I am very pleased to report that the General Assembly has ratified S.B. 1245 (Retainage Payments/Construction
Contracts). The bill now goes to the Governor’s office for his signature, which will occur within the next few weeks,
at which point the bill becomes enacted. The new law will become effective on January 1, 2008 and applies to
contracts entered into on or after that date.

This is a very satisfying development in my life and professional practice. The idea of initiating this legislation and developing the
concepts through an intense and inclusive study sponsored by the N.C.Dept. of Administration was originated during a meeting
of subcontractors in my conference room in 2000. Although we encountered numerous obstacles and delays, the bill is ratified
and will ultimately become law. This is the most significant payment legislation for contractors in at least 15 years.

As I have written previously, the bill preserves the four essential principles on retainage reform that we have advanced since that
meeting in 2000.

1. Retainage provisions should be uniform throughout all public construction: state to local;

2. Retainage should be capped at 5% until 50% completion, at which point retainage should cease;

3. All retainage should be paid by a date certain based upon completion of the project

4. The existence of disputes on additive change orders and third party claims should not be used as a basis for continuing
to hold retainage.

I hope that the membership of your Association will benefit from this legislation as much as I anticipate. Please feel free to call me if you have
any questions or comments.

Sincerely yours,

Henry Jones

Jordan Price Wall Gray Jones & Carlton