Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of August 15,
2016, is by and between EMERGE ENERGY SERVICES LP, a Delaware limited
partnership with offices located at 180 State Street, Suite 225, Southlake,
Texas 76092 (the “Partnership”), and SIG STRATEGIC INVESTMENTS, LLLP (the
“Buyer”).

 

RECITALS

 

A.                                    In connection with the Securities Purchase
Agreement by and among the parties hereto, dated as of August 8, 2016 (the
“Securities Purchase Agreement”), the Partnership has agreed, upon the terms and
subject to the conditions of the Securities Purchase Agreement, to issue and
sell to the Buyer (i) the Series A Preferred Units (as defined in the Securities
Purchase Agreement), which will be convertible into Conversion Units (as defined
in the Securities Purchase Agreement) in accordance with the terms of the LP
Amendment (as defined in the Securities Purchase Agreement) and (ii) the
Warrants (as defined in the Securities Purchase Agreement) which will be
exercisable to purchase Warrant Units (as defined in the Securities Purchase
Agreement) in accordance with the terms of the Warrants.

 

B.                                    To induce the Buyer to consummate the
transactions contemplated by the Securities Purchase Agreement, the Partnership
has agreed to provide certain registration rights under the Securities Act of
1933, as amended, and the rules and regulations thereunder, or any similar
successor statute (collectively, the “1933 Act”), and applicable state
securities laws.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Partnership and the Buyer
hereby agree as follows:

 

1.                                      Definitions.

 

Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.  As used in
this Agreement, the following terms shall have the following meanings:

 

(a)                                 “Affiliate” means, with respect to a
specified Person, directly or indirectly controlling, controlled by, or under
direct or indirect common control with such specified Person.  For the purposes
of this definition, “control” means the power to direct or cause the direction
of the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.

 

(b)                                 “Business Day” means any day other than a
Saturday, Sunday or any other day on which commercial banks in New York, New
York are authorized or required by law to remain closed.

 

(c)                                  “Closing Date” shall have the meaning set
forth in the Securities Purchase Agreement.

 

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(d)                                 “Effective Date” means the date that the
applicable Registration Statement has been declared effective by the SEC.

 

(e)                                  “Effectiveness Deadline” means (i) with
respect to the initial Registration Statement required to be filed pursuant to
Section 2(a), the earlier of the (A) 120th calendar day after the Closing Date
and (B) 2nd Business Day after the date the Partnership is notified (orally or
in writing, whichever is earlier) by the SEC that such Registration Statement
will not be reviewed or will not be subject to further review and (ii) with
respect to any additional Registration Statements that may be required to be
filed by the Partnership pursuant to this Agreement, the earlier of the
(A) 120th calendar day following the date on which the Partnership was required
to file such additional Registration Statement and (B) 2nd Business Day after
the date the Partnership is notified (orally or in writing, whichever is
earlier) by the SEC that such Registration Statement will not be reviewed or
will not be subject to further review.

 

(f)                                   “Holder” means the Buyer or any Affiliate
of the Buyer for so long as the Buyer or such Affiliate is a record holder of
any Registrable Securities.

 

(g)                                  “Person” means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization or a government or any department or agency thereof.

 

(h)                                 “register,” “registered,” and “registration”
refer to a registration effected by preparing and filing one or more
Registration Statements in compliance with the 1933 Act and pursuant to Rule 415
and the declaration of effectiveness of such Registration Statement(s) by the
SEC.

 

(i)                                     “Registrable Securities” means (i) the
Conversion Units, (ii) the Warrant Units beneficially owned by the Buyer or an
Affiliate of the Buyer and (iii) any units or other securities of the
Partnership issued or issuable with respect each of (i) and (ii), including,
without limitation, (1) as a result of any unit split, unit dividend,
recapitalization, exchange or similar event or otherwise and (2) units of the
Partnership into which the Common Units (as defined in the Warrants) are
converted or exchanged and shares of capital stock or other security of a
Successor Entity (as defined in the Warrants) into which the Common Units are
converted or exchanged, in each case, without regard to any limitations on
conversion of the Series A Preferred Units or exercise of the Warrants.

 

(j)                                    “Registration Statement” means a
registration statement or registration statements of the Partnership filed under
the 1933 Act covering Registrable Securities.

 

(k)                                 “Required Registration Amount” means the sum
of (i) 125% of the maximum number of Conversion Units issuable upon conversion
of the Series A Preferred Units as of the Closing Date (without taking into
account any limitations on the conversion of the Series A Preferred Units set
forth in the LP Agreement) and (ii) the maximum number of Warrant Units issued
and issuable pursuant to the Warrants immediately preceding the applicable date
of determination (without taking into account any limitations on the exercise of
the Warrants set forth therein), all subject to adjustment as provided in
Section 2(b) and/or Section 2(d).

 

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(l)                                     “Rule 144” means Rule 144 promulgated by
the SEC under the 1933 Act, as such rule may be amended from time to time, or
any other similar or successor rule or regulation of the SEC that may at any
time permit the Holder to sell securities of the Partnership to the public
without registration.

 

(m)                             “Rule 415” means Rule 415 promulgated by the SEC
under the 1933 Act, as such rule may be amended from time to time, or any other
similar or successor rule or regulation of the SEC providing for offering
securities on a continuous or delayed basis.

 

(n)                                 “SEC” means the United States Securities and
Exchange Commission or any successor thereto.

 

2.                                      Registration.

 

(a)                                 Mandatory Registration.  The Partnership
shall prepare and, as soon as commercially practicable, file with the SEC an
initial Registration Statement on Form S-1 covering the resale of all of the
Registrable Securities, provided that such initial Registration Statement shall
register for resale at least the number of Common Units equal to the Required
Registration Amount as of the date such Registration Statement is initially
filed with the SEC.  Such initial Registration Statement, and each other
Registration Statement required to be filed pursuant to the terms of this
Agreement, shall contain the “Selling Unitholders” and “Plan of Distribution”
sections in substantially the form attached hereto as Exhibit B.  The
Partnership shall use its commercially reasonable efforts to have such initial
Registration Statement, and each other Registration Statement required to be
filed pursuant to the terms of this Agreement, declared effective by the SEC as
soon as practicable, but in no event later than the applicable Effectiveness
Deadline for such Registration Statement.

 

(b)                                 Sufficient Number of Units Registered.  In
the event the number of units available under any Registration Statement is
insufficient to cover all of the Registrable Securities required to be covered
by such Registration Statement, the Partnership shall amend such Registration
Statement (if permissible), or file with the SEC a new Registration Statement
(on the short form available therefor, if applicable), or both, so as to cover
at least the Required Registration Amount as of the Trading Day immediately
preceding the date of the filing of such amendment or new Registration
Statement, in each case, as soon as practicable, but in any event not later than
fifteen (15) days after the necessity therefor arises (but taking account of any
Staff position with respect to the date on which the Staff will permit such
amendment to the Registration Statement and/or such new Registration Statement
(as the case may be) to be filed with the SEC).  The Partnership shall use its
commercially reasonable efforts to cause such amendment to such Registration
Statement and/or such new Registration Statement (as the case may be) to become
effective as soon as practicable following the filing thereof with the SEC, but
in no event later than the applicable Effectiveness Deadline for such
Registration Statement.  For purposes of the foregoing provision, the number of
units available under a Registration Statement shall be deemed “insufficient to
cover all of the Registrable Securities” if at any time during the Registration
Period (as defined below) the number of Common Units available for resale under
the applicable Registration Statement is less than the product determined by
multiplying (i) the Required Registration Amount as of such time by (ii) 0.90. 
The calculation set forth in the foregoing sentence shall be made without regard
to any limitations on exercise of the Warrants

 

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(and such calculation shall assume that the Warrants are then fully exercisable
for Common Units at the then-prevailing applicable Exercise Price).

 

(c)                                  Effect of Failure to Obtain and Maintain
Effectiveness of any Registration Statement.  If (i) a Registration Statement
covering the resale of all of the Registrable Securities required to be covered
thereby (disregarding any reduction pursuant to Section 2(d)) and required to be
filed by the Partnership pursuant to this Agreement is not declared effective by
the SEC on or before the Effectiveness Deadline for such Registration Statement
(an “Effectiveness Failure”) (it being understood that if on the Business Day
immediately following the Effective Date for such Registration Statement the
Partnership shall not have filed a “final” prospectus for such Registration
Statement with the SEC under Rule 424(b) in accordance with
Section 3(b) (whether or not such a prospectus is technically required by such
rule), the Partnership shall be deemed to not have satisfied this clause
(i)(B) and such event shall be deemed to be an Effectiveness Failure),
(ii) other than during an Allowable Grace Period (as defined below), on any day
after the Effective Date of a Registration Statement sales of all of the
Registrable Securities required to be included on such Registration Statement
(disregarding any reduction pursuant to Section 2(d)) cannot be made pursuant to
such Registration Statement (including, without limitation, because of a failure
to keep such Registration Statement effective, a failure to disclose such
information as is necessary for sales to be made pursuant to such Registration
Statement, a suspension or delisting of (or a failure to timely list) the Common
Units on the Principal Market (as defined in the Securities Purchase Agreement),
or a failure to register a sufficient number of Common Units or by reason of a
stop order) or the prospectus contained therein is not available for use for any
reason (a “Maintenance Failure”), or (iii) if after the six month anniversary of
the Closing Date a Registration Statement is not effective for any reason or the
prospectus contained therein is not available for use for any reason, and either
(x) the Partnership fails for any reason to satisfy the requirements of
Rule 144(c)(1), including, without limitation, the failure to satisfy the
current public information requirement under Rule 144(c) or (y) the Partnership
has ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer
in the future, and the Partnership shall fail to satisfy any condition set forth
in Rule 144(i)(2) (a “Current Public Information Failure”) as a result of which
the Holder is unable to sell Registrable Securities without restriction under
Rule 144 (including, without limitation, volume restrictions), then, as partial
relief for the damages to the Holder by reason of any such delay in, or
reduction of, its ability to sell the underlying Common Units (which remedy
shall not be exclusive of any other remedies available at law or in equity), the
Partnership shall pay to the Holder of Registrable Securities relating to such
Registration Statement an amount in cash equal to one percent (1%) of the
aggregate Purchase Price (as such term is defined in the Securities Purchase
Agreement):  (1) on the date of such Effectiveness Failure, Maintenance Failure
or Current Public Information Failure, as applicable, and (2) on every thirty
(30) day anniversary of (I) an Effectiveness Failure until such Effectiveness
Failure is cured; (II) a Maintenance Failure until such Maintenance Failure is
cured; and (III) a Current Public Information Failure until the earlier of
(i) the date such Current Public Information Failure is cured and (ii) such time
that such public information is no longer required pursuant to Rule 144 (in each
case, pro rated for periods totaling less than thirty (30) days).  The payments
to which a Holder shall be entitled pursuant to this Section 2(c) are referred
to herein as “Registration Delay Payments.”  Following the initial Registration
Delay Payment for any particular event or failure (which shall be paid on the
date of such event or failure, as set forth above), without limiting the
foregoing, if an event or failure giving rise to the Registration Delay Payments
is cured prior to any thirty (30)

 

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day anniversary of such event or failure, then such Registration Delay Payment
shall be made on the third (3rd) Business Day after such cure.  In the event the
Partnership fails to make Registration Delay Payments in a timely manner in
accordance with the foregoing, such Registration Delay Payments shall bear
interest at the rate of one percent (1%) per month (prorated for partial months)
until paid in full.  Notwithstanding the foregoing, (i) no Registration Delay
Payments shall be owed to the Holder (other than with respect to a Maintenance
Failure resulting from a suspension or delisting of (or a failure to timely
list) the Common Units on the Principal Market) with respect to any period
during which all of the Holder’s Registrable Securities may be sold by the
Holder without restriction under Rule 144 (including, without limitation, volume
restrictions) and without the need for current public information required by
Rule 144(c)(1) (or Rule 144(i)(2), if applicable) and (ii) no Registration Delay
Payments shall be owed to the Holder to the extent the Holder shall have
received Registration Delay Payments in excess of 10% of the aggregate Purchase
Price of the Holder. For the avoidance of doubt, no more than one Registration
Delay Payment shall be payable by the Partnership at any given time,
notwithstanding that more than one failure giving rise to a Registration Delay
Payment shall have occurred and is continuing (e.g., an Effectiveness Failure
and a Current Public Information Failure continuing simultaneously); provided
that Registration Delay Payments shall continue in accordance with this
Section 2(c) until all failures giving rise to such payments are cured.

 

(d)                                 Offering.  Notwithstanding anything to the
contrary contained in this Agreement, in the event the staff of the SEC (the
“Staff”) or the SEC seeks to characterize any offering pursuant to a
Registration Statement filed pursuant to this Agreement as constituting
an offering of securities by, or on behalf of, the Partnership, or in any other
manner, such that the Staff or the SEC do not permit such Registration Statement
to become effective and used for resales in a manner that does not constitute
such an offering and that permits the continuous resale at the market by the
Holder without being named therein as an “underwriter,” then the Partnership
shall reduce the number of units to be included in such Registration Statement
by the Holder until such time as the Staff and the SEC shall so permit such
Registration Statement to become effective as aforesaid.  In making such
reduction, the Partnership shall reduce the number of units to be included by
the Holder .  In addition, in the event that the Staff or the SEC requires the
Holder to be specifically identified as an “underwriter” in order to permit such
Registration Statement to become effective, and the Holder does not consent to
being so named as an underwriter in such Registration Statement, then the
Partnership shall reduce the total number of Registrable Securities to be
registered on behalf of the Holder, until such time as the Staff or the SEC does
not require such identification or until the Holder accepts such identification
and the manner thereof.  Any reduction pursuant to this paragraph will first
reduce all Registrable Securities other than those issued pursuant to the
Securities Purchase Agreement. In the event of any reduction in Registrable
Securities pursuant to this paragraph, the Holder shall have the right to
require, upon delivery of a written request to the Partnership signed by the
Holder, the Partnership to file a registration statement within twenty (20) days
of such request (subject to any restrictions imposed by Rule 415 or required by
the Staff or the SEC) for resale by the Holder, and the Partnership shall
following such request use its commercially reasonable efforts to cause to be
and keep effective such registration statement in the same manner as otherwise
contemplated in this Agreement for registration statements hereunder, in each
case until such time as: (i) all Registrable Securities held by the Holder have
been registered and sold pursuant to an effective Registration Statement in a
manner acceptable to the Holder or (ii) all Registrable Securities may be resold
by the Holder without restriction (including, without limitation, volume

 

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limitations) pursuant to Rule 144 (taking account of any Staff position with
respect to “affiliate” status) and without the need for current public
information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or
(iii) the Holder agrees to be named as an underwriter in any such Registration
Statement in a manner acceptable to the Holder as to all Registrable Securities
held by the Holder and that have not theretofore been included in a Registration
Statement under this Agreement (it being understood that the special demand
right under this sentence may be exercised by the Holder multiple times and with
respect to limited amounts of Registrable Securities in order to permit the
resale thereof by the Holder as contemplated above).

 

(e)                                  Piggyback Registrations.  Without limiting
any obligation of the Partnership hereunder or under the Securities Purchase
Agreement, if there is not an effective Registration Statement covering all of
the Registrable Securities or the prospectus contained therein is not available
for use and the Partnership shall determine to prepare and file with the SEC a
registration statement relating to an offering for its own account or the
account of others under the 1933 Act (an “Offering”) of any of its equity
securities (other than on Form S-4 or Form S-8 (each as promulgated under the
1933 Act) or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with the Partnership’s unit option or other
employee benefit plans), then the Partnership shall deliver to the Holder a
written notice of such determination and, if within fifteen (15) days after the
date of the delivery of such notice, the Holder shall so request in writing, the
Partnership shall include in such registration statement all or any part of such
Registrable Securities the Holder requests to be registered; provided, however,
the Partnership shall not be required to register any Registrable Securities
pursuant to this Section 2(e) that are eligible for resale pursuant to Rule 144
without restriction (including, without limitation, volume restrictions) and
without the need for current public information required by Rule 144(c)(1) (or
Rule 144(i)(2), if applicable) or that are the subject of a then-effective
Registration Statement. If, in connection with an Offering, the primary managing
underwriter of such Offering shall advise the Partnership that, in its
reasonable opinion, the number of securities requested and otherwise proposed to
be included in such Offering exceeds the number which can be sold in such
offering without an adverse effect on the price, timing or distribution of the
securities to be offered (an “Adverse Effect”), then the Partnership shall
include in such Offering the number of Common Units that such primary managing
underwriter advises the Partnership can be sold without having such Adverse
Effect, with such number to be allocated (i) first to the Partnership and
(ii) second, and if any, the number of included Registrable Securities that, in
the opinion of such primary managing underwriter, can be sold without having
such Adverse Effect.

 

(f)                                   Registration Rights of Other Securities.
So long as any Registrable Securities remain outstanding, Partnership shall not
cause a registration statement relating to the resale of the Partnership’s
equity securities that does not register any Registrable Securities to be
declared effective by the SEC prior to the Effective Date.

 

3.                                      Related Obligations.

 

The Partnership shall use its commercially reasonable efforts to effect the
registration of the Registrable Securities in accordance with the intended
method of disposition thereof, and, pursuant thereto, the Partnership shall have
the following obligations:

 

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(a)                                 The Partnership shall promptly prepare and
file with the SEC a Registration Statement with respect to all the Registrable
Securities and use its commercially reasonable efforts to cause such
Registration Statement to become effective as soon as practicable after such
filing (but in no event later than the Effectiveness Deadline).  Subject to
Allowable Grace Periods, the Partnership shall keep each Registration Statement
effective (and the prospectus contained therein available for use) pursuant to
Rule 415 for resales by the Holder on a delayed or continuous basis at
then-prevailing market prices (and not fixed prices) at all times until the
earlier of (i) the date as of which the Holder may sell all of the Registrable
Securities required to be covered by such Registration Statement (disregarding
any reduction pursuant to Section 2(d)) without restriction pursuant to Rule 144
(including, without limitation, volume restrictions) and without the need for
current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if
applicable) or (ii) the date on which the Holder shall have sold all of the
Registrable Securities covered by such Registration Statement (the “Registration
Period”).  Notwithstanding anything to the contrary contained in this Agreement,
the Partnership shall ensure that, when filed and at all times while effective,
each Registration Statement (including, without limitation, all amendments and
supplements thereto) and the prospectus (including, without limitation, all
amendments and supplements thereto) used in connection with such Registration
Statement (1) shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein, or necessary to make the
statements therein (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading and (2) will disclose
(whether directly or through incorporation by reference to other SEC filings to
the extent permitted) all material information regarding the Partnership and its
securities.  The Partnership shall submit to the SEC, within one (1) Business
Day after the later of the date that the Partnership learns that no review of a
particular Registration Statement will be made by the Staff or that the Staff
has no further comments on a particular Registration Statement (as the case may
be), a request for acceleration of effectiveness of such Registration Statement
to a time and date not later than forty-eight (48) hours after the submission of
such request.  The Partnership shall respond in writing to comments made by the
SEC in respect of a Registration Statement as soon as practicable, but in no
event later than fifteen (15) days after the receipt of comments by or notice
from the SEC that an amendment is required in order for a Registration Statement
to be declared effective.

 

(b)                                 Subject to Section 3(r) of this Agreement,
the Partnership shall prepare and file with the SEC such amendments (including,
without limitation, post-effective amendments) and supplements to each
Registration Statement and the prospectus used in connection with each such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep each such
Registration Statement effective at all times during the Registration Period for
such Registration Statement, and, during such period, comply with the provisions
of the 1933 Act with respect to the disposition of all Registrable Securities of
the Partnership required to be covered by such Registration Statement until such
time as all of such Registrable Securities shall have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in such Registration Statement; provided, however, by 8:30
a.m. (New York time) on the Business Day immediately following each Effective
Date, the Partnership shall file with the SEC in accordance with
Rule 424(b) under the 1933 Act the final prospectus to be used in connection
with sales pursuant to the applicable Registration Statement (whether or not
such a prospectus is technically required by such rule).  In the case of
amendments and supplements to any Registration Statement which

 

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are required to be filed pursuant to this Agreement (including, without
limitation, pursuant to this Section 3(b)) by reason of the Partnership filing a
report on Form 10-Q or Form 10-K or any analogous report under the Securities
Exchange Act of 1934, as amended (the “1934 Act”), the Partnership shall, if
permitted under the applicable rules and regulations of the SEC, have
incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the
same day on which the 1934 Act report is filed which created the requirement for
the Partnership to amend or supplement such Registration Statement.

 

(c)                                  The Partnership shall, during the
Registration Period, (A) permit legal counsel for the Holder to review and
comment upon (i) each Registration Statement at least three (3) Business Days
prior to its filing with the SEC and (ii) all amendments and supplements to each
such Registration Statement (including, without limitation, the prospectus
contained therein) within a reasonable number of days prior to their filing with
the SEC, and (B) not file any Registration Statement or amendment or supplement
thereto in a form to which legal counsel for the Holder reasonably objects. The
Partnership shall promptly furnish to legal counsel for the Holder, without
charge, copies of any correspondence from the SEC or the Staff to the
Partnership or its representatives relating to each Registration Statement,
provided that such correspondence shall not contain any material, non-public
information regarding the Partnership or any of its Subsidiaries (as defined in
the Securities Purchase Agreement). The Partnership shall reasonably cooperate
with legal counsel for the Holder in performing the Partnership’s obligations
pursuant to this Section 3.

 

(d)                                 The Partnership shall promptly furnish to
the Holder whose Registrable Securities are included in any Registration
Statement, without charge, (i) after the same is prepared and filed with the
SEC, an electronic copy of each Registration Statement and any amendment(s) and
supplement(s) thereto, including, without limitation, financial statements and
schedules, all documents incorporated therein by reference, if requested by the
Holder, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of each Registration Statement, an electronic copy of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as the Holder may reasonably
request from time to time) and (iii) such other documents, including, without
limitation, copies of any preliminary or final prospectus, as the Holder may
reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities owned by the Holder.

 

(e)                                  The Partnership shall use its commercially
reasonable efforts to (i) register and qualify, unless an exemption from
registration and qualification applies, the resale by the Holder of the
Registrable Securities covered by a Registration Statement under such other
securities or “blue sky” laws of all applicable jurisdictions in the United
States, (ii) prepare and file in those jurisdictions, such amendments
(including, without limitation, post-effective amendments) and supplements to
such registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, the Partnership shall not be
required in connection therewith or as a condition thereto to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(e), (y)

 

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subject itself to general taxation in any such jurisdiction, or (z) file a
general consent to service of process in any such jurisdiction.  The Partnership
shall promptly notify the Holder and legal counsel for the Holder of the receipt
by the Partnership of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or “blue sky” laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.

 

(f)                                   The Partnership shall notify the Holder
and legal counsel for the Holder in writing of the happening of any event, as
promptly as practicable after becoming aware of such event, as a result of which
the prospectus included in a Registration Statement, as then in effect, may
include an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading
(provided that in no event shall such notice contain any material, non-public
information regarding the Partnership or any of its Subsidiaries), and, subject
to Section 3(r), promptly prepare a supplement or amendment to such Registration
Statement and such prospectus contained therein to correct such untrue statement
or omission and deliver an electronic copy of such supplement or amendment to
the Holder and legal counsel for the Holder. The Partnership shall also promptly
notify the Holder and legal counsel for the Holder in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, when a Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to the Holder
and legal counsel for the Holder by e-mail on the same day of such effectiveness
and by overnight mail), and when the Partnership receives written notice from
the SEC that a Registration Statement or any post-effective amendment will be
reviewed by the SEC, (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related prospectus or related
information, (iii) of the Partnership’s reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate; and
(iv) of the receipt of any request by the SEC or any other federal or state
governmental authority for any additional information relating to the
Registration Statement or any amendment or supplement thereto or any related
prospectus.  The Partnership shall respond as promptly as practicable to any
comments received from the SEC with respect to each Registration Statement or
any amendment thereto (it being understood and agreed that the Partnership’s
response to any such comments shall be delivered to the SEC no later than
fifteen (15) Business Days after the receipt thereof).

 

(g)                                  The Partnership shall (i) use its
commercially reasonable efforts to prevent the issuance of any stop order or
other suspension of effectiveness of each Registration Statement or the use of
any prospectus contained therein, or the suspension of the qualification, or the
loss of an exemption from qualification, of any of the Registrable Securities
for sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and (ii) notify the Holder and legal counsel for the Holder of the
issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.

 

(h)                                 If the Holder may be required under
applicable securities law to be described in any Registration Statement as an
underwriter and the Holder consents to so being named an underwriter, at the
request of the Holder, the Partnership shall furnish to the Holder, on the date
of the effectiveness of such Registration Statement and thereafter from time to
time on such

 

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dates as the Holder may reasonably request (i) a letter, dated such date, from
the Partnership’s independent certified public accountants in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the Holder, and
(ii) an opinion, dated as of such date, of counsel representing the Partnership
for purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the Holder.

 

(i)                                     If the Holder may be required under
applicable securities law to be described in any Registration Statement as an
underwriter and the Holder consents to so being named an underwriter, upon the
written request of the Holder, the Partnership shall make available for
inspection by (i) the Holder, (ii) legal counsel for the Holder and (iii) one
(1) firm of accountants or other agents retained by the Holder (collectively,
the “Inspectors”), all pertinent financial and other records, and pertinent
partnership documents and properties of the Partnership (collectively, the
“Records”), as shall be reasonably deemed necessary by each Inspector, and cause
the Partnership’s officers, directors and employees to supply all information
which any Inspector may reasonably request; provided, however, each Inspector
shall agree in writing to hold in strict confidence and not to make any
disclosure (except to the Holder) or use of any Record or other information
which the Partnership’s board of directors determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(1) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise required
under the 1933 Act, (2) the release of such Records is ordered pursuant to a
final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (3) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
Agreement or any other Transaction Document (as defined in the Securities
Purchase Agreement).  The Holder agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the
Partnership and allow the Partnership, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential.  Nothing herein (or in any other confidentiality
agreement between the Partnership and the Holder, if any) shall be deemed to
limit the Holder’s ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.

 

(j)                                    The Partnership shall hold in confidence
and not make any disclosure of information concerning the Holder provided to the
Partnership unless (i) disclosure of such information is necessary to comply
with federal or state securities laws, (ii) the disclosure of such information
is necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required to be disclosed in such Registration
Statement pursuant to the 1933 Act, (iii) the release of such information is
ordered pursuant to a subpoena or other final, non-appealable order from a court
or governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this Agreement or any other Transaction Document.  The Partnership
agrees that it shall, upon learning that disclosure of such information
concerning the Holder is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to the
Holder and allow the Holder, at the Holder’s expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, such
information.

 

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(k)                                 Without limiting any obligation of the
Partnership under the Securities Purchase Agreement, the Partnership shall use
its commercially reasonable efforts either to (i) cause all of the Registrable
Securities covered by each Registration Statement to be listed on each
securities exchange on which securities of the same class or series issued by
the Partnership are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, (ii) secure
designation and quotation of all of the Registrable Securities covered by each
Registration Statement on an Eligible Market (as defined in the Securities
Purchase Agreement), or (iii) if, despite the Partnership’s best efforts to
satisfy the preceding clauses (i) or (ii) the Partnership is unsuccessful in
satisfying the preceding clauses (i) or (ii), without limiting the generality of
the foregoing, to use its best efforts to arrange for at least two market makers
to register with the Financial Industry Regulatory Authority (“FINRA”) as such
with respect to such Registrable Securities.  In addition, the Partnership shall
cooperate with the Holder and any broker or dealer through which the Holder
proposes to sell its Registrable Securities in effecting a filing with FINRA
pursuant to FINRA Rule 5110 as requested by the Holder.  The Partnership shall
pay all fees and expenses in connection with satisfying its obligations under
this Section 3(k).

 

(l)                                     The Partnership shall cooperate with the
Holder of Registrable Securities being offered and, to the extent applicable,
facilitate the timely preparation and delivery of Common Units (not bearing any
restrictive legend) representing the Registrable Securities to be offered
pursuant to a Registration Statement and registered in such names as the Holder
may request.

 

(m)                             If requested by the Holder, the Partnership
shall as soon as practicable after receipt of notice from the Holder and subject
to Section 3(r) hereof, (i) incorporate in a prospectus supplement or
post-effective amendment such information as the Holder reasonably requests to
be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
number of Registrable Securities being offered or sold, the purchase price being
paid therefor and any other terms of the offering of the Registrable Securities
to be sold in such offering; (ii) make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement or prospectus
contained therein if reasonably requested by the Holder.

 

(n)                                 The Partnership shall use its commercially
reasonable efforts to cause the Registrable Securities covered by a Registration
Statement to be registered with or approved by such other governmental agencies
or authorities as may be necessary to consummate the disposition of such
Registrable Securities.

 

(o)                                 The Partnership shall make generally
available to its security holders as soon as reasonably practical, but not later
than ninety (90) days after the close of the period covered thereby, an earnings
statement (in form complying with, and in the manner provided by, the provisions
of Rule 158 under the 1933 Act) covering a twelve-month period beginning not
later than the first day of the Partnership’s fiscal quarter next following the
applicable Effective Date of each Registration Statement.

 

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(p)                                 The Partnership shall otherwise use its best
efforts to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.

 

(q)                                 Within one (1) Business Day after a
Registration Statement which covers Registrable Securities is declared effective
by the SEC, the Partnership shall deliver, and shall cause legal counsel for the
Partnership to deliver, to the transfer agent for such Registrable Securities
(with copies to the Holder of Registrable Securities included in such
Registration Statement) confirmation that such Registration Statement has been
declared effective by the SEC in the form attached hereto as Exhibit A.

 

(r)                                    Notwithstanding anything to the contrary
herein (but subject to the last sentence of this Section 3(r)), at any time
after the Effective Date of a particular Registration Statement, the Partnership
may delay the disclosure of material, non-public information concerning the
Partnership or any of its Subsidiaries the disclosure of which at the time is
not, in the good faith opinion of the board of directors of the Partnership, in
the best interest of the Partnership and, in the opinion of counsel to the
Partnership, otherwise required (a “Grace Period”), provided that the
Partnership shall promptly notify the Holder in writing of the (i) existence of
material, non-public information giving rise to a Grace Period (provided that in
each such notice the Partnership shall not disclose the content of such
material, non-public information to any of the Holder) and the date on which
such Grace Period will begin and (ii) date on which such Grace Period ends,
provided further that (I) no Grace Period shall exceed ten (10) consecutive days
and during any three hundred sixty five (365) day period all such Grace Periods
shall not exceed an aggregate of sixty (60) days, (II) the first day of any
Grace Period must be at least five (5) Trading Days after the last day of any
prior Grace Period and (III) no Grace Period may exist during the sixty (60)
Trading Day period immediately following the Effective Date of such Registration
Statement (provided that such sixty (60) Trading Day period shall be extended by
the number of Trading Days during such period and any extension thereof
contemplated by this proviso during which such Registration Statement is not
effective or the prospectus contained therein is not available for use) (each,
an “Allowable Grace Period”).  For purposes of determining the length of a Grace
Period above, such Grace Period shall begin on and include the date the Holder
receives the notice referred to in clause (i) above and shall end on and include
the later of the date the Holder receives the notice referred to in clause
(ii) above and the date referred to in such notice.  The provisions of
Section 3(g) hereof shall not be applicable during the period of any Allowable
Grace Period.  Upon expiration of each Grace Period, the Partnership shall again
be bound by the first sentence of Section 3(f) with respect to the information
giving rise thereto unless such material, non-public information is no longer
applicable.  Notwithstanding anything to the contrary contained in this
Section 3(r), the Partnership shall cause its transfer agent to deliver
unlegended Common Units to a transferee of the Holder in accordance with the
terms of the Securities Purchase Agreement in connection with any sale of
Registrable Securities with respect to which the Holder has entered into a
contract for sale, and delivered a copy of the prospectus included as part of
the particular Registration Statement to the extent applicable, prior to the
Holder’s receipt of the notice of a Grace Period and for which the Holder has
not yet settled.

 

(s)                                   The Partnership shall take all other
reasonable actions necessary to expedite and facilitate disposition by the
Holder of its Registrable Securities pursuant to each Registration Statement.

 

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(t)                                    Neither the Partnership nor any
Subsidiary or Affiliate thereof shall identify the Holder as an underwriter in
any public disclosure or filing with the SEC, the Principal Market or any
Eligible Market and any Buyer being deemed an underwriter by the SEC shall not
relieve the Partnership of any obligations it has under this Agreement or any
other Transaction Document; provided, however, that the foregoing shall not
prohibit the Partnership from including the disclosure found in the “Plan of
Distribution” section attached hereto as Exhibit B in the Registration
Statement.  Notwithstanding anything herein to the contrary, if the Holder is
required by the SEC to be named as an underwriter in a Registration Statement
and the Holder elects not to be named as an underwriter (or the Partnership is
required by the SEC to reduce the number of Registrable Securities included in
such Registration Statement to remove such requirement by the SEC, if applicable
or, otherwise, and the Holder refuses to permit such Registration to be so
reduced), the Partnership shall not be required to include the Holder’s
Registrable Securities in such Registration Statement hereunder and no
Registration Delay Payments shall accrue with respect to the Holder’s
Registrable Securities.

 

(u)                                 Neither the Partnership nor any of its
Subsidiaries has entered, as of the date hereof, nor shall the Partnership or
any of its Subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Buyer in this Agreement or otherwise
conflicts with the provisions hereof.

 

4.                                      Obligations of the Holder.

 

(a)                                 At least five (5) Business Days prior to the
first anticipated filing date of each Registration Statement, the Partnership
shall notify the Holder in writing of the information the Partnership requires
from each the Holder with respect to such Registration Statement.  It shall be a
condition precedent to the obligations of the Partnership to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of the Holder that the Holder shall furnish to the Partnership such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it, as
shall be reasonably required to effect and maintain the effectiveness of the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Partnership may reasonably request.

 

(b)                                 The Holder, by its acceptance of the
Registrable Securities, agrees to cooperate with the Partnership as reasonably
requested by the Partnership in connection with the preparation and filing of
each Registration Statement hereunder, unless the Holder has notified the
Partnership in writing of the Holder’s election to exclude all of the Holder’s
Registrable Securities from such Registration Statement.

 

(c)                                  The Holder agrees that, upon receipt of any
notice from the Partnership of the happening of any event of the kind described
in Section 3(g) or the first sentence of 3(f), the Holder will immediately
discontinue disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until the Holder’s receipt of
the copies of the supplemented or amended prospectus contemplated by
Section 3(g) or the first sentence of Section 3(f) or receipt of notice that no
supplement or amendment is required.  Notwithstanding anything to the contrary
in this Section 4(c), the Partnership shall cause its transfer agent to deliver
unlegended Common Units to a transferee of the Holder in accordance

 

13

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with the terms of the Securities Purchase Agreement in connection with any sale
of Registrable Securities with respect to which the Holder has entered into a
contract for sale prior to the Holder’s receipt of a notice from the Partnership
of the happening of any event of the kind described in Section 3(g) or the first
sentence of Section 3(f) and for which the Holder has not yet settled.

 

(d)                                 The Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the 1933 Act as applicable
to it in connection with sales of Registrable Securities pursuant to a
Registration Statement.

 

5.                                      Expenses of Registration.

 

All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, FINRA filing fees (if any)
and fees and disbursements of counsel for the Partnership shall be paid by the
Partnership.  The Partnership shall reimburse legal counsel for the Holder for
its fees and disbursements in connection with registration, filing or
qualification pursuant to Sections 2 and 3 of this Agreement which amount shall
be limited to $5,000.

 

6.                                      Indemnification.

 

(a)                                 To the fullest extent permitted by law, the
Partnership will, and hereby does, indemnify, hold harmless and defend the
Holder and each of its directors, officers, unitholders, members, partners,
employees, agents, advisors, representatives (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding the
lack of such title or any other title) and each Person, if any, who controls the
Holder within the meaning of the 1933 Act or the 1934 Act and each of the
directors, officers, unitholders, members, partners, employees, agents,
advisors, representatives (and any other Persons with a functionally equivalent
role of a Person holding such titles notwithstanding the lack of such title or
any other title) of such controlling Persons (each, an “Indemnified Person”),
against any losses, obligations, claims, damages, liabilities, contingencies,
judgments, fines, penalties, charges, costs (including, without limitation,
court costs, reasonable attorneys’ fees and costs of defense and investigation),
amounts paid in settlement or expenses, joint or several, (collectively,
“Claims”) incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an Indemnified
Person is or may be a party thereto (“Indemnified Damages”), to which any of
them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon:  (i) any untrue statement or alleged untrue statement of a material fact
in a Registration Statement or any post-effective amendment thereto or in any
filing made in connection with the qualification of the offering under the
securities or other “blue sky” laws of any jurisdiction in which Registrable
Securities are offered, or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final

 

14

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prospectus (as amended or supplemented, if the Partnership files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the
Partnership of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the foregoing clauses (i) through
(iii) being, collectively, “Violations”).  Subject to Section 6(c), the
Partnership shall reimburse the Indemnified Persons, promptly as such expenses
are incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim.  Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a):  (i) shall not apply
to a Claim by an Indemnified Person arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information furnished in
writing to the Partnership by such Indemnified Person for such Indemnified
Person expressly for use in connection with the preparation of such Registration
Statement or any such amendment thereof or supplement thereto and (ii) shall not
be available to the Holder to the extent such Claim is based on a failure of the
Holder to deliver or to cause to be delivered the prospectus made available by
the Partnership (to the extent applicable), including, without limitation, a
corrected prospectus, if such prospectus or corrected prospectus was timely made
available by the Partnership pursuant to Section 3(d) and then only if, and to
the extent that, following the receipt of the corrected prospectus no grounds
for such Claim would have existed; and (iii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Partnership, which consent shall not be unreasonably withheld or
delayed.  Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of any of the Registrable Securities by the Holder pursuant to
Section 9.

 

(b)                                 In connection with any Registration
Statement in which the Holder is participating, the Holder agrees to severally
and not jointly indemnify, hold harmless and defend, to the same extent and in
the same manner as is set forth in Section 6(a), the Partnership, each of its
directors, each of its officers who signs the Registration Statement and each
Person, if any, who controls the Partnership within the meaning of the 1933 Act
or the 1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified
Damages to which any of them may become subject, under the 1933 Act, the 1934
Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or
are based upon any Violation, in each case, to the extent, and only to the
extent, that such Violation occurs in reliance upon and in conformity with
written information furnished to the Partnership by the Holder expressly for use
in connection with such Registration Statement; and, subject to Section 6(c) and
the below provisos in this Section 6(b), the Holder will reimburse an
Indemnified Party any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, the indemnity agreement contained in this Section 6(b) and
the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Holder, which consent shall not be
unreasonably withheld or delayed, provided further that the Holder shall be
liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to the Holder as a result of the
applicable sale of Registrable Securities pursuant to such Registration
Statement.  Such indemnity shall remain in full force

 

15

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and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of any of the Registrable
Securities by the Holder pursuant to Section 9.

 

(c)                                  Promptly after receipt by an Indemnified
Person or Indemnified Party (as the case may be) under this Section 6 of notice
of the commencement of any action or proceeding (including, without limitation,
any governmental action or proceeding) involving a Claim, such Indemnified
Person or Indemnified Party (as the case may be) shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party (as the case may be); provided, however, an Indemnified
Person or Indemnified Party (as the case may be) shall have the right to retain
its own counsel with the fees and expenses of such counsel to be paid by the
indemnifying party if:  (i) the indemnifying party has agreed in writing to pay
such fees and expenses; (ii) the indemnifying party shall have failed promptly
to assume the defense of such Claim and to employ counsel reasonably
satisfactory to such Indemnified Person or Indemnified Party (as the case may
be) in any such Claim; or (iii) the named parties to any such Claim (including,
without limitation, any impleaded parties) include both such Indemnified Person
or Indemnified Party (as the case may be) and the indemnifying party, and such
Indemnified Person or such Indemnified Party (as the case may be) shall have
been advised by counsel that a conflict of interest is likely to exist if the
same counsel were to represent such Indemnified Person or such Indemnified Party
and the indemnifying party (in which case, if such Indemnified Person or such
Indemnified Party (as the case may be) notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, then the indemnifying party shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
Indemnifying Party), provided further that in the case of clause (iii) above the
indemnifying party shall not be responsible for the reasonable fees and expenses
of more than one (1) separate legal counsel for such Indemnified Person or
Indemnified Party (as the case may be).  The Indemnified Party or Indemnified
Person (as the case may be) shall reasonably cooperate with the indemnifying
party in connection with any negotiation or defense of any such action or Claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or Indemnified Person
(as the case may be) which relates to such action or Claim.  The indemnifying
party shall keep the Indemnified Party or Indemnified Person (as the case may
be) reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto.  No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent; provided, however, the indemnifying party shall not
unreasonably withhold, delay or condition its consent.  No indemnifying party
shall, without the prior written consent of the Indemnified Party or Indemnified
Person (as the case may be), consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person (as the case may be) of a release from all liability in
respect to such Claim or litigation, and such settlement shall not include any
admission as to fault on the part of the Indemnified Party.  Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person (as the
case may be) with respect to all third parties, firms or corporations relating
to the

 

16

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matter for which indemnification has been made.  The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the Indemnified Person or Indemnified Party (as the case may be) under this
Section 6, except to the extent that the indemnifying party is materially and
adversely prejudiced in its ability to defend such action.

 

(d)                                 The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.

 

(e)                                  The indemnity and contribution agreements
contained herein shall be in addition to (i) any cause of action or similar
right of the Indemnified Party or Indemnified Person against the indemnifying
party or others, and (ii) any liabilities the indemnifying party may be subject
to pursuant to the law.

 

7.                                      Contribution.

 

To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under
Section 6 to the fullest extent permitted by law; provided, however:  (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section 6
of this Agreement, (ii) no Person involved in the sale of Registrable Securities
which Person is guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to
contribution from any Person involved in such sale of Registrable Securities who
was not guilty of fraudulent misrepresentation; and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the amount of net
proceeds received by such seller from the applicable sale of such Registrable
Securities pursuant to such Registration Statement.  Notwithstanding the
provisions of this Section 7, the Holder shall not be required to contribute, in
the aggregate, any amount in excess of the amount by which the net proceeds
actually received by the Holder from the applicable sale of the Registrable
Securities subject to the Claim exceeds the amount of any damages that the
Holder has otherwise been required to pay, or would otherwise be required to pay
under Section 6(b), by reason of such untrue or alleged untrue statement or
omission or alleged omission.

 

8.                                      Reports Under the 1934 Act.

 

With a view to making available to the Holder the benefits of Rule 144, the
Partnership agrees from and after the six month anniversary of the Closing Date,
to:

 

(a)                                 make and keep public information available,
as those terms are understood and defined in Rule 144;

 

(b)                                 file with the SEC in a timely manner all
reports and other documents required of the Partnership under the 1933 Act and
the 1934 Act so long as the Partnership remains subject to such requirements (it
being understood and agreed that nothing herein shall limit any obligations of
the Partnership under the Securities Purchase Agreement) and the filing of such
reports and other documents is required for the applicable provisions of
Rule 144; and

 

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(c)                                  furnish to the Holder so long as the Holder
owns Registrable Securities, promptly upon request, (i) a written statement by
the Partnership, if true, that it has complied with the reporting, submission
and posting requirements of Rule 144 and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Partnership and such other reports and
documents so filed by the Partnership with the SEC if such reports are not
publicly available via EDGAR, and (iii) such other information as may be
reasonably requested to permit the Holder to sell such securities pursuant to
Rule 144 without registration.

 

9.                                      Assignment of Registration Rights.

 

All or any portion of the rights under this Agreement shall be automatically
assignable by the Holder to any of its Affiliates if (i) the Holder agrees in
writing with such transferee or assignee (as the case may be) to assign all or
any portion of such rights, and a copy of such agreement is furnished to the
Partnership within a reasonable time after such transfer or assignment (as the
case may be); (ii) the Partnership is, within a reasonable time after such
transfer or assignment (as the case may be), furnished with written notice of
(a) the name and address of such transferee or assignee (as the case may be),
and (b) the securities with respect to which such registration rights are being
transferred or assigned (as the case may be); (iii) immediately following such
transfer or assignment (as the case may be) the further disposition of such
securities by such transferee or assignee (as the case may be) is restricted
under the 1933 Act or applicable state securities laws if so required; (iv) at
or before the time the Partnership receives the written notice contemplated by
clause (ii) of this sentence such transferee or assignee (as the case may be)
agrees in writing with the Partnership to be bound by all of the provisions
contained herein; (v) such transfer or assignment (as the case may be) shall
have been made in accordance with the applicable requirements of the Securities
Purchase Agreement and the Warrants (as the case may be); and (vi) such transfer
or assignment (as the case may be) shall have been conducted in accordance with
all applicable federal and state securities laws.

 

10.                               Amendment of Registration Rights.

 

Provisions of this Agreement may be amended only with the written consent of the
Partnership and the Holder.  Any amendment effected in accordance with this
Section 10 shall be binding upon the Holder and the Partnership, provided that
no such amendment shall be effective to the extent that it (1) applies to less
than all of the holders of Registrable Securities or (2) imposes any obligation
or liability on the Holder without the Holder’s prior written consent (which may
be granted or withheld in the Holder’s sole discretion).  No waiver shall be
effective unless it is in writing and signed by an authorized representative of
the waiving party.

 

11.                               Miscellaneous.

 

(a)                                 Solely for purposes of this Agreement, a
Person is deemed to be a holder of Registrable Securities whenever such Person
owns, or is deemed to own, of record such Registrable Securities.  If the
Partnership receives conflicting instructions, notices or elections from two or
more Persons with respect to the same Registrable Securities, the Partnership
shall act upon the basis of instructions, notice or election received from such
record owner of such Registrable Securities.

 

18

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(b)                                 Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: 
(i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); (iii) with
respect to Section 3(c), by electronic mail (provided confirmation of
transmission is electronically generated and kept on file by the sending party);
or (iv) one (1) Business Day after deposit with a nationally recognized
overnight delivery service with next day delivery specified, in each case,
properly addressed to the party to receive the same.  The addresses and
facsimile numbers for such communications shall be:

 

If to the Partnership:

 

Emerge Energy Services LP
180 State Street, Suite 225
Southlake, Texas 76092
Telephone:  (817) 865-5830
Attention:  Deborah Deibert
E-Mail:  ddeibert@emergelp.com

 

With a copy (for informational purposes only) to:

 

Latham & Watkins LLP

811 Main Street, Suite 3700

Houston, Texas 77002

Telephone:  (713) 546-5400
Facsimile:  (713) 546-5401
Attention:  Ryan J Maierson
E-Mail:  ryan.maierson@lw.com

 

If to the Transfer Agent:

 

American Stock Transfer & Trust Company, LLC

15455 Dallas Parkway, Suite 600

Addison, TX 75001

Telephone:  (972) 764-2716
Facsimile:  (972) 764-5101
Attention:  William Torre
E-Mail:  wtorre@amstock.com

 

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached to the Securities Purchase Agreement, with a copy (for
informational purposes only) to Kelley Drye & Warren LLP, 101 Park Avenue, New
York, NY 10178, Telephone:  (212) 808-7540, Attention:  Michael A.
Adelstein, Esq., E-mail: madelstein@kelleydrye.com, and copies to any other
Buyer representatives as set forth on the Schedule of Buyers, or to such other
address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change.  Written confirmation
of receipt (A) given by the recipient of such notice, consent,

 

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waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine or electronic mail transmission containing the
time, date, recipient facsimile number or electronic mail address and an image
of the first page of such transmission or (C) provided by a courier or overnight
courier service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.

 

(c)                                  Failure of any party to exercise any right
or remedy under this Agreement or otherwise, or delay by a party in exercising
such right or remedy, shall not operate as a waiver thereof.  The Partnership
and the Holder acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.  It is
accordingly agreed that each party hereto shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement by
any other party hereto and to enforce specifically the terms and provisions
hereof (without the necessity of showing economic loss and without any bond or
other security being required), this being in addition to any other remedy to
which any party may be entitled by law or equity.

 

(d)                                 All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper.  Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof.  Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT
MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.

 

(e)                                  If any provision of this Agreement is
prohibited by law or otherwise determined to be invalid or unenforceable by a
court of competent jurisdiction, the provision that would otherwise be
prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or
unenforceability of such provision shall not affect the validity of the
remaining provisions of this Agreement so long as this Agreement as so modified
continues to express, without material change, the original intentions of the
parties as to the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair
the respective

 

20

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expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties. 
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

 

(f)                                   This Agreement, the other Transaction
Documents, the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein constitute the entire agreement among
the parties hereto and thereto solely with respect to the subject matter hereof
and thereof.  There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein and therein.  This Agreement,
the other Transaction Documents, the schedules and exhibits attached hereto and
thereto and the instruments referenced herein and therein supersede all prior
agreements and understandings among the parties hereto solely with respect to
the subject matter hereof and thereof; provided, however, nothing contained in
this Agreement or any other Transaction Document shall (or shall be deemed to)
(i) have any effect on any agreements the Holder has entered into with the
Partnership or any of its Subsidiaries prior to the date hereof with respect to
any prior investment made by the Holder in the Partnership, (ii) waive, alter,
modify or amend in any respect any obligations of the Partnership or any of its
Subsidiaries or any rights of or benefits to the Holder or any other Person in
any agreement entered into prior to the date hereof between or among the
Partnership and/or any of its Subsidiaries and the Holder and all such
agreements shall continue in full force and effect or (iii) limit any
obligations of the Partnership under any of the other Transaction Documents.

 

(g)                                  Subject to compliance with Section 9 (if
applicable), this Agreement shall inure to the benefit of and be binding upon
the permitted successors and assigns of each of the parties hereto.  This
Agreement is not for the benefit of, nor may any provision hereof be enforced
by, any Person, other than the parties hereto, their respective permitted
successors and assigns and the Persons referred to in Sections 6 and 7 hereof.

 

(h)                                 The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.  Unless the context clearly indicates otherwise, each pronoun
herein shall be deemed to include the masculine, feminine, neuter, singular and
plural forms thereof.  The terms “including,” “includes,” “include” and words of
like import shall be construed broadly as if followed by the words “without
limitation.”  The terms “herein,” “hereunder,” “hereof” and words of like import
refer to this entire Agreement instead of just the provision in which they are
found.

 

(i)                                     This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party.  In the event that any signature is
delivered by facsimile transmission or by an e-mail which contains a portable
document format (.pdf) file of an executed signature page, such signature
page shall create a valid and binding obligation of the party executing (or on
whose behalf such signature is executed) with the same force and effect as if
such signature page were an original thereof.

 

(j)                                    Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates,

 

21

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instruments and documents as any other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.

 

(k)                                 The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent
and no rules of strict construction will be applied against any party. 
Notwithstanding anything to the contrary set forth in Section 10, terms used in
this Agreement but defined in the other Transaction Documents shall have the
meanings ascribed to such terms on the Closing Date in such other Transaction
Documents unless otherwise consented to in writing by the Holder.

 

(l)                                     This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

 

[signature page follows]

 

22

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IN WITNESS WHEREOF, the Buyer and the Partnership have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.

 

 

PARTNERSHIP:

 

 

 

EMERGE ENERGY SERVICES LP

 

 

 

 

By:

EMERGE ENERGY SERVICES GP LLC,

 

 

its general partner

 

 

 

 

 

 

 

By:

/s/ Warren Bonham

 

Name:

Warren Bonham

 

Title:

Vice President

 

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IN WITNESS WHEREOF, the Buyer and the Partnership have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.

 

 

BUYER:

 

 

 

SIG STRATEGIC INVESTMENTS, LLLP

 

 

 

By:

/s/ Martin Kobinger

 

 

Name:

Martin Kobinger

 

 

Title:

Investment Manager

 

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EXHIBIT A

 

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

 

[To be provided to Holder.]

 

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EXHIBIT B

 

SELLING UNITHOLDERS

 

The common units being offered by the selling unitholders are those issuable to
the selling unitholders upon conversion of series A preferred units and exercise
of the warrants.  For additional information regarding the issuance of series A
preferred units and the warrants, see “Private Placement of Series A Preferred
Units and Warrants” above.  We are registering the common units in order to
permit the selling unitholders to offer the units for resale from time to time. 
Except for the ownership of the series A preferred units and the warrants issued
pursuant to the Securities Purchase Agreement, the selling unitholders have not
had any material relationship with us within the past three years.

 

The table below lists the selling unitholders and other information regarding
the beneficial ownership (as determined under Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder) of
the common units held by each of the selling unitholders. The second column
lists the number of common units beneficially owned by the selling unitholders,
based on their respective ownership of series A preferred units and warrants, as
of         , 201 , assuming conversion of the series A preferred units and
exercise of the warrants held by each such selling unitholder on that date but
taking account of any limitations on conversion or exercise related thereto.

 

The third column lists the common units being offered by this prospectus by the
selling unitholders and does not take in account any limitations on conversion
of the series A preferred units or exercise of the warrants related thereto.

 

In accordance with the terms of a registration rights agreement with the holders
of the series A preferred units and the warrants, this prospectus generally
covers the resale of the sum of (i) 125% of the maximum number of common units
issuable upon conversion of the series A preferred units (without regard to any
limitations on conversion related thereto) and (ii) the maximum number of common
units issuable upon exercise of the warrants, in each case, determined as if the
outstanding warrants were exercised in full (without regard to any limitations
on exercise contained therein) as of the trading day immediately preceding the
date this registration statement was initially filed with the SEC.  Because the
conversion price of the series A preferred units and the exercise price of the
warrants may be adjusted, the number of units that will actually be issued may
be more or less than the number of units being offered by this prospectus. The
fourth column assumes the sale of all of the units offered by the selling
unitholders pursuant to this prospectus.

 

Under the terms of the series A preferred units and the warrants, a selling
unitholder may not convert the series A preferred units or exercise the warrants
to the extent (but only to the extent) such selling unitholder or any of its
affiliates would beneficially own a number of our common units which would
exceed 4.99%. The number of units in the second column reflects these
limitations. The selling unitholders may sell all, some or none of their units
in this offering.  See “Plan of Distribution.”

 

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Name of Selling Unitholder

 

Number of Common Units
Owned Prior to Offering

 

Maximum Number of
Common Units to be Sold
Pursuant to this Prospectus

 

Number of Common
Units of Owned After
Offering

 

[HOLDER] (1)

 

 

 

 

 

 

 

[OTHER BUYERS]

 

 

 

 

 

 

 

 

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(1)                                 [                  ]

 

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PLAN OF DISTRIBUTION

 

We are registering the common units issuable upon conversion of the series A
preferred units and exercise of the warrants to permit the resale of these
common units by the holders of the series A preferred units and warrants from
time to time after the date of this prospectus.  We will not receive any of the
proceeds from the sale by the selling unitholders of the common units.  We will
bear all fees and expenses incident to our obligation to register the common
units.

 

The selling unitholders may sell all or a portion of the common units held by
them and offered hereby from time to time directly or through one or more
underwriters, broker-dealers or agents. If the common units are sold through
underwriters or broker-dealers, the selling unitholders will be responsible for
underwriting discounts or commissions or agent’s commissions. The common units
may be sold in one or more transactions at fixed prices, at prevailing market
prices at the time of the sale, at varying prices determined at the time of sale
or at negotiated prices. These sales may be effected in transactions, which may
involve crosses or block transactions, pursuant to one or more of the following
methods:

 

·                  on any national securities exchange or quotation service on
which the securities may be listed or quoted at the time of sale;

 

·                  in the over-the-counter market;

 

·                  in transactions otherwise than on these exchanges or systems
or in the over-the-counter market;

 

·                  through the writing or settlement of options, whether such
options are listed on an options exchange or otherwise;

 

·                  ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

 

·                  block trades in which the broker-dealer will attempt to sell
the units as agent but may position and resell a portion of the block as
principal to facilitate the transaction;

 

·                  purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

 

·                  an exchange distribution in accordance with the rules of the
applicable exchange;

 

·                  privately negotiated transactions;

 

·                  short sales made after the date the Registration Statement is
declared effective by the SEC;

 

·                  broker-dealers may agree with a selling security holder to
sell a specified number of such units at a stipulated price per unit;

 

·                  a combination of any such methods of sale; and

 

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·                  any other method permitted pursuant to applicable law.

 

The selling unitholders may also sell common units under Rule 144 promulgated
under the Securities Act of 1933, as amended, if available, rather than under
this prospectus. In addition, the selling unitholders may transfer the common
units by other means not described in this prospectus. If the selling
unitholders effect such transactions by selling common units to or through
underwriters, broker-dealers or agents, such underwriters, broker-dealers or
agents may receive commissions in the form of discounts, concessions or
commissions from the selling unitholders or commissions from purchasers of the
common units for whom they may act as agent or to whom they may sell as
principal (which discounts, concessions or commissions as to particular
underwriters, broker-dealers or agents may be in excess of those customary in
the types of transactions involved). In connection with sales of the common
units or otherwise, the selling unitholders may enter into hedging transactions
with broker-dealers, which may in turn engage in short sales of the common units
in the course of hedging in positions they assume. The selling unitholders may
also sell common units short and deliver common units covered by this prospectus
to close out short positions and to return borrowed units in connection with
such short sales. The selling unitholders may also loan or pledge common units
to broker-dealers that in turn may sell such units.

 

The selling unitholders may pledge or grant a security interest in some or all
of the warrants or common units owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the common units from time to time pursuant to this prospectus or
any amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act amending, if necessary, the list of selling
unitholders to include the pledgee, transferee or other successors in interest
as selling unitholders under this prospectus. The selling unitholders also may
transfer and donate the common units in other circumstances in which case the
transferees, donees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.

 

To the extent required by the Securities Act and the rules and regulations
thereunder, the selling unitholders and any broker-dealer participating in the
distribution of the common units may be deemed to be “underwriters” within the
meaning of the Securities Act, and any commission paid, or any discounts or
concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular
offering of the common units is made, a prospectus supplement, if required, will
be distributed, which will set forth the aggregate amount of common units being
offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling unitholders and any discounts,
commissions or concessions allowed or re-allowed or paid to broker-dealers.

 

Under the securities laws of some states, the common units may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
some states the common units may not be sold unless such units have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.

 

There can be no assurance that any selling unitholder will sell any or all of
the common units registered pursuant to the registration statement, of which
this prospectus forms a part.

 

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The selling unitholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, including, without
limitation, to the extent applicable, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the common units by the
selling unitholders and any other participating person. To the extent
applicable, Regulation M may also restrict the ability of any person engaged in
the distribution of the common units to engage in market-making activities with
respect to the common units. All of the foregoing may affect the marketability
of the common units and the ability of any person or entity to engage in
market-making activities with respect to the common units.

 

We will pay all expenses of the registration of the common units pursuant to the
registration rights agreement, estimated to be $[     ] in total, including,
without limitation, Securities and Exchange Commission filing fees and expenses
of compliance with state securities or “blue sky” laws; provided, however, a
selling unitholder will pay all underwriting discounts and selling commissions,
if any. We will indemnify the selling unitholders against liabilities, including
some liabilities under the Securities Act in accordance with the registration
rights agreements or the selling unitholders will be entitled to contribution.
We may be indemnified by the selling unitholders against civil liabilities,
including liabilities under the Securities Act that may arise from any written
information furnished to us by the selling unitholder specifically for use in
this prospectus, in accordance with the related registration rights agreements
or we may be entitled to contribution.

 

Once sold under the registration statement, of which this prospectus forms a
part, the common units will be freely tradable in the hands of persons other
than our affiliates.

 

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