866273--9/28/2010--MATRIX_SERVICE

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The following risk factors should be considered with the other information included in this Annual Report on Form 10-K. As we operate in a continuously changing environment, other risk factors may emerge which could have material adverse effects on our results of operations, financial condition and cash flow. Risk Factors Related to Our Business Our reputation and our ability to do business may be impaired by the corrupt behavior of certain of our employees. Unsatisfactory safety performance can affect customer relationships, result in higher operating costs, negatively impact employee morale and result in higher employee turnover. Demand for our products and services is cyclical and is vulnerable to the level of capital and maintenance spending of our customers and to downturns in the industries and markets we serve as well as conditions in the general economy. The lingering economic weakness has adversely impacted us and could continue to adversely impact us in the future. Our results of operations depend upon the award of new contracts and the timing of those awards. Our credit facility imposes restrictions that may limit business alternatives. We face substantial competition in each of our business segments, which may have a material adverse effect on our business. Our backlog is subject to unexpected fluctuations, adjustments and cancellations and does not include the full value of our long-term maintenance contracts, and therefore, may not be a reliable indicator of our future earnings. The loss of one or more of our significant customers could adversely affect us. The terms of our contracts could expose us to unforeseen costs and costs not within our control, which may not be recoverable and could adversely affect our results of operations and financial condition. We may incur significant costs in providing services in excess of original project scope without having an approved change order. Our profitability could be negatively impacted if we are not able to maintain adequate utilization of our workforce. Our use of percentage-of-completion accounting for fixed-price contracts and our reporting of profits for cost-plus contracts prior to contract completion could result in a reduction or elimination of previously reported profits. We are exposed to credit risk from customers. If we experience delays and/or defaults in customer payments, we could suffer liquidity problems or we could be unable to recover all expenditures. Actual results could differ from the estimates and assumptions that we use to prepare our financial statements. An inability to attract and retain qualified personnel, and in particular, engineers, project managers and skilled craft workers, could impact our ability to perform on our contracts, which could harm our business and impair our future revenues and profitability. Work stoppages and other labor problems could adversely affect us. Future events, including those associated with our growth strategy, could negatively affect our liquidity position. There are integration and consolidation risks associated with our acquisition strategy. Future acquisitions may result in significant transaction expenses, unexpected liabilities and risks associated with entering new markets, and we may be unable to profitably operate these businesses. We are involved, and are likely to continue to be involved in legal proceedings, which will increase our costs and, if adversely determined, could have a material effect on our financial condition and results of operations. Our projects expose us to potential professional liability, product liability, warranty and other claims, which could be expensive, damage our reputation and harm our business. We may not be able to obtain or maintain adequate insurance to cover these claims. Employee, subcontractor or partner misconduct or our overall failure to comply with laws or regulations could harm our reputation, damage our relationships with customers, reduce our revenues and profits, and subject us to criminal and civil enforcement actions. We rely on internally and externally developed software applications and systems to support critical functions including project management, estimating, human resources, accounting, and financial reporting. Any sudden loss, disruption or unexpected costs to maintain these systems could significantly increase our operational expense as well as disrupt the management of our business operations. We are susceptible to adverse weather conditions, which may harm our business and financial results. Environmental factors and changes in laws and regulations could increase our costs and liabilities. Earnings for future periods may be affected by impairment charges. Earnings for future periods may be negatively impacted by foreign currency exchange rates We may need to raise additional capital in the future for working capital, capital expenditures and/or acquisitions, and we may not be able to do so on favorable terms or at all, which would impair our ability to operate our business or achieve our growth objectives. Risk Factors Related to Our Common Stock Our common stock, which is listed on the NASDAQ Global Market, has from time-to-time experienced significant price and volume fluctuations. These fluctuations are likely to continue in the future, and our stockholders may not be able to resell their shares of common stock at or above the purchase price paid. Future sales of our common stock may depress our stock price. We may issue additional equity securities, which would lead to dilution of our issued and outstanding stock.

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866273--9/28/2010--MATRIX_SERVICE_CO