, equipment, materials, or services related to the
implementation of video lottery, the commission must comply with
procurement procedures prescribed under:
             (1)  Subtitle D, Title 10; and
             (2)  Section 466.101.
       SECTION 1.05.  Section 466.015(b), Government Code, is
amended to read as follows:
       (b)  The commission shall adopt rules to the extent they are
not inconsistent with Chapters 551 and 552 governing the:
             (1)  security for the lottery and the commission,
including the development of an internal security plan;
             (2)  apportionment of the total revenues from the sale
of tickets and from all other sources in the amounts provided by
this chapter;
             (3)  enforcement of prohibitions on the sale of tickets
to or by an individual younger than 21 [18] years of age; [and]
             (4)  enforcement of prohibitions on a person playing a
lottery game by telephone; and
             (5)  enforcement of prohibitions provided by law on the
sale of any purchase or play of a video lottery game.
       SECTION 1.06.  Section 466.017, Government Code, is amended
to read as follows:
       Sec. 466.017.  AUDITS.  (a)  The commission [executive
director] shall contract with the state auditor for the state
auditor [provide for a certified public accountant] to conduct an
independent audit of the commission's annual financial statements
in accordance with the standards applicable to financial audits
under the Government Auditing Standards (2003 Revision) issued by
the Comptroller General of the United States [for each fiscal year
of all accounts and transactions of the lottery]. [The certified
public accountant may not have, as determined by the executive
director, a significant financial interest in a sales agent,
lottery vendor, or lottery operator. The certified public
accountant shall present an audit report to the executive director,
the commission, the governor, the comptroller, and the legislature
not later than the 30th day after the submission date for the annual
financial report required by the General Appropriations Act.  The
report must contain recommendations to enhance the earnings
capability of the lottery and improve the efficiency of lottery
operations. The state auditor may review the results of and working
papers related to the audit.]
       (b)  The records of a [Each] lottery operator, sales agent,
video lottery manager, video lottery retailer, video lottery
terminal provider, or video lottery central system provider
[operator's and sales agent's records] are subject to audit by the
commission and the state auditor. For the purpose of carrying out
this chapter, the executive director or state auditor may examine
all books, records, papers, or other objects that the executive
director or state auditor determines are necessary for conducting a
complete examination under this chapter and may also examine under
oath any officer, director, or employee of a lottery operator, [or]
sales agent, video lottery manager, video lottery retailer, video
lottery terminal provider, or video lottery central system
provider. The executive director or state auditor may conduct an
examination at the principal office or any other office of the
person subject to the audit [lottery operator or sales agent] or may
require the person [lottery operator or sales agent] to produce the
records at the office of the commission or state auditor. If a
sales agent, video lottery manager, video lottery retailer, video
lottery terminal provider, or video lottery central system provider
refuses to permit an examination or to answer any question
authorized by this subsection, the executive director may summarily
suspend the license or certificate of registration of the sales
agent, video lottery manager, video lottery retailer, or video
lottery terminal provider under Section 466.160 or Subchapter K
until the examination is completed as required. A video lottery
manager, video lottery retailer, video lottery terminal provider,
or video lottery central system provider that is audited as
provided by this section is responsible for the costs incurred by
the commission or auditor in conducting the audit.  Section
321.013(h) does not apply to an audit of a lottery operator, [or]
sales agent, video lottery manager, video lottery retailer, video
lottery terminal provider, or video lottery central system
provider.
       SECTION 1.07.  Section 466.018, Government Code, is amended
to read as follows:
       Sec. 466.018.  INVESTIGATIONS.  The attorney general, the
district attorney for Travis County, or the district attorney,
criminal district attorney, or county attorney performing the
duties of district attorney for the county in which the violation or
alleged violation occurred may investigate a violation or alleged
violation of this chapter and of the penal laws of this state by the
commission or its employees, a sales agent, a lottery vendor, [or] a
lottery operator, a video lottery manager, a video lottery
retailer, a video lottery terminal provider, or a video lottery
central system provider.
       SECTION 1.08.  Sections 466.020(c), (d), and (e), Government
Code, are amended to read as follows:
       (c)  A security officer or investigator employed by the
department of security or a peace officer who is working in
conjunction with the commission or the Department of Public Safety
in the enforcement of this chapter may:
             (1)  [,] without a search warrant, [may] search and
seize a lottery vending machine, lottery computer terminal, video
lottery terminal, or other lottery or gaming equipment that is
located on premises for which a person holds a sales agent, video
lottery retailer, or video lottery manager license issued under
this chapter; or
             (2)  seize a lottery vending machine, lottery computer
terminal, video lottery terminal, or other lottery or gaming
equipment that is being used or is in the possession of any person
in violation of this chapter.
       (d)  The Department of Public Safety or any other state or
local law enforcement agency in this state, at the commission's
request and in accordance with an interagency agreement, shall
perform a full criminal background investigation of a prospective
deputy or investigator of the department of security. The
commission shall reimburse the agency [Department of Public Safety]
for the actual costs of an investigation.
       (e)  At least once every two years, the executive director
shall employ an independent firm that is experienced in security,
including computer security and systems security, to conduct a
comprehensive study of all aspects of lottery security, including:
             (1)  lottery personnel security;
             (2)  sales agent security;
             (3)  lottery operator and vendor security;
             (4)  security against ticket counterfeiting and
alteration and other means of fraudulent winning;
             (5)  security of lottery drawings;
             (6)  lottery computer, data communications, database,
and systems security;
             (7)  lottery premises and warehouse security;
             (8)  security of distribution of tickets;
             (9)  security of validation and payment procedures;
             (10)  security involving unclaimed prizes;
             (11)  security aspects of each lottery game;
             (12)  security against the deliberate placement of
winning tickets in lottery games that involve preprinted winning
tickets by persons involved in the production, storage,
transportation, or distribution of tickets; [and]
             (13)  security of video lottery retailers, video
lottery managers, video lottery terminal providers, video lottery
terminal establishments, and video lottery central system
providers; and
             (14)  other security aspects of lottery operations,
including video lottery game operations.
       SECTION 1.09.  Section 466.021(a), Government Code, is
amended to read as follows:
       (a)  The executive director shall, every two years, employ an
independent firm experienced in demographic analysis to conduct a
demographic study of lottery players. The study must examine
[include] the income, age, sex, race, education, and frequency of
participation of players. The study must distinguish between
players of traditional lottery games and video lottery games.
       SECTION 1.10.  Section 466.022, Government Code, is amended
by amending Subsection (b) and adding Subsections (c), (d), and (e)
to read as follows:
       (b)  In addition to commission records excepted from
disclosure under Chapter 552, the following information is
confidential and is exempt from disclosure:
             (1)  security plans and procedures of the commission
designed to ensure the integrity and security of the operation of
the lottery;
             (2)  information of a nature that is designed to ensure
the integrity and security of the selection of winning tickets or
numbers in the lottery, other than information describing the
general procedures for selecting winning tickets or numbers; [and]
             (3)  the street address and telephone number of a prize
winner, if the prize winner has not consented to the release of the
information;
             (4)  information relating to all system operations of
video lottery games, including the operation of the video lottery
system, security related to video lottery games, and commission
plans and procedures intended to ensure the integrity and security
of the operation of video lottery games; and
             (5)  information that pertains to an applicant's
criminal record, antecedents, and background and is furnished to or
obtained by the commission from any source, including information
obtained by the commission under Section 411.108(d).
       (c)  Information that qualifies as confidential under
Subsection (b)(4) or (5) may be disclosed wholly or partly only as
necessary to administer this chapter or under a court order. The
commission, subject to appropriate procedures, may disclose the
information and data to an authorized agent of a political
subdivision of this state, the United States, another state or a
political subdivision of another state, a tribal law enforcement
agency, or the government of a foreign country.
       (d)  For the annual report required under Section 466.016,
the commission may disclose a compilation of statistical
information that is otherwise confidential under Subsection (b)(4)
if the compilation does not disclose the identity of an applicant,
license or certificate holder, or video lottery terminal
establishment.
       (e)  Notwithstanding any other provision of state law, the
information provided under Subsection (c) or (d) may not otherwise
be disclosed without specific commission authorization.
       SECTION 1.11.  Section 466.024, Government Code, is amended
to read as follows:
       Sec. 466.024.  PROHIBITED GAMES.  (a)  Except as provided by
Chapter 2004, Occupations Code, the [The] executive director, [or]
a lottery operator, a video lottery manager, a video lottery
retailer, a video lottery terminal provider, or a video lottery
central system provider may not establish or operate a lottery game
in which the winner is chosen on the basis of the outcome of a sports
event.
       (b)  Except as provided by Chapter 2001, Occupations Code,
the [The commission shall adopt rules prohibiting the] operation of
any game using a video lottery machine, slot [or] machine, or other
gambling device that is not connected to the video lottery central
system and controlled and supervised by the commission is
prohibited.
       (c)  In this section, "sports[:
             [(1)"Sports] event" means a football, basketball,
baseball, or similar game, or a horse or dog race on which
pari-mutuel wagering is allowed.
             [(2)  "Video lottery machine" or "machine" means any
electronic video game machine that, upon insertion of cash, is
available to play or simulate the play of a video game, including
video poker, keno, and blackjack, using a video display and
microprocessors in which the player may receive free games or
credits that can be redeemed for cash, coins, or tokens, or that
directly dispenses cash, coins, or tokens.]
       SECTION 1.12.  Section 466.025, Government Code, is amended
to read as follows:
       Sec. 466.025.  REPORTS OF TICKETS SOLD, NET TERMINAL INCOME,
AND PRIZES AWARDED.  For each lottery game, other than a video
lottery game, after the last date on which a prize may be claimed
under Section 466.408(d), the director shall prepare a report that
shows the total number of tickets sold and the number and amounts of
prizes awarded in the game. The report must be available for public
inspection.  For video lottery games, the director shall prepare a
weekly report that shows net terminal income for the preceding
week.
       SECTION 1.13.  Section 466.103(a), Government Code, is
amended to read as follows:
       (a)  Except as provided by Subsection (b), the executive
director may not award a contract for the purchase or lease of
facilities, goods, or services related to lottery operations to a
person who:
             (1)  would be denied a license as a sales agent under
Section 466.155; or
             (2)  with regard to a contract for the purchase or lease
of video lottery equipment:
                   (A)  is not a registered video lottery terminal
provider if a certificate of registration is required; or
                   (B)  would be deemed unsuitable to be a video
lottery terminal provider under Subchapter K.
       SECTION 1.14.  Section 466.110, Government Code, is amended
to read as follows:
       Sec. 466.110.  PROHIBITED ADVERTISEMENTS.  The legislature
intends that advertisements or promotions sponsored by the
commission or the division for the lottery not be of a nature that
unduly influences any person to purchase a lottery ticket or number
or play a video lottery game.
       SECTION 1.15.  Section 466.151(b), Government Code, is
amended to read as follows:
       (b)  The executive director may establish a provisional
license or other classes of licenses necessary to regulate and
administer the quantity and type of lottery games provided at each
licensed location of a sales agent.
       SECTION 1.16.  Section 466.158(a), Government Code, is
amended to read as follows:
       (a)  Unless suspended or revoked, a license issued under this
subchapter expires on the date specified in the license, which may
not be later than the second anniversary of its date of issuance.
       SECTION 1.17.  Section 466.201(a), Government Code, is
amended to read as follows:
       (a)  The commission is entitled to conduct an investigation
of and is entitled to obtain criminal history record information
maintained by the Department of Public Safety, the Federal Bureau
of Investigation Identification Division, or another law
enforcement agency to assist in the investigation of:
             (1)  a sales agent or an applicant for a sales agent
license;
             (2)  a person required to be named in a license
application;
             (3)  a lottery operator, video lottery manager, video
lottery retailer, video lottery terminal provider, or video lottery
central system provider, or prospective lottery operator, video
lottery manager, video lottery retailer, video lottery terminal
provider, or video lottery central system provider;
             (4)  an employee of a lottery operator, video lottery
manager, video lottery retailer, video lottery terminal provider,
or video lottery central system provider or prospective lottery
operator, video lottery manager, video lottery retailer, video
lottery terminal provider, or video lottery central system
provider, if the employee is or will be directly involved in lottery
operations;
             (5)  a person who manufactures or distributes lottery
equipment or supplies, or a representative of a person who
manufactures or distributes lottery equipment or supplies offered
to the lottery;
             (6)  a person who has submitted a written bid or
proposal to the commission in connection with the procurement of
goods or services by the commission, if the amount of the bid or
proposal exceeds $500;
             (7)  an employee or other person who works for or will
work for a sales agent or an applicant for a sales agent license;
             (8)  a person who proposes to enter into or who has a
contract with the commission to supply goods or services to the
commission; or
             (9)  if a person described in Subdivisions (1) through
(8) is not an individual, an individual who:
                   (A)  is an officer or director of the person;
                   (B)  holds more than 10 percent of the stock in the
person;
                   (C)  holds an equitable interest greater than 10
percent in the person;
                   (D)  is a creditor of the person who holds more
than 10 percent of the person's outstanding debt;
                   (E)  is the owner or lessee of a business that the
person conducts or through which the person will conduct
lottery-related activities;
                   (F)  shares or will share in the profits, other
than stock dividends, of the person;
                   (G)  participates in managing the affairs of the
person; or
                   (H)  is an employee of the person who is or will be
involved in:
                         (i)  selling tickets; or
                         (ii)  handling money from the sale of
tickets.
       SECTION 1.18.  Subchapter E, Chapter 466, Government Code,
is amended by adding Section 466.206 to read as follows:
       Sec. 466.206.  CRIMINAL HISTORY INVESTIGATION FOR VIDEO
LOTTERY.  (a)  Except as otherwise provided by this section,
Sections 466.020 and 466.201, and Subchapter K, a criminal history
investigation of a video lottery retailer, video lottery manager,
video lottery terminal provider, or video lottery central system
provider is governed by commission rules adopted under Subchapter
K, which may consider a criminal history investigation conducted
under the Texas Racing Act (Article 179e, Vernon's Texas Civil
Statutes).
       (b)  The Department of Public Safety or a state or local law
enforcement agency in this state, in accordance with an interagency
agreement with the commission, shall provide any assistance
requested by the commission in the administration and enforcement
of this chapter, including conducting background investigations of
a person seeking a license, certificate of registration, or other
commission authorization required under Subchapter K or of any
person required to be named in an application for a license,
certificate of registration, or other commission authorization
under that subchapter.
       (c)  This section does not limit the commission's right to
obtain criminal history record information from any other local,
state, or federal agency. The commission may enter into a
confidentiality agreement with the agency as necessary and proper.
       (d)  Except as otherwise provided by Section 411.108(d) or
another provision of this chapter, criminal history record
information obtained by the commission under this section may be
disclosed only:
             (1)  to another law enforcement agency to assist in or
further an investigation related to the commission's operation and
oversight of video lottery; or
             (2)  under a court order.
       SECTION 1.19.  Section 466.252, Government Code, is amended
to read as follows:
       Sec. 466.252.  PLAYER [PURCHASE OF TICKET] AGREEMENT TO
ABIDE BY RULES AND INSTRUCTIONS. (a)  By purchasing a ticket in a
particular lottery game or participating as a player in a lottery
game, a player agrees to abide by and be bound by the commission's
rules and instructions, including the rules or instructions
applicable to the particular lottery game involved. The player
also acknowledges that the determination of whether the player is a
valid winner is subject to:
             (1)  the commission's rules, instructions, and claims
procedures, including those developed for the particular lottery
game involved; [and]
             (2)  any validation tests established by the commission
for the particular lottery game involved; and
             (3)  the limitations and other provisions prescribed by
this chapter.
       (b)  If the lottery uses tickets, an abbreviated form of the
rules or a reference to the rules may appear on the tickets.
       SECTION 1.20.  Section 466.3011, Government Code, is amended
to read as follows:
       Sec. 466.3011.  VENUE.  Venue is proper in Travis County or
any county in which venue is proper under Chapter 13, Code of
Criminal Procedure, for:
             (1)  an offense under this chapter;
             (2)  an offense under the Penal Code, if the accused:
                   (A)  is a lottery operator, lottery vendor, sales
agent, video lottery manager, video lottery retailer, video lottery
terminal provider, video lottery central system provider, or
employee of the division; and
                   (B)  is alleged to have committed the offense
while engaged in lottery activities, including video lottery
activities; or
             (3)  an offense that involves property consisting of or
including lottery tickets under Title 7 or 11, Penal Code.
       SECTION 1.21.  Subchapter G, Chapter 466, Government Code,
is amended by adding Section 466.3031 to read as follows:
       Sec. 466.3031.  UNAUTHORIZED OPERATION, USE, OR POSSESSION
OF VIDEO LOTTERY TERMINAL.  (a)  A person may not operate, use, or
possess a video lottery terminal unless the operation, use, or
possession is expressly authorized by this chapter or other law.
       (b)  Except for transport to or from a video lottery terminal
establishment and as provided by this chapter, a person commits an
offense if the person operates, uses, or possesses any video
lottery terminal that is not at all times connected to the video
lottery central system or that does not generate revenue for this
state, except funds retained by the commission to pay
administrative costs.  An offense under this subsection is a felony
of the third degree.
       (c)  Notwithstanding Subsection (b), a video lottery
retailer, video lottery manager, or registered or approved video
lottery terminal provider may store a video lottery terminal as
authorized by the commission for a period not to exceed 120
consecutive days, and the commission may possess video lottery
terminals for study and evaluation.
       (d)  Nothing in this section shall be construed to prohibit
the operation, use, or possession of equipment, machines,
technological aids, or other devices allowed in connection with the
play of bingo under Chapter 2001, Occupations Code.
       SECTION 1.22.  Section 466.305(a), Government Code, is
amended to read as follows:
       (a)  A sales agent, video lottery manager, or video lottery
retailer, or an employee of a sales agent, video lottery manager, or
video lottery retailer, commits an offense if the person
intentionally or knowingly sells a ticket to another person or
allows the person to play or conduct a game on a video lottery
terminal by extending credit or lending money to the person to
enable the person to purchase the ticket or play the game.
       SECTION 1.23.  The heading to Section 466.3051, Government
Code, is amended to read as follows:
       Sec. 466.3051.  SALE OF TICKET OR LOTTERY GAME TO OR PURCHASE
OF TICKET OR LOTTERY GAME BY PERSON YOUNGER THAN 21 [18] YEARS OF
AGE.
       SECTION 1.24.  Section 466.3051, Government Code, is amended
by amending Subsections (a), (b), (c), (d), and (e) and adding
Subsection (a-1) to read as follows:
       (a)  A sales agent or an employee of a sales agent commits an
offense if the person intentionally or knowingly sells or offers to
sell a ticket to an individual that the person knows is younger than
21 [18] years of age.
       (a-1)  A video lottery manager, a video lottery retailer, or
an employee of a video lottery manager or video lottery retailer
commits an offense if the person intentionally or knowingly allows
a person younger than 21 years of age to play a video lottery game.
       (b)  An individual who is younger than 21 [18] years of age
commits an offense if the individual:
             (1)  purchases a ticket;
             (2)  plays a video lottery game; or
             (3) [(2)]  falsely represents the individual to be 21 
[18] years of age or older by displaying evidence of age that is
false or fraudulent or misrepresents in any way the individual's
age in order to purchase a ticket or play a video lottery game.
       (c)  A person 21 [18] years of age or older may purchase a
ticket to give as a gift to another person, including an individual
younger than 21 [18] years of age.
       (d)  It is a defense to the application of Subsection (b)
that the individual younger than 21 [18] years of age is
participating in an inspection or investigation on behalf of the
commission or other appropriate governmental entity regarding
compliance with this section.
       (e)  An offense under Subsection (a) or (a-1) is a Class C
misdemeanor.
       SECTION 1.25.  Section 466.3053, Government Code, is amended
to read as follows:
       Sec. 466.3053.  PURCHASE OF TICKET OR VIDEO LOTTERY GAME
WITH PROCEEDS OF AFDC CHECK OR FOOD STAMPS.  (a)  A person commits an
offense if the person intentionally or knowingly purchases a ticket
or plays a video lottery game with:
             (1)  the proceeds of a check issued as a payment under
the Aid to Families with Dependent Children program administered
under Chapter 31, Human Resources Code; or
             (2)  a food stamp coupon issued under the food stamp
program administered under Chapter 33, Human Resources Code.
       (b)  An offense under this section is a Class C misdemeanor.
       SECTION 1.26.  Section 466.306, Government Code, is amended
to read as follows:
       Sec. 466.306.  FORGERY; ALTERATION OF TICKET.  (a)  A person
commits an offense if the person intentionally or knowingly alters
or forges a ticket or video lottery ticket.
       (b)  An offense under this section is a felony of the third
degree unless it is shown on the trial of the offense that the prize
alleged to be authorized by the ticket or video lottery ticket
forged or altered is greater than $10,000, in which event the
offense is a felony of the second degree.
       SECTION 1.27.  Section 466.309(a), Government Code, is
amended to read as follows:
       (a)  A person commits an offense if the person intentionally
or knowingly tampers with, damages, defaces, or renders inoperable
any vending machine, electronic computer terminal, video lottery
terminal or other video lottery equipment, or other mechanical
device used in a lottery game.
       SECTION 1.28.  The heading to Section 466.317, Government
Code, is amended to read as follows:
       Sec. 466.317.  PROHIBITION AGAINST SALE OF CERTAIN LOTTERY
TICKETS OR OPERATION OF CERTAIN VIDEO LOTTERY SYSTEMS.
       SECTION 1.29.  Section 466.317, Government Code, is amended
by adding Subsection (a-1) and amending Subsections (b) and (c) to
read as follows:
       (a-1)  A person may not control or operate a video lottery
system in this state except as provided by this chapter.
       (b)  The state may enter into a compact with another state or
state government [or an Indian tribe or tribal government] to
permit the sale of lottery tickets of this state in the state's[,
tribe's,] or government's jurisdiction and to allow the sale of the
state's[, tribe's,] or government's lottery tickets in this state.
       (c)  A person commits an offense if the person violates this
section. An offense under this section is a felony of the third
degree [Class A misdemeanor].
       SECTION 1.30.  Section 466.355, Government Code, is amended
by amending Subsection (a) and adding Subsection (d) to read as
follows:
       (a)  The state lottery account is a special account in the
general revenue fund. The account consists of all revenue received
from the sale of tickets, license and application fees under this
chapter, other than Subchapter K [chapter], and all money credited
to the account from any other fund or source under law. Interest
earned by the state lottery account shall be deposited in the
unobligated portion of the general revenue fund.
       (d)  Immediately after the comptroller makes the August
transfer to the foundation school fund under Subsection (b)(4) and
the transfer to the foundation school fund for the following
September 15 under Subsection (c), the comptroller shall determine
whether the total amount transferred to the foundation school fund
from the state lottery fund in the current fiscal year is less than
the total amount transferred to the foundation school fund from the
state lottery account in the fiscal year ending August 31, 2007. If
the comptroller determines that the total amount transferred to the
foundation school fund in the current fiscal year is less than the
total amount transferred in the fiscal year ending August 31, 2007,
the comptroller not later than August 31 shall transfer to the
foundation school fund from the state video lottery account in the
general revenue fund an amount equal to the difference.
       SECTION 1.31.  Subchapter H, Chapter 466, Government Code,
is amended by adding Section 466.360 to read as follows:
       Sec. 466.360.  VIDEO LOTTERY TERMINAL REVENUE.  Revenue
generated from the operation of video lottery terminals is governed
by Subchapter K and commission rules.
       SECTION 1.32.  Section 466.402, Government Code, is amended
by adding Subsection (e) to read as follows:
       (e)  This section does not apply to the payment of prizes for
video lottery games governed by Subchapter K.
       SECTION 1.33.  Section 466.409, Government Code, is amended
to read as follows:
       Sec. 466.409.  TREATMENT OF PRIZE PAYABLE ON TICKET PURCHASE
BY INELIGIBLE PERSON.  If an individual listed in Section 466.254
purchases a ticket or claims or otherwise attempts to collect or
receive a lottery prize or a share of a lottery prize or an
individual younger than 21 [18] years of age directly purchases a
ticket, the individual is not eligible to receive a prize or share
of a prize, and the prize or share of a prize otherwise payable on
the ticket is treated as an unclaimed prize as provided by Section
466.408.
       SECTION 1.34.  Chapter 466, Government Code, is amended by
adding Subchapter K to read as follows:
SUBCHAPTER K. VIDEO LOTTERY
       Sec. 466.501.  LEGISLATIVE FINDINGS AND DECLARATIONS.  The
legislature finds and declares the following:
             (1)  This state's public policy prohibiting gambling is
subject only to limited exceptions provided by the Texas Racing Act
(Article 179e, Vernon's Texas Civil Statutes) or enumerated in the
Texas Constitution and approved by the voters.
             (2)  Any game that is a lottery cannot lawfully be
operated in this state unless the game is excepted from the
constitutional prohibition against lotteries. In 1991, the
electorate approved a constitutional amendment authorizing the
state to operate lotteries.  In 2007, the electorate approved a
constitutional amendment allowing expansion of the existing state
lottery through a state-controlled video lottery system allowing
video lottery terminals connected to a state-controlled and
determined video lottery central system to be placed at locations
determined in accordance with law enacted by the legislature.
             (3)  The purpose and intent of this chapter is to carry
out the intent of the voters as established by the approval of
Section 47-a, Article III, Texas Constitution.
             (4)  The people of this state intend to allow only
state-controlled video lottery games to be conducted in this state
and only in locations licensed by this state to operate video
lottery terminals or at locations on Indian lands under an
agreement between this state and the appropriate Indian tribe.
             (5)  This state has the authority and responsibility to
control the proliferation of gambling by:
                   (A)  limiting the total number of video lottery
terminals permitted at authorized locations in this state;
                   (B)  limiting video lottery to licensed
establishments;
                   (C)  extending strict and exclusive state
oversight and supervision to all persons, locations, practices, and
associations related to the operation of video lottery games; and
                   (D)  providing comprehensive law enforcement
supervision of video lottery game activities.
             (6)  This state's ability to monitor and control the
operation of all video lottery terminals ensures the integrity of
the system and provides for the most efficient oversight and
supervision. Costs incurred for oversight and supervision of
gambling will be significantly less than if video lottery terminals
were not operated as part of the video lottery system. In addition,
providing for the state-controlled and determined system will
defend against criminal infiltration of gambling operations.
             (7)  The video lottery games operated at video lottery
terminal establishments under this chapter are controlled and
determined by this state in a manner that allows this state to
continuously monitor all video lottery terminals and to disable any
video lottery terminal for the protection of the public and this
state.
             (8)  Through the video lottery system this state will
monitor the network of video lottery terminals to ensure maximum
security unique to state-operated gambling. Except as may
otherwise be required by federal law governing Indian lands, each
operating video lottery terminal in this state will be connected to
a video lottery central system.
             (9)  By limiting the operation of video lottery
terminals to those connected to the state-controlled and determined
video lottery system and to certain lands and certain types of
games, the legislature seeks to foster this state's legitimate
sovereign interest in regulating the growth of gambling activities
in this state. Limiting video lottery terminals to those
controlled by this state and located at licensed establishments is
reasonably designed to defend against the criminal infiltration of
gambling operations and adverse impacts on communities statewide.
By restricting video lottery terminals to limited locations and
video lottery terminals controlled by this state that may be
disabled by this state if necessary to protect the public, this
chapter furthers the state's purpose of ensuring that such gambling
activities are free from criminal and undesirable elements.
             (10)  This chapter is game-specific and may not be
construed to allow the operation of any other form of gambling
unless specifically allowed by this chapter. This chapter does not
allow the operation of slot machines, dice games, roulette wheels,
house-banked games, including house-banked card games, or games in
which winners are determined by the outcome of a sports contest that
are prohibited under other state law.
             (11)  To effectuate the will of the voters, any video
lottery games on lands of Indian tribes must be in strict compliance
with state law, unless otherwise required by federal law, or in
accordance with a gaming agreement negotiated with the governor and
ratified by the legislature.
             (12)  This state has conferred a substantial economic
benefit on federally recognized Indian tribes by allowing operation
of video lottery terminals on lands held in trust by the Indian
tribes and on Indian lands on which gaming is allowed under
applicable federal law. Federally recognized Indian tribes have
the exclusive right to operate video lottery terminals at locations
on the Indian lands in this state without incurring the investment
necessary to construct, maintain, and operate racetracks for live
racing, and through revenue-sharing both the policy of
self-governance for the tribes and this state's interests in
generating additional revenue to fund governmental programs can be
promoted.
             (13)  The public has an interest in video lottery game
operations, and other gaming operations conducted under Section
47-a, Article III, Texas Constitution, and this chapter represent
an exception to the general policy of this state prohibiting
wagering for private gain. Therefore, participation in a video
lottery game by a holder of a license, certificate of registration,
or approval under this chapter is considered a privilege
conditioned on the proper and continued qualification of the holder
and on the discharge of the affirmative responsibility of each
holder to provide to the commission or other regulatory and
investigatory authorities established by this chapter any
assistance and information necessary to assure that the policies
declared by this chapter are achieved. Consistent with this
policy, the legislature intends this chapter to:
                   (A)  preclude the creation of any property right
in any license, certificate of registration, or approval issued or
granted by this state under this chapter, the accrual of any value
to the privilege of participation in any video lottery game
operation, or the transfer of a license or certificate; and
                   (B)  require that participation in video lottery
game operations be solely conditioned on the individual
qualifications of persons seeking this privilege.
             (14)  Only video lottery terminals lawfully operated in
connection with a video lottery system authorized by this
subchapter may be lawfully operated on Indian lands under the
Johnson Act (15 U.S.C. Section 1175).
       Sec. 466.502.  CONSTRUCTION; APPLICABILITY OF OTHER LAWS.  
(a)  Nothing contained in this chapter may be construed to
implicitly repeal or modify existing state laws with respect to
gambling, except that the state lottery and video lottery terminals
are not prohibited by another law if conducted as authorized under
this subchapter.
       (b)  To the extent of any inconsistency between Chapter 2003
and this subchapter or a commission rule governing video lottery
terminals, this subchapter or the commission rule controls in all
matters related to video lottery terminals, including hearings
before the State Office of Administrative Hearings.
       (c)  Video lottery equipment operated under commission
authority and this chapter is exempt from 15 U.S.C. Section 1172.
       Sec. 466.503.  AUTHORITY TO OPERATE VIDEO LOTTERY SYSTEM.  
(a)  The commission may implement and operate a video lottery system
and control the operation of video lottery terminals at video
lottery terminal establishments in accordance with this chapter
and, for a video lottery terminal establishment at a racetrack, the
Texas Racing Act (Article 179e, Vernon's Texas Civil Statutes).
This chapter supersedes any conflicting or inconsistent provision
of the Texas Racing Act.
       (b)  The commission may allow the operation of video lottery
terminals pursuant to this chapter at locations on Indian lands in
accordance with an effective gaming agreement or license and in
compliance with applicable federal law.
       Sec. 466.504.  VIDEO LOTTERY GAMES; STATE OWNERSHIP AND
PROPRIETARY INTEREST.  (a)  This state must own all video lottery
games conducted through the video lottery system, regardless of
ownership of the video lottery terminal on which the game is played.
This state must possess a proprietary interest in:
             (1)  the main logic boards and any electronic storage
medium used in video lottery equipment or games; and
             (2)  software consisting of computer programs,
documentation, and other related materials necessary for the
operation of the video lottery system.
       (b)  For purposes of this chapter, this state may acquire a
proprietary interest in video lottery game software through:
             (1)  ownership of the software; or
             (2)  an exclusive product license agreement with a
provider in which the provider retains copyrighted ownership of the
software but the license granted to this state is nontransferable
and authorizes this state to operate the software program, solely
for the state's own use, on the video lottery central system and
video lottery terminals connected to the video lottery central
system.
       Sec. 466.505.  STATE CONTROL OF VIDEO LOTTERY SYSTEM.  (a)  
The commission shall control and operate the video lottery system
and the video lottery central system.
       (b)  The commission may disable a video lottery terminal if a
video lottery retailer's or video lottery manager's license is
revoked, surrendered, or summarily suspended under this
subchapter.
       Sec. 466.506.  VIDEO LOTTERY CENTRAL SYSTEM.  (a)  The
commission shall establish or cause to be established a video
lottery central system to link all video lottery terminals in the
video lottery system through which the commission has the exclusive
and unilateral ability to:
             (1)  control and determine the outcome of all video
lottery games;
             (2)  monitor activity of video lottery terminals and
remotely disable video lottery terminals for the public safety,
health, and welfare or the preservation of the integrity of the
lottery; and
             (3)  provide the auditing and other information
required by the commission.
       (b)  The video lottery central system must be a central
determinant system that communicates lottery outcomes from a
central determination computer to video lottery terminals in a
manner prescribed by the commission.
       (c)  The commission shall provide to a registered video
lottery terminal provider or an applicant applying for a
certificate of registration as a video lottery terminal provider
the protocol documentation data necessary to enable the provider's
or applicant's video lottery terminals to communicate with the
commission's video lottery central system for the transmission of
auditing information and for activation and disabling of video
lottery terminals.
       (d)  The video lottery central system may not limit or
preclude potential providers from providing the video lottery
terminals, other than providers that fail to meet specifications
established by the commission.
       (e)  The video lottery central system provider may not sell
or distribute video lottery terminals in this state.
       (f)  The commission may contract with a video lottery central
system provider to establish the video lottery central system.
       (g)  The commission may not contract with a person to provide
the video lottery central system if within the preceding five years
that person owned any interest in a racetrack or pari-mutuel
license in this state.
       Sec. 466.507.  VIDEO LOTTERY TERMINAL PROVIDER:
REGISTRATION OR APPROVAL REQUIRED.  (a)  A person may not
manufacture or distribute video lottery equipment for use or play
in this state unless the person is registered as a video lottery
terminal provider or is otherwise approved by the commission to
manufacture or distribute video lottery equipment in this state.
       (b)  A person who manufactures and distributes video lottery
terminals must obtain a separate certificate of registration or
commission approval for each of those activities.
       (c)  Unless suspended or revoked, the certificate of
registration or approval expires on the date specified by the
commission, which may not be later than the fifth anniversary of the
date of issuance of the certificate or approval.  A person may renew
an unexpired certificate of registration or approval by paying a
renewal fee in the amount determined by the commission to cover the
costs of administering the renewal application and complying with
the requirements of this subchapter and commission rule.
       (d)  To be eligible for a certificate of registration or
commission approval as required by this section, an applicant must
satisfy all applicable requirements under this subchapter.
       Sec. 466.508. VIDEO LOTTERY TERMINAL PROVIDER: APPLICATION;
CHANGE IN INFORMATION.  (a)  The commission shall adopt rules
governing the registration or approval of video lottery terminal
providers. The rules must require:
             (1)  the application and any other form or document
submitted to the commission by or on behalf of the applicant to
determine the applicant's qualification under this section to be
sworn to or affirmed before an officer qualified to administer
oaths; and
             (2)  the certificate of registration or approval to
designate whether the provider is a manufacturer or distributor.
       (b)  An applicant seeking registration or approval as a video
lottery terminal provider to manufacture and distribute video
lottery terminals in this state may apply for both approvals or
certificates of registration in a single application.
       (c)  An applicant for a video lottery terminal provider
certificate of registration or approval must provide the following
information:
             (1)  the full name and address of the applicant;
             (2)  the full name and address of each location at which
video lottery equipment is or will be manufactured or stored in this
state;
             (3)  the name, home address, and share of ownership of
the applicant's substantial interest holders;
             (4)  a full description of each separate type of video
lottery equipment that the applicant seeks to manufacture or
distribute in this state;
             (5)  the brand name under which each type of video
lottery equipment is to be distributed;
             (6)  if the applicant is incorporated under law other
than the laws of this state, the applicant's irrevocable
designation of the secretary of state as the applicant's resident
agent for service of process and notice in accordance with the law
of this state;
             (7)  a list of all businesses or organizations in this
state in which the applicant has any financial interest and the
details of that financial interest, including all arrangements
through which a person directly or indirectly receives any portion
of the profits of the video lottery terminal provider and
indebtedness between the license holder and any other person, other
than a regulated financial institution, in excess of $5,000;
             (8)  a list of all affiliated businesses or
corporations in which the applicant or an officer, director, or
substantial interest-holder of the applicant, either directly or
indirectly, owns or controls as a sole proprietor or partner more
than 10 percent of the voting stock of a publicly traded
corporation;
             (9)  a list of all businesses or corporations licensed
to conduct gambling activities or to supply gambling-related
equipment, supplies, or services in which the applicant or an
officer, director, or substantial interest-holder of the applicant
has any interest;
             (10)  a list of all jurisdictions in which the
applicant or an officer, director, or substantial interest-holder
of the applicant has been licensed, registered, qualified, or
otherwise approved to conduct gambling-related activities during
the 10 years preceding the date of the filing of the application;
             (11)  a statement, including all related details,
indicating whether the applicant or an officer, director, or
substantial interest-holder of the applicant has ever had a
license, registration, qualification, or other approval for
gambling-related activities denied, revoked, or suspended by any
jurisdiction or has been fined or otherwise required to pay
penalties or monetary forfeitures for gambling-related activities
in any jurisdiction; and
             (12)  a statement acknowledging that the applicant will
make available for review at the time and place requested by the
commission all records related to the ownership or operation of the
business.
       (d)  The commission may require the following information
from an applicant:
             (1)  personal financial and personal history records of
all substantial interest-holders;
             (2)  all records related to the scope of activity,
including sales of product, purchases of raw materials and parts,
and any contracts, franchises, patent agreements, or similar
contracts or arrangements related to manufacturing or distributing
video lottery terminals; and
             (3)  records related to any financial or management
control of or by customers and suppliers.
       (e)  The applicant must:
             (1)  demonstrate the ability to comply with all
manufacturing, quality control, and operational restrictions
imposed on authorized video lottery equipment, patented or
otherwise restricted video lottery games, or other video lottery
equipment that the applicant seeks to manufacture or distribute for
use in this state; and
             (2)  submit to an on-site review of the applicant's
manufacturing equipment and process for each separate type of
authorized video lottery equipment to ensure compliance with the
requirements of this chapter and commission rules.
       (f)  Not later than the 10th day after the date of any change
in the information submitted on or with the application form, the
applicant shall notify the commission of the change, including a
change that occurs after the certificate of registration or other
commission approval has been granted.
       (g)  The applicant shall comply with all federal and state
laws, local ordinances, and rules.
       Sec. 466.509.  VIDEO LOTTERY TERMINAL PROVIDER: APPLICATION
AND CERTIFICATE OF REGISTRATION OR APPROVAL FEE.  (a)  An applicant
seeking certificate of registration or approval or renewal of
registration or approval as a video lottery terminal provider must
pay a nonrefundable application fee in the amount of $100,000 and an
annual fee due on each anniversary of initial registration or
approval of $100,000.
       (b)  An applicant seeking registration or approval as both a
manufacturer and distributor must pay a separate application and
annual fee for each registration or approval.
       (c)  Application fees paid under this section shall be
retained by the commission to defray costs incurred in the
administration and enforcement of this chapter relating to the
operation of video lottery terminals.
       Sec. 466.510.  VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
MANAGER LICENSE REQUIRED.  (a)  Except as provided by a gaming
agreement, a person may not own or operate a video lottery terminal
if the person does not satisfy the requirements of this subchapter
and is not licensed by the commission to act as a video lottery
retailer or video lottery manager.
       (b)  A federally recognized Indian tribe may obtain a license
as a video lottery retailer to conduct video lottery games on Indian
lands as an alternative to operating those games under a gaming
agreement under this subchapter.  A retailer license issued by the
commission to the tribe constitutes an agreement between the tribe
and this state for purposes of the Indian Gaming Regulatory Act of
1988 (25 U.S.C. Sec. 2701 et seq.).
       Sec. 466.511.  VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
MANAGER:  APPLICATION AND QUALIFICATION.  (a)  An applicant for a
video lottery retailer or video lottery manager license must apply
to the commission under rules adopted by the commission, provide
the information necessary to determine the applicant's eligibility
for a license, and provide other information considered necessary
by the commission.
       (b)  Except as provided by Section 466.510(b) or other law,
an applicant for a video lottery retailer license must hold a valid
racing license granted under the Texas Racing Act (Article 179e,
Vernon's Texas Civil Statutes) and operate a racetrack as defined
by Section 466.002.
       (c)  An applicant for a video lottery manager license must:
             (1)  have a valid and executed contract with a
racetrack that satisfies the requirements of Subsection (b) to act
as a video lottery manager for the racetrack subject to licensing
under this chapter; or
             (2)  demonstrate to the commission's satisfaction that
the applicant seeks to act as a video lottery manager for a
federally recognized Indian tribe that:
                   (A)  has entered into a gaming agreement with this
state that is in effect and governs the regulation of video lottery
terminals on Indian lands in this state; or
                   (B)  has obtained a license as a video lottery
retailer in accordance with this subchapter.
       (d)  Each officer, partner, director, key employee,
substantial interest-holder, video lottery game operation
employee, and owner of video lottery game operations must be
eligible and maintain eligibility in accordance with this
subchapter to be involved in video lottery games in this state.
       (e)  An applicant for a video lottery retailer or video
lottery manager license has the burden of proving qualification for
a license by clear and convincing evidence.  In addition to
satisfying minimum requirements established by commission rules,
an applicant for a video lottery retailer or video lottery manager
license must:
             (1)  be a person of good character, honesty, and
integrity;
             (2)  be a person whose background and prior activities,
including criminal record, reputation, habits, and associations,
do not pose a threat to the security and integrity of video lottery
or to the public interest of this state or to the effective
operation and control of video lottery, or do not create or enhance
the dangers of unsuitable, unfair, or illegal practices, methods,
and activities in the conduct of video lottery or in the carrying on
of the business and financial arrangements incidental to video
lottery;
             (3)  if applying for a new license, provide
fingerprints for a criminal records evaluation by the Texas
Department of Public Safety or other law enforcement agency,
including fingerprints for each person required to be named in an
application, accompanied by a signed authorization for the release
of information to the commission by the department of public safety
and the Federal Bureau of Investigation;
             (4)  not have been convicted of an offense under this
chapter or of any crime related to theft, bribery, gambling, or
involving moral turpitude;
             (5)  demonstrate adequate business probity,
competence, experience, and financial stability as defined by the
commission;
             (6)  demonstrate adequate financing for the operation
of the facility at which the video lottery terminals will be
operated from a source that meets the requirements of this
subchapter and is adequate to support the successful performance of
the duties and responsibilities of the license holder and disclose
all financing or refinancing arrangements for the purchase, lease,
or other acquisition of video lottery equipment in the degree of
detail requested by the commission;
             (7)  when applying for a new license or renewing a
license under this chapter, present evidence to the commission of
the existence and terms of any agreement regarding the proceeds
from the operation of video lottery terminals;
             (8)  demonstrate that each substantial interest-holder
in the applicant meets all applicable qualifications under this
subchapter;
             (9)  provide all information, including financial data
and documents, consents, waivers, and any other materials,
requested by the commission for purposes of determining
qualifications for a license; and
             (10)  as part of its application, expressly waive any
and all claims against the commission, this state, and a member,
officer, employee, or authorized agent of the commission or this
state for damages resulting from any background investigation,
disclosure, or publication relating to an application for a video
lottery retailer or video lottery manager license.
       (f)  An application or disclosure form and any other document
submitted to the commission by or on behalf of the applicant for
purposes of determining qualification for a video lottery retailer
or video lottery manager license must be sworn to or affirmed before
an officer qualified to administer oaths.
       (g)  An applicant who knowingly fails to reveal any fact
material to qualification for a license, finding of suitability, or
other approval or who knowingly submits false or misleading
material information is ineligible for a video lottery retailer or
video lottery manager license.
       (h)  An applicant for a license or renewal of a license as a
video lottery retailer or video lottery manager shall notify the
commission of any change in the application information for a
license or renewal of a license not later than the 10th day after
the date of the change, except that a publicly traded corporation or
other business association or entity applicant is not required to
notify the commission of a transfer by which any person directly or
indirectly becomes the beneficial owner of less than 10 percent of
the stock of the corporation or association.
       (i)  Except as otherwise provided by this subchapter, the
commission shall deny an application for a license or shall suspend
or revoke a license if the commission finds that the applicant would
be subject to denial or revocation of a sales agent license under
Section 466.155.
       (j)  If a majority of voters of the county in which an
applicant for a video lottery retailer or video lottery manager
license proposes to operate video lottery terminals voted against
the 2007 proposition to approve the operation of video lottery
terminals at racetracks and on Indian lands, the commission:
             (1)  shall hold a hearing in the community in which the
racetrack is located or proposed to be located regarding the
operation of video lottery in that community; and
             (2)  may not issue a video lottery retailer or video
lottery manager license to operate a video lottery at a racetrack in
that community if the commission determines the community is
substantially opposed to the operation of video lottery games in
that community.
       Sec. 466.512.  VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
MANAGER:  APPLICATION AND ANNUAL LICENSE FEES.  (a)  An applicant
for a video lottery retailer or video lottery manager license must
pay a nonrefundable application fee in the amount of:
             (1)  $500,000 for an applicant applying to operate a
video lottery terminal establishment at a class 1 racetrack or a
greyhound racetrack; or
             (2)  $200,000 for an applicant applying to operate a
video lottery terminal establishment at a class 2 or class 3
racetrack.
       (b)  A video lottery retailer or video lottery manager must
pay an annual license fee due on each anniversary of initial
licensing in the amount of:
             (1)  $50,000 for a license holder operating a video
lottery terminal establishment at a class 1 racetrack or a
greyhound racetrack; or
             (2)  $25,000 for a license holder operating a video
lottery terminal establishment at a class 2 or class 3 racetrack.
       (c)  An application may not be processed until the applicant
pays the application fee. If the application fee is not received by
the 30th day after the date the commission notifies the applicant of
the amount of the fee, the application is considered withdrawn and
may not be considered by the commission.
       (d)  The commission shall set any additional application fee
necessary to pay the costs of determining the applicant's
eligibility, including costs to conduct all investigations
necessary for processing the application. An investigation may not
begin until the applicant has submitted all required fees to the
commission. If additional fees are required by the commission
during the course of the investigation or processing of the
application and are not received by the commission by the 15th day
after the date the commission notifies the applicant of the amount
of the fees, the investigation and evaluation processes shall be
suspended.
       (e)  The commission shall retain an application fee paid
under this section to defray costs incurred in the administration
and enforcement of this chapter relating to the operation of video
lottery terminals.
       Sec. 466.513.  VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
MANAGER:  EMPLOYEE INFORMATION.  (a)  A video lottery retailer or
video lottery manager shall provide to the commission the name and
address of each employee involved in the operation of video lottery
games and the name and address of the providers of surety and
insurance required by Section 466.559.
       (b)  Not later than the 10th day following the date of the
change, a license holder must report to the commission any change in
an officer, partner, director, key employee, substantial
interest-holder, video lottery game operation employee, or owner
and any change in a surety or insurance provider.
       Sec. 466.514.  VIDEO LOTTERY TERMINAL ESTABLISHMENT:
REQUIREMENTS; LOCATION.  (a)  A video lottery retailer or video
lottery manager may not operate video lottery terminals at any
place that is not licensed as a video lottery terminal
establishment.
       (b)  The commission by rule shall establish standards for
video lottery terminal establishments to ensure that
establishments are accessible, safe, comfortable, durable, and of
sufficiently high-quality construction to promote investments in
establishments and related facilities that foster lasting economic
development and continuity in producing state revenue, and that
protect the health and welfare of employees, patrons, and all state
residents. The standards must include or incorporate high-quality
commercial building standards, including safety, air-conditioning,
heating, and electrical standards.
       (c)  An applicant for a video lottery terminal establishment
license must:
             (1)  consent to the application of state laws with
exclusive venue in Travis County, Texas, related to any action
arising out of the operation of video lottery terminals;
             (2)  provide office space for at least one commission
employee as required by commission rule; and
             (3)  provide free and unrestricted access to the
establishment by the commission.
       (d)  An applicant for a video lottery terminal establishment
license must provide the maps, surveys, site plans, architectural
plans, and financial statements required by the commission and
update the information at least annually if required by the
commission.
       (e)  Notwithstanding Sections 466.155 and 466.511(i), the
commission may not deny, suspend, or revoke a license under this
subchapter based on the fact that a video lottery terminal
establishment or a proposed video lottery terminal establishment is
a location for which a person holds a wine and beer retailer's
permit, mixed beverage permit, mixed beverage late hours permit,
private club registration permit, or private club late hours
permit, issued under Chapter 25, 28, 29, 32, or 33, Alcoholic
Beverage Code.
       Sec. 466.515.  LICENSE HOLDER AS SALES AGENT.  The holder of
a video lottery retailer or video lottery manager license may
operate as a sales agent for lottery tickets in accordance with this
chapter.
       Sec. 466.516.  TERM OF LICENSE, REGISTRATION, OR APPROVAL;
RENEWAL ELIGIBILITY.  (a)  Unless suspended or revoked, a license,
certificate of registration, or approval issued under this
subchapter expires:
             (1)  except as provided by Subdivision (2), on the date
specified in the license, which may not be later than the fifth
anniversary of the date of issuance; or
             (2)  for a video lottery retailer license held by a
pari-mutuel license holder, on the date the person's pari-mutuel
license expires.
       (b)  To be eligible for renewal of a license or certificate,
an applicant must satisfy all applicable licensing, registration,
or approval requirements under this subchapter, including payment
of any renewal fee charged by the commission to cover costs of
administering a renewal application.
       Sec. 466.517.  RULES FOR ADDITIONAL LICENSE QUALIFICATIONS.  
The commission by rule may establish other license qualifications
the commission determines are in the public interest and consistent
with the declared policy of this state.
       Sec. 466.518.  APPLICATION AS REQUEST FOR CHARACTER
DETERMINATION.  An application under this subchapter to receive or
renew a license, certificate of registration, or approval or to be
found suitable constitutes a request for a determination of the
applicant's general character, integrity, and ability to
participate or engage in or be associated with the operation of
video lottery terminals.
       Sec. 466.519.  IMMUNITY FOR STATEMENT MADE IN PROCEEDING OR
INVESTIGATION.  Any written or oral statement made in the course of
an official commission proceeding or investigative activities
related to an application for commission licensing, registration,
or other approval under this subchapter, by any member or agent or
any witness testifying under oath that is relevant to the purpose of
the proceeding is absolutely privileged and does not impose
liability for defamation or constitute a ground for recovery in any
civil action.
       Sec. 466.520.  SUITABILITY FINDING.  To promote the
integrity and security of the lottery, the commission in its
discretion may require a suitability finding for any person doing
business with or in relation to the operation of video lottery
terminals who is not otherwise required to obtain a license,
registration, or approval from the commission for the person's
video lottery-related operations.
       Sec. 466.521.  SUMMARY SUSPENSION OF VIDEO LOTTERY RETAILER
OR VIDEO LOTTERY MANAGER LICENSE; TERMINAL DISABLED. (a)  The
commission may summarily suspend the license of a video lottery
retailer or video lottery manager without notice or hearing if the
commission finds the action is necessary to maintain the integrity,
security, honesty, or fairness of the operation or administration
of the lottery or to prevent financial loss to this state and:
             (1)  the license holder fails to deposit money received
from video lottery terminal operations as required by this chapter
or commission rule;
             (2)  an event occurs that would render the license
holder ineligible for a license under this subchapter;
             (3)  the license holder refuses to allow the
commission, the commission's agents, or the state auditor, or their
designees, to examine the license holder's books, records, papers,
or other objects under Section 466.017; or
             (4)  the executive director learns the license holder
failed to disclose information that would, if disclosed, render the
video lottery retailer or video lottery manager ineligible for a
license under this subchapter.
       (b)  A summary suspension under this section must comply with
the notice and procedure requirements provided by Section 466.160.
       (c)  The commission may disable a video lottery terminal
operated by a license holder under this subchapter at the time:
             (1)  a proceeding to summarily suspend the license is
initiated;
             (2)  the commission discovers the license holder failed
to deposit money received from video lottery terminal operation as
required if the license is being summarily suspended under this
section; or
             (3)  an act or omission occurs that, under commission
rules, justifies the termination of video lottery terminal
operations to:
                   (A)  protect the integrity of the lottery or the
public health, welfare, or safety; or
                   (B)  prevent financial loss to this state.
       (d)  The commission shall immediately disable a video
lottery terminal if necessary to protect the public health,
welfare, or safety.
       Sec. 466.522.  LICENSING, REGISTRATION, SUITABILITY, AND
REGULATORY APPROVAL AS REVOCABLE PERSONAL PRIVILEGES.  (a)  An
applicant for a license, certificate of registration, suitability,
or other affirmative regulatory approval under this subchapter does
not have any right to the license, certificate of registration,
suitability, or approval sought.
       (b)  Any license, certificate of registration, or
suitability or other regulatory approval granted under this
subchapter is a revocable privilege, and a holder of the privilege
does not acquire any vested right in or under the privilege.
       (c)  The courts of this state do not have jurisdiction to
review a decision to deny, limit, or condition the license,
registration, suitability, or approval unless the judicial review
is sought on the ground that the denial, limitation, or condition is
based on a suspect classification, such as race, color, religion,
sex, or national origin, in violation of the Equal Protection
Clause of the Fourteenth Amendment to the United States
Constitution. The state court must affirm the commission's action
unless the violation is proven by clear and convincing evidence.  If
a state court has jurisdiction over a claim under this section, then
this state's sovereign immunity is waived only to the extent
expressly provided by Section 466.573.
       (d)  A license, certificate of registration, suitability, or
regulatory approval granted or renewed under this subchapter may
not be transferred or assigned to another person, and a license,
registration, suitability, or approval may not be pledged as
collateral. The purchaser or successor of a person who has been
granted a license, certificate of registration, suitability, or
regulatory approval must independently qualify for a license,
certificate, suitability, or approval required by this subchapter.
       (e)  The following acts void the license, certificate,
suitability, or other regulatory approval of the holder unless
approved in advance by the commission:
             (1)  the transfer, sale, or other disposition of an
interest in the holder that results in a change in the identity of a
substantial interest holder; or
             (2)  the sale of the assets of the holder, other than
assets bought and sold in the ordinary course of business, or any
interest in the assets, to any person not already determined to have
met the applicable qualifications of this subchapter.
       Sec. 466.523.  CAPITAL INVESTMENTS AND IMPROVEMENT
REQUIREMENTS FOR VIDEO LOTTERY TERMINAL ESTABLISHMENT.  (a)  A
video lottery retailer or video lottery manager shall provide all
necessary capital investments and required improvements at a video
lottery terminal establishment operated by the retailer or manager.
       (b)  The commission may not issue a license for the operation
of a video lottery terminal establishment at a class 2 racetrack
that has not made at least $20 million in capital investments or
improvements to new or existing facilities at the racetrack.
       Sec. 466.524.  VIDEO LOTTERY TERMINAL: PROCUREMENT AND FEE.  
(a)  The commission shall provide all video lottery retailers or
video lottery managers with a list of registered video lottery
terminal providers, video lottery games, and video lottery
terminals authorized for operation under this subchapter.
       (b)  At the time and in the manner prescribed by commission
rule, a video lottery retailer or video lottery manager shall pay to
the commission a fee of $5,000 for each video lottery terminal
delivered to the video lottery terminal establishment operated by
the retailer or manager.  The commission by rule may allow a video
lottery retailer or video lottery manager to replace a
malfunctioning video lottery terminal without paying the fee
required by this subsection.
       Sec. 466.525.  VIDEO LOTTERY TERMINAL: DISTRIBUTION AND
COMMISSION APPROVAL.  (a)  A video lottery terminal provider may not
distribute a video lottery terminal or other video lottery
equipment for placement at a video lottery terminal establishment
in this state unless the video lottery terminal has been approved by
the commission.
       (b)  Only a video lottery terminal provider registered with
or approved by the commission may apply for approval of a video
lottery terminal or other video lottery equipment.
       (c)  Not later than the 10th day before the date of shipment
to a location in this state, a video lottery terminal provider shall
file a report with the commission itemizing all video lottery
terminals and other video lottery equipment to be provided to a
video lottery retailer or video lottery manager in the shipment.
       Sec. 466.526.  VIDEO LOTTERY TERMINAL: TESTING; REPORT.  (a)  
A video lottery terminal provider shall submit two copies of
terminal illustrations, schematics, block diagrams, circuit
analysis, technical and operation manuals, and any other
information requested by the commission for the purpose of
analyzing and testing the video lottery terminal or other video
lottery equipment.
       (b)  The commission may require up to four working models of
a video lottery terminal to be transported to a location designated
by the commission for testing, examination, and analysis.  The
video lottery terminal provider shall pay all the costs of testing,
examination, analysis, and transportation of the models. The
testing, examination, and analysis of video lottery terminals may
require dismantling of the terminal, and some tests may result in
damage or destruction to one or more electronic components of the
model. The commission may require a video lottery terminal
provider to provide specialized equipment or pay for an independent
technical expert or laboratory to test the terminal.
       (c)  The video lottery terminal provider shall pay the cost
of transporting up to four video lottery terminals to the
headquarters of the commission or a location designated by the
commission. The commission shall conduct an acceptance test to
determine terminal functions and compatibility with the video
lottery central system. At the expense of the video lottery
terminal provider, the commission may contract with an independent
technical expert or laboratory to determine compatibility and
terminal functions. If the video lottery terminal fails the
acceptance test conducted by the commission, the video lottery
terminal provider shall make all modifications required by the
commission before distribution in this state.
       (d)  After each test under this section has been completed,
the commission shall provide the video lottery terminal provider
with a report containing findings, conclusions, and pass or fail
results. The report may contain recommendations for modifications
to bring a video lottery terminal into compliance with this chapter
and commission standards.
       (e)  Before approving a particular video lottery terminal
model, the commission may require a field trial period not to exceed
60 days for a licensed video lottery terminal establishment to test
the terminal. During the trial period, modifications may not be
made to the video lottery terminal model unless approved by the
commission.
       Sec. 466.527.  VIDEO LOTTERY TERMINAL: INSTALLATION;
MODIFICATION REQUEST.  (a)  A video lottery terminal provider is
responsible for the assembly and installation of all video lottery
terminals and other video lottery equipment.
       (b)  A video lottery terminal provider or a video lottery
retailer or video lottery manager may not change the assembly or
operational functions of a video lottery terminal authorized by the
commission for placement in this state unless a request for
modification of an existing video lottery terminal prototype is
approved by the commission. The request must contain:
             (1)  a detailed description of the type of change;
             (2)  a detailed description of the reasons for the
change; and
             (3)  technical documentation of the change.
       (c)  A video lottery terminal approved by the commission for
placement at a video lottery terminal establishment must conform to
the exact specifications of the video lottery terminal prototype
tested and approved by the commission.
       Sec. 466.528.  VIDEO LOTTERY TERMINAL REMOVAL.  (a)  If any
video lottery terminal that has not been approved by the commission
is distributed by a video lottery terminal provider or operated by a
video lottery retailer or video lottery manager or if an approved
video lottery terminal malfunctions, the commission shall require
the terminal to be removed from use and play.
       (b)  The commission may order that an unapproved terminal be
seized and destroyed and that a malfunctioning terminal not
repaired and returned to play within 30 days or as otherwise
prescribed by the commission be disposed of in compliance with
Section 466.531(b).
       (c)  The commission may suspend or revoke the license of a
video lottery retailer or video lottery manager or the registration
of a video lottery terminal provider for the distribution,
possession, or operation of an unauthorized video lottery terminal.
       Sec. 466.529.  VIDEO LOTTERY TERMINAL SPECIFICATIONS.  (a)  
The commission shall adopt rules for approval of video lottery
terminals, including requirements for video lottery game tickets,
maximum and minimum payout, and maximum wagers.
       (b)  A commission-approved video lottery terminal must meet
the following minimum specifications:
             (1)  the terminal must:
                   (A)  operate through a player's insertion of a
coin, currency, voucher, or token into the terminal that causes the
video lottery terminal to display credits that entitle the player
to select one or more symbols or numbers or cause the terminal to
randomly select symbols or numbers;
                   (B)  allow the player to win additional game play
credits, coins, or tokens based on game rules that establish the
random selection of winning combinations of symbols or numbers and
the number of free play credits, coins, or tokens to be awarded for
each winning combination; and
                   (C)  allow the player at any time to clear all game
play credits and receive a video lottery ticket entitling the
player to receive the cash value of those credits;
             (2)  a surge protector must be installed on the
electrical power supply line to each video lottery terminal, a
battery or equivalent power backup for the electronic meters must
be capable of maintaining the accuracy of all accounting records
and video lottery terminal status reports for a period of 180 days
after power is disconnected from the video lottery terminal, and
the power backup device must be in the compartment specified in
Subdivision (4);
             (3)  the operation of each video lottery terminal may
not be adversely affected by any static discharge or other
electromagnetic interference;
             (4)  the main logic boards of all electronic storage
mediums must be located in a separate compartment in the video
lottery terminal that is locked and sealed by the commission;
             (5)  the instructions for play of each game must be
displayed on the video lottery terminal face or screen, including a
display detailing the credits awarded for the occurrence of each
possible winning combination of numbers or symbols;
             (6)  communication equipment and devices must be
installed to enable each video lottery terminal to communicate with
the video lottery central system through the use of a
communications protocol provided by the commission to each
registered video lottery terminal provider, which must include
information retrieval and programs to activate and disable the
terminal; and
             (7)  a video lottery terminal may be operated only if
connected to the video lottery central system, and play on the
terminal may not be conducted unless the terminal is connected to
the video lottery central system.
       (c)  The commission may reject any instructions for play
required under Subsection (b)(5) that the commission determines to
be incomplete, confusing, or misleading.
       Sec. 466.530.  VIDEO LOTTERY TERMINALS:  HOURS OF OPERATION;
COMMUNICATION; LOCATION.  (a)  The hours of operation for video
lottery terminals are subject to restrictions or other conditions
provided by commission rules.
       (b)  The commission by rule may prescribe restrictions or
conditions on the hours of video lottery terminal operations for
purposes determined by the commission, including accounting for and
collecting revenue generated by video lottery terminal operations
and performing other operational services on the video lottery
system.
       (c)  Communication between the video lottery central system
and each video lottery terminal must be continuous and on a
real-time basis as prescribed by the commission.
       (d)  Except as provided by a gaming agreement, placement or
movement of video lottery terminals in a video lottery terminal
establishment must be consistent with a commission-approved video
lottery terminal establishment floor plan.
       Sec. 466.531.  VIDEO LOTTERY TERMINAL: TRANSPORT;
DISPOSITION OF OBSOLETE TERMINAL.  (a)  The transportation and
movement of video lottery terminals into or within this state is
prohibited, except as permitted by this subchapter and approved by
the commission.
       (b)  An obsolete video lottery terminal or a video lottery
terminal that is no longer in operation must be promptly reported to
the commission and, if taken out of use and play, must immediately
be sold or otherwise transferred to a registered video lottery
terminal provider or another person in a jurisdiction outside this
state for use in that jurisdiction.
       Sec. 466.532.  VIDEO LOTTERY TERMINALS:  MAXIMUM NUMBER.  
(a)  The commission by rule shall establish the maximum number of
video lottery terminals that may be operated at each video lottery
terminal establishment operated by a video lottery retailer or
video lottery manager based on factors prescribed by commission
rule, including demographics, to ensure that the number of permits
to operate video lottery terminals requested by the retailer or
manager is not detrimental to the public health, safety, welfare,
and economic development of this state and will result in the
optimization of revenue to fund state governmental programs.
       (b)  The commission shall determine the number of video
lottery terminals that may be operated by an Indian tribe in
connection with the tribe's video lottery system in accordance with
the applicable gaming agreement entered into pursuant to this
chapter and the criteria prescribed by Subsection (a).
       Sec. 466.533.  REGISTRATION OF VIDEO LOTTERY TERMINALS. (a)
A video lottery retailer or video lottery manager may not operate or
display a video lottery terminal for play in this state unless the
terminal is annually registered with the commission in accordance
with this section and the certificate of registration is affixed to
the terminal.
       (b)  To obtain a certificate of registration under this
section, a person must:
             (1)  file with the commission a registration
application on a form prescribed by the commission; and
             (2)  pay a $1,000 registration fee to the commission
for each video lottery terminal that is the subject of the
application.
       (c)  Chapter 2153, Occupations Code, does not apply to a
video lottery terminal.
       Sec. 466.534.  LICENSE AND REGISTRATION INVESTIGATIVE TRUST
FUND.  (a)  The investigative trust fund is created as a trust fund
to pay all expenses incurred by the commission related to oversight
investigations of applicants for a license, certificate of
registration, or approval and of license, certificate, or approval
holders.
       (b)  The commission shall determine the amount initially
deposited and the amount maintained in the fund by each applicant or
license, certificate, or approval holder and shall administer the
money in the fund as a revolving fund available to the commission.
       (c)  If the commission does not receive the initial deposit
required by Subsection (b) before the 30th day following the date
the commission notifies the applicant or license, registration, or
approval holder of the initial deposit amount, the commission may
not issue or renew the license, certificate, or approval.  The
investigative trust fund is in the state treasury and is held in
trust with the comptroller's treasury operations division.
       (d)  Expenses may be advanced from the investigative fund,
and expenditures may be made from the fund without regard to any
other state law regarding travel expenses of state employees.
       (e)  The commission at least quarterly shall provide each
applicant or license, certificate, or approval holder a written
accounting of the costs and charges incurred in oversight
investigations for that applicant or holder. An applicant or a
license, certificate, or approval holder shall deposit money not
later than the 10th day after receipt of the accounting to maintain
the fund balance required by the commission.
       (f)  If an applicant for a license, certificate of
registration, or approval is not licensed, registered, or approved,
or if a license, registration, or approval is not renewed, the
commission shall refund to the applicant or holder any balance in
the fund paid by the applicant or holder not offset by costs
incurred in an investigation for that applicant or holder.
       Sec. 466.535.  CONSENT TO COMMISSION DETERMINATION.  (a)  An
application for a license, certificate of registration, finding of
suitability, or other approval under this chapter constitutes a
request to the commission for a decision on the applicant's general
suitability, character, integrity, and ability to participate or
engage in or be associated with the lottery in the manner or
position sought.
       (b)  By filing an application with the commission, the
applicant specifically consents to the commission's decision at the
commission's election when the application, after filing, becomes
moot for any reason other than death.
       Sec. 466.536.  ABSOLUTE AUTHORITY OF COMMISSION.  To protect
the integrity of the lottery or the public health, welfare, or
safety, or to prevent financial loss to this state, the commission
has full and absolute power and authority to:
             (1)  deny any application or limit, condition,
restrict, revoke, or suspend any license, certificate of
registration, or finding of suitability or approval; and
             (2)  fine any person licensed, registered, found
suitable, or approved for any cause deemed reasonable by the
commission.
       Sec. 466.537.  WAIVER OF REQUIREMENTS.  (a)  The commission
may waive, either selectively or by general rule, one or more of the
requirements of Sections 466.508 and 466.511 if the commission
makes a written finding that the waiver is consistent with the
policy of this state, the public health, safety, and welfare, and
the integrity of the lottery.
       (b)  The commission may waive any requirement under this
chapter for a finding of suitability of an institutional investor
that is a substantial interest holder with respect to the
beneficial ownership of the voting securities of a publicly traded
corporation if the institutional investor holds the securities for
investment purposes only and applies for a waiver in compliance
with Section 466.538 and commission rules.
       (c)  An institutional investor is not eligible for the
waiver, except as otherwise provided by Subsection (f), if the
institutional investor beneficially owns, directly or indirectly,
more than 15 percent of the voting securities and if any of the
voting securities were acquired other than through a debt
restructuring.
       (d)  Voting securities acquired before a debt restructuring
and retained after a debt restructuring or as a result of an
exchange, exercise, or conversion after a debt restructuring, or
any securities issued to the institutional investor through a debt
restructuring, are considered to have been acquired through a debt
restructuring.
       (e)  A waiver granted under Subsection (b) is effective only
as long as the institutional investor's direct or indirect
beneficial ownership interest in the voting securities meets the
limitations set forth in this section, and if the institutional
investor's interest exceeds the limitation at any time, the
investor is subject to the suitability findings required under this
subchapter.
       (f)  An institutional investor that has been granted a waiver
under Subsection (b) may beneficially own more than 15 percent, but
not more than 19 percent, of the voting securities of a publicly
traded corporation registered with or licensed by the commission
only:
             (1)  if the additional ownership results from a stock
repurchase program conducted by the publicly traded corporation;
and
             (2)  on the conditions that:
                   (A)  the institutional investor does not purchase
or otherwise acquire any additional voting securities of the
publicly traded corporation that would result in an increase in the
institutional investor's ownership percentage; and
                   (B)  the institutional investor reduces its
ownership percentage of the publicly traded corporation to 15
percent or less before the first anniversary of the date the
institutional investor receives constructive notice that it
exceeded the 15 percent threshold, based on any public filing by the
corporation with the United States Securities and Exchange
Commission.
       (g)  The one-year period under Subsection (f)(2)(B) may be
extended for a reasonable time on commission approval.
       (h)  An institutional investor may not be considered to hold
voting securities of a publicly traded corporation for investment
purposes only unless the voting securities were acquired and are
held in the ordinary course of business as an institutional
investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board
of directors, any change in the corporate charter, bylaws,
management, policies, or operations of the corporation registered
with or licensed by the commission or any of its gaming affiliates,
or any other action which the commission finds to be inconsistent
with investment purposes only. The following activities may not be
considered to be inconsistent with holding voting securities for
investment purposes only:
             (1)  voting, directly or indirectly through the
delivery of a proxy furnished by the board of directors, on all
matters voted on by the holders of the voting securities;
             (2)  serving as a member of any committee of creditors
or security holders formed in connection with a debt restructuring;
             (3)  nominating any candidate for election or
appointment to the board of directors in connection with a debt
restructuring;
             (4)  accepting appointment or election as a member of
the board of directors in connection with a debt restructuring and
serving in that capacity until the conclusion of the member's term;
             (5)  making financial and other inquiries of management
of the type normally made by securities analysts for information
purposes and not to cause a change in management, policies, or
operations; or
             (6)  any other activity the commission determines to be
consistent with the investment intent.
       (i)  For purposes of this section, "debt restructuring"
means:
             (1)  a proceeding under the United States Bankruptcy
Code; or
             (2)  any out-of-court reorganization of a person that
is insolvent or generally unable to pay the person's debts as they
become due.
       Sec. 466.538.  WAIVER APPLICATION REQUIREMENTS.  An
application for a waiver under Section 466.537(b) must include:
             (1)  a description of the institutional investor's
business and a statement as to why the institutional investor meets
the definition of an institutional investor set forth in this
chapter;
             (2)  a certification, made under oath and penalty of
perjury, that:
                   (A)  states that the voting securities were
acquired and are held for investment purposes only in accordance
with Section 466.537;
                   (B)  provides that the applicant agrees to be
bound by and comply with this chapter and the rules adopted under
this chapter, to be subject to the jurisdiction of the courts of
this state, and to consent to this state as the choice of forum in
the event any dispute, question, or controversy arises regarding
the application or any waiver granted under Section 466.537(b); and
                   (C)  includes a statement by the signatory
explaining the basis of the signatory's authority to sign the
certification and bind the institutional investor to its terms;
             (3)  a description of all actions, if any, taken or
expected to be taken by the institutional investor related to the
activities described in Section 466.537(f);
             (4)  the names, addresses, telephone numbers, dates of
birth, and social security numbers of:
                   (A)  the officers and directors of the
institutional investor or the officers' and directors' equivalents;
and
                   (B)  the persons that have direct control over the
institutional investor's holdings of voting securities of the
publicly traded corporation registered with or licensed by the
commission;
             (5)  the name, address, telephone number, date of
birth, and social security number or federal tax identification
number of each person who has the power to direct or control the
institutional investor's exercise of its voting rights as a holder
of voting securities of the publicly traded corporation registered
with or licensed by the commission;
             (6)  the name of each person that beneficially owns
more than five percent of the institutional investor's voting
securities or other equivalent;
             (7)  a list of the institutional investor's affiliates;
             (8)  a list of all securities of the publicly traded
corporation registered with or licensed by the commission that are
or were beneficially owned by the institutional investor or its
affiliates in the preceding year, including a description of the
securities, the amount of the securities, and the date of
acquisition or sale of the securities;
             (9)  a list of all regulatory agencies with which the
institutional investor or any affiliate that beneficially owns
voting securities of the publicly traded corporation registered
with or licensed by the commission files periodic reports, and the
name, address, and telephone number of the person, if known, to
contact at each agency regarding the institutional investor;
             (10)  a disclosure of all criminal or regulatory
sanctions imposed during the preceding 10 years and of any
administrative or court proceedings filed by any regulatory agency
during the preceding five years against the institutional investor,
its affiliates, any current officer or director, or any former
officer or director whose tenure ended within the preceding 12
months, except that for a former officer or director, the
information need be provided only to the extent that it relates to
actions arising out of or during the person's tenure with the
institutional investor or its affiliates;
             (11)  a copy of the institutional investor's most
recent Schedule 13D or 13G and any amendments to that schedule filed
with the United States Securities and Exchange Commission
concerning any voting securities of the publicly traded corporation
registered with or licensed by the commission;
             (12)  a copy of any filing made under the Securities
Exchange Act of 1934 (15 U.S.C. Section 78a et seq.) with respect to
the acquisition or proposed acquisition of voting securities of the
publicly traded corporation registered with or licensed by the
commission; and
             (13)  any additional information the commission may
request.
       Sec. 466.539.  CHANGE IN INVESTMENT FOLLOWING WAIVER;
NOTICE.  (a)  An institutional investor that has been granted a
waiver of a finding of suitability under Section 466.537 and that
subsequently intends not to hold the investor's voting securities
of the publicly traded corporation for investment purposes only or
that intends to take any action inconsistent with the investor's
prior intent shall, not later than the second business day after the
date of the decision, deliver notice to the commission in writing of
the change in the investor's investment intent. The commission may
then take any action the commission considers appropriate.
       (b)  If the commission finds that an institutional investor
has failed to comply with this chapter or should be subject to a
finding of suitability to protect the public interest, the
commission may require the institutional investor to apply for a
finding of suitability.
       (c)  Any publicly traded corporation registered with or
licensed by the commission shall immediately notify the commission
of any information about, fact concerning, or actions of an
institutional investor holding any of its voting securities that
may materially affect the institutional investor's eligibility to
hold a waiver under Section 466.537.
       Sec. 466.540.  EFFECT OF DENIAL OF LICENSE OR REGISTRATION.  
(a)  A person whose application for a license or certificate of
registration has been denied may not have any interest in or
association with a video lottery retailer or video lottery manager
or any other business conducted in connection with video lottery
without prior approval of the commission.
       (b)  Any contract related to the operation of video lottery
terminals in this state between a person holding a license or
certificate of registration and a person denied a license or
registration must be terminated immediately. If the person denied
a license or certificate has previously been granted a temporary
license or certificate, the temporary license or certificate
expires immediately on denial of the permanent license or
certificate.
       (c)  Except as otherwise authorized by the commission, a
person denied a license or certificate of registration may not
reapply for any license or certificate before the second
anniversary of the date of the denial.
       Sec. 466.541.  PRACTICE BY VIDEO LOTTERY RETAILER OR VIDEO
LOTTERY MANAGER.  A video lottery retailer or video lottery manager
must:
             (1)  be aware of patron conditions and prohibit play by
visibly intoxicated patrons;
             (2)  comply with state alcoholic beverage control laws;
             (3)  at all times maintain sufficient change and cash
in denominations accepted by video lottery terminals;
             (4)  promptly report all video lottery terminal
malfunctions and down-time;
             (5)  install, post, and display prominently any
material required by the commission;
             (6)  prohibit illegal gambling and any related
paraphernalia;
             (7)  except as otherwise provided by this chapter, at
all times prohibit money lending or other extensions of credit at
the video lottery terminal establishment;
             (8)  supervise employees and activities to ensure
compliance with all commission rules and this chapter;
             (9)  maintain continuous camera coverage of all aspects
of video lottery game operations, including video lottery
terminals; and
             (10)  maintain an entry log for each video lottery
terminal on the premises of the video lottery terminal
establishment and maintain and submit complete records on receipt
of each video lottery terminal on the premises as determined by the
commission.
       Sec. 466.542.  RACETRACK REQUIREMENTS.  (a)  Except as
provided by Section 466.510(b), other law, or this section, a video
lottery retailer at all times must hold a valid pari-mutuel
wagering license.  The commission may allow a video lottery
retailer whose pari-mutuel wagering license has lapsed or been
revoked, suspended, or surrendered to reapply for a license in
order to operate the video lottery terminal establishment or by
rule may establish a period not to exceed two years during which
time the video lottery terminal establishment may be operated
pending acquisition by a person qualified and licensed under this
chapter to operate video lottery terminals.
       (b)  If a video lottery retailer is not licensed as required
by Subsection (a) before the second anniversary of the date a
license lapses or is revoked, suspended, or surrendered or a new
video lottery manager or video lottery retailer is not licensed and
authorized to operate the facility before the second anniversary,
the racetrack shall permanently lose eligibility under this chapter
to operate video lottery terminals.
       (c)  Subject to the commission's discretion, a video lottery
retailer may continue to operate the video lottery terminal
establishment after the second anniversary of the date a license
lapses or is revoked, suspended, or surrendered only to satisfy the
establishment's existing outstanding debt attributable to video
lottery operation.
       Sec. 466.543.  PRIZE RULES.  The commission shall adopt
rules governing:
             (1)  the amount a player may be charged to play each
video lottery game; and
             (2)  the prizes and credits that may be awarded to the
player of a video lottery game.
       Sec. 466.544.  VIDEO LOTTERY CENTRAL SYSTEM:  COMMUNICATION
TECHNOLOGY.  The video lottery central system provider shall pay
for the installation and operation of commission-approved
communication technology to provide real-time communication
between each video lottery terminal and the video lottery central
system.
       Sec. 466.545.  RESPONSIBILITY FOR VIDEO LOTTERY GAME
OPERATIONS.  (a)  A video lottery retailer or a video lottery
manager, if applicable, is responsible for the management of video
lottery game operations, including:
             (1)  the validation and payment of prizes; and
             (2)  the management of cashiers, food and beverage
workers, floor workers, security personnel, the security system,
building completion, janitorial services, landscaping design, and
maintenance.
       (b)  Nothing in Subsection (a) limits the authority of the
commission, the Department of Public Safety, or another law
enforcement agency to administer and enforce this chapter as
related to video lottery.
       (c)  In addition to other requirements under this chapter
relating to video lottery, a video lottery retailer or a video
lottery manager at all times shall:
             (1)  operate only video lottery terminals that are
distributed by a registered video lottery terminal provider and
provide a secure location for the placement, operation, and play of
the video lottery terminals;
             (2)  prevent any person from tampering with or
interfering with the operation of a video lottery terminal;
             (3)  ensure that communication technology from the
video lottery central system to the video lottery terminals is
connected at all times and prevent any person from tampering or
interfering with the operation of the connection;
             (4)  ensure that video lottery terminals are in the
sight and control of designated employees of the video lottery
retailer or video lottery manager and in the sight of video cameras
as required under this subchapter;
             (5)  ensure that video lottery terminals are placed and
remain placed in the specific locations in the video lottery
terminal establishment that are consistent with the retailer's or
manager's commission-approved floor plan;
             (6)  monitor video lottery terminals to prevent a
person who is under 21 years of age or who is visibly intoxicated
from placing a wager;
             (7)  refuse to accept a credit card payment from a
player for the exchange or purchase of video lottery game credits or
for an advance of coins, currency, vouchers, or tokens to be used by
a player to play video lottery games, refuse to extend credit, in
any manner, to a player that enables the player to play a video
lottery game, and ensure that any person doing business at the video
lottery terminal establishment, including a person operating or
managing an auxiliary service such as a restaurant, refuses to
accept a credit card payment or to extend credit in a manner
prohibited by this subdivision, except that:
                   (A)  a license holder may cash a check for a player
if the license holder exercises reasonable caution cashing the
check and does not cash checks for any player in an amount exceeding
$1,000 in any 24-hour period; and
                   (B)  an automated teller machine may be located at
a video lottery terminal establishment in compliance with the Texas
Racing Act (Article 179e, Vernon's Texas Civil Statutes) or an
effective gaming agreement;
             (8)  pay all credits won by a player on presentment of a
valid winning video lottery game ticket;
             (9)  conduct only the video lottery game advertising
and promotional activities consistent with criteria prescribed by
the commission, which must prohibit undue influence, offensive
language, and anything that would affect the integrity of video
lottery operation;
             (10)  install, post, and display prominently at the
licensed location redemption information and other informational
or promotional materials as required by the commission;
             (11)  maintain general liability insurance coverage
for the video lottery terminal establishment and all video lottery
terminals in the amounts required by the commission;
             (12)  assume liability for money lost or stolen from
any video lottery terminal; and
             (13)  annually submit an audited financial statement to
the commission in a format approved by the commission.
       Sec. 466.546.  TECHNICAL STANDARDS FOR VIDEO LOTTERY
EQUIPMENT.  The commission by rule shall establish minimum
technical standards for video lottery equipment that may be
operated in this state.
       Sec. 466.547.  INCIDENT REPORTS.  (a)  A video lottery
retailer or video lottery manager shall record all unusual
occurrences related to gaming activity in a video lottery terminal
establishment operated by the retailer or manager.
       (b)  A video lottery retailer or video lottery manager shall
assign each incident, without regard to materiality, a sequential
number and, at a minimum, provide the following information in a
permanent record prepared in accordance with commission rules to
ensure the integrity of the record:
             (1)  the number assigned to the incident;
             (2)  the date and time of the incident;
             (3)  the nature of the incident;
             (4)  each person involved in the incident; and
             (5)  the name of the employee or other agent of the
video lottery retailer or video lottery manager who investigated
the incident.
       Sec. 466.548.  EXCLUSION OF PERSONS.  (a)  The commission
shall compile a list of persons that a video lottery retailer or
video lottery manager must bar from a video lottery terminal
establishment based on a person's criminal history or association
with criminal offenders or because the person poses a threat to the
integrity of the lottery.
       (b)  A video lottery retailer or video lottery manager shall
employ the retailer's or manager's best efforts to exclude such
persons from entry into the establishment.
       (c)  A video lottery retailer or video lottery manager may
exclude a person for any reason not related to the person's race,
sex, national origin, physical disability, or religion.
       (d)  A person who believes the person may be playing video
lottery games on a compulsive basis may request that the person's
name be placed on the list compiled by the commission under
Subsection (a).
       (e)  All video lottery game employees shall receive training
in identifying players with a compulsive playing problem and shall
be instructed to ask the players to leave the establishment. Signs
and other materials shall be readily available to direct compulsive
players to agencies that offer appropriate counseling.
       Sec. 466.549.  REPORT ON LITIGATION.  (a)  A video lottery
retailer or video lottery manager shall report to the commission
any litigation relating to the retailer's or manager's video
lottery terminal establishment, including a criminal proceeding, a
proceeding involving an issue related to racing activities that
impact video lottery operations, or a matter related to character
or reputation relevant to a person's suitability under this
subchapter.
       (b)  The report required under Subsection (a) must be filed
not later than the fifth day after acquiring knowledge of the
litigation.
       Sec. 466.550.  COMMISSION APPROVAL REQUIRED FOR PROCEDURES
AND ADMINISTRATIVE AND ACCOUNTING CONTROLS.  (a)  The commission's
approval is required for:
             (1)  all internal procedures and administrative and
accounting controls of a video lottery retailer or video lottery
manager; and
             (2)  all internal procedures and administrative and
accounting controls of a video lottery terminal provider that
relate to the manufacturing and distribution of video lottery
terminals to be used in this state.
       (b)  The commission by rule shall establish general
accounting and auditing requirements and internal control
standards for video lottery retailers and video lottery managers.
       Sec. 466.551.  FINANCIAL AND OPERATING INFORMATION.  A video
lottery retailer or video lottery manager shall submit financial
and operating information and statistical data to the commission in
a format approved by the commission in order for the financial
operating position of the retailer or manager and performance and
trends of the video lottery game industry in this state to be
evaluated.
       Sec. 466.552.  VIDEO LOTTERY TERMINAL EVENTS.  A video
lottery retailer or video lottery manager shall keep a database of
video lottery terminal events. The commission by rule shall
determine what constitutes a video lottery terminal event for
purposes of this section.
       Sec. 466.553.  EMPLOYEE REPORTING.  (a)  On or before the
15th day of each month, a video lottery retailer or video lottery
manager shall submit to the commission an employee report for the
video lottery terminal establishment operated by the retailer or
manager. For each employee of the retailer or manager, the report
must provide the employee's name, job title, date of birth, and
social security number.
       (b)  The employee report is confidential and may not be
disclosed except under commission order or in accordance with
Section 466.022(c).
       (c)  The commission may conduct criminal history
investigations for employees of video lottery retailers and video
lottery managers.
       (d)  The commission may prohibit an employee from performing
any act relating to video lottery terminals if the commission finds
that an employee has:
             (1)  committed, attempted, or conspired to commit any
act prohibited by this chapter;
             (2)  concealed or refused to disclose any material fact
in any commission investigation;
             (3)  committed, attempted, or conspired to commit
larceny or embezzlement;
             (4)  been convicted in any jurisdiction of an offense
involving or relating to gambling;
             (5)  accepted employment in a position for which
commission approval is required after commission approval was
denied for a reason involving personal unsuitability or after
failing to apply for a license or approval on commission request;
             (6)  been prohibited under color of governmental
authority from being present on the premises of any gaming
establishment or any establishment where pari-mutuel wagering is
conducted for any reason relating to improper gambling activity or
for any illegal act;
             (7)  wilfully defied any legislative investigative
committee or other officially constituted body acting on behalf of
the United States or any state, county, or municipality that sought
to investigate alleged or potential crimes relating to gaming,
corruption of public officials, or any organized criminal
activities; or
             (8)  been convicted of any felony or any crime
involving moral turpitude.
       (e)  The commission may prohibit an employee from performing
any act relating to video lottery terminals based on a revocation or
suspension of any gaming or wagering license, permit, or approval
or for any other reason the commission finds appropriate, including
a refusal by a regulatory authority to issue a license, permit, or
other approval for the employee to engage in or be involved with the
lottery or with regulated gaming or pari-mutuel wagering in any
jurisdiction.
       (f)  In this section, "employee" includes any person
connected directly with or compensated by an applicant or license
holder as an agent, personal representative, consultant,
independent contractor, or lobbyist for the advocacy of the
adoption or amendment of a law related to gaming or lottery
activities or the furtherance of gaming or lottery activities in
any jurisdiction or as otherwise specified by commission rule.
       Sec. 466.554.  REPORT OF VIOLATIONS.  A person who holds a
license or certificate of registration under this subchapter shall
immediately report a violation or suspected violation of this
chapter or a rule adopted under this chapter by any license or
certificate holder, by an employee of a license or certificate
holder, or by any person on the premises of a video lottery terminal
establishment, whether or not associated with the license or
certificate holder.
       Sec. 466.555.  SECURITY.  (a)  In addition to the security
provisions applicable under Section 466.020, a video lottery
retailer or video lottery manager shall:
             (1)  continuously monitor all video lottery terminals
through the use of a closed-circuit television system that records
activity for a continuous 24-hour period, retain all videotapes or
other media used to store video images for at least 30 days, and
make the tapes or media available to the commission on request;
             (2)  submit for commission approval a security plan and
a floor plan of the area where video lottery terminals are operated
showing video lottery terminal locations and security camera mount
locations; and
             (3)  employ at least the minimum number of private
security personnel the commission determines is necessary to
provide for safe and approved operation of the video lottery
terminal establishment and the safety and well-being of the
players.
       (b)  Private security personnel must be present during all
hours of operation at each video lottery terminal establishment.
       (c)  An agent or employee of the commission or the Department
of Public Safety or other law enforcement personnel may be present
at a video lottery terminal establishment at any time.
       (d)  The commission may adopt rules to impose additional
surveillance and security requirements related to video lottery
terminal establishments and the operation of video lottery
terminals.
       Sec. 466.556.  VIDEO LOTTERY TERMINAL ESTABLISHMENT:
COMMISSION RIGHT TO ENTER.  The commission or the commission's
representative, after displaying appropriate identification and
credentials, has the free and unrestricted right to:
             (1)  enter the premises of a video lottery terminal
establishment;
             (2)  enter any other locations involved in operation or
support of video lottery games at all times to examine the systems;
and
             (3)  inspect and copy the records of a video lottery
retailer or video lottery manager pertaining to the operation of
video lottery games.
       Sec. 466.557.  APPOINTMENT OF SUPERVISOR.  (a)  The
commission by rule may provide for the appointment of a supervisor
to manage and operate a video lottery terminal establishment at the
direction of the commission and perform any act that a video lottery
retailer or video lottery manager is entitled to perform in the
event that:
             (1)  a video lottery retailer license or other license
required for operation of the establishment is revoked or
suspended, lapses, or is surrendered;
             (2)  a video lottery terminal establishment has been
conveyed or transferred to a secured party receiver or trustee who
does not hold the licenses necessary to operate the establishment;
or
             (3)  any other event occurs that causes the
establishment to cease the operation of video lottery terminals.
       (b)  The rules may allow the commission to:
             (1)  take any action or adopt any procedure necessary
to operate a video lottery terminal establishment pending the
licensing of a video lottery retailer, video lottery manager, the
video lottery establishment, or a successor on the transfer or sale
of the establishment or property; and
             (2)  if necessary to continue the operation of the
video lottery establishment, sell the establishment to a person
that holds or has applied for the licenses required to operate the
establishment under this subchapter and make appropriate
distributions of the proceeds of the sale.
       Sec. 466.558.  OFFENSE:  CONVEYANCE OF VIDEO LOTTERY
TERMINAL ESTABLISHMENT PROPERTY.  (a)  A person commits an offense
if during the pendency of any proceeding before the commission that
may result in the appointment of a supervisor or during the period
of supervision the person:
             (1)  sells, leases, or otherwise conveys for less than
full market value or pledges as security any property of a video
lottery terminal establishment; or
             (2)  removes from this state or secretes from the
commission or the supervisor any property, money, books, or records
of the video lottery terminal establishment, including evidences of
debts owed to the establishment.
       (b)  An offense under Subsection (a) is a felony of the third
degree.
       Sec. 466.559.  INDEMNIFICATION, INSURANCE, AND BONDING
REQUIREMENTS.  (a)  A license or certificate holder shall indemnify
and hold harmless this state, the commission, and all officers and
employees of this state and the commission from any and all claims
which may be asserted against a license or certificate holder, the
commission, this state, and the members, officers, employees, and
authorized agents of this state or the commission arising from the
license or certificate holder's participation in the video lottery
system authorized under this chapter.
       (b)  Surety and insurance required under this subchapter
shall be issued by companies or financial institutions financially
rated "A" or better as rated by A.M. Best Company or other rating
organization designated by the commission and duly licensed,
admitted, and authorized to conduct business in this state, or by
other surety approved by the commission.
       (c)  The commission shall be named as the obligee in each
required surety and as an additional insured in each required
insurance contract.
       (d)  A video lottery retailer or video lottery manager may
not be self-insured with regard to video lottery terminal
operations under this section.
       (e)  The commission by rule shall establish minimum
insurance coverage requirements for a video lottery retailer, video
lottery manager, or video lottery terminal provider, including:
             (1)  insurance for performance;
             (2)  insurance against losses caused by fraudulent or
dishonest acts by an officer or employee of a video lottery
retailer, video lottery manager, or video lottery terminal
provider;
             (3)  general liability insurance;
             (4)  property insurance;
             (5)  liability insurance for drivers and vehicles
employed by a video lottery retailer or video lottery manager; and
             (6)  crime insurance for the location.
       Sec. 466.560.  LIABILITY FOR CREDIT AWARDED OR DENIED;
PLAYER DISPUTE.  This state and the commission are not liable for
any video lottery terminal malfunction or error by a video lottery
retailer, video lottery manager, or video lottery terminal provider
that causes credit to be wrongfully awarded or denied to players.
       Sec. 466.561.  STATE VIDEO LOTTERY ACCOUNT.  (a)  The
commission shall deposit money received under this subchapter to
the state video lottery account.  The state video lottery account is
a special account in the general revenue fund.  The account consists
of all revenue received by this state from the operation of video
lottery terminals.  Except as otherwise provided by this
subchapter, money in the account may be used solely to fund state
governmental programs and the administration of the video lottery
system.
       (b)  Not more than two percent of the net terminal income
received by this state under Section 466.562 may be used to defray
expenses incurred in administering this chapter related to video
lottery games, including expenses incurred to operate the video
lottery central system.
       Sec. 466.562.  ALLOCATION OF NET TERMINAL INCOME; TRANSFER
OF MONEY.  (a)  Net terminal income derived from the operation of
video lottery games in this state is allocated as follows:
             (1)  net terminal income generated from the operation
of video lottery terminals at a video lottery terminal
establishment shall be distributed 65 percent to the establishment
and 35 percent to this state; and
             (2)  net terminal income generated from the operation
of video lottery terminals on Indian lands under a gaming agreement
authorized under this subchapter shall be distributed in accordance
with the gaming agreement.
       (b)  One-quarter of one percent of the net terminal income
received by this state under Subsection (a)(1) shall be allocated
to a compulsive gambling program to be established by the
commission.
       (c)  One-quarter of one percent of the net terminal income
received by this state under Subsection (a)(1) shall be transferred
to the Equine Research Program at the College of Veterinary
Medicine at Texas A&M University for use in equine research under
Subchapter F, Chapter 88, Education Code, and greyhound research.
       (c-1)  Except as otherwise provided by Subsection (c-2):
             (1)  one-quarter of one percent of the net terminal
income received by this state under Subsection (a)(1) shall be
allocated to the municipality in which the video lottery terminal
establishment is located; and
             (2)  one-quarter of one percent of the net terminal
income received by this state under Subsection (a)(1) shall be
allocated to the county in which the video lottery terminal
establishment is located.
       (c-2)  If a video lottery terminal establishment is located
in an unincorporated area, one-half of one percent of the net
terminal income received by this state under Subsection (a)(1)
shall be allocated to the county in which the establishment is
located.
       (d)  The commission shall require a video lottery retailer or
video lottery manager to establish a separate electronic funds
transfer account for depositing money from video lottery terminal
operations, making payments to the commission or its designee, and
receiving payments from the commission or its designee.
       (e)  A video lottery retailer or video lottery manager may
not make payments to the commission in cash.  As authorized by the
commission, a video lottery retailer or video lottery manager may
make payments to the commission by cashier's check.
       (f)  The commission at least daily shall transfer this
state's share of net terminal income of a video lottery retailer or
video lottery manager to the commission through the electronic
transfer of the money.
       (g)  The commission by rule shall establish the procedures
for:
             (1)  depositing money from video lottery terminal
operations into electronic funds transfer accounts; and
             (2)  handling money from video lottery terminal
operations.
       (h)  Unless otherwise directed by the commission, a video
lottery retailer or a video lottery manager shall maintain in its
account this state's share of the net terminal income from the
operation of video lottery terminals, to be electronically
transferred by the commission on dates established by the
commission.  On a license holder's failure to maintain this
balance, the commission may disable all of a license holder's video
lottery terminals until full payment of all amounts due is made.
Interest shall accrue on any unpaid balance at a rate consistent
with the amount charged under Section 111.060, Tax Code. The
interest shall begin to accrue on the date payment is due to the
commission.
       (i)  In the commission's sole discretion, rather than
disable a license holder's video lottery terminals, the commission
may elect to impose a fine on a license holder in an amount
determined by the commission not to exceed $250,000 for each
violation. If the license holder fails to remedy the violation,
including payment of any amounts assessed by or due to this state,
within 10 days, the commission may disable the license holder's
video lottery terminals or use any other means for collection as
provided by the penalty chart established by the commission.
       (j)  A video lottery retailer or video lottery manager is
solely responsible for resolving any income discrepancies between
actual money collected and the net terminal income reported by the
video lottery central system. Unless an accounting discrepancy is
resolved in favor of the video lottery retailer or video lottery
manager, the commission may not make any credit adjustments. Any
accounting discrepancies which cannot otherwise be resolved shall
be resolved in favor of the commission.
       (k)  A video lottery retailer and video lottery manager shall
remit payment as directed by the commission if the electronic
transfer of money is not operational or the commission notifies the
license holder that other remittance is required. The license
holder shall report this state's share of net terminal income, and
remit the amount generated from the terminals during the reporting
period.
       Sec. 466.563.  COMMISSION EXAMINATION OF FINANCIAL RECORDS.  
The commission may examine all accounts, bank accounts, financial
statements, and records in the possession or control of a person
licensed under this subchapter or in which the license holder has an
interest.  The license holder must authorize and direct all third
parties in possession or in control of the accounts or records to
allow examination of any of those accounts or records by the
commission.
       Sec. 466.564.  FINANCIAL INFORMATION REQUIRED.  (a)  A video
lottery retailer or video lottery manager shall furnish to the
commission all information and bank authorizations required to
facilitate the timely transfer of money to the commission.
       (b)  A video lottery retailer or video lottery manager must
provide the commission 30 days' advance notice of any proposed
account changes in information and bank authorizations to assure
the uninterrupted electronic transfer of money.
       (c)  The commission is not responsible for any interruption
or delays in the transfer of money. The video lottery retailer or
video lottery manager is responsible for any interruption or delay
in the transfer of money.
       Sec. 466.565.  DEDUCTIONS FROM VIDEO LOTTERY PROCEEDS AT
HORSE RACETRACKS. A racetrack that conducts horse races under the
Texas Racing Act (Article 179e, Vernon's Texas Civil Statutes)
shall allocate a percentage of its share of net terminal income
retained under Section 466.562(a) to a purse fund as provided by
Section 6.095, Texas Racing Act (Article 179e, Vernon's Texas Civil
Statutes).
       Sec. 466.566.  DEDUCTIONS FROM VIDEO LOTTERY PROCEEDS AT
GREYHOUND RACETRACKS. A racetrack that conducts greyhound races
under the Texas Racing Act (Article 179e, Vernon's Texas Civil
Statutes) shall allocate a percentage of its share of net terminal
income retained under Section 466.562(a) to a purse fund as
provided by Section 6.095, Texas Racing Act (Article 179e, Vernon's
Texas Civil Statutes).
       Sec. 466.567.  LIABILITY OF VIDEO LOTTERY RETAILER AND VIDEO
LOTTERY MANAGER.  (a)  A video lottery retailer, video lottery
manager, or both, are liable to the commission for the state's share
of net terminal income reported by the video lottery central
system.
       (b)  Net terminal income received by the video lottery
retailer or video lottery manager is held in trust for the benefit
of this state before delivery of the state's share to the commission
or electronic transfer to the state treasury, and the video lottery
retailer or video lottery manager, or both, are liable to the
commission for the full amount of the money held in trust.
       (c)  If the video lottery retailer or video lottery manager
is not an individual, each officer, director, or owner of the video
lottery retailer or video lottery manager is personally liable to
the commission for the full amount of the money held in trust,
except that shareholders of a publicly held corporation are liable
in an amount not to exceed the value of their equity investment.
       Sec. 466.568.  PRIZE PAYMENT AND REDEMPTION.  (a)  Payment of
prizes is the sole and exclusive responsibility of the video
lottery retailer or video lottery manager. A prize may not be paid
by the commission or this state except as otherwise authorized.
       (b)  Nothing in this subchapter limits the ability of a video
lottery retailer or video lottery manager to provide promotional
prizes, including wide area progressive networks, in addition to
prize payouts regulated by the commission.
       (c)  A video lottery ticket must be redeemed not later than
the 180th day following the date of issuance. If a claim is not made
for prize money on or before the 180th day after the date on which
the video lottery ticket was issued, the prize money becomes the
property of this state.
       (d)  The commission shall enact rules consistent with this
section governing the use and redemption of prizes and credits
recorded on electronic player account records, such as players'
club cards and smart cards.
       Sec. 466.569.  REVOCATION OF LICENSE, CERTIFICATE OF
REGISTRATION, OR OTHER REGULATORY APPROVAL.  (a)  The commission
shall revoke or suspend a license, certificate of registration, or
other regulatory approval issued under this subchapter if the
holder of the license, certificate, or approval at any time fails to
meet the eligibility requirements set forth in this subchapter.
       (b)  Failure to timely remit revenue generated by video
lottery terminals to the commission or any tax or other fee owed to
this state as demonstrated by report from the applicable taxing
authority or to timely file any report or information required
under this subchapter as a condition of any license, certificate of
registration, or other approval issued under this subchapter may be
grounds for suspension or revocation, or both, of a license,
certificate, or other approval issued under this subchapter.
       Sec. 466.570.  DISCIPLINARY HEARING.  (a)  Before the
commission revokes or suspends a video lottery terminal provider's
certificate of registration or video lottery retailer's or video
lottery manager's license, or imposes monetary penalties for a
violation of this subchapter, the commission shall provide written
notification to the license or certificate holder of the
revocation, the period of suspension, or the monetary penalty. The
notice shall include:
             (1)  the effective date of the revocation or the period
of suspension or the amount of the monetary penalty, as applicable;
             (2)  each reason for the revocation, suspension, or
penalty;
             (3)  an explanation of the evidence supporting the
reasons;
             (4)  an opportunity to present the license or
certificate holder's position in response on or before the 15th day
after the effective date of the revocation; and
             (5)  a statement explaining the person's right to an
administrative hearing to determine whether the revocation,
suspension, or penalty is warranted.
       (b)  The notice required under Subsection (a) must be made by
personal delivery or by mail to the person's mailing address as it
appears on the commission's records.
       (c)  To obtain an administrative hearing on a suspension,
revocation, or penalty under this section, a person must submit a
written request for a hearing to the commission not later than the
20th day after the date notice is delivered personally or is mailed.
       (d)  If the commission receives a timely request under
Subsection (c), the commission shall provide the person with an
opportunity for a hearing as soon as practicable. If the commission
does not receive a timely request under Subsection (c), the
commission may impose the penalty, revoke or suspend a license or
certificate of registration, or sustain the revocation or
suspension without a hearing.
       (e)  Except as provided by Subsection (f) the hearing must be
held not earlier than the 11th day after the date the written
request is submitted to the commission.
       (f)  The commission may provide that a revocation or
suspension takes effect on receipt of notice under Subsection (a)
if the commission finds that the action is necessary to prevent or
remedy a threat to public health, safety, or welfare. The
commission by rule shall establish a nonexclusive list of
violations that present a threat to the public health, safety, or
welfare.
       (g)  A hearing on a revocation or suspension that takes
effect on receipt of notice must be held not later than the 14th day
after the date the commission receives the request for hearing
under this section. The revocation or suspension continues in
effect until the hearing is completed. If the hearing is continued,
the revocation or suspension shall continue in effect beyond the
14-day period at the request of the license or certificate holder or
on a finding of good cause by the commission or administrative law
judge.
       (h)  To prevail in a post-deprivation administrative hearing
under this section, the license or certificate holder must
demonstrate by clear and convincing evidence that the deprivation
or imposition of a penalty was unwarranted or otherwise unlawful.
The post-deprivation hearing may be conducted by the commission or
referred to the State Office of Administrative Hearings.
       (i)  The administrative record created by the hearing
conducted by the State Office of Administrative Hearings shall be
provided to the commission for review and determination on the
revocation or suspension.
       (j)  If an administrative law judge of the State Office of
Administrative Hearings conducts a hearing under this section and
the proposal for decision supports the commission's position, the
administrative law judge shall include in the proposal a finding of
the costs, fees, expenses, and reasonable and necessary attorney's
fees this state incurred in bringing the proceeding.
       (k)  The commission may adopt the findings for costs, fees,
and expenses and make the finding a part of the final order entered
in the proceeding. Proceeds collected from a finding made under
this section shall be paid to the commission.
       Sec. 466.571.  JUDICIAL REVIEW OF REVOCATION, SUSPENSION, OR
PENALTY IMPOSITION.  (a)  A person aggrieved by a final decision of
the commission to revoke or suspend a certificate of registration
or license or to impose any monetary penalty may obtain judicial
review before a district court in Travis County.
       (b)  The judicial review must be instituted by serving on the
commission and filing a petition not later than the 20th day after
the effective date of the final decision and must identify the order
appealed from and the grounds or reason why the petitioner contends
the decision of the commission should be reversed or modified.
       (c)  The review must be conducted by the court sitting
without jury, and must not be a trial de novo but is confined to the
record on review. The reviewing court may only affirm the decision,
remand the case for further proceedings, or reverse the decision if
the substantial rights of the petitioner have been violated.
       (d)  If any court of competent jurisdiction concludes on
judicial review limited to the administrative record before the
commission and subject to the substantial evidence standard that
the deprivation or penalty was unwarranted or otherwise unlawful,
the sole remedy available is invalidation of the penalty or
reinstatement of the license or certificate of registration and the
continued distribution, manufacture, or operation of video lottery
terminals.
       (e)  The commission, this state, or the members, officers,
employees, and authorized agents of either are not under any
circumstances subject to monetary damages, attorney's fees, or
court costs resulting from the penalty or license or certificate
revocation.
       Sec. 466.572.  LICENSE OR CERTIFICATE OF REGISTRATION:  
AGREEMENT TO WAIVE ENFORCEABILITY.  A license or certificate holder
by virtue of accepting the license or certificate agrees that the
privilege of holding a license or certificate under this subchapter
is conditioned on the holder's agreement to Sections
466.569-466.571 and waives any right to challenge or otherwise
appeal the enforceability of those sections.
       Sec. 466.573.  LIMITED WAIVER OF SOVEREIGN IMMUNITY; NO
LIABILITY OF STATE FOR ENFORCEMENT.  (a)  This state does not waive
its sovereign immunity by negotiating gaming agreements with Indian
tribes or other persons for the operation of video lottery
terminals or other lottery games under this chapter. An actor or
agent for this state may not waive this state's sovereign immunity
absent an express legislative grant of the authority. The only
waiver of sovereign immunity relative to video lottery terminal
operations is that expressly provided for in this section.
       (b)  With regard to video lottery terminal operations on
Indian lands, this state consents to the jurisdiction of the
District Court of the United States with jurisdiction in the county
where the Indian lands are located, or if the federal court lacks
jurisdiction, to the jurisdiction of a district court in Travis
County, solely for the purpose of resolving disputes arising from a
gaming agreement authorized under this subchapter for declaratory
or injunctive relief or contract damages of $100,000 or more. Any
disputes relating to damages or other awards valued at less than
$100,000 shall be arbitrated under the rules of the American
Arbitration Association, provided, however, that application of
the rules may not be construed as a waiver of sovereign immunity.
       (c)  All financial obligations of the commission are payable
solely out of the income, revenues, and receipts of the commission
and are subject to statutory restrictions and appropriations.
       (d)  This state and the commission are not liable if
performance by the commission is compromised or terminated by acts
or omissions of the legislature or the state or federal judiciary.
       (e)  This state and the commission are not liable related to
any enforcement of this chapter.
       Sec. 466.574.  ABSOLUTE PRIVILEGE OF REQUIRED
COMMUNICATIONS AND DOCUMENTS.  (a)  Any communication, document, or
record of a video lottery central system provider, video lottery
terminal provider, video lottery retailer, or video lottery
manager, an applicant, or a license or certificate holder or holder
of a regulatory approval that is made or transmitted to the
commission or any of its employees to comply with any law, including
a rule of the commission, to comply with a subpoena issued by the
commission, or to assist the commission or its designee in the
performance of their respective duties is absolutely privileged,
does not impose liability for defamation, and is not a ground for
recovery in any civil action.
       (b)  If a communication, document, or record provided under
Subsection (a) contains any information that is privileged under
state law, that privilege is not waived or lost because the
communication, document, or record is disclosed to the commission
or any commission employees.
       (c)  The commission shall maintain all privileged
information, communications, documents, and records in a secure
place as determined in the commission's sole discretion that is
accessible only to commission members and authorized commission
employees.
       Sec. 466.575.  INTELLECTUAL PROPERTY RIGHTS OF COMMISSION.  
The legislature finds and declares that the commission has the
right to establish ownership of intellectual property rights for
all lottery products, including video lottery terminals and related
video lottery equipment.
       Sec. 466.576.  MODEL GAMING AGREEMENT.  (a)  The governor
shall execute, on behalf of this state, a gaming agreement with the
Ysleta del Sur Pueblo Indian tribe, the Alabama-Coushatta Indian
tribe, or the Kickapoo Traditional Tribe of Texas containing the
terms set forth in Subsection (b), as a ministerial act, without
preconditions, not later than the 30th day after the date the
governor receives a request from the tribe, accompanied by or in the
form of a duly enacted resolution of the tribe's governing body, to
enter into the gaming agreement.
       (b)  A gaming agreement executed under Subsection (a) must be
in the form and contain the provisions as follows:
GAMING AGREEMENT GOVERNING
VIDEO LOTTERY TERMINAL OPERATIONS
Between the [Name of Tribe]
and the STATE OF TEXAS
       This agreement is made and entered into by and between the
[Name of Tribe], a federally recognized Indian Tribe ("Tribe"), and
the State of Texas ("State"), with respect to the operation of video
lottery terminals (as defined by Section 466.002, Texas Government
Code) on the Tribe's Indian lands (as defined by Chapter 466, Texas
Government Code).
       SECTION 1.0.  TITLE.
       Sec. 1.1.  This document shall be referred to as "The [Name
of Tribe] and State of Texas gaming agreement."
       SECTION 2.0.  PURPOSES AND OBJECTIVES.
       Sec. 2.1.  The terms of this agreement are designed and
intended to:
       (a)  evidence the good will and cooperation of  the Tribe and 
State in fostering a mutually respectful government-to-government
relationship that will serve the mutual interests of the parties;
       (b)  develop and implement a means of regulating limited
Class III gaming on the Tribe's Indian lands to ensure fair and
honest operation in accordance with the applicable federal and
state law, and, through that regulated limited Class III gaming,
enable the Tribe to develop self-sufficiency, promote tribal
economic development, and generate jobs and revenues to support the
Tribe's government and governmental services and programs; and
       (c)  ensure fair operation of video lottery games and
minimize the possibilities of corruption and infiltration by
criminal influences; promote ethical practices in conjunction with
that gaming, through the licensing and control of persons employed
in, or providing goods and services to, the Tribe's video lottery
operation and protecting against the presence or participation of
persons whose criminal backgrounds, reputations, character, or
associations make the persons unsuitable for participation in
gaming, thereby maintaining a high level of integrity in government
gaming.
       SECTION 3.0.  DEFINITIONS.
       As used in this agreement, all terms have the meaning
assigned by Section 466.002, Texas Government Code, unless
otherwise specified:
       Sec. 3.1.  "Class III gaming" means the forms of Class III
gaming defined in 25 U.S.C. Section 2703(8) and by regulations of
the National Indian Gaming Commission.
       Sec. 3.2.  "Financial source" means any person providing
financing, directly or indirectly, to the Tribe's video lottery
terminal establishment or operation of video lottery terminals
authorized under this gaming agreement.
       Sec. 3.3.  "Gaming activities" means the limited Class III
gaming activities authorized under this gaming agreement.
       Sec. 3.4.  "Gaming employee" means any person who:
       (a)  operates, maintains, repairs, or assists in any gaming
activities, or is in any way responsible for supervising the gaming
activities or persons who conduct, operate, account for, or
supervise the gaming activities;
       (b)  is in a category under applicable federal or tribal
gaming law requiring licensing;
       (c)  is an employee of the Tribal Compliance Agency with
access to confidential information; or
       (d)  is a person whose employment duties require or authorize
access to areas of the video lottery terminal establishment that
are not open to the public.
       Sec. 3.5.  "Gaming ordinance" means a tribal ordinance or
resolution authorizing the conduct of Class III Gaming Activities
on the Tribe's Indian lands and approved under IGRA or other
applicable federal law.
       Sec. 3.6.  "IGRA" means the Indian Gaming Regulatory Act of
1988 (18 U.S.C. Sec. 1166 et seq. and 25 U.S.C. Sec. 2701 et seq.),
any amendments to the act, and all regulations promulgated under
the act.
       Sec. 3.7.  "Key employee" means any person employed by the
Tribe as chief operating or executive officer, chief financial
officer, chief of security, or manager of a video lottery terminal
establishment or operations of video lottery terminals, or any
other person who may directly influence the management of a video
lottery terminal establishment or the operation of video lottery
terminals.
       Sec. 3.8.  "NIGC" means the National Indian Gaming
Commission.
       Sec. 3.9.  "Patron" means any person who is on the premises
of a video lottery terminal establishment, for the purpose of
playing a video lottery game authorized by this gaming agreement.
       Sec. 3.10.  "Principal" means, with respect to any entity,
the entity's sole proprietor or any partner, trustee, beneficiary,
or shareholder holding 10 percent or more of the entity's
beneficial or controlling ownership, either directly or
indirectly, or more than 10 percent of the voting stock of a
publicly traded corporation, or any officer, director, principal
management employee, or key employee of the entity.
       Sec. 3.11.  "Restoration Act" means the Ysleta del Sur
Pueblo and Alabama and Coushatta Indian Tribes of Texas Restoration
Act (25 U.S.C. Section 731 et seq. and 25 U.S.C. Section 1300g et
seq.).
       Sec. 3.12.  "State" means the State of Texas or an authorized
official or agency of the state.
       Sec. 3.13.  "Texas regulatory commission" means the state
agency that regulates video lottery games in Texas under Chapter
466, Texas Government Code.
       Sec. 3.14.  "Transfer agreement" means a written agreement
authorizing the transfer of video lottery terminal operating rights
between the Tribe and another Indian tribe.
       Sec. 3.15.  "Transfer notice" means a written notice that
the Tribe must provide to the Texas regulatory commission of the
Tribe's intent to acquire or transfer video lottery terminal
operating rights pursuant to a transfer agreement.
       Sec. 3.16.  "Tribal chairperson" means the person duly
elected or selected under the Tribe's organic documents, customs,
or traditions to serve as the primary spokesperson for the Tribe.
       Sec. 3.17.  "Tribal Compliance Agency" ("TCA") means the
Tribal governmental agency that has the authority to carry out the
Tribe's regulatory and oversight responsibilities under this
gaming agreement. Unless and until otherwise designated by the
Tribe, the TCA shall be the [Name of Tribe] Gaming Commission. A
gaming employee may not be a member or employee of the TCA. The
Tribe has the ultimate responsibility for ensuring that the TCA
fulfills its responsibilities under this gaming agreement. The
members of the TCA are subject to background investigations and
shall be licensed to the extent required by any applicable Tribal or
federal law and in accordance with this gaming agreement. The Tribe
shall ensure that all TCA officers and agents are qualified for the
position and receive ongoing training to obtain and maintain skills
sufficient to carry out their responsibilities in accordance with
industry standards.
       Sec. 3.18.  "Tribal law enforcement agency" means a police
or security force established and maintained by the Tribe under the
Tribe's powers of self-government to carry out law enforcement
duties at or in connection with a video lottery terminal
establishment.
       Sec. 3.19.  "Tribal gaming license" means any license issued
by the TCA as required by and in compliance with this agreement.
       Sec. 3.20.  "Tribe" means [Name of Tribe], a federally
recognized Indian tribe.
       Sec. 3.21.  "Video lottery terminal establishment" means any
premises at which the operation of video lottery terminals is
authorized under this gaming agreement.
       SECTION 4.0.  RECITALS.
       Sec. 4.1.  This agreement governs all operations of video
lottery terminals as defined by Section 466.002, Texas Government
Code, on the Tribe's Indian lands.
       Sec. 4.2.  A principal goal of Federal Indian policy is to
promote tribal economic development and tribal self-sufficiency.
The State and the Tribe find the goal to be consistent with
applicable federal law, state public policy, and the public health,
safety, and welfare to regulate video lottery terminals on Indian
lands in accordance with this gaming agreement.
       Sec. 4.3.  The Tribe is a federally recognized Indian tribe
possessing sovereign powers and rights of self-government. The
Tribe's governing body has authorized the officials of the Tribe to
enter into contracts and agreements of every description, including
this gaming agreement, with the State.
       Sec. 4.4.  The Tribe exercises governmental authority within
the [name of Reservation] (the "Reservation"), which for purposes
of this gaming agreement means those lands within the current
boundaries of the Reservation and any other Indian lands over which
the Tribe exercises governmental authority.
       Sec. 4.5.  The State of Texas is a state of the United States
of America possessing the sovereign powers and rights of a state.
The State has a legitimate sovereign interest in regulating the
growth of Class III gaming activities in Texas. Mindful of that
interest, the State of Texas, pursuant to Chapter 466, Texas
Government Code, authorized certain gaming agreements with Indian
tribal governments in the State of Texas to permit the operation of
video lottery terminals on Indian lands. It is the general policy
of the State to prohibit commercial gambling throughout the state.
The exceptions to this prohibition are limited under Texas law to
specified types of gaming and to limited locations that meet
specific criteria. Any gaming not expressly authorized is
prohibited.
       Sec. 4.6.  The parties recognize that this agreement
provides the Tribe substantial benefits that create a unique
opportunity for the Tribe to operate video lottery terminals in an
economic environment of limited competition from gaming on
non-Indian lands in Texas, with the operation of video lottery
games on non-Indian lands restricted to licensed racetracks in
existence in 2005 or racetracks for which a license application was
filed on or before June 1, 2005, in locations that provide the Tribe
with a substantial exclusive territory for its video lottery
terminal operations. The parties are mindful that this unique
environment is of economic value to the Tribe. In consideration for
the substantial rights enjoyed by the Tribe, and in further
consideration for the State's willingness to enter into this gaming
agreement and allow the Tribe the opportunity to operate video
lottery terminals connected to the State's video lottery system,
the Tribe has agreed to provide to the State, on a
sovereign-to-sovereign basis, a portion of revenue generated by
video lottery terminals on Indian lands and to collect and remit to
the comptroller State sales and use taxes and State taxes on motor
fuels, alcoholic beverages, cigarettes and tobacco products, and
hotel occupancy generated at a video lottery terminal
establishment.  The requirement to collect and remit these State
taxes does not apply to an item sold to or used or consumed by a
Tribe member.
       Sec. 4.7.  The Tribe desires to offer the play of video
lottery terminals, as a means of generating revenue for the support
of tribal governmental programs, such as health care, housing,
sewer and water projects, police, corrections, fire, judicial
services, highway and bridge construction, general assistance for
tribal elders, day care for the children, economic development,
educational opportunities, and other typical and valuable
governmental services and programs for tribal members.
       Sec. 4.8.  The State recognizes that the positive effects of
this gaming agreement may extend beyond the Tribe's lands to the
Tribe's neighbors and surrounding communities and will generally
benefit all of Texas. These positive effects and benefits may
include not only those described in Section 4.7, but also may
include increased tourism and related economic development
activities that, through the Tribe's revenue sharing with the
State, will generate additional funds for state governmental
programs.
       Sec. 4.9.  The Tribe and the State jointly wish to protect
their citizens from any criminal involvement in the gaming
operations regulated under this gaming agreement.
       Sec. 4.10.  Nothing in this agreement shall supplant the
role or duties of the Texas Department of Public Safety under state
law. The Texas Racing Commission and the Texas Comptroller of
Public Accounts do not have any role in regulation or oversight of
gaming activities conducted by a Tribe.
       Sec. 4.11.  The terms of this gaming agreement strictly
define and limit the relationship of the parties. Nothing in this
gaming agreement shall be construed to create or imply a joint
venture, partnership, principal/agent, or any other relationship
between the parties.
       SECTION 5.0.  CLASS III GAMING AUTHORIZED AND PERMITTED.
       Sec. 5.1.  The Tribe is hereby authorized and permitted to
engage only in the Class III gaming activities expressly referred
to in Section 6.0 and may not engage in Class III gaming that is not
expressly authorized in that section. Nothing in this agreement
shall be construed to allow Internet gaming.
       SECTION 6.0.  AUTHORIZATION OF VIDEO LOTTERY TERMINALS.
       Sec. 6.1.  Authorized and Permitted Class III Gaming. The
Tribe is hereby authorized and permitted to operate the following
Class III gaming under the terms and conditions set forth in this
agreement.
       Sec. 6.2.  The Tribe and State agree that the Tribe is
authorized to operate video lottery terminals only in accordance
with this gaming agreement. However, nothing in this agreement
limits any right of the Kickapoo Traditional Tribe of Texas to
operate any game that is a Class II game under IGRA, and Class II
games are not subject to the exclusivity payments required under
this gaming agreement.
       Sec. 6.2.1.  Operation of Video Lottery Terminals. Video
lottery terminals must be operated in connection with the video
lottery system and at all times be connected through communication
technology or other video lottery equipment controlled by the State
to a State controlled and operated video lottery central system.
The Tribe may enter into a management gaming agreement for a third
party video lottery manager, or the Tribe may act as its own video
lottery manager.
       (a)  Third Party Video Lottery Manager. If the Tribe enters
into a management gaming agreement for a third party video lottery
manager, the manager must be licensed under Subchapter K, Chapter
466, Texas Government Code, and all video lottery operations shall
be subject to and in strict compliance with that subchapter. Any
video lottery manager conducting business on Indian lands shall
indemnify and hold harmless the State and the Texas regulatory
commission and all officers and employees of both from any and all
claims which may be asserted against a license holder, the
commission, the State, and the members, officers, employees, and
authorized agents of either, arising from the license holder's
participation in the video lottery system authorized under the
gaming agreement.
       (b)  Tribe as Video Lottery Manager. If the Tribe elects to
manage video lottery terminal operations, then Sections 7.0 through
14.0 of this agreement govern the procurement and operation of the
video lottery terminals on the Indian lands of the Tribe.
       Sec. 6.3.  In order to remain eligible to operate video
lottery terminals under this gaming agreement, the Tribe must
strictly comply with all requirements of the gaming agreement,
timely file all reports required by this gaming agreement, and
timely remit all payments to the State required under this gaming
agreement or applicable state law, including the taxes collected as
provided by Section 4.6.
       Sec. 6.4.  Regardless of ownership of video lottery
terminals, the State owns all video lottery games.
       SECTION 7.0.  PROCUREMENT OF VIDEO LOTTERY TERMINALS.
       Sec. 7.1.  All video lottery terminals shall be procured
only from a video lottery terminal provider registered with the
Texas regulatory commission under Subchapter K, Chapter 466, Texas
Government Code. The Tribe may not enter into, or continue to make
payments pursuant to, any contract or agreement for the provision
of video lottery equipment with any person who is not registered by
the commission as a video lottery terminal provider under
Subchapter K, Chapter 466, Texas Government Code. Any agreement
between the Tribe and a video lottery terminal provider shall be
deemed to include a provision for the agreement's termination
without further liability on the part of the Tribe, except for the
bona fide repayment of all outstanding sums, exclusive of interest,
owed as of, or payment for services or materials received up to, the
date of termination, on revocation or nonrenewal of the video
lottery terminal provider's registration.
       Sec. 7.2.  The Texas regulatory commission shall provide the
Tribe a list of registered video lottery terminal providers,
commission approved video lottery games, and commission approved
video lottery terminals. The Tribe may not operate a video lottery
terminal that has not been authorized by the commission.
       Sec. 7.3.  The Tribe shall file with the Texas regulatory
commission any order placed for video lottery terminals
simultaneously with the submission of the order to a
commission-approved video lottery terminal provider.
       Sec. 7.4.  The Tribe or the video lottery manager shall
provide all necessary capital investments and required
improvements at a video lottery terminal establishment.
       SECTION 8.0.  LICENSING.
       Sec. 8.1.  Gaming Ordinance and Regulations. All video
lottery operations conducted under this agreement, at a minimum,
shall comply with all terms and conditions of this gaming
agreement, a Gaming Ordinance adopted by the Tribe and approved in
accordance with this agreement and any applicable federal law, and
with all rules, regulations, procedures, specifications, and
standards adopted by the TCA. All licensing related to the
operation of video lottery terminals shall be conditioned on an
agreement by the license holder to indemnify and hold harmless the
State and the Texas regulatory commission and all officers and
employees of both from any and all claims which may be asserted
against a license holder, the commission, the State and the
members, officers, employees, and authorized agents of either
arising from the license or registration holder's participation in
the video lottery system authorized under this agreement.
       Sec. 8.2.  Tribal Ownership and Regulation of Gaming
Operation.  Except as otherwise provided by this agreement, the
Tribe shall have the sole proprietary interest in the video lottery
terminal establishment and video lottery terminals. This provision
may not be construed to prevent the Tribe from granting security
interests or other financial accommodations to secured parties,
lenders or others, or to prevent the Tribe from entering into leases
or financing agreements or a gaming management agreement with a
video lottery manager.
       Sec. 8.3.  Government-to-Government Cooperation.  The
parties intend that the licensing process provided for in this
gaming agreement shall involve joint cooperation between the TCA
and the Texas regulatory commission, as described in this
agreement.
       Sec. 8.4.  Video Lottery Terminal Establishment. (a)  A
video lottery terminal establishment authorized by this agreement
shall be operated by a licensed video lottery manager or the Tribe
and licensed by the TCA in conformity with the requirements of this
gaming agreement, the Tribal Gaming Ordinance, and any applicable
federal law.  The license shall be reviewed and renewed, if
appropriate, every two years.  The Tribe shall promptly certify in
writing to the Texas regulatory commission each time the license is
renewed.  The certification must be posted in a conspicuous and
public place in the video lottery terminal establishment at all
times.
       (b)  In order to protect the health and safety of all video
lottery terminal establishment patrons, guests, and employees, all
video lottery terminal establishments of the Tribe constructed
after the effective date of this gaming agreement, and all
expansions or modifications to a site facility for a video lottery
terminal establishment in existence as of the effective date of
this gaming agreement, shall meet or exceed the building and safety
codes of the Tribe. As a condition for engaging in that
construction, expansion, modification, or renovation, the Tribe
shall amend the Tribe's existing building and safety codes if
necessary, or enact such codes if there are none, so that the codes
meet the standards of the building and safety codes of any county in
which the video lottery terminal establishment is located,
including all uniform fire, plumbing, electrical, mechanical, and
related codes in effect on the date this agreement takes effect.
Nothing in this agreement shall be deemed to confer jurisdiction on
any county or the State with respect to any reference to such
building and safety codes.  Any construction, expansion, or
modification must also comply with the federal Americans with
Disabilities Act of 1990 (42 U.S.C. Sec. 12101 et seq.), as amended.
       (c)  The TCA shall issue a video lottery terminal
establishment a certificate of occupancy prior to occupancy if it
was not used for any lawful gaming prior to the effective date of
this gaming agreement, or, if it was so used, within one year after
the effective date.  The certificate shall be reviewed for
continuing compliance once every two years.  Inspections by
qualified building and safety experts shall be conducted under the
direction of the TCA as the basis for issuing any certificate
hereunder.  The TCA shall determine and certify that, as to new
construction or new use for gaming activities, the video lottery
terminal establishment meets the Tribe's building and safety code,
or, as to facilities or portions of facilities that were used for
the Tribe's gaming before this gaming agreement, that the video
lottery terminal establishment or portions of the establishment do
not endanger the health or safety of occupants or the integrity of
the video lottery system.  The Tribe may not offer video lottery
gaming in a video lottery terminal establishment that is
constructed or maintained in a manner that endangers the health or
safety of occupants or the integrity of the video lottery system.
       (d)  The State shall designate an agent or agents to be given
reasonable notice of each inspection by the TCA's experts, and
State agents may participate in any such inspection.  The Tribe
agrees to correct any video lottery terminal establishment
condition noted in an inspection that does not meet the standards
set forth in Subsections (b) and (c).  The TCA and the State's
designated agent or agents shall exchange any reports of an
inspection within 10 days after completion of the report, and the
reports shall be separately and simultaneously forwarded by both
agencies to the Tribal chairperson.  On certification by the TCA's
experts that a video lottery terminal establishment meets
applicable standards, the TCA shall forward the experts'
certification to the State within 10 days of issuance.  If the
State's agent objects to that certification, the Tribe shall make a
good faith effort to address the State's concerns, but if the State
does not withdraw its objection, the matter will be resolved in
accordance with the dispute resolution provisions of this gaming
agreement.
       Sec. 8.5.  Suitability Standard Regarding Tribal Gaming
Licenses. In reviewing an application for a tribal gaming license,
and in addition to any standards set forth in the Tribal gaming
ordinance, the TCA shall consider whether issuance of the license
is inimical to public health, safety, or welfare, and whether
issuance of the license will undermine public trust that the
Tribe's operation of video lottery terminals, or tribal government
gaming generally, is free from criminal and dishonest elements and
would be conducted honestly.  A license may not be issued unless,
based on all information and documents submitted, the TCA is
satisfied that the applicant, in addition to any other criteria in
any applicable federal law is all of the following:
       (a)  a person of good character, honesty, and integrity;
       (b)  a person whose prior activities, criminal record (if
any), reputation, habits, and associations do not pose a threat to
the security and integrity of the lottery or to the public interest
of the State or to the effective operation and control of the
lottery, or create or enhance the dangers of unsuitable, unfair, or
illegal practices, methods, or activities in the conduct of the
lottery, or in the carrying on of the business and financial
arrangements incidental to the conduct of the lottery; and
       (c)  a person who in all other respects is qualified to be
licensed as provided in this gaming agreement, any applicable
federal law, the Tribal Gaming Ordinance, and any other criteria
adopted by the TCA or the Tribe.  An applicant may not be found
unsuitable solely on the ground that the applicant was an employee
of a tribal gaming operation in Texas that was conducted before the
effective date of this gaming agreement. Employment in an
unauthorized gaming operation in Texas subsequent to the effective
date of this agreement, however, shall impose a presumption of
unsuitability.
       Sec. 8.6.  Gaming Employees.  (a)  Every gaming employee
shall obtain, and thereafter maintain current, a valid tribal
gaming license, which shall be subject to biennial renewal,
provided that in accordance with Section 8.8.2, a person may be
employed on a temporary or conditional basis pending completion of
the licensing process.
       (b)  Without the concurrence of the Texas regulatory
commission, the Tribe may not employ or continue to employ any
person whose application to the commission for a registration,
license, determination of suitability, or other regulatory
approval, or for a renewal of a registration, license,
determination of suitability, or other regulatory approval, has
been denied or has expired without renewal.
       Sec. 8.7.  Financial Sources.  Any person providing
financing, directly or indirectly, to the Tribe's video lottery
terminal establishment or operation of video lottery terminals must
be licensed by the TCA before receipt of that financing, provided
that any person who is providing financing at the time of the
execution of this gaming agreement must be licensed by the TCA
within 90 days of such execution. The TCA shall review licenses at
least every two years for continuing compliance. In connection
with the review, the TCA shall require the Financial Source to
update all information provided in the previous application. Any
agreement between the Tribe and a Financial Source is deemed to
include a provision for its termination without further liability
on the part of the Tribe, except for the bona fide repayment of all
outstanding sums, exclusive of interest, owed as of the date of
termination, on revocation or nonrenewal of the Financial Source's
license by the TCA based on a determination of unsuitability by the
Texas regulatory commission.  The Tribe may not enter into, or
continue to make payments pursuant to any contract or agreement for
the provision of financing with any person whose application to the
commission for a determination of suitability has been denied or
has expired without renewal. A video lottery terminal provider who
provides financing exclusively in connection with the sale or lease
of video lottery equipment obtained from that video lottery
terminal provider may be registered solely in accordance with the
commission's registration procedures for video lottery terminal
providers.  The TCA may, in its discretion, exclude from the
licensing requirements of this section, financing provided by:
             (1)  a federally regulated or state regulated bank,
savings and loan, or other federally regulated or state regulated
lending institution;
             (2)  any agency of the federal, state, or local
government; or
             (3)  any investor who, alone or in conjunction with
others, holds less than 10 percent of any outstanding indebtedness
evidenced by bonds issued by the Tribe.
       Sec. 8.8.  Processing License Applications. Each applicant
for a tribal gaming license shall submit the completed application
on forms prescribed by the TCA and approved by the Texas regulatory
commission, along with the required information and an application
fee, to the TCA in accordance with the rules and regulations of that
agency.  The parties agree that for purposes of this agreement, the
standards set forth under federal law with regard to information
required for Tribal gaming operation applications shall govern.
Accordingly, at a minimum, the TCA shall require submission and
consideration of all information required under federal law,
including 25 C.F.R. Section 556.4, for licensing primary management
officials and key employees.  For applicants who are business
entities, the licensing provisions apply to the entity and:
       (a)  each officer and director;
       (b)  each principal management employee, including any chief
executive officer, chief financial officer, chief operating
officer, and general manager;
       (c)  each owner or partner, if an unincorporated business;
       (d)  each shareholder who owns more than 10 percent of the
shares of the corporation, if a corporation; and
       (e)  each person or entity, other than a financial
institution the TCA has determined does not require a license under
the preceding section, that, alone or in combination with others,
has provided financing in connection with any video lottery
equipment or video lottery terminal establishment under this gaming
agreement, if that person or entity provided more than five percent
of:
             (1)  the start-up capital;
             (2)  the operating capital over a 12-month period; or
             (3)  a combination thereof.
       For purposes of this section, if any commonality of the
characteristics identified in Subsections (a)-(e) exist between
any two or more entities, the entities may be deemed to be a single
entity.  Nothing herein precludes the Tribe or TCA from requiring
more stringent licensing requirements.
       Sec. 8.8.1.  Background Investigations of Applicants.  (a)  
The TCA shall conduct or cause to be conducted all necessary
background investigations reasonably required to determine that
the applicant is qualified for a tribal gaming license under the
standards set forth in this gaming agreement, and to fulfill all
requirements for licensing under any applicable federal law, the
Tribal Gaming Ordinance, and this gaming agreement.  The TCA may not
issue any license other than a temporary license until a
determination is made that the qualifications have been met.
       (b)  Instead of completing its own background investigation,
and to the extent that doing so does not conflict with or violate
any applicable federal law or the Tribal Gaming Ordinance, the TCA
may contract with the Texas regulatory commission or an independent
contractor approved by the commission for the conduct of background
investigations.  An applicant for a tribal gaming license must
provide releases to the commission to make available to the TCA
background information regarding the applicant.  The commission
shall cooperate in furnishing to the TCA that information, unless
doing so would violate any agreement the commission has with a
source of the information other than the applicant, or would impair
or impede a criminal investigation, or unless the TCA cannot
provide sufficient safeguards to assure the commission that the
information will remain confidential.
       Sec. 8.8.2.  Temporary Licensing of Employees.  
Notwithstanding any contrary provision in this gaming agreement,
the TCA may issue a temporary license and may impose specific
conditions on the license pending completion of the applicant's
background investigation as the TCA in its sole discretion shall
determine, if:
       (a)  the applicant for a tribal gaming license has completed
a license application in a manner satisfactory to the TCA; and
       (b)  the TCA has conducted a preliminary background
investigation, and the investigation or other information held by
the TCA does not indicate:
             (1)  that the applicant has a criminal history that
could pose a threat to the security and integrity of the lottery or
to the public interest of the State or the effective operation and
control of the lottery, or create or enhance the dangers of
unsuitable, unfair, or illegal practices, methods, or activities in
the conduct of the lottery, or in the carrying on of the business
and financial arrangements incidental thereto;
             (2)  other information in the applicant's background
that would either disqualify the applicant from obtaining a license
or cause a reasonable person to investigate further before issuing
a license; or
             (3)  that the applicant is otherwise unsuitable for
licensing.
       (c)  The TCA may require special fees to issue or maintain a
temporary license.
       (d)  A temporary license shall remain in effect until
suspended or revoked, or until a final determination is made on the
application.  At any time after issuance of a temporary license, the
TCA may suspend or revoke the temporary license in accordance with
Sections 8.9.1 or 8.9.5, and the Texas regulatory commission may
request suspension or revocation in accordance with Section 8.9.
       (e)  For purposes of this agreement, the parties agree that
the standards set forth in 25 C.F.R. Part 558 govern licensing and
investigations required under the provisions of this agreement.
Nothing in this agreement shall be construed to relieve the Tribe of
any obligation under this agreement to comply with the standards
set forth in 25 C.F.R. Part 558.
       Sec. 8.9.  Tribal Gaming License Issuance.  (a)  On
completion of the necessary background investigation, the TCA may
issue a tribal gaming license on a conditional or unconditional
basis.  Nothing herein shall create a property or other right of an
applicant in an opportunity to be licensed, or in a license itself,
both of which shall be considered to be privileges granted to the
applicant in the sole discretion of the TCA subject to oversight by
the Texas regulatory commission as provided herein. Any license,
registration, suitability, qualification issued, or other
regulatory approval granted pursuant to or in compliance with this
gaming agreement is a revocable privilege, and a holder does not
acquire any vested right therein or thereunder.
       (b)  State and Tribal courts shall have no jurisdiction to
review decisions to deny, limit, or condition a license,
registration, suitability, qualification, or request for approval
unless the judicial review is sought on the ground that such a
denial, limitation, or condition is proven by clear and convincing
evidence to be based on a suspect classification such as race,
color, religion, gender, or national origin, protected under the
Equal Protection Clause of the United States Constitution.
       Sec. 8.9.1.  Denial, Suspension, or Revocation of Licenses.  
(a)  The TCA may deny any application for a tribal gaming license
and may revoke any license issued if the TCA determines the
application is incomplete or deficient or if the applicant is
determined to be unsuitable or otherwise unqualified for the gaming
license.  Pending consideration of revocation, the TCA may
summarily suspend a license in accordance with Section 8.9.5.  All
rights to notice and hearing shall be governed by tribal law.  The
TCA shall notify the applicant in writing of the tribal law
provisions and of the intent to suspend or revoke the license.
       (b)  On receipt of notice that the Texas regulatory
commission has determined a person would be unsuitable for
licensure in a video lottery terminal establishment or related to
video lottery terminal operations subject to the jurisdiction of
the commission, the TCA shall promptly revoke any license issued to
the person.
       Sec. 8.9.2.  Renewal of Licenses; Extensions; Further
Investigation. The term of a tribal gaming license may not exceed
five years, and application for renewal of a license must be made
before the license's expiration.  An applicant for renewal of a
license must provide updated material as requested, on the
appropriate renewal forms, but, at the discretion of the TCA, may
not be required to resubmit historical data previously submitted or
that is otherwise available to the TCA.  At the discretion of the
TCA, an additional background investigation may be required at any
time if the TCA determines the need for further information
concerning the applicant's continuing suitability or eligibility
for a license.  Before renewing a license, the TCA shall deliver to
the Texas regulatory commission copies of all information and
documents received in connection with the application for renewal.
       Sec. 8.9.3.  Identification Cards. The TCA shall require
all persons who are required to be licensed to wear, in plain view
at all times while in the video lottery terminal establishment,
identification badges issued by the TCA.  Identification badges
must include a photograph and an identification number that is
adequate to enable TCA agents to readily identify the person and
determine the validity and date of expiration of the license.
       Sec. 8.9.4.  Fees for Tribal Gaming License.  The fees for
all tribal gaming licenses shall be set by the TCA.
       Sec. 8.9.5.  Summary Suspension of Tribal Gaming License.  
The TCA may summarily suspend a tribal gaming license if the TCA
determines that the continued licensing of the person or entity
could constitute a threat to the public health or safety or may
violate the TCA's licensing or other standards or any provision of
applicable federal or state law or of this agreement.  Any right to
notice or hearing in regard to the suspension are governed by tribal
law provided the law is not inconsistent with any provision of this
agreement.
       Sec. 8.9.6.  State Certification Process.  (a)  On receipt of
a completed tribal gaming license application and a determination
by the TCA that it intends to issue the earlier of a temporary or
permanent license, the TCA shall transmit to the Texas regulatory
commission a notice of intent to license the applicant, together
with all of the following:
             (1)  a copy of all tribal license application materials
and information received by the TCA from the applicant;
             (2)  an original set of fingerprint cards;
             (3)  a current photograph; and
             (4)  except to the extent waived by the commission, the
releases of information, waivers, and other completed and executed
forms obtained by the TCA.
       (b)  Except for an applicant for licensing as a non-key
gaming employee, the TCA shall require the applicant to file an
application with the Texas regulatory commission, before issuance
of a temporary or permanent tribal gaming license, for a
determination of suitability for licensure under Subchapter K,
Chapter 466, Texas Government Code. Investigation and disposition
of that application is governed entirely by State law, and the
commission shall determine whether the applicant would be found
suitable for licensure in a video lottery terminal establishment or
in relation to video lottery terminal operations at a video lottery
terminal establishment subject to the commission's jurisdiction.  
Additional information may be required by the commission to assist
in a background investigation, provided that the commission
requirement is no greater than that which may be required of
applicants for a video lottery retailer license in connection with
video lottery operations at a video lottery terminal establishment
under Subchapter K, Chapter 466, Texas Government Code. A
determination of suitability is valid for the term of the tribal
license held by the applicant, and the TCA shall require a license
holder to apply for renewal of a determination of suitability at the
time the license holder applies for renewal of a tribal gaming
license.  The commission and the TCA, together with tribal gaming
agencies under other gaming agreements, shall cooperate in
developing standard licensing forms for tribal gaming license
applicants, on a statewide basis, that reduce or eliminate
duplicative or excessive paperwork, and the forms and procedures
must take into account the Tribe's requirements under any
applicable federal law and the expense thereof.
       (c)  Background Investigations of Applicants.  On receipt of
completed license application information from the TCA, the Texas
regulatory commission may conduct a background investigation
pursuant to state law to determine whether the applicant would be
suitable to be licensed for association with a video lottery
terminal establishment or operation subject to the jurisdiction of
the commission.  If further investigation is required to supplement
the investigation conducted by the TCA, the applicant will be
required to pay an application fee charged by the commission in an
amount that reimburses the commission for actual costs incurred,
provided that in requesting any deposit, the commission shall take
into consideration reports of the background investigation already
conducted by the TCA and the NIGC, if any.  Failure to pay the
application fee or deposit may be grounds for denial of the
application by the commission.  The commission and TCA shall
cooperate in sharing as much background information as possible to
maximize investigative efficiency and thoroughness and to minimize
investigative costs.  On completion of the necessary background
investigation or other verification of suitability, the commission
shall issue a notice to the TCA certifying the State has determined
that the applicant would be suitable or that the applicant would be
unsuitable for licensure in a video lottery terminal establishment
subject to the jurisdiction of the commission and, if unsuitable,
stating the reasons for unsuitability.
       (d)  The Tribe, on a monthly basis, shall provide the Texas
regulatory commission with the name, badge identification number,
and job descriptions of all non-key gaming employees.
       (e)  The Tribe shall, at all times, have a list of key
employees on file with the Texas regulatory commission and shall
advise the commission of any change to the list not later than the
10th day following the date of the change.
       (f)  Before denying an application for a determination of
suitability, the Texas regulatory commission shall notify the TCA
and afford the Tribe an opportunity to be heard.  The courts of the
State and the Tribe shall have no jurisdiction to review decisions
to deny, limit, or condition a license, registration, suitability,
qualification, or request for approval unless the denial,
limitation, or condition is proven by clear and convincing evidence
to be based on a suspect classification such as race, color,
religion, sex, or national origin, protected under the Equal
Protection Clause of the United States Constitution. Under these
circumstances, any requirement for tribal court exhaustion is
hereby waived by the Tribe.
       Sec. 8.9.7.  State Assessment for Costs of Oversight.  (a)  
The State shall make annually an assessment sufficient to
compensate the State for actual costs of oversight of the operation
of video lottery terminals pursuant to this gaming agreement.
       (b)  Annually, on or before August 1 beginning with the first
such date following the implementation of video lottery operations
under this gaming agreement, the State shall render to the TCA a
statement of the total cost of oversight and any law enforcement for
the preceding fiscal year ending July 31 together with proposed
assessments for the forthcoming fiscal year based on the preceding
fiscal year cost. In the first year of the effective date of this
gaming agreement, however, the assessment must be prospective and
based on a pro rata allocation of costs if this gaming agreement
becomes operative in the course of a fiscal year and must be
established following consultation with the TCA. On September 1,
annually, the State, after receiving any objections to the proposed
assessments and making such changes or adjustments as may be
indicated, shall provide a written notice that assesses the Tribe
for the costs of the oversight and any necessary law enforcement.
Annually, the Tribe shall pay one-third of the assessment within 20
days of the receipt of the written notice and shall pay the
remaining two-thirds of the assessment in two equal payments on
January 1 and April 1. The payments must be deposited with the
Texas regulatory commission in a video lottery account established
solely for funds related to video lottery terminals operated by the
Tribe.
       (c)  In the event that the total assessment paid by the Tribe
during any fiscal year of the State exceeds the actual costs of the
oversight and any necessary law enforcement during that fiscal
year, the State shall adjust the assessment for the succeeding
fiscal year in the amount necessary to offset such excess
assessment. If the Tribe is aggrieved because of any failure by the
State to make such an adjustment, any claim for such an adjustment
must be presented in the appeal of the assessment as provided in
Section 8.9.8.
       Sec. 8.9.8.  Procedure for Appeal of Assessments or Payments
Made to the State.  If the Tribe is aggrieved because of any
assessment levied or payment made to the State as required by this
gaming agreement, the Tribe, not later than the 30th day following
the date provided for the payment, may appeal an assessment or
payment to the Texas regulatory commission.  If the Tribe is
aggrieved by the commission's decision, it may invoke the dispute
resolution provisions of this agreement provided that the Tribe
must prove by clear and convincing evidence that any collection or
assessment of payment to the State was inappropriate.
       Sec. 8.9.9.  Collection and Distribution of Revenue.  (a)  
The Tribe shall establish separate electronic funds transfer
accounts for the purposes of depositing money from video lottery
terminal operations, making payments to the Texas regulatory
commission, and receiving payments from the commission.
       (b)  The State's share of net terminal income of the Tribe's
video lottery terminal operations shall be transferred to the Texas
regulatory commission through the electronic transfer of funds
daily by the commission.  The commission shall establish the
procedures for depositing money from video lottery terminal
operations into electronic funds transfer accounts and the
procedures for the handling of money from video lottery terminal
operations.  The State's share of net terminal income from video
lottery terminal operations shall be held in trust for the State.
       (c)  Unless directed otherwise by the Texas regulatory
commission, the Tribe shall maintain in its account the State's
share of the net terminal income from the operation of video lottery
terminals, to be electronically transferred by the commission.  On
the Tribe's failure to maintain this balance, the commission may
disable all of the Tribe's video lottery terminals until full
payment of all amounts due is made.  Interest shall accrue on any
unpaid balance at a rate consistent with the amount charged under
Section 111.060, Texas Tax Code.  The interest shall begin to accrue
on the date payment is due to the commission.  In the commission's
sole discretion, rather than disable the Tribe's video lottery
terminals, the commission may elect to impose contract penalties in
an amount to be determined by the commission not to exceed $250,000
for each violation.  If the Tribe fails to remedy the violation,
including payment of any amounts due to the State, within 10 days,
the commission may disable the Tribe's video lottery terminals or
use any other means for collection agreed to by the Tribe instead of
disabling the Tribe's video lottery terminals.
       (d)  The Tribe is solely responsible for resolving any income
discrepancies between actual money collected and the net terminal
income reported by the video lottery central system.  Unless an
accounting discrepancy is resolved in favor of the Tribe, the Texas
regulatory commission may not make any credit adjustments.  Any
accounting discrepancies which cannot be resolved shall be resolved
in favor of the commission.
       (e)  Tribes shall remit payment as directed by the Texas
regulatory commission if the electronic transfer of funds is not
operational or the commission notifies the Tribe that remittance by
this method is required. The Tribe shall report the State's share
of net terminal income, and remit the amount as generated from its
terminals during the reporting period.
       (f)  The Tribe agrees to furnish to the Texas regulatory
commission all information and bank authorizations required to
facilitate the timely transfer of money to the commission. The
Tribe agrees to provide the commission 30 days' advance notice of
any proposed account changes in order to assure the uninterrupted
electronic transfer of funds. However, in no event shall the
commission be responsible for any interruption or delays in
transferring of funds. Rather, the Tribe shall be responsible for
any interruption or delay in transferring of funds.
       SECTION 9.0.  RULES AND REGULATIONS; MINIMUM REQUIREMENTS
FOR OPERATIONS.
       Sec. 9.1.  Regulations.  The Tribe shall promulgate any
rules and regulations necessary to implement this gaming agreement,
which at a minimum shall expressly include or incorporate by
reference all requirements of this gaming agreement. Nothing in
this gaming agreement shall be construed to affect the Tribe's
right to amend its rules and regulations, provided that any such
amendment shall be in conformity with this gaming agreement. The
Texas regulatory commission may propose additional rules and
regulations related to implementation of this gaming agreement to
the TCA at any time, and the TCA shall give good faith consideration
to such suggestions and shall notify the commission of its response
or action with respect thereto.
       Sec. 9.2.  Compliance; Internal Control Standards.  All
video lottery operations shall comply with, and all video lottery
games approved under the procedures set forth in this gaming
agreement shall be operated in accordance with the requirements set
forth in this gaming agreement and applicable state law. The
parties agree that for purposes of this agreement, the standards
set forth in 25 C.F.R. Part 542 shall govern minimum requirements
for tribal internal control standards. Accordingly, the Tribe
agrees that all tribal video lottery operations shall comply with
tribal internal control standards that provide a level of control
equal to or exceeding that provided by the standards set forth in 25
C.F.R. Part 542.
       Sec. 9.3.  Records.  (a)  In addition to other records
required to be maintained herein, the Tribe shall maintain in
permanent written or electronic form the following records related
to implementation of this gaming agreement:
             (1)  a log recording all surveillance activities of the
video lottery terminal establishment, including surveillance
records kept in the normal course of operations and in accordance
with industry standards; provided, notwithstanding anything to the
contrary herein, surveillance records may, at the discretion of the
Tribe, be destroyed if no incident has been reported within one year
following the date the records were made;
             (2)  payout from the conduct of all video lottery
games;
             (3)  maintenance logs for all video lottery gaming
equipment used by the video lottery terminal establishment;
             (4)  security logs as kept in the normal course of
conducting and maintaining security at the video lottery terminal
establishment, which at a minimum must conform to industry
practices for such reports;
             (5)  books and records on video lottery terminals, as
described more particularly in Section 9.4, which shall be
maintained in accordance with generally accepted accounting
principles (GAAP) and the standards set forth in Section 9.4; and
             (6)  all documents generated in accordance with this
gaming agreement.
       (b)  The Tribe shall make the records maintained under
Subsection (a) of this section available for inspection by the
Texas regulatory commission for not less than four years from the
date the records are generated.
       (c)  The security logs required under Subsection (a) of this
section must document any unusual or nonstandard activities,
occurrences, or events at or related to the video lottery terminal
establishment or in connection with the video lottery terminal
operations. Each incident, without regard to materiality, shall be
assigned a sequential number for each such report. At a minimum,
the security logs shall consist of the following information, which
shall be recorded in a reasonable fashion noting:
             (1)  the assigned number of the incident;
             (2)  the date of the incident;
             (3)  the time of the incident;
             (4)  the location of the incident;
             (5)  the nature of the incident;
             (6)  the identity, including identification
information, of any persons involved in the incident and any known
witnesses to the incident; and
             (7)  the Tribal compliance officer making the report
and any other persons contributing to its preparation.
       Sec. 9.4.  ACCOUNTING.
       Sec. 9.4.1.  Accounting Records Required.  The Tribe agrees
with regard to any video lottery terminal operations, to keep
accurate, complete, legible, and permanent records of all
transactions pertaining to revenue for six years. If the Tribe
keeps permanent records in a computerized or microfiche fashion, it
shall provide the Texas regulatory commission, on request, with a
detailed index to the microfiche or computer records that is
indexed by date.
       Sec. 9.4.2.  Accounting Systems.  The Tribe agrees with
regard to all video lottery terminal operations, to keep general
accounting records on a double entry system of accounting,
maintaining detailed, supporting, and subsidiary records,
including:
       (a)  detailed records that identify the revenues, expenses,
assets, liabilities, and equity of the video lottery terminal
establishment and operations;
       (b)  records required by the Tribe's Minimum Internal
Control System;
       (c)  journal entries prepared by the Tribe and its
independent accountant; and
       (d)  any other records that the TCA may require.
       Sec. 9.4.3.  Net Terminal Income and Expenses.  The Tribe
agrees with regard to all video lottery terminal operations, to
create and maintain records sufficiently accurate to reflect the
net terminal income and expenses of the video lottery terminal
establishment and operation of video lottery terminals.
       Sec. 9.4.4.  Financial Statements.  (a)  The Tribe agrees to
prepare financial statements covering all financial activities of
the video lottery terminal establishment and operation of video
lottery terminals for a business year. The statements required by
this subsection must be presented on a comparative basis.
       (b)  If the Tribe changes its business year, it must prepare
and submit audited or reviewed financial statements to the Texas
regulatory commission covering the "stub" period from the end of
the previous business year to the beginning of the new business year
not later than 120 days after the end of the stub period or
incorporate the financial results of the stub period in the
statements for the new business year.
       Sec. 9.5.  Audits.  The parties agree that for purposes of
this agreement, the standards set forth in 25 C.F.R. Section 571.12
govern audits required under this agreement. The TCA shall ensure
that an annual independent financial audit of the Tribe's conduct
of video lottery games subject to this gaming agreement and of the
video lottery terminal establishment is secured. The audit shall,
at a minimum, examine revenues and expenses in connection with the
operation of video lottery terminals in accordance with generally
accepted auditing standards and shall include those matters
necessary to verify the determination of net terminal income and
the basis of the payments made to the State pursuant to this gaming
agreement.
       (a)  The auditor selected by the TCA shall be a firm of known
and demonstrable experience, expertise, and stature in conducting
audits of this kind and scope and shall be approved by the Texas
regulatory commission.
       (b)  The audit shall be concluded within five months
following the close of each calendar year, provided that extensions
may be requested by the Tribe and may not be refused by the State if
the circumstances justifying the extension request are beyond the
Tribe's control. An extension, however, may not extend the
conclusion of an audit required by this gaming agreement to more
than 12 months following the close of the relevant calendar year.
       (c)  The audit of the operation of video lottery terminals
may be conducted as part of or in conjunction with the audit of the
video lottery terminal establishment, but if so conducted shall be
separately stated for the reporting purposes required herein.
       (d)  The audit shall conform to generally accepted auditing
standards. As part of the audit report, the auditor shall certify
to the TCA that, in the course of the audit, the auditor did not
discover any matters within the scope of the audit which were
determined or believed to be in violation of any provision of this
gaming agreement. If the auditor discovers matters determined or
believed to be in violation of any provision of this gaming
agreement, the auditor shall immediately notify the Texas
regulatory commission of the alleged violation and the basis for
the auditor's conclusion.
       (e)  The Tribe shall assume all costs in connection with the
audit.
       (f)  The audit report for the conduct of video lottery games
shall be submitted to the Texas regulatory commission within 30
days of completion. The auditor's work papers concerning video
lottery games shall be made available to the commission on request.
       (g)  Representatives of the Texas regulatory commission may,
on request, meet with the auditors to discuss the work papers, the
audit, or any matters in connection therewith; provided such
discussions are limited to video lottery information and pursue
legitimate state video lottery interests.
       Sec. 9.6. Security.  (a)  All video lottery terminals shall
be continuously monitored through the use of a closed circuit
television system that records all activity for a continuous
24-hour period. All videotapes or other media used to store video
images shall be retained for a period of at least 30 days.
       (b)  Access to video lottery terminal locations shall be
restricted to persons legally entitled by age under State law to
play video lottery games.
       (c)  The Tribe must submit for approval by the Texas
regulatory commission a security plan and a floor plan of the area
or areas where video lottery terminals are to be operated showing
video lottery terminal locations and security camera mount
locations. This commission approved security plan shall be subject
to review by the commission which may require revision of the plan
on a biennial basis.
       (d)  Security personnel shall be present during all hours of
operation at each video lottery terminal establishment. The Tribe
shall employ at least the number of security personnel the Texas
regulatory commission determines is necessary to provide for safe
and approved operation of the video lottery terminal establishment
and the safety and well-being of the players.
       (e)  The communication technology used in connection with
video lottery operations must meet accepted industry standards for
security sufficient to minimize the possibility of any third party
intercepting any data transmitted to or from the video lottery
terminals.
       Sec. 9.7.  Exclusion of Persons.  The Tribe's rules and
regulations shall require at a minimum the exclusion of persons
based on their prior conduct at the video lottery terminal
establishment or who, because of their criminal history or
association with criminal offenders, pose a threat to the integrity
of the conduct of video lottery games or may be playing video
lottery games compulsively.
       (a)  The TCA shall establish a list of the persons to be
excluded from any video lottery terminal establishment under this
provision.
       (b)  The Tribe shall employ its best efforts to exclude
persons on such list from entry into its video lottery terminal
establishment.
       (c)  Patrons who believe they may be playing video lottery
games on a compulsive basis may request that their names be placed
on the list. All gaming employees shall receive training on
identifying players who have a problem with compulsive playing and
shall be instructed to ask them to leave. Signs and other materials
shall be readily available to direct such compulsive players to
agencies where they may receive counseling. Notwithstanding any
other provision of this agreement, the TCA's list of self-excluded
persons shall not be open to public inspection.
       (d)  The Tribe or video lottery manager also may exclude any
other person for any reason not related to that person's race, sex,
national origin, physical disability, or religion.
       Sec. 9.8.  Sale of Alcoholic Beverages. The sale and service
of alcoholic beverages in a video lottery terminal establishment
shall be in compliance with state, federal, and tribal law in regard
to the licensing and sale of such beverages.
       Sec. 9.9.  Age Restrictions.  (a)  No person under the age of
21 may be allowed to play video lottery games or be allowed to
operate, or obtain a prize from or in connection with the operation
of, any video lottery game, directly or indirectly. If during the
term of this agreement, the State amends its law to allow play of
video lottery terminals by persons under the age of 21, the Tribe
may amend tribal law to reduce the lawful gaming age under this
agreement to correspond to the lawful gaming age under state law.
       (b)  No person under the age of 21 may be employed as a gaming
employee unless the employment would be allowed under state law.
       (c)  No person under the age of 21 may be employed in the
service of alcoholic beverages at any video lottery terminal
establishment, unless such employment would be allowed under state
law.
       Sec. 9.10.  Destruction of Records.  Books, records, and
other materials documenting the operation of video lottery
terminals may be destroyed only in accordance with rules and
regulations adopted by the TCA, which at a minimum shall provide as
follows:
       (a)  material that might be utilized in connection with a
prize claim, including incident reports, surveillance records,
statements, and the like, shall be maintained at least 180 days
beyond the time which a claim can be made under this gaming
agreement or, if a prize claim is made, beyond the final disposition
of such claim; and
       (b)  except as otherwise provided in Section 9.3(a)(1), all
books and records with respect to the operation of video lottery
terminals or the operation of the video lottery terminal
establishment, including all interim and final financial and audit
reports and materials related thereto which have been generated in
the ordinary course of business, shall be maintained for the
minimum period of four years.
       Sec. 9.11.  Location.  The Tribe may establish facilities
for and operate video lottery terminals only on its Indian lands.
The Tribe shall notify the Texas regulatory commission of any
potential new video lottery terminal establishment following the
effective date of this gaming agreement. Nothing herein shall be
construed as expanding or otherwise altering the term "Indian
lands," as that term is defined by Chapter 466, Texas Government
Code.
       Sec. 9.12.  Placement and Movement of Video Lottery
Terminals.  Placement and movement of video lottery terminals
within a video lottery terminal establishment must be consistent
with a video lottery terminal floor plan approved by the Texas
regulatory commission.
       Sec. 9.13.  Monitoring of Operation of Video Lottery
Terminals.  All terminals connected to the video lottery system
will be continuously monitored by the Texas regulatory commission
and disabled, when, in the commission's discretion, a problem
arises threatening the public health, safety or welfare, or
financial loss to the State, or jeopardizing the integrity of the
video lottery.  Circumstances justifying termination include
malfunction of a video lottery terminal or any game displayed on a
video lottery terminal, misuse of any video lottery terminal or
video lottery game, or a material breach by the Tribe in the
operating requirements or a material provision of this agreement.
       Sec. 9.14.  Wager Limitations.  The TCA shall set the maximum
wager authorized for any single play of a video lottery terminal
consistent with any maximum wager set by rule of the Texas
regulatory commission. During the term of this agreement, the
wager limitation set forth in this section shall be automatically
increased without the need to amend this agreement on each two-year
anniversary of the effective date to an amount equal to the wager
limitation multiplied by the CPI adjustment rate, rounded up to the
next whole dollar.
       Sec. 9.15.  Prizes. (a)  Payment of prizes shall be the sole
and exclusive responsibility of the Tribe or video lottery manager.
No prizes shall be paid by the Texas regulatory commission or the
State except as otherwise authorized. Video lottery tickets shall
be redeemable only for a period of 180 days following the date of
issuance. If a claim is not made for prize money on or before the
180th day after the date on which the video lottery ticket was
issued, the prize money shall be treated as net terminal income.
The Tribe agrees to enact rules consistent with this provision and
authorized by the commission, governing use and redemption of
prizes and credits recorded on electronic player account records,
such as players' club cards and smart cards.
       (b)  Nothing herein shall limit the ability of the Tribe or
video lottery manager to provide promotional prizes, including wide
area progressive networks, in addition to prize payouts regulated
by the commission.
       Sec. 9.16.  Patron Disputes.  (a)  The State and the Texas
regulatory commission shall not be liable for any video lottery
terminal malfunction or error by the Tribe or video lottery manager
that causes credit to be wrongfully awarded or denied to players.
Any disputes arising between players and the Tribe or video lottery
manager shall be resolved:
             (1)  if the fair market value of the prize is less than
$1,000, in accordance with commission approved written policies of
the TCA with no relief available from the commission or the State;
or
             (2)  if the fair market value of the prize is $1,000 or
more, by the commission in its sole discretion pursuant to rules
established by the commission.
       (b)  No court of this state or of the Tribe shall have
jurisdiction to review the decision of the commission resolving a
dispute between players and the Tribe or a video lottery manager.
       Sec. 9.17.  Transfer of Gaming Device Operating Rights.
During the term of this agreement, the Tribe may enter into a
transfer agreement with one or more federally recognized Indian
tribes with Indian lands in this state to acquire or transfer video
lottery terminal operating rights on Indian lands. The Tribe's
acquisition or transfer of video lottery terminal operating rights
is subject to the following conditions:
       (a)  Gaming Agreement. Each Indian tribe that is a party to a
transfer agreement must have a valid and effective gaming agreement
with the State that contains a provision substantially similar to
the provision herein permitting transfers of the Indian tribe's
video lottery terminal operating rights.
       (b)  Forbearance Agreement. If the Tribe enters into a
transfer agreement to transfer some or all of its video lottery
terminal operating rights, the Tribe also shall execute a
forbearance agreement with the State. The forbearance agreement
shall include a waiver of all rights of the Tribe to put into play or
operate the number of video lottery terminal operating rights
transferred during the term of the transfer agreement.
       (c)  The Tribe must be operating video lottery terminals at
least equal to its current video lottery terminal allocation
before, or simultaneously with, the Tribe acquiring the right to
operate additional video lottery terminals by a transfer agreement.
The Tribe is not required to utilize any video lottery terminal
operating rights it acquires, or to utilize them before acquiring
additional video lottery terminal operating rights.
       (d)  The Tribe shall not at any time simultaneously acquire
video lottery terminal operating rights and transfer video lottery
terminal operating rights pursuant to transfer agreements.
       Sec. 9.17.1.  Transfer Agreements. The transfer of video
lottery terminal operating rights may be made pursuant to a
transfer agreement between two Indian tribes. A transfer agreement
must include the following provisions:
       (a)  the number of video lottery terminal operating rights
transferred and acquired;
       (b)  the duration of the transfer agreement;
       (c)  the consideration to be paid by the Indian tribe
acquiring the video lottery terminal operating rights to the Indian
tribe transferring the video lottery terminal operating rights and
the method of payment;
       (d)  the dispute resolution and enforcement procedures,
including a provision for the State to receive notice of any such
proceedings; and
       (e)  a procedure to provide quarterly notice to the Texas
regulatory commission of payments made and received, and to provide
timely notice to the commission of disputes, revocation, amendment,
and termination.
       Sec. 9.17.2.  Transfer Notice. At least 30 days before the
execution of a transfer agreement the Tribe shall send to the Texas
regulatory commission a transfer notice of intent to acquire or
transfer video lottery terminal operating rights. The transfer
notice shall include a copy of the proposed transfer agreement, the
proposed forbearance agreement, and a copy of the tribal resolution
authorizing the acquisition or transfer.
       Sec. 9.17.3.  Texas Regulatory Commission Denial of
Transfer. (a)  The Texas regulatory commission may deny a transfer
as set forth in a transfer notice only if:
             (1)  the proposed transfer violates the conditions set
forth in this agreement; or
             (2)  the proposed transfer agreement does not contain
the minimum requirements listed in this agreement.
       (b)  The commission's denial of a proposed transfer must be
in writing, must include the specific reasons for the denial
(including copies of all documentation relied upon by the
commission to the extent allowed by state law), and must be received
by the Tribe within 60 days of the commission's receipt of the
transfer notice. If the Tribe disputes the commission's denial of a
proposed transfer, the Tribe shall have the right to have the
dispute resolved pursuant to the dispute resolution process
provided in Section 15.0 herein.
       Sec. 9.17.4.  Effective Date of Transfer.  If the Tribe does
not receive a notice of denial of the transfer from the Texas
regulatory commission within the period specified in Section
9.17.3, the proposed transfer agreement shall become effective on
the later of the 61st day following the commission's receipt of the
transfer notice or the date set forth in the transfer agreement.
       Sec. 9.17.5.  Use of Brokers.  The Tribe shall not contract
with any person to act as a broker in connection with a transfer
agreement. No person shall be paid a percentage fee or a commission
as a result of a transfer agreement, nor shall any person receive a
share of any financial interest in the transfer agreement or the
proceeds generated by the transfer agreement. Any person acting as
a broker in connection with a transfer agreement is providing
gaming services.
       Sec. 9.17.6.  Revenue from Transfer Agreements.  The Tribe
agrees that all proceeds received by the Tribe as a transferor under
a transfer agreement shall be used for the governmental purposes
permitted under this agreement for revenue generated by video
lottery terminal operations. The Tribe shall include the proceeds
in an annual audit and shall make available to the State that
portion of the audit addressing proceeds from transfer agreements.
       Sec. 9.17.7.  Agreed Upon Procedures Report.  The Tribe
agrees to provide to the Texas regulatory commission, either
separately or with the other party to the transfer agreement, an
agreed upon procedures report from an independent certified public
accountant. The procedures to be examined and reported upon are
whether payments made under the transfer agreement were made in the
proper amount, made at the proper time, and deposited in an account
of the Indian tribe transferring the video lottery terminal
operating rights.
       Sec. 9.17.8.  State Payment.  Proceeds received by the Tribe
as a transferor under a transfer agreement from the transfer of
video lottery terminal operating rights are not subject to any
payment to the State under this agreement or otherwise.
       Sec. 9.17.9.  Access to Records Regarding Transfer
Agreements.  The Texas regulatory commission shall have access to
all records of the Tribe directly relating to transfer agreements
and forbearance agreements.
       Sec. 9.18.  Supervision of Patrons.  The Tribe agrees to
ensure that gaming employees, at all times, monitor video lottery
terminals to prevent access to or play by persons who are under the
age of 21 years or who are visibly intoxicated.
       Sec. 9.19.  Hours of Operation.  The Tribe may establish by
ordinance or regulation the permissible hours and days of operation
of video lottery terminal operations; provided, however, that with
respect to the sale of liquor, the Tribe agrees to adopt and comply
with standards at least as restrictive as any applicable state
liquor laws at all video lottery terminal establishments.
       Sec. 9.20.  Automatic Teller Machines.  The Tribe agrees to
adopt and comply with a Tribal ordinance establishing responsible
restrictions on the provision of financial services at video
lottery terminal establishments. At a minimum, the ordinance shall
prohibit:
       (a)  locating an automatic teller machine ("ATM") adjacent
to, or in proximity to, any video lottery terminal, however, an ATM
may be installed in a video lottery terminal establishment,
provided that the Tribe adopts and complies with an ordinance
establishing standards no less restrictive than any state and
federal law governing installation of ATMs within a gaming
facility;
       (b)  locating in a video lottery terminal establishment an
ATM that accepts electronic benefit transfer cards issued pursuant
to a state or federal program that is intended to provide for needy
families or individuals; and
       (c)  accepting checks or other noncash items issued pursuant
to a state or federal program that is intended to provide for needy
families or individuals.
       Sec. 9.21.  Advertising.  Advertisements or promotions must
comply with guidelines established by the TCA that are consistent
with criteria established by the Texas regulatory commission.
       Sec. 9.22.  Remedies and Penalties for Unlawful Gaming.  
Operation or possession of any gaming devices not expressly
authorized under this gaming agreement or Texas law (excluding any
Class II gaming authorized under applicable federal law) shall be
considered a material breach of the gaming agreement and justify
termination of the agreement. Under those circumstances, the State
may bring an action in state court and shall be entitled to an
injunction prohibiting the continued operation of any unlawful
gaming activity upon a showing by a preponderance of evidence that
the breach has occurred. In any such proceeding, it is the finding
of the legislature that irreparable injury and inadequate remedy at
law shall be presumed once the State has demonstrated the violation
has occurred. If the State does not seek an injunction for such a
material breach of the gaming agreement, the Tribe agrees to pay a
contract penalty of $10,000 per day for every day the violation or
breach continues. If the breach or violation is not cured within 30
days, the State shall bring an action to enjoin the unlawful conduct
and may disable all video lottery terminals operated by the Tribe or
operated by a video lottery manager on the Indian lands of the
Tribe.
       SECTION 10.0.  ENFORCEMENT OF GAMING AGREEMENT PROVISIONS.
       Sec. 10.1.  The Tribe and TCA shall be responsible for
regulating activities pursuant to this gaming agreement. As part
of its responsibilities, the Tribe shall:
       (a)  take reasonable measures to assure the physical safety
of video lottery terminal establishment patrons and personnel,
prevent illegal activity at the video lottery terminal
establishment, and protect any rights of patrons under the Indian
Civil Rights Act of 1968 (25 U.S.C. Sections 1301-1303);
       (b)  promptly notify appropriate law enforcement authorities
of persons who may be involved in illegal acts in accordance with
applicable tribal, federal, and state law;
       (c)  assure that the construction and maintenance of the
video lottery terminal establishment meets or exceeds federal and
Tribal standards for comparable buildings and minimum standards
under this gaming agreement; and
       (d)  prepare adequate emergency access and preparedness
plans to ensure the health and safety of all video lottery terminal
establishment patrons. On finalization of the emergency access and
preparedness plans, the TCA or the Tribe shall forward copies of the
plans to the Texas regulatory commission.
       Sec. 10.2.  Members and employees of the TCA shall be
licensed in accordance with the provisions of this agreement. All
licenses for members and employees of the TCA shall be issued
according to the same standards and terms applicable to video
lottery terminal establishment employees. The TCA shall employ
qualified compliance officers under the authority of the TCA. The
compliance officers shall be independent of the video lottery
terminal establishment, and shall be supervised by and accountable
only to the TCA. A TCA compliance officer shall be available to the
video lottery terminal establishment during all hours of operation
on reasonable notice, and shall have immediate access to any and all
areas of the video lottery terminal establishment for the purpose
of ensuring compliance with the provisions of this gaming
agreement. The TCA shall investigate any suspected or reported
violation of this gaming agreement and shall require the correction
of the violation. The TCA shall prepare and retain in its files a
timely written report of each investigation and any action taken in
response to the investigation, and shall forward copies of the
report to the Texas regulatory commission within 15 days of the date
of the filing. Any such violations shall be reported immediately to
the TCA, and the TCA shall immediately forward the same to the
commission. In addition, the TCA shall promptly report to the
commission any such violations that it independently discovers.
       Sec. 10.3.  In order to develop and foster a positive and
effective relationship in the enforcement of the provisions of this
gaming agreement, representatives of the TCA and the Texas
regulatory commission shall meet at least annually to review past
practices and examine methods to improve the regulatory scheme
created by this gaming agreement. The meetings shall take place at
a location mutually agreed to by the TCA and the commission. The
commission, before or during such meetings, shall disclose to the
TCA any concerns, suspected activities, or pending matters
reasonably believed to possibly constitute violations of this
gaming agreement by any person, organization, or entity, if such
disclosure will not compromise the interest sought to be protected.
       Sec. 10.4.  Financial Obligations of the Texas Regulatory
Commission.  Any financial obligation of the Texas regulatory
commission or of the State, under this gaming agreement or arising
from the operation of the video lottery on the Tribe's Indian lands,
shall be payable solely out of the income, revenues, and receipts of
the commission resulting from the operation of video lottery
terminals on Indian lands of the Tribe.
       Sec. 10.5.  Penalties and Remedies for Noncompliance.  (a)  
Failure to timely remit revenue generated by video lottery
terminals to the Texas regulatory commission or any sales tax or
other fee owed to the State or to timely file any report or
information required under this gaming agreement or by applicable
federal or state law shall constitute a material breach of this
gaming agreement. After receiving at least 24 hours written notice
from the commission and an additional 48 hours for the opportunity
to remedy the breach or otherwise correct the violation, the Tribe
shall be subject to contract penalties in the amount of $10,000 per
day for the breach. If the breach is not cured within 30 days, the
commission shall disable all video lottery terminals operated by
the Tribe.
       (b)  If the Tribe is in material breach of this agreement and
the Texas regulatory commission exercises its right to disable all
video lottery terminals operated by the Tribe, the commission shall
have the right to enter the premises of any video lottery terminal
establishment on the Tribe's Indian lands and remove any video
lottery games or other video lottery equipment owned by the State.
       Sec. 10.6.  No Liability of the State Related to
Enforcement. The State and the Texas regulatory commission are not
liable for any enforcement of the provisions of this gaming
agreement.
       SECTION 11.0.  STATE MONITORING OF GAMING AGREEMENT.
       Sec. 11.1.  (a)  The Texas regulatory commission shall,
pursuant to the provisions of this gaming agreement, have the
authority to monitor the conduct of video lottery games to ensure
video lottery games are conducted in compliance with the provisions
of this gaming agreement. In order to properly monitor the conduct
of video lottery games, in addition to the State's operation and
control of the central system and video lottery system, agents of
the commission shall have reasonable access to all areas of the
video lottery terminal establishment related to the conduct of
video lottery games as provided herein:
             (1)  the commission shall have access to the video
lottery terminal establishment only during the video lottery
terminal establishment's normal operating hours; provided that to
the extent such inspections are limited to areas of the video
lottery terminal establishment where the public is normally
allowed, commission agents may inspect the video lottery terminal
establishment without giving prior notice to the Tribe;
             (2)  any suspected or claimed violations of this gaming
agreement or of law shall be directed in writing to the TCA;
commission agents may not interfere with the functioning of the
video lottery terminal establishment unless the public safety,
welfare, or financial loss to the State, or integrity of the state
lottery so requires; and
             (3)  before entering any nonpublic area of the video
lottery terminal establishment, commission agents must provide
proper photographic identification to the TCA.
       (b)  A TCA agent shall accompany a commission agent in
nonpublic areas of the video lottery terminal establishment. A
one-hour notice by the commission to the TCA may be required to
assure that a TCA officer is available to accompany commission
agents at all times.
       Sec. 11.2.  Subject to the provisions herein, agents of the
Texas regulatory commission shall have the right to review and copy
documents or other records related to the operation of video
lottery terminals. The review and copying of those records shall be
during normal business hours or hours otherwise at the Tribe's
discretion. However, the commission may not copy those portions of
any records related to the Tribe's operation of video lottery
terminals that contain business or marketing strategies or other
proprietary and confidential information, including customer
lists, business plans, marketing studies, and customer
demographics or profiles. No records of the Tribe related to its
conduct of video lottery games or copies thereof shall be released
to the public by the State. All such records shall be deemed
confidential records owned by the Tribe and are not subject to
public disclosure by the State.
       Sec. 11.3.  At the completion of any commission inspection
or investigation, the Texas regulatory commission shall forward a
written report thereof to the TCA. The TCA shall be apprised on a
timely basis of all pertinent, nonconfidential information
regarding any violation of federal, or state laws, rules or
regulations, or this gaming agreement. Nothing herein prevents the
commission from contacting Tribal or federal law enforcement
authorities concerning suspected criminal wrongdoing involving the
TCA. The TCA may interview commission agents and inspectors upon
reasonable notice and examine work papers in the same fashion that
commission agents and inspectors may examine auditors' notes and
make auditor inquiry unless providing such information to the TCA
will compromise the interests sought to be protected.
       Sec. 11.4.  Nothing in this gaming agreement shall be deemed
to authorize the State to regulate the Tribe's government,
including the TCA, or to interfere in any way with the Tribe's
selection of its governmental officers, including members of the
TCA. The Texas regulatory commission and the Tribe, however, on
request of the Tribe, shall jointly employ, at the Tribe's expense,
an independent firm to perform on behalf of the commission the
duties set forth in Sections 11.2 and 11.3.
       SECTION 12.0.  JURISDICTION.
       Sec. 12.1.  Except as expressly provided herein, this gaming
agreement shall not alter tribal, federal, or state civil
adjudicatory or criminal jurisdiction.
       Sec. 12.2.  The Tribe expressly consents to the State's
jurisdiction to enforce the terms of this gaming agreement
including any request for judicial injunctive relief to prohibit
unlawful gaming activities.
       SECTION 13.0.  PUBLIC AND WORKPLACE HEALTH, SAFETY, AND
LIABILITY.
       Sec. 13.1.  The Tribe will not conduct any gaming activity in
a manner that endangers the public health, safety, or welfare.
       Sec. 13.2.  For the purposes of this gaming agreement, the
Tribe agrees to:
       (a)  adopt and comply with standards at least as stringent as
state public health standards for food and beverage handling at any
video lottery terminal establishment.  The Tribe will allow
inspection of food and beverage services at any video lottery
terminal establishment by state or county health inspectors, during
normal hours of operation, to assess compliance with these
standards, unless inspections are routinely made by an agency of
the United States government to ensure compliance with equivalent
standards of the United States Public Health Service.  Nothing
herein shall be construed as submission of the Tribe to the
jurisdiction of those state or county health inspectors, but any
alleged violations of the standards shall be treated as alleged
violations of the gaming agreement;
       (b)  adopt and comply with standards at least as stringent as
federal water quality and safe drinking water standards applicable
in Texas at any video lottery terminal establishment.  The Tribe
will allow for inspection and testing of water quality at any video
lottery terminal establishment by state or county health
inspectors, as applicable, during normal hours of operation, to
assess compliance with these standards, unless inspections and
testing are made by an agency of the United States pursuant to, or
by the Tribe under express authorization of, federal law, to ensure
compliance with federal water quality and safe drinking water
standards.  Nothing herein shall be construed as submission of the
Tribe to the jurisdiction of those state or county health
inspectors, but any alleged violations of the standards shall be
treated as alleged violations of this gaming agreement;
       (c)  comply with the building and safety standards set forth
in Section 8.4 of this agreement;
       (d)  carry not less than $1 million in public liability
insurance for patron claims. The Tribe herein provides reasonable
assurance that such claims will be promptly and fairly adjudicated,
and that legitimate claims will be paid; provided that nothing
herein requires the Tribe to agree to liability for punitive
damages or attorneys' fees. On or before the effective date of this
gaming agreement or not less than 30 days before the commencement of
operation of video lottery terminals under this gaming agreement,
whichever is later, the Tribe shall adopt and make available to
patrons a tort liability ordinance setting forth the terms and
conditions, if any, under which the Tribe waives immunity to suit
for money damages resulting from intentional or negligent injuries
to person or property at the video lottery terminal establishment
or in connection with the Tribe's operation of video lottery
terminals. The tort liability ordinance shall include procedures
for processing any claims for such money damages. Nothing in this
section shall require the Tribe to waive its immunity to suit except
to the extent of the policy limits set out in this subsection.  Any
insurance policy provided in compliance with the terms of this
subsection shall provide that the policy provider shall not raise
the Tribe's sovereign immunity as a defense or otherwise to avoid
payment of a claim under this subsection;
       (e)  adopt and comply with standards at least as stringent as
federal workplace and occupational health and safety standards at
any video lottery terminal establishment. The Tribe will allow for
inspection of video lottery terminal establishment workplaces by
state inspectors, during normal hours of operation, to assess
compliance with these standards, unless inspections are regularly
made by an agency of the United States government to ensure
compliance with federal workplace and occupational health and
safety standards.  Nothing herein shall be construed as submission
of the Tribe to the jurisdiction of those state inspectors, but any
alleged violations of the standards shall be treated as alleged
violations of this gaming agreement;
       (f)  comply with tribal codes and any applicable federal law
regarding public health and safety;
       (g)  adopt and comply with standards at least as stringent as
federal laws and state laws forbidding employers generally from
discriminating in the employment of persons to work for the Tribe in
relation to its operation of video lottery terminals or in the video
lottery terminal establishment on the basis of race, color,
religion, national origin, gender, sexual orientation, age, or
disability. However, nothing herein shall preclude the Tribe from
giving a preference in employment to Indians, pursuant to a duly
adopted tribal ordinance;
       (h)  adopt and comply with standards that are at least as
stringent as state laws prohibiting a video lottery manager or any
employee thereof from cashing any check drawn against a federal,
state, county, or city fund, including social security,
unemployment insurance, disability payments, or public assistance
payments;
       (i)  adopt and comply with standards that are at least as
stringent as state laws governing the extension of credit to, the
cashing of checks for, and other financial transactions with
patrons calculated to protect players from problem and pathological
gambling; and
       (j)  adopt and comply with the provisions of the Bank Secrecy
Act (31 U.S.C. Sections 5311-5314), as amended, and all reporting
requirements of the Internal Revenue Service, insofar as such
provisions and reporting requirements are applicable to gaming
facilities.
       Sec. 13.2.1.  The Tribe agrees to adopt and, not later than
30 days after the effective date of this gaming agreement, make
available on request the standards described in Sections
13.2(a)-(c) and (e)-(j) to which the Tribe is held with regard to
operation of video lottery terminals. In the absence of a
promulgated tribal standard in respect to a matter identified in
those subsections, or the express adoption of an applicable federal
statute or regulation instead of a tribal standard in respect to any
such matter, an applicable state statute or regulation shall be
deemed to have been adopted by the Tribe as the applicable standard.
       Sec. 13.3.  Participation in State Statutory Programs
Related to Employment.  (a)  Instead of allowing the Tribe to
participate in the state statutory workers' compensation system for
employees of a video lottery terminal establishment or otherwise
engaged in the operation of video lottery terminals, the Tribe may
create and maintain a system that provides redress for employee
work-related injuries through requiring insurance or
self-insurance.  The system must include a scope of coverage,
availability of an independent medical examination, right to
notice, hearings before an independent tribunal, a means of
enforcement against the employer, and benefits comparable to those
mandated for comparable employees under state law.  Not later than
the effective date of this gaming agreement, or 60 days before the
commencement of video lottery terminal operations under this gaming
agreement, the Tribe will advise the State of its election to
participate in the statutory workers' compensation system or,
alternatively, will forward to the State all relevant ordinances
that have been adopted and all other documents establishing the
system and demonstrating that the system is fully operational and
compliant with the comparability standard set forth in this
subsection.  The parties agree that independent contractors doing
business with the Tribe must comply with all state workers'
compensation laws and obligations.
       (b)  The Tribe agrees to participate in the State's program
for providing unemployment compensation benefits and unemployment
compensation disability benefits with respect to employees of the
video lottery terminal establishment, and the Tribe consents to the
jurisdiction of the state agencies charged with the enforcement of
that code and of the courts of the State for purposes of
enforcement.
       (c)  As a matter of comity, with respect to persons employed
at the video lottery terminal establishment in capacities otherwise
related to the operation of video lottery terminals, other than
members of the Tribe, the Tribe shall withhold all taxes due to the
State as provided by Texas law, and shall forward the amounts as
provided by State law.
       Sec. 13.4.  Emergency Service Accessibility.  The Tribe
shall make reasonable provisions for adequate emergency fire,
medical, and related relief and disaster services for patrons and
employees of the video lottery terminal establishment.
       Sec. 13.5.  The Tribe agrees to prohibit the intentional,
knowing, or reckless possession of a firearm, illegal knife, club,
explosive weapon, machine gun, firearm silencer, knuckles,
armor-piercing ammunition, a chemical dispensing device, or a zip
gun, as those terms are defined in Section 46.01, Texas Penal Code,
at all times in the video lottery terminal establishment. The
defenses that apply to the prohibition of possession of those
weapons on the premises of a racetrack under Section 46.03, Texas
Penal Code, shall also apply to the prohibition of possession of the
weapons in video lottery terminal establishments. In addition,
Tribal security or Tribal law enforcement personnel, shall be
allowed to possess firearms and clubs at a video lottery terminal
establishment as authorized by Tribal law.
       Sec. 13.6.  Tribal Law Enforcement Plan.  The Tribe agrees to
implement a written tribal law enforcement services plan that
provides a comprehensive and effective means to address criminal
and undesirable activity at the video lottery terminal
establishment. The plan shall provide that sufficient tribal law
enforcement resources are available 24 hours a day, seven days a
week to protect the public health, safety, and welfare at the video
lottery terminal establishment. To accommodate investigations and
intelligence sharing, the Tribe will provide that a police officer
holding a current Texas police officer standards and training
certification is employed by the Tribe and assigned to handle video
lottery terminal related matters when they arise. Intelligence
liaisons will be established at the tribal police department or TCA
and also at the Texas regulatory commission. There will be federal,
tribal, and state cooperation in task force investigations. The
commission's intelligence unit will gather, coordinate,
centralize, and disseminate accurate and current intelligence
information pertaining to criminal and undesirable activity that
may threaten patrons, employees, and assets of a video lottery
terminal establishment or the video lottery system. The State and
the Tribe will coordinate the use of resources, authority, and
personnel of the State and the Tribe for the shared goal of
preventing and prosecuting criminal or undesirable activity by
players, employees, or businesses in connection with tribal video
lottery terminal operations.
       Sec. 13.7.  Annual Statement of Compliance Regarding Use of
Revenue.  The Tribe agrees to submit to the Texas regulatory
commission an annual statement of compliance regarding the use of
its share of revenue generated from video lottery terminal
operations and a copy of a current tribal ordinance requiring that
revenue generated from video lottery terminal operations be used
exclusively for the establishment and improvement of governmental
services and programs.
       SECTION 14.0.  EXCLUSIVITY AND FEES.
       Sec. 14.1.  The parties acknowledge and recognize that this
gaming agreement provides the Tribe territorial exclusivity
through the permitted operation of video lottery terminals without
requiring construction or operation of a racetrack for live horse
or dog racing. This territorial exclusivity and the additional
benefits to the Tribe are of substantial benefit to the Tribe and,
consistent with Federal Indian policy, provide special
opportunities for tribal economic opportunity through gaming
within the external boundaries of Texas. In consideration thereof,
as long as the State does not after the effective date of this
gaming agreement authorize a person to operate video lottery
terminals or any additional form of gaming that would be considered
a lottery or gift enterprise under Section 47(a), Article III,
Texas Constitution, without the Tribe's written consent within the
exclusive territory designated by this gaming agreement for the
operation of video lottery games by the Tribe, the Tribe agrees to
pay the fees described in this section.
       (a)  The Tribe covenants and agrees to pay to the State a fee
derived from net terminal income calculated as set forth in
Subsection (b). The fee shall be deducted from the daily deposit of
funds into the State's account from the video lottery terminal
operations prior to the State's transfer of funds back to the Tribe
for such operations.
       (b)  The fee shall be eight percent of all net terminal
income received by the Tribe in a calendar year.
       Sec. 14.2.  Start-Up Assessment.  On the effective date of
this gaming agreement, the Tribe shall deposit with the Texas
regulatory commission a Start-Up Assessment in the sum of $10,000.
The purpose of the Start-Up Assessment shall be to assist the State
in initiating its administrative and oversight responsibilities
hereunder, and shall be a one-time payment to the State for such
purposes.
       Sec. 14.3.  Nothing in this gaming agreement shall be deemed
to authorize the State to impose any tax, fee, charge, or assessment
on the Tribe or the video lottery terminal establishment except as
expressly authorized pursuant to this gaming agreement under
Sections 4.6 and 13.3(c). To the extent that the Tribe is required
under federal law to report prizes awarded, the Tribe agrees to copy
such reports to the Texas regulatory commission. Any state sales
tax on the sale of goods and services to non-Indians at video
lottery terminal establishments shall be conclusively presumed to
be a direct tax on the retail consumer, pre-collected for the
purpose of convenience and facility.
       Sec. 14.4.  In consideration for the covenants and
agreements contained herein, the State agrees that it will not,
during the term of this gaming agreement, allow the nontribal
operation of any video lottery games or other gaming that would be
considered a lottery or gift enterprise under Section 47(a),
Article III, Texas Constitution, without the Tribe's written
consent within ______ [limitation on state video lottery or other
new lottery gaming in exclusive Indian video lottery territory].
The state recognizes the importance of this provision to the Tribe
and agrees, in the event of a breach of this provision by the State,
to require any nontribal entity that operates any such games within
the prohibited territory to remit to the State not less than 50
percent of any revenue from those games. The State further agrees
to remit that revenue at least quarterly to Eligible Tribes, as
liquidated damages. For purposes of this part, "Eligible Tribes"
shall mean those tribes that have entered into a gaming agreement
with the State under Section 466.576, Texas Government Code, and
are operating gaming pursuant to the gaming agreement within ______
[description of exclusive territory for tribal video lottery].
Such liquidated damages shall be allocated pro rata to the Eligible
Tribes based on the number of video lottery terminals operated by
each Eligible Tribe in the period when those revenues were
generated.
       SECTION 15.0.  DISPUTE RESOLUTION.
       Sec. 15.1.  Voluntary Resolution; Reference to Other Means
of Resolution.  In recognition of the government-to-government
relationship of the Tribe and the State, the parties shall make
their best efforts to resolve disputes that occur under this gaming
agreement by good faith negotiations whenever possible.  Therefore,
without prejudice to the right of either party to seek injunctive
relief or specific relief provided in this agreement against the
other when circumstances are deemed to require immediate relief,
the parties hereby establish a threshold requirement that disputes
between the Tribe and the State first be subjected to a process of
meeting and conferring in good faith in order to foster a spirit of
cooperation and efficiency in the administration and monitoring of
performance and compliance by each other with the terms,
provisions, and conditions of this gaming agreement, as follows:
       (a)  either party shall give the other, as soon as possible
after the event giving rise to the concern, a written notice setting
forth, with specificity, the issues to be resolved;
       (b)  the parties shall meet and confer in a good faith
attempt to resolve the dispute through negotiation not later than
10 days after receipt of the notice, unless both parties agree in
writing to an extension of time;
       (c)  if the dispute is not resolved to the satisfaction of
the parties within 30 days after the first meeting, then either
party may seek to have the dispute resolved by an arbitrator in
accordance with this section; and
       (d)  disagreements that are not otherwise resolved by
arbitration or other mutually acceptable means as provided herein
may be resolved in the United States District Court with
jurisdiction over the location or planned location of the Tribe's
video lottery terminal establishment or, if the federal courts lack
jurisdiction, in a state district court in Travis County.  The
disputes to be submitted to court action are limited to claims of
breach or violation of this gaming agreement or failure to
negotiate in good faith as required by the terms of this gaming
agreement.  The parties agree that, except in the case of imminent
threat to the public health, safety, or welfare or the integrity of
the lottery, reasonable efforts will be made to explore alternative
dispute resolution avenues prior to resorting to judicial process.
       Sec.  15.2.  Arbitration Rules.  Arbitration shall be
conducted in accordance with the policies and procedures of the
Commercial Arbitration Rules of the American Arbitration
Association, provided that application of these rules shall not be
construed to waive the State's sovereign immunity to an extent
greater than otherwise authorized herein. Arbitration shall be
held at such location as the parties may agree.  Each side shall
bear its own costs, attorneys' fees, and one-half the costs and
expenses of the American Arbitration Association and the
arbitrator, unless the arbitrator rules otherwise.  Only one
neutral arbitrator may be named, unless the Tribe or the State
objects, in which case a panel of three arbitrators (one of whom is
selected by each party) will be named.  The decision of the
arbitrator or arbitrators shall be in writing, shall give reasons
for the decision, and shall be binding. Judgment on the award may be
entered in any federal or state court having jurisdiction thereof.
       Sec. 15.3.  Limited Waiver of Sovereign Immunity.  (a)  In
the event that a dispute is to be resolved in federal court or a
state court of competent jurisdiction as provided in this section,
the State and the Tribe expressly consent to be sued therein and
waive any immunity therefrom that they may have provided that:
             (1)  the dispute is limited solely to issues arising
under this gaming agreement;
             (2)  neither side makes any claim for monetary damages
(that is, only injunctive, specific performance, including
enforcement of a provision of this gaming agreement requiring
payment of money to one or another of the parties, or declaratory
relief is sought); and
             (3)  no person or entity other than the Tribe and the
State is party to the action, unless failure to join a third party
would deprive the court of jurisdiction, provided that nothing
herein shall be construed to constitute a waiver of the sovereign
immunity of either the Tribe or the State in respect to any such
third party.
       (b)  In the event of intervention by any additional party
into any such action without the consent of the Tribe and the State,
the waivers of either the Tribe or the State provided for herein may
be revoked, unless joinder is required to preserve the court's
jurisdiction, provided that nothing herein shall be construed to
constitute a waiver of the sovereign immunity of either the Tribe or
the State in respect to any such third party.
       (c)  The waivers and consents provided for under this section
shall extend to civil actions authorized by this gaming agreement,
such as actions to compel arbitration, any arbitration proceeding
herein, any action to confirm or enforce any judgment or
arbitration award as provided herein, and any appellate proceedings
emanating from a matter in which an immunity waiver has been
granted.  Except as stated herein or elsewhere in this gaming
agreement, no other waivers or consents to be sued, either express
or implied, are granted by either party.
       (d)  The State only waives sovereign immunity to the extent
authorized by Section 466.573, Texas Government Code.
       SECTION 16.0.  CONSTRUCTION OF GAMING AGREEMENT; FEDERAL
APPROVAL.
       Sec. 16.1.  Each provision, section, and subsection of this
gaming agreement shall stand separate and independent of every
other provision, section, or subsection. In the event that a
federal district court or a state court of competent jurisdiction
as provided in this agreement shall find any provision, section, or
subsection of this gaming agreement to be invalid, the remaining
provisions, sections, and subsections of this gaming agreement
shall remain in full force and effect, unless the invalidated
provision, section, or subsection is material. It is a material
provision of this gaming agreement that Class III gaming be limited
to that expressly authorized under this gaming agreement, and
Subchapter K, Chapter 466, Texas Government Code. If any final and
nonappealable judicial determination authorizes or requires the
State to authorize that any Class III gaming be operated by the
Tribe other than video lottery terminals connected to the video
lottery system or to a government operated video lottery system
structured identically to that expressly authorized under
Subchapter K, Chapter 466, Texas Government Code, if so required by
federal law, then this gaming agreement shall be null and void for
all purposes.
       Sec. 16.2.  Each party hereto agrees to defend the validity
of this gaming agreement and the legislation in which it is
embodied.
       Sec. 16.3.  The parties shall cooperate in seeking approval
of this gaming agreement from an appropriate federal agency if so
required by federal law.
       SECTION 17.0.  NOTICES.
       All notices required under this gaming agreement shall be
given by certified mail, return receipt requested, commercial
overnight courier service, or personal delivery, to the following
persons:
       Governor
       Chair, State-Tribal Relations Committee
       Attorney General
       [Principal Chief, Governor or Chair]
       [Name of Tribe]
       [Address]
       With copies to: _______________________
       SECTION 18.0.  DURATION, NEGOTIATION, AND TERMINATION.
       Sec. 18.1.  This gaming agreement shall become effective on
the last date of the satisfaction of the following requirements:
       (a)  due execution on behalf of the Tribe, including
obtaining all tribal resolutions and completing other tribal
procedures as may be necessary to render the Tribe's execution
effective including a final and nonappealable decision of a tribal
court of competent jurisdiction that the Tribe's execution of this
gaming agreement is effective and that all parts and provisions of
the gaming agreement are enforceable by and against the Tribe as set
forth herein;
       (b)  any federal regulatory approval required under federal
law and, if so required, publication in the Federal Register or
satisfaction of any other requirement of federal law; and
       (c)  payment of the Start-up Assessment provided for in
Section 14.2 of this gaming agreement.
       Sec. 18.2.  This gaming agreement shall have an initial term
of 10 years from the effective date, renewable for an additional 10
years; provided that the Tribe and the State, acting through its
Governor, may renegotiate the terms of this gaming agreement after
the initial term.  The Tribe's noncompliance with any operational,
reporting, or other requirements under this gaming agreement shall
justify termination of operation of video lottery terminals on the
Tribe's Indian lands.  The Tribe shall be entitled to notice and a
hearing on the compliance issue as set forth under Chapter 466,
Texas Government Code, and accompanying rules of the Texas
regulatory commission.  If the Tribe does not remedy the
noncompliance issue within 180 days of the termination or 60 days
after a final decision of the commission that the Tribe is out of
compliance, then this gaming agreement shall terminate without
penalty against the commission or the State.
       Sec. 18.3.  This gaming agreement shall remain in full force
and effect until the sooner of expiration of the term, termination
as provided herein, or termination by mutual consent of the
parties.  In addition to the remedies set forth above, either party
may bring an action in federal court, after providing a 60-day
written notice of an opportunity to cure any alleged breach of this
gaming agreement, for a declaration that the other party has
materially breached this gaming agreement.  On issuance of such a
declaration, the complaining party may unilaterally terminate this
gaming agreement on service of written notice on the other party.  
In the event a federal court determines that it lacks jurisdiction
over such an action, the action may be brought in the district court
for the county in which the Tribe's video lottery terminal
establishment is located.  The parties expressly waive their
immunity to suit for purposes of an action under this subsection,
subject to the qualifications stated herein.  Nothing in this
provision shall be construed to limit other remedies available to
and contract penalties enforceable by the Texas regulatory
commission, as expressly provided herein, in the event of the
Tribe's material breach.  The Tribe and the State recognize and
agree that the narrow and enumerated provisions for such immediate
remedies and enforcement by the State are necessary to protect the
public health, safety, and welfare and the integrity of the video
lottery.
       SECTION 19.0.  AMENDMENTS; RENEGOTIATIONS.
       Sec. 19.1.  The terms and conditions of this gaming
agreement may be amended at any time by the mutual and written
agreement of both parties.
       Sec. 19.2.  This gaming agreement is subject to
renegotiation in the event the Tribe wishes to engage in forms of
Class III gaming other than those games authorized herein and
requests renegotiation for that purpose, provided that no such
renegotiation may be sought for 24 months following the effective
date of this gaming agreement.
       SECTION 20.0.  AUTHORITY TO EXECUTE.
       This gaming agreement, as an enactment of the State
Legislature, is deemed approved by the State.  On valid execution by
the Tribe and the Governor of the State, no further action by the
State or any state official is necessary for this gaming agreement
to take effect on any necessary approval by any federal agency as
required by applicable federal law, including publication in the
Federal Register, if required.  The undersigned tribal official or
officials represent that the official or officials are duly
authorized and have the authority to execute this gaming agreement
on behalf of the Tribe for whom the official or officials are
signing.
APPROVED:
[Name of Tribe]
_________________________Date:__________
[CHIEF EXECUTIVE OFFICER]
State of Texas
_________________________Date:__________
Governor of Texas
       Sec. 466.577.  NEGOTIATION FOR DIFFERENT GAMING AGREEMENT
TERMS.  (a)  Nothing in this subchapter may be construed to limit
the ability of a federally recognized Indian tribe to request that a
gaming agreement be negotiated with this state on terms that are
different from those set forth in the gaming agreement under
Section 466.576, or the ability of this state to engage in
negotiations and to reach agreement under any applicable federal
law.
       (b)  In offering to enter into a gaming agreement with Indian
tribes in this state under Section 466.576(b), and, except for
assessments by this state as provided in that section of the amounts
necessary to defray state costs of regulating activities as
provided under the gaming agreement, nothing in this chapter may be
construed to mean that:
             (1)  this state is imposing any tax, fee, charge, or
other assessment on an Indian tribe or on any other person or entity
authorized by an Indian tribe as a condition to engaging in a Class
III activity; or
             (2)  this state is refusing to enter into gaming
agreement negotiations based on the lack of authority of this state
or a political subdivision of this state to impose the tax, fee,
charge, or other assessment.
       (c)  If any federally recognized tribe with jurisdiction
over Indian lands in this state requests that the governor enter
into negotiations for a gaming agreement under federal law
applicable to the tribe, including the Indian Gaming Regulatory Act
(18 U.S.C. Section 1166 and 25 U.S.C. Section 2701 et seq.), on
terms different than those prescribed in the gaming agreement in
Section 466.576(b), the governor shall enter into those
negotiations under the federal law applicable to the tribe and
without preconditions and is authorized to reach agreement and
execute the agreement on behalf of this state, provided that the
gaming agreement does not expand the scope of gaming expressly
authorized under this chapter and entitles the tribe only to
operate video lottery terminals in strict compliance with state
law, unless otherwise required by applicable federal law, and
provided that the gaming agreement includes the following
provisions:
             (1)  a provision prescribing that the tribe is
authorized and allowed to engage only in the Class III gaming
activities expressly referred to in the gaming agreement or
authorized under Texas law and may not engage in Class III gaming
that is not expressly authorized in the gaming agreement or under
Texas law;
             (2)  a provision prescribing that any operation or
possession by the tribe of any gaming devices not expressly
authorized under the gaming agreement or other Texas law, excluding
any Class II gaming authorized under applicable federal law, shall
be considered a material breach of the gaming agreement and justify
termination of the agreement and this state may bring an action in
federal court or, in the event the federal court declines
jurisdiction, in state court and shall be entitled to an injunction
prohibiting the continued operation of any unlawful gaming activity
on the tribal lands on a showing by a preponderance of evidence that
the breach has occurred;
             (3)  a provision waiving state and tribal sovereign
immunity for purposes of operation of video lottery terminals and
enforcement of the gaming agreement, provided that this state may
not waive sovereign immunity except to the extent expressly
permitted under Section 466.573;
             (4)  a provision establishing minimum internal control
standards at least as restrictive as those provided under this
subchapter and any standards set forth under applicable federal
law;
             (5)  a provision requiring any video lottery manager
doing business on Indian lands to indemnify and hold harmless the
commission, this state, and the members, officers, employees, and
authorized agents of the commission and this state from any and all
claims which may be asserted against a license or certificate
holder, the commission, this state, or the employees arising from
the license or certificate holder's participation in the video
lottery system authorized under the gaming agreement;
             (6)  a provision requiring the tribe to pay all
regulatory costs incurred by this state in relation to the
operation of video lottery terminals on the Indian lands of the
tribe to assure compliance with all federal and state law and all
provisions of the agreement;
             (7)  a provision recognizing the substantial benefit of
the exclusivity or other substantial benefits afforded to the tribe
under the agreement and providing for the sharing of net terminal
revenue between the tribe and this state as payment for the
exclusivity or other substantial benefit;
             (8)  a provision establishing investigative and
licensing standards at least as restrictive as those provided under
this subchapter and under any applicable federal law;
             (9)  a provision requiring video lottery terminals and
facilities operating the video lottery terminals authorized under
the gaming agreement to be owned by the tribe;
             (10)  a provision requiring the video lottery games
authorized by the gaming agreement to be licensed by the tribe in
conformity with the requirements of the agreement, the Tribal
Gaming Ordinance, and any applicable federal law every five years
and the tribe shall review and renew the license, if appropriate,
and provide to the commission verification that this requirement
has been satisfied;
             (11)  a provision requiring the licensing of all video
lottery employees and any person extending financing, directly or
indirectly, to the tribe's video lottery operation before extending
that financing, provided that any person who is extending financing
at the time of the execution of the agreement must be licensed by
the tribe not later than the 90th day after the date of execution,
and the provision may allow the tribe, in its discretion, to exclude
from the licensing requirements of this section financing provided
by:
                   (A)  a federally regulated or state-regulated
bank, savings and loan, or other federally or state-regulated
lending institution;
                   (B)  any federal, state, or local government
agency; or
                   (C)  any investor who, alone or in conjunction
with others, holds less than 10 percent of any outstanding
indebtedness evidenced by bonds issued by the tribe;
             (12)  a provision allowing the commission, under the
provisions of the gaming agreement, to monitor the conduct of video
lottery games to ensure that the video lottery games are conducted
in compliance with the provisions of the agreement, and granting
the Department of Public Safety and agents of the commission
reasonable access to all areas of the facility related to the
conduct of video lottery games in order to properly monitor the
conduct of video lottery games;
             (13)  a provision specifying jurisdiction of tribal,
state, and federal courts with regard to matters arising from the
gaming agreement or the operation of video lottery terminals, or
both, as authorized by the agreement and consistent with Section
466.573;
             (14)  a provision requiring the tribe to adopt and
comply with standards at least as stringent as state public health
standards for food and beverage handling at any facilities where
video lottery terminals are operated;
             (15)  a provision requiring the tribe to adopt and
comply with standards at least as stringent as federal water
quality and safe drinking water standards applicable in this state
at any facilities where video lottery terminals are operated, and
requiring the tribe to allow for inspection and testing of water
quality by state or county health inspectors, as applicable, during
normal hours of operation, to assess compliance with these
standards, unless inspections and testing are made by an agency of
the United States pursuant to or by the tribe under express
authorization of federal law to ensure compliance with federal
water quality and safe drinking water standards;
             (16)  a provision requiring the tribe to carry at least
$5 million in public liability insurance for patron claims and
providing reasonable assurance that the claims will be promptly and
fairly adjudicated and that legitimate claims will be paid;
             (17)  a provision requiring the tribe to adopt and
comply with standards at least as stringent as federal workplace
and occupational health and safety standards for any facilities
where video lottery terminals are operated, and requiring the tribe
to allow for inspection of the workplaces by state inspectors
during normal hours of operation to assess compliance with these
standards, unless inspections are regularly made by an agency of
the United States government to ensure compliance with federal
workplace and occupational health and safety standards;
             (18)  a provision requiring the tribe to adopt and
comply with standards at least as stringent as federal laws and
state laws forbidding employers generally from discriminating in
the employment of persons to work for the facility operating video
lottery terminals on the basis of race, color, religion, national
origin, gender, sexual orientation, age, or disability, provided
that nothing in the provision precludes the tribe from giving a
preference in employment to tribe members, pursuant to a duly
adopted tribal ordinance;
             (19)  a provision requiring the tribe to adopt and
comply with standards that are at least as stringent as state laws
prohibiting the use of proceeds of a check issued as a payment under
the financial assistance program under Chapter 31, Human Resources
Code, or a food stamp coupon issued under the food stamp program
administered under Chapter 33, Human Resources Code, for gaming or
other wagering;
             (20)  a provision requiring the tribe to adopt and
comply with standards at least as stringent as state laws governing
the extension of credit to, the cashing of checks for, and other
financial transactions with patrons calculated to protect players
from problem and compulsive gambling;
             (21)  a provision requiring the tribe to participate in
state statutory programs related to employment in video lottery
terminal operations or instead of participation in this state
workers' compensation system, allowing the tribe to create and
maintain a system that provides redress for employee work-related
injuries through requiring insurance or self-insurance that
includes a scope of coverage, availability of an independent
medical examination, right to notice, hearings before an
independent tribunal, a means of enforcement against the employer,
and benefits comparable to those mandated for comparable employees
under state law;
             (22)  a provision requiring the tribe to make
reasonable provisions for adequate emergency fire, medical, and
related relief and disaster services for patrons and employees of
the video lottery terminal operations;
             (23)  a provision:
                   (A)  requiring the tribe to prohibit the
intentional, knowing, or reckless possession of a firearm, illegal
knife, club, explosive weapon, machine gun, firearm silencer,
knuckles, armor-piercing ammunition, a chemical dispensing device,
or a zip gun, as those terms are defined in Section 46.01, Penal
Code, at all times in the video lottery terminal establishment;
                   (B)  requiring the defenses that apply to the
possession of weapons on the premises of a racetrack under Section
46.03, Penal Code, to apply to possession of the weapons in a video
lottery terminal establishment; and
                   (C)  requiring tribal security or tribal law
enforcement personnel to be allowed to possess firearms and clubs
at a video lottery terminal establishment as authorized by tribal
law;
             (24)  a provision requiring the tribe to agree that on
or before the effective date of the agreement, or not less than 90
days before the commencement of any project constructed to serve as
the site of video lottery terminals, the tribe shall adopt an
ordinance providing for the preparation, circulation, and
consideration by the tribe of environmental impact reports
concerning potential off-reservation environmental impacts of the
construction to be commenced on or after the effective date of the
agreement;
             (25)  a provision requiring the tribe to agree to
establish separate electronic funds transfer accounts for the
purposes of depositing money from video lottery terminal
operations, making payments to the commission, and receiving
payments from the commission, which must prohibit the tribe from
making payments to the commission in cash, but as authorized by the
commission may allow a tribe to make payments to the commission by
cashier's check;
             (26)  a provision requiring the tribe to adopt and
comply with the Bank Secrecy Act (31 U.S.C. Sections 5311-5314), as
amended, and all reporting requirements of the Internal Revenue
Service, insofar as the provisions and reporting requirements are
applicable to gaming facilities; and
             (27)  a provision requiring the tribe to collect and
remit to the comptroller state sales and use taxes and state taxes
on motor fuels, alcoholic beverages, cigarettes and tobacco
products, and hotel occupancy generated at a video lottery terminal
establishment, other than on an item sold to or used or consumed by
a tribe member.
       (d)  The legislature finds that, in any proceeding described
by Subsection (c)(2), irreparable injury and inadequate remedy at
law shall be presumed once this state has demonstrated that the
violation has occurred.  If this state does not seek an injunction
for such a material breach of the gaming agreement, the tribe agrees
to pay a contract penalty of $10,000 per day for every day the
violation or breach continues.  If the violation or breach is not
cured within 10 days, this state may bring an action to enjoin the
unlawful conduct.
       Sec. 466.578.  IMPLEMENTATION OF GAMING AGREEMENT.  The
governor shall execute any documents necessary to implement a
gaming agreement authorized under this subchapter.
       Sec. 466.579.  INCORPORATION INTO STATE LAW.  The model
gaming agreement set out in Section 466.576(b) is hereby
incorporated into state law, and the operation of video lottery
terminals authorized under the agreement is expressly authorized as
a matter of state law for any Indian tribe entering into the gaming
agreement in accordance with this subchapter.
       Sec. 466.580.  REGULATORY MONEY RECEIVED UNDER GAMING
AGREEMENT.  All money received by the commission under a gaming
agreement for regulatory costs incurred relative to tribal
operations of video lottery terminals shall be deposited to the
credit of the state video lottery account to defray expenses of the
commission incurred in the oversight, compliance with, and
enforcement of video lottery terminal operations conducted
pursuant to a gaming agreement.
       Sec. 466.581.  INJUNCTION; CIVIL PENALTY.  (a)  If the
commission, the appropriate governing body for an Indian tribe, or
the attorney general has reason to believe that this chapter has
been or is about to be violated, the attorney general may petition a
court for appropriate injunctive relief to restrain the violation.  
Filing of the petition does not waive applicable sovereign
immunity.
       (b)  Venue for an action by this state seeking injunctive
relief is in a district court in Travis County.
       (c)  If the court finds that this chapter has been knowingly
violated, the court shall order all proceeds from any illegal
gambling to be forfeited to the appropriate governing body as a
civil penalty.
       (d)  The remedies provided herein are not exclusive.  The
commission may suspend or revoke a license, impose an
administrative penalty, or seek injunctive or civil penalties or
both, depending on the severity of the violation.
       SECTION 1.35.  Section 467.001, Government Code, is amended
by amending Subdivision (9) and adding Subdivision (12) to read as
follows:
             (9)  "Person that has a significant financial interest
in the lottery" means:
                   (A)  a person or a board member, officer, trustee,
or general partner of a person that manufactures, distributes,
sells, or produces lottery equipment, video lottery equipment,
video lottery games, video lottery central systems, supplies,
services, or advertising;
                   (B)  an employee of a video lottery terminal
provider, video lottery central system provider, or person that
manufactures, distributes, sells, or produces lottery equipment, 
supplies, services, or advertising or video lottery equipment or
games and that employee is directly involved in the manufacturing,
distribution, selling, or production of lottery equipment,
supplies, services, or advertising or video lottery equipment or
games;
                   (C)  a person or a board member, officer, trustee,
or general partner of a person that has made a bid to operate the
lottery in the preceding two years or that intends to make a bid to
operate the lottery or an employee of the person if the employee is
directly involved in making the bid; or
                   (D)  a sales agent, video lottery retailer, video
lottery manager, video lottery terminal provider, or video lottery
central system provider.
             (12)  "Video lottery central system," "video lottery
equipment," "video lottery game," "video lottery manager," "video
lottery retailer," and "video lottery terminal provider" have the
meanings assigned by Section 466.002.
       SECTION 1.36.  Section 467.031, Government Code, is amended
to read as follows:
       Sec. 467.031.  DIVISIONS.  The commission shall establish
separate divisions to oversee bingo and the state lottery.  The
commission shall create a division to oversee the video lottery
system and delegate responsibilities in the administration of
Chapter 466 to the executive director, the director of the
appropriate division, and the division's staff; provided, however,
that the commission may not delegate the following actions:
             (1)  a final determination in any application or
request for licensing or registration under Chapter 466;
             (2)  a final determination in any proceeding involving
the suspension or revocation of a certificate of registration or
license under Chapter 466;
             (3)  a final determination that Chapter 466 has been
violated; or
             (4)  a final determination or imposition of an
assessment of fines or penalties under a law administered by the
commission.
       SECTION 1.37.  Section 467.035(a), Government Code, is
amended to read as follows:
       (a)  The commission may not employ or continue to employ a
person who owns a financial interest in:
             (1)  a bingo commercial lessor, bingo distributor, or
bingo manufacturer; or
             (2)  a lottery sales agency, [or] a lottery operator, a
video lottery retailer, a video lottery manager, a video lottery
terminal provider, a video lottery central system provider, or a
manufacturer of video lottery games.
       SECTION 1.38.  Section 411.108, Government Code, is amended
by adding Subsection (d) to read as follows:
       (d)  The Texas Lottery Commission or a successor agency may
obtain from the department, subject to an interagency agreement
entered into under Section 466.020(d) or 466.206, criminal history
record information maintained by the department that relates to any
natural person, corporation, association, trust, partnership,
limited partnership, joint venture, government, subsidiary, or
other entity, regardless of its form, structure, or nature that the
commission has the authority to investigate under Chapter 466 as
related to the commission's operation and oversight of video
lottery. Criminal history record information obtained by the
commission under this subsection may be released or disclosed only
as provided in Sections 466.022(c) and 466.206.
       SECTION 1.39.  Article 6, Texas Racing Act (Article 179e,
Vernon's Texas Civil Statutes), is amended by adding Section 6.095
to read as follows:
       Sec. 6.095.  SPECIAL ALLOCATION TO PURSES. (a)  A
pari-mutuel license holder that owns or operates a racetrack at
which video lottery games are conducted under Subchapter K, Chapter
466, Government Code, and the state breed registry representing the
breed conducting live racing at the license holder's racetrack
shall enter into a written agreement to allocate a percentage of the
share of the video lottery game proceeds received by the racetrack
under Section 466.562(a)(1), Government Code, for purses at that
racetrack as provided by this section and to specify the period for
which the percentage is in effect. If the racetrack is a horse
racetrack:
             (1)  the officially recognized horsemen's organization
must also be a party to the agreement; and
             (2)  the purse amounts shall be deposited in accordance
with Section 6.08(b)(3) of this Act.
       (a-1)  At a greyhound racetrack, the agreement under
Subsection (a) must require that 50 percent of the purse amount set
aside as provided by Subsection (a) of this section be allocated to
Texas-bred greyhounds.
       (b)  If an agreement cannot be reached under Subsection (a),
any party that would be a necessary party to the agreement may
submit the matter to the commission 60 days after failure to reach
an agreement for determination of the matter in accordance with a
procedure established by commission rule.
       (c)  The commission in a determination under Subsection (b):
             (1)  may not set the percentage of net terminal income
to be used for purses at the racetrack at less than 10 percent of the
share of the video lottery proceeds received by the racetrack under
Section 466.562(a)(1), Government Code, and must allocate an
additional percentage if necessary to ensure the purses at the
racetracks are nationally competitive; and
             (2)  may not establish a period for which the
percentage is to be in effect that is less than two years.
       (d)  Each officially designated breed registry may use a
portion, not to exceed 10 percent, of the amount allocated for
purses under this section for administration, Accredited Texas Bred
awards, enhancement and promotion of championship Texas-bred race
days, and marketing and promotion of the Accredited Texas Bred
Incentive Program.
       (e)  The commission shall adopt rules to administer this
section and to require a horse racetrack to allocate from the amount
set aside for purses under Subsection (a) of this section:
             (1)  two percent to the purse account for Arabians;
             (2)  one percent to the purse account for Paints;
             (3)  29.1 percent to the purse account for quarter
horses; and
             (4)  67.9 percent to the purse account for
thoroughbreds.
       (f)  A matter considered by the commission under this section
is a contested case requiring a public hearing under Chapter 2001,
Government Code.
       SECTION 1.40.  Article 6, Texas Racing Act (Article 179e,
Vernon's Texas Civil Statutes), is amended by adding Section 6.20
to read as follows:
       Sec. 6.20.  LIVE RACING REQUIREMENT. (a) Except as provided
by Subsections (b) and (c) of this section, a person who holds a
class 1 or class 2 racetrack license for a racetrack that is a video
lottery terminal establishment under Subchapter K, Chapter 466,
Government Code, shall conduct the greater of:
             (1)  for each breed, not less than the number of live
racing days conducted by the racetrack for that breed in 2002; or
             (2)  for quarter horses and thoroughbreds, not less
than 50 live race days or 500 live races.
       (b)  A class 2 racetrack that has not previously conducted
live racing and that becomes licensed as a video lottery terminal
establishment under Subchapter K, Chapter 466, Government Code,
shall conduct live racing not later than the second anniversary of
the date the license is issued under that subchapter.
       (c)  A person who holds a class 1 or class 2 racetrack license
may conduct fewer live racing days than required by Subsection (a)
of this section if the racetrack, the affected breed registry, and
the recognized horsemen's organization enter into a written
agreement to conduct fewer races.
       (d)  A greyhound racetrack that is a video lottery terminal
establishment under Subchapter K, Chapter 466, Government Code,
shall offer for pari-mutuel wagering not less than 420 live
greyhound racing performances in each calendar year, unless
otherwise agreed to in writing by the racetrack and the official
state greyhound breed registry.  For purposes of this subsection,
"greyhound racing performance" means the consecutive running of not
fewer than 12 greyhound races.
       SECTION 1.41.  Section 16.18, Texas Racing Act (Article
179e, Vernon's Texas Civil Statutes), is amended by adding
Subsection (d) to read as follows:
       (d)  This section does not apply to a county in which is
located a racetrack that is authorized to operate video lottery
terminals under Subchapter K, Chapter 466, Government Code.
       SECTION 1.42.  The Legislature finds and declares the
following:
             (1)  This state is facing a crisis in providing funding
for state governmental programs. Contingent on the approval of the
voters, in order to generate additional revenue to fund state
governmental programs, a limited and narrow exception to the
constitutional prohibition on lotteries has been proposed to
authorize a state-controlled and state-operated video lottery
system in accordance with this article.
             (2)  In light of the financial needs of the state and
the need to fund state governmental programs, in the event the
voters approve this limited state-controlled and state-operated
video lottery system, the Texas Lottery Commission must be
authorized to commence operation of the video lottery system in
accordance with this article at the earliest possible date,
consistent with the intent of the voters and legislative directive.
             (3)  The implementation of the video lottery system
will require significant time for application investigations and
determinations and for video lottery terminal and video lottery
central system providers and manufacturers of video lottery games
to develop prototypes for testing for the video lottery central
system and video lottery terminals and games.
             (4)  The state's critical financial need constitutes an
imminent peril to the public welfare, requiring the adoption of
rules and authorization for the Texas Lottery Commission to conduct
certain limited pre-implementation activities related to the
establishment of the video lottery system to promote and ensure the
integrity, security, honesty, and fairness of the operation and
administration of the video lottery system.
             (5)  In order to commence operation of the video
lottery system at the earliest possible date and to maintain the
integrity of state-controlled and state-operated video lottery
established by this article, the Texas Lottery Commission may
conduct limited pre-implementation acts before the constitutional
amendment proposed by the 80th Legislature, Regular Session, 2007,
to authorize the state to operate video lottery games is submitted
to the voters for approval.
       SECTION 1.43.  (a)  As soon as practicable after the
constitutional amendment to authorize the state to operate video
lottery games proposed by the 80th Legislature, Regular Session,
2007, is approved by the voters and becomes effective, the Texas
Lottery Commission or the Texas Gaming and Boxing Commission, as
applicable, shall adopt the rules necessary to implement video
lottery in accordance with Subchapter K, Chapter 466, Government
Code, as added by this Act.
       (b)  Before the proposed constitutional amendment is
submitted to the voters, the Texas Lottery Commission may expend
money from the commission's appropriation for the 2008-2009 state
fiscal biennium for purposes of conducting pre-implementation
activities to establish the state video lottery system in
accordance with Subchapter K, Chapter 466, Government Code, as
added by this Act. Notwithstanding Section 466.355, Government
Code, the money authorized to be expended under this section may be
withdrawn from the state lottery account to fund the establishment
of the state video lottery system.
       (c)  Before the proposed constitutional amendment is
submitted to the voters, the Texas Lottery Commission may develop
and approve forms for applications for licensing and registration
required under Subchapter K, Chapter 466, Government Code, as added
by this Act.
       (d)  Before the proposed constitutional amendment is
submitted to the voters, the Texas Lottery Commission may accept
pre-implementation applications for video lottery retailers and
video lottery managers under Subchapter K, Chapter 466, Government
Code, as added by this Act. On receipt of a complete application,
completion of all investigations, and submittal of the
nonrefundable investigatory fees the commission requires
consistent with Subchapter K, Chapter 466, Government Code, as
added by this Act, the commission may make preliminary findings of
suitability for an applicant and location of a video lottery
terminal establishment. If the commission determines that all the
requirements under Subchapter K, Chapter 466, Government Code, have
been satisfied, the commission may issue a letter advising the
applicant of the status of approval of the application pending
approval by the voters of the proposed constitutional amendment to
authorize the state video lottery system. If the commission
determines that any requirements under Subchapter K, Chapter 466,
Government Code, have not been satisfied, the commission may
request additional information or conduct further investigations
the commission considers necessary and may issue a letter advising
the applicant of the status of the application.
       (e)  Before the proposed constitutional amendment is
submitted to the voters, the Texas Lottery Commission may request
and receive information related to applications for licensing and
registration under Subchapter K, Chapter 466, Government Code, as
added by this Act.  An applicant's failure to comply with any
requests made by the Texas Lottery Commission under this subsection
may be considered grounds for denial of an application.
       (f)  The Texas Lottery Commission may not issue any license,
certificate of registration, or temporary license related to the
state video lottery system under Subchapter K, Chapter 466,
Government Code, as added by this Act, unless and until the
constitutional amendment authorizing the state to operate video
lottery games is approved by the voters and becomes effective.
       (g)  Before the proposed constitutional amendment is
submitted to the voters, the Texas Lottery Commission may conduct
investigations and collect investigative fees related to
information requested and received for pre-implementation
applications under this section and necessary for the commission's
evaluation and determination of an application for any licensing,
registration, or commission approval required under Subchapter K,
Chapter 466, Government Code, as added by this Act.
       (h)  Before the proposed constitutional amendment is
submitted to the voters, the Texas Lottery Commission may conduct
preregistration of potential video lottery terminal providers. To
qualify for preregistration under this subsection, an applicant
must satisfy the minimum application requirements under Section
466.508, Government Code, as added by this Act, except that the
application fee required under Section 466.509(a), Government
Code, as added by this Act, is not due until the applicant files an
application for registration under Subchapter K, Chapter 466,
Government Code, as added by this Act.  A preregistration
application must be accompanied by a nonrefundable deposit to the
Texas Lottery Commission in the amount of $25,000. A
preregistration applicant shall submit additional money not later
than the 10th day after the date the applicant receives notice from
the commission that it has incurred actual costs for the
preregistration investigation in excess of the initial deposit
required under this subsection. If the commission does not receive
the additional money from the applicant on or before the 15th day
after the date the applicant receives the commission's notice, the
commission shall suspend the application until the money is
received by the commission. Any deposit or other nonrefundable
money provided under this subsection shall be credited toward an
application fee required under Section 466.509(a), Government
Code, as added by this Act.
       (i)  The Texas Lottery Commission may not register any video
lottery terminal providers unless and until the constitutional
amendment authorizing the state to operate video lottery games is
approved by the voters and becomes effective.
       (j)  Notwithstanding Section 466.509, Government Code, as
added by this Act, a video lottery terminal provider that has been
preregistered by the Texas Lottery Commission in accordance with
this section, a video lottery central system provider, or a
manufacturer of video lottery games, under a contract with the
commission, may manufacture and test prototypes of or existing
video lottery equipment for a video lottery central system, video
lottery terminals, and video lottery games for the commission's
consideration.
       (k)  Before the proposed constitutional amendment is
submitted to the voters, the Texas Lottery Commission may negotiate
contracts with preregistered video lottery terminal providers. The
commission may enter into contracts with preregistered video
lottery terminal providers, video lottery central system
providers, and manufacturers of video lottery games as required for
the creation and testing of a video lottery central system, video
lottery terminals, and video lottery games for the commission's
consideration.
       (l)  Before the proposed constitutional amendment is
submitted to the voters, the Texas Lottery Commission may negotiate
and enter contracts as necessary to establish the video lottery
system.
       (m)  Before the proposed constitutional amendment is
submitted to the voters, the Texas Lottery Commission may employ
additional full-time equivalent employees to administer this Act
and establish the video lottery system.
       SECTION 1.44.  Sections 1.01 through 1.41 of this article
take effect on the date the amendment adding Section 47-a, Article
III, Texas Constitution, authorizing the operation of video lottery
games at racetracks and on certain Indian lands to provide
additional money to fund governmental programs proposed by the 80th
Legislature, Regular Session, 2007, becomes effective.  Sections
1.42 and 1.43 of this article and this section take effect
immediately if this Act receives a vote of two-thirds of all the
members elected to each house, as provided by Section 39, Article
III, Texas Constitution.  If this Act does not receive the vote
necessary for immediate effect, Sections 1.42 and 1.43 of this
article and this section take effect on the 91st day after the last
day of the legislative session.  Sections 1.42 and 1.43(m) of this
article expire March 1, 2008.
ARTICLE 2.  ESTABLISHMENT OF TEXAS GAMING AND BOXING COMMISSION
       SECTION 2.01.  Subtitle A, Title 13, Occupations Code, is
amended by adding Chapter 2004 to read as follows:
CHAPTER 2004. TEXAS GAMING AND BOXING COMMISSION
SUBCHAPTER A. GENERAL PROVISIONS
       Sec. 2004.001.  DEFINITIONS.  In this chapter:
             (1)  "Commission" means the Texas Gaming and Boxing
Commission.
             (2)  "Executive director" means the executive director
of the commission.
       Sec. 2004.002.  APPLICATION OF SUNSET ACT.  (a)  The Texas
Gaming and Boxing Commission is subject to Chapter 325, Government
Code (Texas Sunset Act).  Unless continued in existence as provided
by that chapter, the commission is abolished and this chapter
expires September 1, 2019.
       (b)  On the date the commission is abolished under Subsection
(a), the following statutes are repealed:
             (1)  Chapter 2001;
             (2)  Chapter 2052;
             (3)  Chapter 466, Government Code; and
             (4)  the Texas Racing Act (Article 179e, Vernon's Texas
Civil Statutes).
       Sec. 2004.003.  REFERENCES TO LICENSE INCLUDE CERTIFICATE OF
REGISTRATION OR OTHER APPROVAL.  Except as expressly provided by
this chapter, other law, or commission rule, a reference in this
chapter to a license applies to a certificate of registration,
finding of suitability, or prior approval under this chapter, other
law, or commission rule.
[Sections 2004.004-2004.050 reserved for expansion]
SUBCHAPTER B. TEXAS GAMING AND BOXING COMMISSION
       Sec. 2004.051.  COMMISSION; MEMBERSHIP.  (a) The Texas
Gaming and Boxing Commission is composed of seven members. Six
members shall be appointed by the governor with the advice and
consent of the senate. The chairman of the Public Safety Commission
is an ex officio voting member of the commission.
       (b)  Appointments to the commission shall be made without
regard to the race, color, disability, sex, religion, age, or
national origin of the appointee.
       Sec. 2004.052.  QUALIFICATIONS OF COMMISSION MEMBERS.  (a)
To be eligible for appointment to the commission, a person:
             (1)  must be a citizen of the United States;
             (2)  must have resided in this state for the two years
preceding the date of the person's appointment;
             (3)  must submit a financial statement that contains
the information required by Chapter 572, Government Code;
             (4)  may not own a financial or other interest in a
person engaged in the conduct of gaming, or in a security issued by
that person, or be related within the second degree by affinity or
the third degree by consanguinity, as determined under Chapter 573,
Government Code, to an individual who owns a financial or other
interest or security;
             (5)  may not be an applicant for or holder of a license,
certificate of registration, or approval under a law administered
by the commission; and
             (6)  may not be a member of the governing body of a
political subdivision of this state.
       (b)  A person holding an elective office or an officer or
official of a political party is not eligible for appointment to the
commission.
       (c)  A person is not eligible for appointment as a member of
the commission if the person or the person's spouse:
             (1)  is registered, certified, or licensed by an
occupational regulatory agency in the field of gaming;
             (2)  is employed by or participates in the management
of a business entity or other organization regulated by the
commission or receiving funds from the commission;
             (3)  owns or controls, directly or indirectly, more
than a 10 percent interest in a business entity or other
organization regulated by the commission or receiving funds from
the commission; or
             (4)  uses or receives a substantial amount of tangible
goods, services, or money from the commission, other than
compensation or reimbursement authorized by law for commission
membership, attendance, or expenses.
       Sec. 2004.053.  MEMBERSHIP AND EMPLOYEE RESTRICTIONS. (a)
In this section, "Texas trade association" means a cooperative and
voluntarily joined association of business or professional
competitors in this state designed to assist its members and its
industry or profession in dealing with mutual business or
professional problems and in promoting their common interest.
       (b)  A person may not be a member of the commission or an
employee of the commission employed in a "bona fide executive,
administrative, or professional capacity," as that phrase is used
for purposes of establishing an exemption to the overtime
provisions of the federal Fair Labor Standards Act of 1938 (29
U.S.C. Section 201 et seq.) if:
             (1)  the person is an officer, employee, manager, or
paid consultant of a Texas trade association in the field of gaming;
or
             (2)  the person's spouse is an officer, manager, or paid
consultant of a Texas trade association in the field of gaming.
       (c)  A person may not be a member of the commission or act as
general counsel to the commission if the person is required to
register as a lobbyist under Chapter 305, Government Code, because
of the person's activities for compensation on behalf of a
profession related to the operation of the commission.
       Sec. 2004.054.  TERMS; VACANCIES. (a) Appointed members of
the commission serve staggered six-year terms. The terms of two
members expire on February 1 of each odd-numbered year.
       (b)  A vacancy in an appointive position on the commission
shall be filled by appointment of the governor with the advice and
consent of the senate.
       Sec. 2004.055.  PRESIDING OFFICER. The governor shall
designate a member of the commission as presiding officer of the
commission to serve in that capacity at the pleasure of the
governor.
       Sec. 2004.056.  MEETINGS; OFFICIAL RECORD.  (a) The
commission shall meet not less than six times each year.
       (b)  The commission may meet at other times at the call of the
presiding officer or as provided by commission rule.
       (c)  The commission shall keep an official record of all
commission meetings and proceedings.
       Sec. 2004.057.  GROUNDS FOR REMOVAL. (a) It is a ground for
removal from the commission that a member:
             (1)  does not have at the time of taking office the
qualifications required by Section 2004.052;
             (2)  does not maintain during service on the commission
the qualifications required by Section 2004.052;
             (3)  is ineligible for membership under Section
2004.053;
             (4)  cannot, because of illness or disability,
discharge the member's duties for a substantial part of the member's
term; or
             (5)  is absent from more than half of the regularly
scheduled commission meetings that the member is eligible to attend
during a calendar year without an excuse approved by a majority vote
of the commission.
       (b)  The validity of an action of the commission is not
affected by the fact that it is taken when a ground for removal of a
commission member exists.
       (c)  If the executive director has knowledge that a potential
ground for removal of a commission member exists, the executive
director shall notify the presiding officer of the commission of
the potential ground. The presiding officer shall then notify the
governor and the attorney general that a potential ground for
removal exists. If the potential ground for removal involves the
presiding officer, the executive director shall notify the next
highest officer of the commission, who shall notify the governor
and the attorney general that a potential ground for removal
exists.
       Sec. 2004.058.  TRAINING. (a) A person who is appointed to
and qualifies for office as a member of the commission may not vote,
deliberate, or be counted as a member in attendance at a meeting of
the commission until the person completes a training program that
complies with this section.
       (b)  The training program must provide the person with
information regarding:
             (1)  this chapter and the other laws administered by
the commission and the commission's programs, functions, rules, and
budget;
             (2)  the results of the most recent formal audit of the
commission;
             (3)  the requirements of laws relating to open
meetings, public information, administrative procedure, and
conflict of interest; and
             (4)  any applicable ethics policies adopted by the
commission or the Texas Ethics Commission.
       (c)  A person appointed to the commission is entitled to
reimbursement, as provided by the General Appropriations Act, for
travel expenses incurred in attending the training program
regardless of whether the attendance at the program occurs before
or after the person qualifies for office.
       Sec. 2004.059.  QUALIFICATIONS AND STANDARDS OF CONDUCT
INFORMATION. The executive director or the executive director's
designee shall provide to members of the commission, as often as
necessary, information regarding their:
             (1)  qualifications for office under this chapter; and
             (2)  responsibilities under applicable laws relating
to standards of conduct for state officers.
       Sec. 2004.060.  BOND.  (a) Before assuming the duties of
office, an appointed member of the commission must execute a bond in
the amount of $25,000 payable to the state and conditioned on the
member's faithful performance of the member's duties of office.
       (b)  The bond must be approved by the governor.
       (c)  The cost of the bond shall be paid by the commission.
       Sec. 2004.061.  PROHIBITION OF CERTAIN ACTIVITIES.  (a) An
appointed member of the commission may not:
             (1)  use the member's official authority to affect the
result of an election or nomination for public office; or
             (2)  directly or indirectly coerce, attempt to coerce,
command, or advise a person to pay, lend, or contribute anything of
value to another person for political purposes.
       (b)  A commission member or the spouse of a commission member
may not solicit or accept employment from a license, certificate of
registration, or approval holder under a law administered by the
commission or from an applicant for such a license, certificate, or
approval before the second anniversary of the date the commission
member's service on the commission ends.
       (c)  A person who violates this section commits an offense.  
An offense under this subsection is a Class B misdemeanor.
       Sec. 2004.062.  APPLICATION OF FINANCIAL DISCLOSURE LAW.  
For purposes of Chapter 572, Government Code, a member of the
commission, the executive director, and the division directors are
appointed officers of a major state agency.
       Sec. 2004.063.  PER DIEM; EXPENSES.  (a)  Each appointed
member of the commission is entitled to:
             (1)  a per diem in an amount prescribed by
appropriation for each day spent in performing the duties of the
member; and
             (2)  reimbursement for actual and necessary expenses
incurred in performing those duties.
       (b)  Reimbursement for expenses under this section is
subject to any applicable limitation in the General Appropriations
Act.
       (c)  The ex officio member is entitled to reimbursement for
expenses from that member's agency as provided by law for expenses
incurred in the performance of that member's other official duties.
       Sec. 2004.064.  EXECUTIVE DIRECTOR.  (a) The commission
shall appoint an executive director, who serves at the pleasure of
the commission.
       (b)  A person holding an elective office or an officer or
official of a political party is not eligible for appointment as
executive director.
       (c)  The executive director must have five or more years of
responsible administrative experience in public or business
administration or possess broad management skills.
       (d)  The executive director may not pursue any other business
or occupation or hold any other office for profit.
       (e)  The executive director must meet all eligibility
requirements relating to members of the commission, except the
requirement for prior residency in this state.
       (f)  The executive director is entitled to an annual salary
and other compensation specified by the commission.
       (g)  The executive director may not, before the second
anniversary of the date the director's service to the commission
ends, acquire a direct or indirect interest in or be employed by a
person licensed or registered by the commission in connection with
the conduct of gaming in this state.
       Sec. 2004.065.  OFFICES.  The commission shall maintain its
primary office in Travis County and may maintain other offices
determined to be necessary by the commission.
       Sec. 2004.066.  AUTHORITY TO SUE OR BE SUED.  (a) The
commission may sue and be sued.
       (b)  Service of process in a suit against the commission may
be secured by serving the executive director.
       (c)  A suit against the commission must be brought in Travis
County.
       Sec. 2004.067.  AUDIT.  The transactions of the commission
are subject to audit by the state auditor under Chapter 321,
Government Code.
       Sec. 2004.068.  ACCESS TO CRIMINAL HISTORY RECORDS.  (a)  
The governor shall conduct an investigation of and is entitled to
obtain criminal history record information maintained by the
Department of Public Safety, the Federal Bureau of Investigation
Identification Division, or another law enforcement agency
relating to an individual the governor intends to appoint to the
commission.
       (b)  The commission shall conduct an investigation of and is
entitled to obtain criminal history record information maintained
by the Department of Public Safety, the Federal Bureau of
Investigation Identification Division, or another law enforcement
agency relating to an individual the commission intends to employ.
[Sections 2004.069-2004.100 reserved for expansion]
SUBCHAPTER C. POWERS AND DUTIES OF COMMISSION
       Sec. 2004.101.  GENERAL POWERS.  (a)  The commission has
broad authority and shall exercise strict control and close
supervision over all activities authorized and conducted in this
state under a law administered by the commission, including:
             (1)  Chapter 2001;
             (2)  this chapter;
             (3)  Chapter 2052;
             (4)  Chapter 466, Government Code; and
             (5)  the Texas Racing Act (Article 179e, Vernon's Texas
Civil Statutes).
       (b)  The commission shall ensure that all gaming activities
subject to the oversight or regulatory authority of the commission
are conducted fairly and in compliance with the law.
       (c)  The commission also has the powers and duties granted
under:
             (1)  Chapter 2001;
             (2)  Chapter 2052;
             (3)  Chapter 466, Government Code; and
             (4)  the Texas Racing Act (Article 179e, Vernon's Texas
Civil Statutes).
       (d)  All aspects of this chapter and the other laws
administered by the commission, including those relating to
licensing, qualification, execution, and enforcement, shall be
administered by the executive director and the commission for the
protection of the public and in the public interest.
       (e)  The commission and the executive director have full
power and authority to hold hearings, and in connection to the
hearings, to issue subpoenas, to compel the attendance of witnesses
at any place in this state, to administer oaths, and to require
testimony under oath. Any process or notice relating to a hearing
may be served in the manner provided for service of process and
notices in civil actions. The commission and the executive
director may pay transportation and other expenses of witnesses as
they consider reasonable.
       (f)  The executive director and the executive director's
authorized employees may:
             (1)  inspect and examine a premises where gaming is
conducted or equipment or supplies, including a gaming device, or
associated equipment is manufactured, assembled, produced,
programmed, sold, leased, marketed, distributed, repaired, or
modified for use in gaming;
             (2)  for good cause, seize and remove from a premises
and impound equipment or supplies for the purpose of examination
and inspection; and
             (3)  demand access to, inspect, examine, photocopy, or
audit papers, books, and records of applicants and license and
certificate holders, on their premises or elsewhere as practicable,
in the presence of the license or certificate holder or the license
or certificate holder's agent, reporting the gross income produced
by a gaming business, verification of the gross income, and other
matters affecting the enforcement of this chapter.
       (g)  For the purpose of conducting audits after the cessation
of gaming by a license or certificate holder, a former license
holder shall furnish, on demand of the executive director or the
executive director's authorized employees, books, papers, and
records as necessary to conduct the audits. The former license or
certificate holder shall maintain all books, papers, and records
necessary for audits for three years after the date of the surrender
or revocation of the license or certificate and is responsible for
the costs incurred by the commission in the conduct of an audit
under this section. If the former license or certificate holder
seeks judicial review of a deficiency determination or files a
petition for a redetermination, the former license or certificate
holder must maintain all books, papers, and records until a final
order is entered on the determination.
       Sec. 2004.102.  RULEMAKING AUTHORITY.  (a) The commission
shall adopt rules the commission considers necessary or desirable
for the public interest in carrying out the policy and provisions of
this chapter and the other laws administered by the commission.
       (b)  The rules shall set out:
             (1)  the method and form of application that an
applicant for a license or certificate of registration must follow
and complete before consideration of an application by the
commission;
             (2)  the information to be furnished by an applicant or
license or certificate holder concerning antecedents, habits,
character, associates, criminal record, business activities, and
financial affairs;
             (3)  the criteria to be used in the award, revocation,
and suspension of licenses or certificates;
             (4)  the information to be furnished by a license or
certificate holder relating to the holder's employees;
             (5)  the manner and procedure of hearings conducted by
the commission or a hearing examiner of the commission;
             (6)  the payment of fees or costs an applicant or
license or certificate holder must pay;
             (7)  the manner and method of collection and payment of
fees and the issuance of licenses or certificates;
             (8)  the definition of "unsuitable method of
operation";
             (9)  the conditions under which the nonpayment of a
gambling debt by a license or certificate holder constitutes
grounds for disciplinary action;
             (10)  the manner of approval of new games and gaming
devices and the method to determine whether the gaming device is a
video lottery terminal that must comply with Subchapter K, Chapter
466, Government Code;
             (11)  access to confidential information obtained
under this chapter or other law and means to ensure that the
confidentiality of the information is maintained and protected;
             (12)  financial reporting and internal control
requirements for license or certificate holders;
             (13)  requirements for the annual audit of the
financial statements of a license or certificate holder;
             (14)  requirements for periodic financial reports from
each license or certificate holder consistent with standards and
intervals prescribed by the commission; and
             (15)  the procedures for exempting or waiving
institutional investors from the licensing or registration
requirements for shareholders of publicly traded corporations.
       Sec. 2004.103.  AUTHORITY OF EXECUTIVE DIRECTOR.  (a)  With
commission approval, the executive director may create executive
positions as the director considers necessary to implement the
provisions of this chapter and any other law administered by the
commission.
       (b)  The executive director shall employ directors in the
areas of audit, investigation, and enforcement. The audit director
must be a certified public accountant, have five or more years of
progressively responsible experience in general accounting, and
have a comprehensive knowledge of the principles and practices of
corporate finance or must possess qualifications of an expert in
the field of corporate finance and auditing, general finance,
gaming, and economics. Other directors must possess five or more
years of training and experience in the fields of investigation,
law enforcement, law, or gaming.
       (c)  The executive director may investigate, for the purpose
of prosecution, a suspected criminal violation of this chapter or
another law administered by the commission. For the purpose of the
administration and enforcement of this chapter or another law
administered by the commission, the executive director and
employees designated by the executive director may be commissioned
as peace officers.
       (d)  The executive director, to further the objectives and
purposes of this chapter or another law administered by the
commission, may:
             (1)  direct and supervise all administrative actions of
the commission;
             (2)  bring legal action in the name and on behalf of the
commission;
             (3)  make, execute, and effect an agreement or contract
authorized by the commission;
             (4)  employ the services of persons considered
necessary for consultation or investigation and set the salaries of
or contract for the services of legal, professional, technical, and
operational personnel and consultants, except that outside legal
assistance may be retained only with the approval of the attorney
general;
             (5)  acquire furnishings, equipment, supplies,
stationery, books, and all other things the executive director
considers necessary or desirable in carrying out the executive
director's functions; and
             (6)  perform other duties the executive director may
consider necessary to effect the purposes of this chapter or
another law administered by the commission.
       (e)  Except as otherwise provided in this chapter, the costs
of administration incurred by the executive director shall be paid
in the same manner as other claims against the state are paid.
       Sec. 2004.104.  OFFICE OF HEARING EXAMINERS.  (a) The
commission shall create an office of hearing examiners to assist
the commission in carrying out its powers and duties.
       (b)  The office of hearing examiners shall:
             (1)  hold hearings under the authority of the
commission on matters relating to the commission's administration
of this chapter or another law administered by the commission as the
commission orders; and
             (2)  report after hearing in the manner prescribed by
the commission.
       (c)  The commission shall refer any contested case arising
under this chapter or another law administered by the commission to
the office of hearing examiners.
       (d)  The office of hearing examiners is independent of the
executive director and is under the exclusive control of the
commission.
       (e)  The office of hearing examiners is under the direction
of a chief hearing examiner appointed by the commission.
       (f)  The commission may authorize the chief hearing examiner
to delegate to one or more hearing examiners the authority to hold
any hearing called by the chief hearing examiner.
       (g)  The chief hearing examiner and all assistant hearing
examiners employed by the office of hearing examiners must be
attorneys licensed to practice law in this state.
       (h)  The chief hearing examiner and all assistant hearing
examiners may administer oaths, receive evidence, and issue
subpoenas to compel the attendance of witnesses and the production
of papers and documents in all matters delegated by the commission.
       (i)  The chief hearing examiner and all assistant hearing
examiners are entitled to an annual salary and other compensation
specified by the commission.
       (j)  The office of hearing examiners may contract for
additional services it considers necessary to carry out its powers.
       Sec. 2004.105.  JUDICIAL REVIEW IN CONTESTED CASES.  A final
ruling of the commission in a contested case is subject to judicial
review under Chapter 2001, Government Code.  Judicial review is
under the substantial evidence rule.
       Sec. 2004.106.  RECORDS.  (a) The executive director shall
maintain a file of all applications for licenses, registrations, or
approvals under a law administered by the commission, together with
a record of all action taken with respect to the applications.
       (b)  The commission and the executive director may maintain
other records they consider desirable.
       (c)  The information made confidential by this subsection
may be revealed, wholly or partly, only in the course of the
necessary administration of this chapter or other law administered
by the commission or on the order of a court of competent
jurisdiction, except that the executive director or the commission
may disclose the information to an authorized agent of any agency of
the United States, another state, or a political subdivision of
this state authorized under commission rules. Notice of the
content of any information furnished or released under this
subsection may be given to any affected applicant or license,
certificate of registration, or approval holder as prescribed by
commission rule. The following information is confidential:
             (1)  information requested by the commission or the
executive director to be furnished to either of them under this
chapter or another law administered by the commission or that may
otherwise be obtained relating to the finances, earnings, or
revenue of an applicant or license, registration, or approval
holder;
             (2)  information pertaining to an applicant's criminal
record, antecedents, and background that has been furnished to or
obtained by the commission or the executive director from any
source;
             (3)  information provided to the commission or the
executive director or a commission employee by a governmental
agency or an informer or on the assurance that the information will
be held in confidence and treated as confidential; and
             (4)  information obtained by the executive director or
the commission from a license, certificate, or approval holder
relating to the manufacturing, modification, or repair of gaming
devices.
       Sec. 2004.107.  REPRESENTATION BY ATTORNEY GENERAL.  (a)
The attorney general shall represent the commission and the
executive director in any proceeding to which the commission or the
executive director is a party under this chapter or another law
administered by the commission or in any suit filed against the
commission or executive director.
       (b)  The office of the attorney general on request shall
advise the commission and the executive director in all other
matters, including representing the commission when the commission
acts in its official capacity.
       Sec. 2004.108.  RULES RESTRICTING ADVERTISING OR
COMPETITIVE BIDDING. (a) The commission may not adopt rules
restricting advertising or competitive bidding by a person
regulated by the commission except to prohibit false, misleading,
or deceptive practices by that person.
       (b)  The commission may not include in its rules to prohibit
false, misleading, or deceptive practices by a person regulated by
the commission a rule that:
             (1)  restricts the use of any advertising medium;
             (2)  restricts the person's personal appearance or the
use of the person's voice in an advertisement;
             (3)  relates to the size or duration of an
advertisement by the person; or
             (4)  restricts the use of a trade name in advertising by
the person.
       Sec. 2004.109.  RULES ON CONSEQUENCES OF CRIMINAL
CONVICTION.  (a)  The commission shall adopt rules necessary to
comply with Chapter 53.
       (b)  In its rules under this section, the commission shall
list the specific offenses for which a conviction would constitute
grounds for the commission to take action under Section 53.021.
       Sec. 2004.110.  SUBPOENA. (a) The commission may request
and, if necessary, compel by subpoena:
             (1)  the attendance of a witness for examination under
oath; and
             (2)  the production for inspection and copying of
records and other evidence relevant to the investigation of an
alleged violation of this chapter or another law administered by
the commission.
       (b)  If a person fails to comply with a subpoena issued under
this section, the commission, acting through the attorney general,
may file suit to enforce the subpoena in a district court in Travis
County or in the county in which a hearing conducted by the
commission may be held.
       (c)  The court shall order a person to comply with the
subpoena if the court determines that good cause exists for issuing
the subpoena.
       Sec. 2004.111.  USE OF TECHNOLOGY. The commission shall
implement a policy requiring the commission to use appropriate
technological solutions to improve the commission's ability to
perform its functions. The policy must ensure that the public is
able to interact with the commission on the Internet.
       Sec. 2004.112.  NEGOTIATED RULEMAKING AND ALTERNATIVE
DISPUTE RESOLUTION POLICY. (a) The commission shall develop and
implement a policy to encourage the use of:
             (1)  negotiated rulemaking procedures under Chapter
2008, Government Code, for the adoption of commission rules; and
             (2)  appropriate alternative dispute resolution
procedures under Chapter 2009, Government Code, to assist in the
resolution of internal and external disputes under the commission's
jurisdiction.
       (b)  The commission's procedures relating to alternative
dispute resolution must conform, to the extent possible, to any
model guidelines issued by the State Office of Administrative
Hearings for the use of alternative dispute resolution by state
agencies.
       (c)  The commission shall designate a trained person to:
             (1)  coordinate the implementation of the policy
adopted under Subsection (a);
             (2)  serve as a resource for any training needed to
implement the procedures for negotiated rulemaking or alternative
dispute resolution; and
             (3)  collect data concerning the effectiveness of those
procedures, as implemented by the commission.
       Sec. 2004.113.  COMMITTEES. The commission may appoint
committees that it considers necessary to carry out its duties.
       Sec. 2004.114.  ANNUAL REPORT. (a) The commission shall
file annually with the governor and the presiding officer of each
house of the legislature a complete and detailed written report
accounting for all money received and disbursed by the commission
during the preceding fiscal year.
       (b)  The annual report must be in the form and be reported in
the time provided by the General Appropriations Act.
       Sec. 2004.115.  GIFT OR POLITICAL CONTRIBUTION TO OFFICER OR
EMPLOYEE.  (a)  A commission member, the executive director, or an
employee of the commission may not intentionally or knowingly
accept a gift or political contribution from:
             (1)  a person that has a significant financial interest
in the lottery or in any other activity regulated under a law
administered by the commission;
             (2)  a person related in the first degree of
consanguinity or affinity to a person that has a significant
financial interest in the lottery or in any other activity
regulated under a law administered by the commission;
             (3)  a person that owns more than a 10 percent interest
in an entity that has a significant financial interest in the
lottery or in any other activity regulated under a law administered
by the commission;
             (4)  a political committee that is directly
established, administered, or controlled wholly or partly by a
person that has a significant financial interest in the lottery or
in any other activity regulated under a law administered by the
commission; or
             (5)  a person who, within the two years preceding the
date of the gift or contribution, won a lottery prize exceeding $600
in amount or value.
       (b)  A person may not make a gift or political contribution
to a person known by the actor to be a commission member, the
executive director, or an employee of the commission, if the actor:
             (1)  has a significant financial interest in the
lottery or in any other activity regulated under a law administered
by the commission;
             (2)  is related in the first degree of consanguinity or
affinity to a person that has a significant financial interest in
the lottery or in any other activity regulated under a law
administered by the commission;
             (3)  owns more than a 10 percent interest in an entity
that has a significant financial interest in the lottery or in any
other activity regulated under a law administered by the
commission;
             (4)  is a political committee that is directly
established, administered, or controlled wholly or partly by a
person that has a significant financial interest in the lottery or
in any other activity regulated under a law administered by the
commission; or
             (5)  within the two years preceding the date of the gift
or contribution, won a lottery prize exceeding $600 in amount or
value.
       (c)  A person commits an offense if the person violates this
section. An offense under this section is a Class A misdemeanor.
       Sec. 2004.116.  DIVISIONS.  (a)  The commission shall
establish separate divisions to oversee and regulate:
             (1)  bingo;
             (2)  the state lottery;
             (3)  video lottery;
             (4)  combative sports; and
             (5)  pari-mutuel racing.
       (b)  To facilitate the operations of the commission or a
division of the commission, the commission or executive director
may delegate to a division or a division director a specific power
or duty given to the commission or executive director under this
chapter or other law.
       (c)  A division director shall, at the request of the
executive commissioner, assist in the development of rules and
policies for the operation and provision of a division of the
commission. The division director:
             (1)  acts on behalf of the executive director in
performing the delegated function; and
             (2)  reports to the executive director regarding the
delegated function and any matter affecting commission programs and
operations.
       Sec. 2004.117.  RESTRICTIONS ON EMPLOYMENT.  (a)  The
commission may not employ or continue to employ a person who owns a
financial interest in:
             (1)  a bingo commercial lessor, bingo distributor, or
bingo manufacturer;
             (2)  a lottery sales agency or a lottery operator;
             (3)  any video lottery activity regulated under
Subchapter K, Chapter 466, Government Code, or a person licensed,
registered, or approved under that subchapter;
             (4)  combative sports regulated under Chapter 2052; or
             (5)  pari-mutuel wagering regulated under the Texas
Racing Act (Article 179e, Vernon's Texas Civil Statutes).
       (b)  The commission may not employ or continue to employ a
person who is a spouse, child, brother, sister, or parent residing
as a member of the same household in the principal place of
residence of a person who is subject to a disqualification
prescribed by Subsection (a).
       (c)  In employing the executive director and other
employees, the commission shall strive to reflect the diversity of
the population of the state as regards race, color, handicap, sex,
religion, age, and national origin.
[Sections 2004.118-2004.150 reserved for expansion]
SUBCHAPTER D. PUBLIC PARTICIPATION AND COMPLAINT PROCEDURES
       Sec. 2004.151.  PUBLIC INTEREST INFORMATION. (a)  The
commission shall prepare and disseminate consumer information that
describes the regulatory functions of the commission and the
procedures by which consumer complaints are filed with and resolved
by the commission.
       (b)  The commission shall make the information available to
the public and appropriate state agencies.
       Sec. 2004.152.  COMPLAINTS. (a)  The commission by rule
shall establish methods by which consumers and service recipients
are notified of the name, mailing address, and telephone number of
the commission for the purpose of directing complaints to the
commission. The commission may provide for that notice:
             (1)  on each form, application, or written contract for
services of a person regulated under a law administered by the
commission;
             (2)  on a sign prominently displayed in the place of
business of each person regulated under a law administered by the
commission; or
             (3)  in a bill for service provided by a person
regulated under a law administered by the commission.
       (b)  The commission shall list with its regular telephone
number any toll-free telephone number established under other state
law that may be called to present a complaint about a person
regulated under a law administered by the commission.
       Sec. 2004.153.  RECORDS OF COMPLAINTS. (a) The commission
shall maintain a system to promptly and efficiently act on
complaints filed with the commission. The commission shall
maintain:
             (1)  information about the parties to the complaint and
the subject matter of the complaint;
             (2)  a summary of the results of the review or
investigation of the complaint; and
             (3)  information about the disposition of the
complaint.
       (b)  The commission shall make information available
describing its procedures for complaint investigation and
resolution.
       (c)  The commission shall periodically notify the parties of
the status of the complaint until final disposition of the
complaint.
       Sec. 2004.154.  GENERAL RULES REGARDING COMPLAINT
INVESTIGATION AND DISPOSITION. The commission shall adopt rules
concerning the investigation of a complaint filed with the
commission. The rules must:
             (1)  distinguish between categories of complaints;
             (2)  ensure that complaints are not dismissed without
appropriate consideration;
             (3)  require that the commission be advised of a
complaint that is dismissed and that a letter be sent to the person
who filed the complaint explaining the action taken on the
dismissed complaint;
             (4)  ensure that the person who files a complaint has an
opportunity to explain the allegations made in the complaint; and
             (5)  prescribe guidelines concerning the categories of
complaints that require the use of a private investigator and the
procedures for the commission to obtain the services of a private
investigator.
       Sec. 2004.155.  DISPOSITION OF COMPLAINT. (a) The
commission shall:
             (1)  dispose of each complaint in a timely manner; and
             (2)  establish a schedule for conducting each phase of
a complaint that is under the control of the commission not later
than the 30th day after the date the commission receives the
complaint.
       (b)  Each party shall be notified of the projected time
requirements for pursuing the complaint. The commission shall
notify each party to the complaint of any change in the schedule
established under Subsection (a)(2) not later than the seventh day
after the date the change is made.
       (c)  The executive director shall notify the commission of a
complaint that is not resolved within the time prescribed by the
commission for resolving the complaint.
       Sec. 2004.156.  PUBLIC PARTICIPATION. (a) The commission
shall develop and implement policies that provide the public with a
reasonable opportunity to appear before the commission and to speak
on any issue under the commission's jurisdiction.
       (b)  The commission shall prepare and maintain a written plan
that describes how a person who does not speak English may be
provided reasonable access to the commission's programs.
       Sec. 2004.157.  INFORMAL SETTLEMENT CONFERENCE. The
commission shall establish guidelines for an informal settlement
conference related to a complaint filed with the commission.
       SECTION 2.02.  Section 47.01, Penal Code, is amended by
amending Subdivisions (4) and (9) and adding Subdivision (10) to
read as follows:
             (4)  "Gambling device" means any device:
                   (A)  on which a game or other activity can be
played or conducted for consideration; and
                   (B)  that is designed, constructed, adapted, or
maintained to afford a user of the device an opportunity to obtain a
thing of value based solely or partially on chance [electronic,
electromechanical, or mechanical contrivance not excluded under
Paragraph (B) that for a consideration affords the player an
opportunity to obtain anything of value, the award of which is
determined solely or partially by chance, even though accompanied
by some skill, whether or not the prize is automatically paid by the
contrivance. The term:
                   [(A)  includes, but is not limited to, gambling
device versions of bingo, keno, blackjack, lottery, roulette, video
poker, or similar electronic, electromechanical, or mechanical
games, or facsimiles thereof, that operate by chance or partially
so, that as a result of the play or operation of the game award
credits or free games, and that record the number of free games or
credits so awarded and the cancellation or removal of the free games
or credits; and
                   [(B)  does not include any electronic,
electromechanical, or mechanical contrivance designed, made, and
adapted solely for bona fide amusement purposes if the contrivance
rewards the player exclusively with noncash merchandise prizes,
toys, or novelties, or a representation of value redeemable for
those items, that have a wholesale value available from a single
play of the game or device of not more than 10 times the amount
charged to play the game or device once or $5, whichever is less].
             (9)  "Thing of value" means any property, money, right,
privilege, or other benefit, including a representation of value
redeemable for any property, money, right, privilege, or other
benefit [but does not include an unrecorded and immediate right of
replay not exchangeable for value].
             (10)  "Device" includes all or part of an operable or
inoperable mechanical, electronic, or electromechanical
contrivance, machine, or apparatus.
       SECTION 2.03.  Section 47.02(c), Penal Code, is amended to
read as follows:
       (c)  It is a defense to prosecution under this section that
the actor reasonably believed that the conduct:
             (1)  was permitted under Chapter 2001, Occupations
Code;
             (2)  was permitted under Chapter 2002, Occupations
Code;
             (3)  consisted entirely of participation in the state
lottery or video lottery authorized by the State Lottery Act
(Chapter 466, Government Code);
             (4)  was permitted under the Texas Racing Act (Article
179e, Vernon's Texas Civil Statutes); or
             (5)  consisted entirely of participation in a drawing
for the opportunity to participate in a hunting, fishing, or other
recreational event conducted by the Parks and Wildlife Department.
       SECTION 2.04.  Section 47.06(e), Penal Code, is amended to
read as follows:
       (e)  An offense under this section is a felony of the third
degree [Class A misdemeanor].
       SECTION 2.05.  Section 47.09(a), Penal Code, is amended to
read as follows:
       (a)  It is a defense to prosecution under this chapter that
the conduct:
             (1)  was authorized under:
                   (A)  Chapter 2001, Occupations Code (Bingo
Enabling Act);
                   (B)  Chapter 2002, Occupations Code (Charitable
Raffle Enabling Act); or
                   (C)  the Texas Racing Act (Article 179e, Vernon's
Texas Civil Statutes);
             (2)  consisted entirely of participation in the state
lottery or video lottery authorized by Chapter 466, Government
Code; or
             (3)  was a necessary incident to the operation of the
state lottery or video lottery and was directly or indirectly
authorized by[:
                   [(A)]  Chapter 466, Government Code[;
                   [(B)  the lottery division of the Texas Lottery
Commission;
                   [(C)the Texas Lottery Commission; or
                   [(D)  the director of the lottery division of the
Texas Lottery Commission].
       SECTION 2.06.  Chapter 47, Penal Code, is amended by adding
Section 47.091 to read as follows:
       Sec. 47.091.  DEFENSES FOR CERTAIN AMUSEMENT DEVICES.  (a)  
It is a defense to prosecution under Section 47.02 that the conduct
consists entirely of the use of a gambling device in which:
             (1)  skill is the predominate requirement for the user
to win or be awarded a thing of value; and
             (2)  the user may not win or be awarded a thing of value
for playing or using the device other than:
                   (A)  noncash merchandise available only on the
premises where the device is located; or
                   (B)  a ticket, coupon, or other representation of
value redeemable only on the premises where the device is located
for noncash merchandise.
       (b)  For purposes of Subsection (a)(2):
             (1)  the noncash merchandise or representation of value
redeemable for noncash merchandise that may be won or awarded for a
single play of a game or activity on the device may not have a
wholesale value of more than 10 times the amount charged for a
single play or $5, whichever is less; and
             (2)  an item of noncash merchandise that may be won or
awarded for playing or using the device or for which a person may
redeem one or more tickets, coupons, or other representations of
value won or awarded for playing or using the device may not have a
wholesale value of more than $50.
       (c)  It is a defense to prosecution under Section 47.02 that:
             (1)  the conduct consists entirely of the use of a
gambling device for which the user of the device may win or be
awarded only the opportunity to continue playing the game or
conducting an activity on the device; and
             (2)  the opportunity to continue is not exchangeable
for another thing of value.
       (d)  It is a defense to prosecution under Section 47.03,
47.04, or 47.06 that the conduct consists of or is a necessary
incident to offering, using, or maintaining one or more gambling
devices used exclusively for conduct for which Subsection (a) or
(c) provides a defense to a person using the device, including the
manufacturing, transporting, storing, or repairing of such a
device.
       (e)  In this section, "noncash merchandise" does not
include:
             (1)  cash;
             (2)  an item of cash  equivalent, including a check,
money order, cashier's check, or traveler's check; or
             (3)  a gift certificate, gift card, coupon, voucher, or
other item that entitles the bearer to receive money or any other
thing of value at a location other than the premises where the
gambling device is located.
       SECTION 2.07.  Chapter 47, Penal Code, is amended by adding
Section 47.095 to read as follows:
       Sec. 47.095.  INTERSTATE OR FOREIGN COMMERCE DEFENSE.  It is
a defense to prosecution under this chapter that a person sells,
leases, transports, possesses, stores, or manufactures a gambling
device with the authorization of the Texas Lottery Commission or
the Texas Gaming and Boxing Commission under Chapter 466,
Government Code.
       SECTION 2.08.  The governor shall make the initial
appointments to the Texas Gaming and Boxing Commission not later
than January 1, 2008. In making the initial appointments to the
Texas Gaming and Boxing Commission, the governor shall designate
two members for terms expiring in 2009, two members for terms
expiring in 2011, and two members for terms expiring in 2013.
       SECTION 2.09.  Section 47.02(e), Penal Code, is repealed.
       SECTION 2.10.  The change in law made by this article applies
only to an offense committed on or after the effective date of this
article.  An offense committed before the effective date of this
article is covered by the law in effect when the offense was
committed, and the former law is continued in effect for that
purpose. For purposes of this section, an offense was committed
before the effective date of this article if any element of the
offense was committed before that date.
       SECTION 2.11.  This article takes effect on the date the
constitutional amendment proposed by the 80th Legislature, Regular
Session, 2007, authorizing the operation of video lottery games at
racetracks and on certain Indian lands to provide additional money
to fund governmental programs is approved by the voters. If that
amendment is not approved by the voters, this article has no effect.
ARTICLE 3.  TRANSFER OF POWERS AND DUTIES OF OTHER STATE AGENCIES TO
TEXAS GAMING AND BOXING COMMISSION
       SECTION 3.01.  Sections 466.002(1) and (3), Government Code,
are amended to read as follows:
             (1)  "Commission" means the Texas Gaming and Boxing
[Lottery] Commission.
             (5-a) [(3)]  "Division" means the state lottery
division established by the commission under Chapter 2004,
Occupations Code [467].
       SECTION 3.02.  Section 2001.002(8), Occupations Code, is
amended to read as follows:
             (8)  "Commission" means the Texas Gaming and Boxing
[Lottery] Commission.
       SECTION 3.03.  Sections 2052.002(5), (7), (9), and (20),
Occupations Code, are amended to read as follows:
             (5)  "Commission" means the Texas Gaming and Boxing
Commission [of Licensing and Regulation].
             (7)  "Division" ["Department"] means the combative
sports division of the commission [Texas Department of Licensing
and Regulation].
             (9)  "Executive director" means the executive director
of the commission [department] or the executive director's
designated representative.
             (20)  "Ringside physician" means an individual
licensed to practice medicine in this state who is registered with
the division [department].
       SECTION 3.04.  Section 2052.051, Occupations Code, is
amended to read as follows:
       Sec. 2052.051.  ADMINISTRATION OF CHAPTER.  The commission
[department] shall administer this chapter.
       SECTION 3.05.  Section 2052.052(b), Occupations Code, is
amended to read as follows:
       (b)  The commission may adopt rules:
             (1)  governing boxing, kickboxing, martial arts, or
mixed martial arts contests and exhibitions;
             (2)  establishing reasonable qualifications for an
applicant seeking a license or registration from the division
[department] under this chapter;
             (3)  recognizing a sanction, medical suspension, or
disqualification of a licensee or registrant by a combative sports
authority in any state, provided that if licensure or registration
is denied based on those actions, an applicant has an opportunity
for a hearing as prescribed by rule;
             (4)  establishing practice requirements or specialty
certifications that a person licensed to practice medicine in this
state must meet to register as a ringside physician;
             (5)  requiring a contestant to present with an
application for licensure or license renewal documentation of
recent blood test results that demonstrate whether the contestant
is free from hepatitis B virus, hepatitis C virus, human
immunodeficiency virus, and any other communicable disease
designated by commission rule and providing that a contestant's
failure to provide the required blood test results disqualifies the
contestant;
             (6)  providing that to participate in any event a
contestant must be free of hepatitis B virus, hepatitis C virus,
human immunodeficiency virus, and any other communicable disease
designated by rule;
             (7)  requiring that a contestant present with an
application for licensure or license renewal documentation of the
results of a physical examination, including an ophthalmologic
examination, and providing for disqualification of a contestant who
is determined by an examining physician to be unfit;
             (8)  establishing additional responsibilities for
promoters; and
             (9)  governing regulated amateur events.
       SECTION 3.06.  Section 2052.055(a), Occupations Code, is
amended to read as follows:
       (a)  The presiding officer of the commission, with the
commission's approval, may appoint a medical advisory committee to
advise the division [department] concerning health issues for
combative sports event contestants.
       SECTION 3.07.  Section 2052.109(c), Occupations Code, is
amended to read as follows:
       (c)  A company that issues a bond shall notify the division
[department] in writing of the cancellation of the bond not later
than the 30th day before the date on which the bond is canceled.
       SECTION 3.08.  Section 2052.114(b), Occupations Code, is
amended to read as follows:
       (b)  The holder of a license, registration, or permit may
renew the license, registration, or permit by paying a renewal fee
and complying with other renewal requirements prescribed by
division [department] rule before the expiration date. The
division [department] shall issue a renewal certificate to the
holder at the time of renewal.
       SECTION 3.09.  Sections 2052.152(a) and (c), Occupations
Code, are amended to read as follows:
       (a)  A person on whom a tax is imposed under Section
2052.151, not later than three business days after the end of the
event or telecast for which the tax is due, shall submit to the
division [department] a verified report on a form acceptable to the
division [department] stating:
             (1)  the number of tickets sold to the event;
             (2)  the ticket prices charged;
             (3)  the gross price charged for the sale or lease of
broadcasting, television, and motion picture rights without any
deductions for commissions, brokerage fees, distribution fees,
advertising, or other expenses or charges; and
             (4)  the amount of gross receipts obtained from the
event.
       (c)  The division [department] may audit a report filed under
Subsection (b).
       SECTION 3.10.  Section 2052.302(b), Occupations Code, is
amended to read as follows:
       (b)  The promoter shall surrender any purse or funds withheld
as provided by Subsection (a) to the executive director on demand.
Not later than the fifth working day after the event, the division
[department] shall notify in writing the promoter and any person
from whom a sum was withheld of the date of a hearing to determine
whether all or part of the purse or funds withheld should be
forfeited to the state. The hearing must be scheduled for a date
not later than the 10th day after the date of the notice. Not later
than the 10th day after the date of the hearing, the executive
director shall enter an order with findings of fact and conclusions
of law determining whether all or part of the purse or funds should
be forfeited. Any funds not forfeited shall be distributed to the
persons entitled to the funds.
       SECTION 3.11.  Section 2052.303(b), Occupations Code, is
amended to read as follows:
       (b)  The attorney general or the commission [department] may
file a civil suit to:
             (1)  assess and recover a civil penalty under
Subsection (a); or
             (2)  enjoin a person who violates or threatens to
violate this chapter or a rule adopted under this chapter from
continuing the violation or threat.
       SECTION 3.12.  Sections 1.03(3) and (5), Texas Racing Act
(Article 179e, Vernon's Texas Civil Statutes), are amended to read
as follows:
             (3)  "Commission" means the Texas Gaming and Boxing
[Racing] Commission.
             (5)  "Executive secretary" means the executive
director [secretary] of the Texas Gaming and Boxing [Racing]
Commission.
       SECTION 3.13.  The heading to Article 2, Texas Racing Act
(Article 179e, Vernon's Texas Civil Statutes), is amended to read
as follows:
ARTICLE 2. TEXAS GAMING AND BOXING [RACING] COMMISSION
       SECTION 3.14.  Section 3.09(b), Texas Racing Act (Article
179e, Vernon's Texas Civil Statutes), is amended to read as
follows:
       (b)  The commission shall deposit the money it collects under
this Act in the State Treasury to the credit of a special fund to be
known as the Texas Racing [Commission] fund. The Texas Racing
[Commission] fund may be appropriated only for the administration
and enforcement of this Act. Any unappropriated money remaining in
that special fund at the close of each fiscal biennium shall be
transferred to the General Revenue Fund and may be appropriated for
any legal purpose. The legislature may also appropriate money from
the General Revenue Fund for the administration and enforcement of
this Act. Any amount of general revenue appropriated for the
administration and enforcement of this Act in excess of the
cumulative amount deposited in the Texas Racing [Commission] fund
shall be reimbursed from the Texas Racing [Commission] fund not
later than one year after the date on which the general revenue
funds are appropriated, with 12 percent interest per year until
August 31, 1993, and 6 3/4 percent interest thereafter with all
payments first attributable to interest.
       SECTION 3.15.  Section 6.091(a), Texas Racing Act (Article
179e, Vernon's Texas Civil Statutes), is amended to read as
follows:
       (a)  An association shall distribute from the total amount
deducted as provided by Sections 6.08(a) and 6.09(a) of this Act
from each simulcast pari-mutuel pool and each simulcast
cross-species pool the following shares:
             (1)(A)  until January 1, 1999, an amount equal to 0.25
percent of each simulcast pari-mutuel pool and each simulcast
cross-species simulcast pool as the amount set aside to reimburse
the general revenue fund for amounts that are appropriated for the
administration and enforcement of this Act and that are in excess of
the cumulative amount of funds deposited in the Texas Racing
[Commission] fund, until the excess amount and interest on the
excess amount are fully reimbursed;
                   (B)  an amount equal to one percent of each
simulcast pool as the amount set aside for the state; and
                   (C)  an amount equal to 1.25 percent of each
cross-species simulcast pool as the amount set aside for the state;
             (2)  an amount equal to 0.25 percent of each pool set
aside to reimburse the general revenue fund for amounts that are
appropriated for the administration and enforcement of this Act and
that are in excess of the cumulative amount of funds deposited in
the Texas Racing [Commission] fund, until the excess amount and
interest on the excess amount are fully reimbursed;
             (3)  if the association is a horse racing association,
an amount equal to one percent of a multiple two wagering pool or
multiple three wagering pool as the amount set aside for the
Texas-bred program to be used as provided by Section 6.08(f) of this
Act;
             (4)  if the association is a greyhound association, an
amount equal to one percent of a multiple two wagering pool or a
multiple three wagering pool as the amount set aside for the
Texas-bred program for greyhound races, to be distributed and used
in accordance with rules of the commission adopted to promote
greyhound breeding in this state; and
             (5)  the remainder as the amount set aside for purses,
expenses, the sending association, and the receiving location
pursuant to a contract approved by the commission between the
sending association and the receiving location.
       SECTION 3.16.  The following are repealed:
             (1)  Sections 2.01-2.05, Texas Racing Act (Article
179e, Vernon's Texas Civil Statutes);
             (2)  Sections 2.073-2.11, Texas Racing Act (Article
179e, Vernon's Texas Civil Statutes); and
             (3)  Sections 6.093(a) and 18.01(a), Texas Racing Act
(Article 179e, Vernon's Texas Civil Statutes).
       SECTION 3.17.  (a) On September 1, 2008, or an earlier date
specified in the transition plan required under Section 3.19 of
this article, the following powers, duties, functions, programs,
and activities are transferred to the Texas Gaming  and Boxing
Commission:
             (1)  all powers, duties, functions, programs, and
activities related to administrative support services, such as
strategic planning and evaluation, audit, legal, human resources,
information resources, accounting, purchasing, financial
management, and contract management services, of a state agency or
entity abolished by Section 3.22 of this article;
             (2)  all powers, duties, functions, programs, and
activities of the Texas Lottery Commission related to:
                   (A)  the operation of the state lottery or video
lottery under Chapter 466, Government Code; and
                   (B)  the regulation of bingo under Chapter 2001,
Occupations Code;
             (3)  all powers, duties, functions, programs, and
activities of the Texas Racing Commission under the Texas Racing
Act (Article 179e, Vernon's Texas Civil Statutes); and
             (4)  all powers, duties, functions, programs, and
activities of the Texas Commission of Licensing and Regulation and
the Texas Department of Licensing and Regulation under Chapter
2052, Occupations Code.
       (b)  On the date specified by Subsection (a) of this section:
             (1)  all obligations and contracts of a state agency or
entity that are related to a power, duty, function, program, or
activity transferred from the agency or entity under Subsection (a)
of this section are transferred to the Texas Gaming and Boxing
Commission;
             (2)  all property and records in the custody of a state
agency or entity that are related to a power, duty, function,
program, or activity transferred from the agency or entity under
Subsection (a) of this section and all funds appropriated by the
legislature for the power, duty, function, program, or activity
shall be transferred to the Texas Gaming and Boxing Commission; and
             (3)  all complaints, investigations, or contested
cases that are pending before a state agency or entity or the
governing body of the agency or entity and that are related to a
power, duty, function, program, or activity transferred from the
agency or entity under Subsection (a) of this section are
transferred without change in status to the Texas Gaming and Boxing
Commission.
       (c)  A rule or form adopted by a state agency or entity that
relates to a power, duty, function, program, or activity
transferred from the agency or entity under Subsection (a) of this
section is a rule or form of the Texas Gaming and Boxing Commission
and remains in effect until altered by the commission.
       (d)  A reference in law to a state agency or entity abolished
by Section 3.22 of this article, or to the governing body of the
agency or entity, that relates to a power, duty, function, program,
or activity transferred under Subsection (a) of this section means
the Texas Gaming and Boxing Commission.
       (e)  A license, permit, or certification in effect that was
issued by a state agency or entity abolished by Section 3.22 of this
article or described in Subsection (a)(4) of this section and that
relates to a power, duty, function, program, or activity
transferred under Subsection (a) of this section is continued in
effect as a license, permit, or certification of the Texas Gaming
and Boxing Commission.
       SECTION 3.18.  (a)  The Texas Gaming and Boxing Commission
Transition Legislative Oversight Committee is created to
facilitate the transfer of powers, duties, functions, programs, and
activities between the state's gaming agencies and the Texas Gaming
and Boxing Commission as provided by this article with a minimal
negative effect on the operation of those regulated activities in
this state.
       (b)  The committee is composed of seven members, as follows:
             (1)  two members of the senate, appointed by the
lieutenant governor not later than December 1, 2007;
             (2)  two members of the house of representatives,
appointed by the speaker of the house of representatives not later
than December 1, 2007; and
             (3)  three members of the public, appointed by the
governor not later than December 1, 2007.
       (c)  Once the other members of the committee have been
appointed, the executive director of the Texas Gaming and Boxing
Commission serves as an ex officio member of the committee.
       (d)  An appointed member of the committee serves at the
pleasure of the appointing official.
       (e)  The lieutenant governor and the speaker of the house of
representatives shall alternate designating a presiding officer
from among their respective appointments. The speaker of the house
of representatives shall make the first appointment after the
effective date of this section.
       (f)  A member of the committee may not receive compensation
for serving on the committee but is entitled to reimbursement for
travel expenses incurred by the member while conducting the
business of the committee as provided by the General Appropriations
Act.
       (g)  The committee shall:
             (1)  facilitate the transfer of powers, duties,
functions, programs, and activities between the state's gaming
agencies and the Texas Gaming and Boxing Commission as provided by
this article with a minimal negative effect on the gaming
activities regulated in this state;
             (2)  with assistance from the Texas Gaming and Boxing
Commission and the gaming agencies listed in Section 3.17(a) of
this article, advise the executive commissioner of the Texas Gaming
and Boxing Commission concerning:
                   (A)  the powers, duties, functions, programs, and
activities transferred under this article and the funds and
obligations that are related to the powers, duties, functions,
programs, or activities; and
                   (B)  the transfer of the powers, duties,
functions, programs, activities, records, property, funds,
obligations, and employees by the entities as required by Section
3.17 of this article;
             (3)  meet at the call of the presiding officer;
             (4)  research, take public testimony, and issue reports
on other appropriate issues or specific issues requested by the
lieutenant governor, speaker, or governor; and
             (5)  review specific recommendations for legislation
proposed by the Texas Gaming and Boxing Commission or the other
agencies.
       (h)  The committee may request reports and other information
from the Texas Gaming and Boxing Commission, other state agencies,
and the attorney general relating to gaming in this state and other
appropriate issues.
       (i)  The committee shall use existing staff of the senate,
the house of representatives, and the Texas Legislative Council to
assist the committee in performing its duties under this section.
       (j)  Chapter 551, Government Code, applies to the committee.
       (k)  The committee shall report to the governor, lieutenant
governor, and speaker of the house of representatives not later
than November 15 of each even-numbered year. The report must
include:
             (1)  identification of significant issues within
gaming regulation, with recommendations for action;
             (2)  an analysis of the effectiveness and efficiency of
gaming regulation, with recommendations for any necessary
research; and
             (3)  recommendations for legislative action.
       SECTION 3.19.  (a) The transfer of powers, duties,
functions, programs, and activities under Section 3.17 of this
article to the Texas Gaming and Boxing Commission must be
accomplished in accordance with a schedule included in a transition
plan developed by the executive commissioner of the Texas Gaming
and Boxing Commission and submitted to the governor and the
Legislative Budget Board not later than September 1, 2007. The
executive commissioner shall provide to the governor and the
Legislative Budget Board transition plan status reports and updates
on at least a quarterly basis following submission of the initial
transition plan. The transition plan must be made available to the
public.
       (b)  Not later than March 1, 2007, the Texas Gaming and
Boxing Commission shall hold a public hearing and accept public
comment regarding the transition plan required to be developed by
the executive commissioner of the Texas Gaming and Boxing
Commission under Subsection (a) of this section.
       (c)  In developing the transition plan, the executive
commissioner of the Texas Gaming and Boxing Commission shall hold
public hearings in various geographic areas in this state before
submitting the plan to the governor and the Legislative Budget
Board as required by this section.
       SECTION 3.20.  An action brought or proceeding commenced
before the date of a transfer prescribed by this article in
accordance with the transition plan required under Section 3.19 of
this article, including a contested case or a remand of an action or
proceeding by a reviewing court, is governed by the laws and rules
applicable to the action or proceeding before the transfer.
       SECTION 3.21.  (a) The Texas Gaming and Boxing Commission
shall implement the powers, duties, functions, programs, and
activities assigned to the commission under this article in
accordance with a work plan designed by the commission to ensure
that the transfer of gaming regulation in this state is
accomplished in a careful and deliberative manner.
       (b)  A work plan designed by the commission under this
section must include the following phases:
             (1)  a planning phase, during which the commission will
focus on and stabilize the organization of the agency's powers,
duties, functions, programs, and activities, and which must
include:
                   (A)  initiation of recommendations made by the
Texas Gaming and Boxing Commission Transition Legislative
Oversight Committee;
                   (B)  creation of interagency and intra-agency
steering committees;
                   (C)  development of global visions, goals, and
organizational strategies; and
                   (D)  development of communications and risk
management plans;
             (2)  an integration phase, during which the commission
will identify opportunities and problems and design customized
solutions for those problems, and which must include:
                   (A)  identification of key issues related to costs
or legal requirements for other commission activities;
                   (B)  planning for daily operations; and
                   (C)  validation of fiscal and program synergies;
             (3)  an optimization phase, during which the commission
will complete and expand on the initial transitions, and which must
include:
                   (A)  optimization of initial implementation
initiatives;
                   (B)  use of enterprise teaming operations;
                   (C)  building infrastructures to support and
facilitate changes in gaming regulation and oversight; and
                   (D)  identification and use of beneficial assets
management and facilities approaches; and
             (4)  a transformation phase, during which the
commission will continue implementing initial and additional
changes in gaming regulation and oversight, and which must include
implementation of changes in agency management activities.
       SECTION 3.22.  (a) The Texas Lottery Commission and the
Texas Racing Commission are abolished on the date on which their
respective powers, duties, functions, programs, and activities are
transferred under Section 3.17 of this article, and after that date
a reference in any law to the Texas Lottery Commission or to the
Texas Racing Commission means the Texas Gaming and Boxing
Commission.
       (b)  The abolition of a state agency or entity listed in
Subsection (a) of this section and the transfer of its powers,
duties, functions, programs, activities, obligations, rights,
contracts, records, property, funds, and employees as provided by
this article do not affect or impair an act done, any obligation,
right, order, permit, certificate, rule, criterion, standard, or
requirement existing, or any penalty accrued under former law, and
that law remains in effect for any action concerning those matters.
       SECTION 3.23.  (a) Except as provided by Subsection (b),
Sections 3.01 through 3.16 of this article take effect on the date
the Texas Lottery Commission and the Texas Racing Commission are
abolished under Section 3.22 of this article.
       (b)  Sections 3.17 through 3.22 of this article and this
section take effect on the date the amendment adding Section 47-a,
Article III, Texas Constitution, authorizing the operation of video
lottery games at racetracks and on certain Indian lands to provide
additional money to fund governmental programs proposed by the 80th
Legislature, Regular Session, 2007, becomes effective. If that
amendment is not approved by the voters, this article has no effect.