Emerge Energy Services LP (Form: 10-Q, Received: 09/12/2016 06:04:50)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-35912

EMERGE ENERGY SERVICES LP

(Exact name of registrant as specified in its charter)



Delaware		90-0832937
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

180 State Street, Suite 225, Southlake, Texas 76092		(817) 865-5830
(Address of principal executive offices)		(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class		Name of Each Exchange On Which Registered
Common Units Representing Limited Partner Interests		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)



Large-Accelerated Filer x		Accelerated Filer o
Non-Accelerated Filer o		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes ý No

As of September 2, 2016 , 24,132,851 common units were outstanding.

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TABLE OF CONTENTS



		Page
	PART I – FINANCIAL INFORMATION

	Forward-Looking Statements	3

Item 1.	Financial Statements	4

	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015	4

	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015	5

	Unaudited Condensed Consolidated Statement of Partners’ Equity for the Six Months Ended June 30, 2016	6

	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	37

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sale of Equity Securities And Use of Proceeds	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39

Item 6.	Exhibits	40

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FORWARD-LOOKING STATEMENTS

Certain statements and information in this Quarterly Report on Form 10-Q may constitute “forward-looking statements.” The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:


•	failure to secure or maintain contracts with our largest customers, or non-performance of any of those customers under the applicable contract;


•	competitive conditions in our industry;


•	the amount of frac sand we are able to excavate and process, which could be adversely affected by, among other things, operating difficulties and unusual or unfavorable geologic conditions;


•	the volume of frac sand we are able to sell;


•	the price at which we are able to sell frac sand;


•	changes in the long-term supply of and demand for oil and natural gas;


•	volatility of fuel prices;


•	unanticipated ground, grade or water conditions at our sand mines;


•	actions taken by our customers, competitors and third-party operators;


•	our ability to complete growth projects on time and on budget;


•	increasing costs and minimum contractual obligations relating to our transportation services and infrastructure;


•	inclement or hazardous weather conditions, including flooding, and the physical impacts of climate change;


•	environmental hazards;


•	industrial accidents;


•	changes in laws and regulations (or the interpretation thereof) related to the mining and hydraulic fracturing industries, silica dust exposure or the environment;


•	inability to acquire or maintain necessary permits or mining or water rights;


•	facility shutdowns in response to environmental regulatory actions;


•	inability to obtain necessary production equipment or replacement parts;


•	reduction in the amount of water available for processing;


•	technical difficulties or failures;


•	labor disputes and disputes with our excavation contractor;


•	late delivery of supplies;


•	difficulty collecting receivables;


•	inability of our customers to take delivery of our products;


•	changes in the price and availability of transportation;


•	fires, explosions or other accidents;


•	pit wall failures or rock falls;


•	the effects of future litigation; and


•	other factors discussed in this Quarterly Report on Form 10-Q and the detailed factors discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 .

When considering forward-looking statements, you should keep in mind the known material risk factors and other cautionary statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2015 in “Risk Factors” and in this Form 10-Q in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.

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PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EMERGE ENERGY SERVICES LP

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ in thousands, except unit data)



	June 30, 2016		December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	3,158	$	20,870
Trade and other receivables, net	15,294		28,955
Inventories	20,305		30,162
Prepaid expenses and other current assets	5,450		8,994
Assets held for sale	28,038		23,453
Total current assets	72,245		112,434

Property, plant and equipment, net	172,195		179,520
Intangible assets, net	6,340		7,323
Other assets, net	21,058		13,230
Non-current assets held for sale	111,411		107,541
Total assets	$	383,249	$	420,048

LIABILITIES AND PARTNERS’ EQUITY
Current liabilities:
Accounts payable	$	8,605	$	8,339
Accrued liabilities	11,160		13,294
Liabilities held for sale	13,611		15,195
Total current liabilities	33,376		36,828

Long-term debt, net of current portion	304,163		295,938
Business acquisition obligation, net of current portion	8,254		7,772
Other long-term liabilities	18,410		4,732
Total liabilities	364,203		345,270

Commitments and contingencies
Partners’ equity:
General partner	—		—
Limited partner common units (issued and outstanding 24,129,418 units and 24,119,972 units as of June 30, 2016 and December 31, 2015, respectively)	19,046		74,778
Total partners’ equity	19,046		74,778
Total liabilities and partners’ equity	$	383,249	$	420,048

See accompanying notes to unaudited condensed consolidated financial statements.

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EMERGE ENERGY SERVICES LP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands, except unit and per unit data)



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Revenues	$	24,825		$	68,118		$	54,495		$	164,362
Operating expenses:
Cost of goods sold (excluding depreciation, depletion and amortization)	38,354			50,738			82,144			116,993
Depreciation, depletion and amortization	4,870			4,721			9,777			8,522
Selling, general and administrative expenses	4,459			6,872			11,234			14,589
Contract and project terminations	10			2,693			4,036			9,412
Total operating expenses	47,693			65,024			107,191			149,516
Operating income (loss)	(22,868		)	3,094			(52,696		)	14,846
Other expense (income):
Interest expense, net	5,283			2,328			9,877			5,165
Other	(2		)	(8		)	(3		)	(29		)
Total other expense	5,281			2,320			9,874			5,136
Income (loss) from continuing operations before provision for income taxes	(28,149		)	774			(62,570		)	9,710
Provision for income taxes	1			87			21			268
Net income (loss) from continuing operations	(28,150		)	687			(62,591		)	9,442
Income (loss) from discontinued operations, net of taxes	5,253			2,197			5,479			2,933
Net income (loss)	$	(22,897	)	$	2,884		$	(57,112	)	$	12,375

Earnings (loss) per common unit (1)
Basic:
Earnings (loss) per common unit from continuing operations	$	(1.17	)	$	0.03		$	(2.59	)	$	0.39
Earnings (loss) per common unit from discontinued operations	0.22			0.09			0.23			0.12
Basic earnings (loss) per common unit (1)	$	(0.95	)	$	0.12		$	(2.36	)	$	0.51
Diluted:
Earnings (loss) per common unit from continuing operations	$	(1.17	)	$	0.03		$	(2.59	)	$	0.39
Earnings (loss) per common unit from discontinued operations	0.22			0.09			0.23			0.12
Diluted earnings (loss) per common unit (1)	$	(0.95	)	$	0.12		$	(2.36	)	$	0.51

Weighted average number of common units outstanding including participating securities (basic) (1)	24,188,605			24,131,302			24,184,838			24,129,664
Weighted average number of common units outstanding (diluted) (1)	24,188,605			24,133,813			24,184,838			24,131,682

(1) See Note 9.

See accompanying notes to unaudited condensed consolidated financial statements.

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EMERGE ENERGY SERVICES LP

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ EQUITY

($ in thousands)



	Limited Partner Common Units			General Partner (non-economic interest)		Total Partners’ Equity
Balance at December 31, 2015	$	74,778		$	—	$	74,778
Net income (loss)	(57,112		)	—		(57,112		)
Equity-based compensation expense	136			—		136
Other	337			—		337
Issuance of warrants	907			—		907
Balance at June 30, 2016	$	19,046		$	—	$	19,046

See accompanying notes to unaudited condensed consolidated financial statements.

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EMERGE ENERGY SERVICES LP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)



	Six Months Ended June 30,
	2016			2015
Cash flows from operating activities:
Net income (loss)	$	(57,112	)	$	12,375
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation, depletion and amortization	12,131			13,795
Equity-based compensation expense	136			3,227
Project and contract termination costs - non-cash portion	4,011			8,684
Provision for doubtful accounts	1,746			296
Loss on disposal of assets	76			8
Amortization of debt discount/premium and deferred financing costs	1,506			557
Write-down of inventory	5,394			—
Unrealized loss on derivative instruments	665			389
Other non-cash	59			39
Changes in operating assets and liabilities:
Accounts receivable	6,845			22,705
Inventories	8,135			(9,341		)
Prepaid expenses and other current assets	1,643			(3,055		)
Accounts payable and accrued liabilities	1,560			(6,605		)
Other assets	173			(3,161		)
Cash flows from operating activities:	(13,032		)	39,913

Cash flows from investing activities:
Purchases of property, plant and equipment	(11,010		)	(16,596		)
Net proceeds	(9		)	1,046
Collection of notes receivable	7			7
Cash flows from investing activities:	(11,012		)	(15,543		)

Cash flows from financing activities:
Proceeds from line of credit borrowings	141,345			162,400
Repayment of line of credit borrowings	(130,451		)	(130,400		)
Repayment of other long-term debt	—			(53		)
Distributions to unitholders	—			(58,164		)
Payment of business acquisition obligation	(382		)	(518		)
Payments on capital lease obligation	—			(832		)
Payment of financing costs	(4,177		)	(438		)
Other financing activities	(3		)	—
Cash flows from financing activities:	6,332			(28,005		)

Cash and cash equivalents:
Net decrease	(17,712		)	(3,635		)
Balance at beginning of period	20,870			6,876
Balance at end of period	$	3,158		$	3,241

See accompanying notes to unaudited condensed consolidated financial statements.

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EMERGE ENERGY SERVICES LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization

Emerge Energy Services LP (“Emerge”) is a Delaware limited partnership that completed its initial public offering (“IPO”) on May 14, 2013 to become a publicly traded partnership. The combined entities of Superior Silica Sands LLC (“SSS”), a Texas limited liability company, Allied Energy Company LLC (“AEC”), an Alabama limited liability company, and Emerge Energy Services Operating LLC (“Emerge Operating”), a Delaware limited liability company, represent the predecessor for accounting purposes (the “Predecessor”) of Emerge. Emerge acquired Direct Fuels LLC (“Direct Fuels”) in a business combination concurrent with the IPO on May 14, 2013,

References to the “Partnership,” “we,” “our” or “us” when used for dates or periods ended prior to the IPO, refer collectively to the Predecessor. References to the “Partnership,” “we,” “our” or “us” when used for dates or periods ended on or after the IPO, refer collectively to Emerge and all of its subsidiaries, including Direct Fuels.

We are a growth-oriented energy services company engaged in the business of mining, producing, and distributing silica sand that is a key input for the hydraulic fracturing of oil and gas wells. The Sand business conducts mining and processing operations from facilities located in Wisconsin and Texas. In addition to mining and processing silica sand for the oil and gas industry, the Sand business sells its product for use in building products and foundry operations.

The Fuel business operates transmix processing facilities located in the Dallas-Fort Worth area and in Birmingham, Alabama. The Fuel business also offers third-party bulk motor fuel storage and terminal services, biodiesel refining, sale and distribution of wholesale motor fuels, reclamation services (which consists primarily of cleaning bulk storage tanks used by other petroleum terminal and others) and blending of renewable fuels.

On August 31, 2016, we entered into an Amended and Restated Purchase and Sale Agreement, dated August 31, 2016 (the “Restated Purchase Agreement”), with Susser Petroleum Operating Company LLC and Sunoco LP (together, “Sunoco”). The Restated Purchase Agreement amended and restated in its entirety the previously disclosed Purchase and Sale Agreement, dated June 23, 2016, between the Partnership and Sunoco in connection with the closing of the sale by Emerge to Sunoco of all of the issued and outstanding ownership interests in our Fuel business. Pursuant to the Restated Purchase Agreement, Sunoco paid Emerge a purchase price of approximately $167.7 million in cash (subject to certain working capital and other adjustments in accordance with the terms of the Restated Purchase Agreement), of which $14.25 million is placed into several escrow accounts to satisfy potential claims from Sunoco for indemnification under the Restated Purchase Agreement. Any escrowed funds remaining after certain periods of time set forth in the Restated Purchase Agreement will be released to Emerge, provided that no unsatisfied indemnity claims exist at such time.

Accordingly, the assets and liabilities of our Fuel business were classified as held for sale and the results of operations have been classified as discontinued operations for all periods presented. We now operate our continuing business in a single sand segment. We report silica sand activities as our continuing operations and fuel operations as our discontinued operations.

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, these financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read together with our 2015 Annual Report on Form 10-K. These financial statements include the accounts of all of our subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included.

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to the current period presentation. These reclassifications do not impact net income and do not reflect a material change in the information previously presented in our Condensed Consolidated Statements of Operations.

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NOTE 2 – DISCONTINUED OPERATIONS

At March 31, 2016, the assets and liabilities of our Fuel business were classified as held for sale and the results of operations have been classified as discontinued operations for all periods presented in accordance with ASU 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity."

Summarized assets and liabilities of the Fuel business, classified as held for sale as of June 30, 2016 and December 31, 2015 are as follows:



	June 30, 2016		December 31, 2015

	($ in thousands)
Trade and other receivables, net	$	15,132	$	8,247
Inventories	8,784		12,457
Prepaid expenses and other current assets	4,122		2,749
Current assets held for sale	$	28,038	$	23,453

Property, plant and equipment, net	$	59,426	$	54,110
Intangible assets, net	22,678		24,124
Goodwill	29,264		29,264
Other assets, net	43		43
Long-term assets held for sale	$	111,411	$	107,541

Accounts payable	$	7,656	$	10,088
Accrued liabilities	5,955		5,107
Total liabilities held for sale	$	13,611	$	15,195

The following corporate costs were allocated to discontinued operations for the three and six months ended June 30, 2016 and all prior periods presented:


•	Interest on the revolver was allocated to the discontinued operation based on the allocation of debt between sand and fuel business.


•	Equity-based compensation costs recognized for the Fuel business employees was allocated to discontinued operations.


•	The taxes paid on behalf of the Fuel business were compiled by review of prior tax filings and payments. These amounts were allocated to discontinued operations.


•	General corporate overhead costs were not allocated to discontinued operations.

Summarized results of the discontinued operations for the three and six months ended June 30, 2016 and 2015 are as follows :

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	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015

	($ in thousands)
Revenues (1)	$	101,982	$	132,734		$	182,463	$	240,451
Cost of goods sold (excluding depreciation, depletion and amortization) (1)	93,844		126,195			169,544		228,270
Depreciation and amortization	—		2,634			2,354		5,273
Selling, general and administrative expenses	2,194		1,307			3,792		3,193
Interest expense, net	686		302			1,283		590
Other	—		(5		)	—		(9		)
Income from discontinued operations before provision for income taxes	5,258		2,301			5,490		3,134
Provision for income taxes	5		104			11		201
Income from discontinued operations, net of taxes	$	5,253	$	2,197		$	5,479	$	2,933

(1) Fuel revenues and cost of goods sold include excise taxes and similar taxes:	$	13,405	$	12,520		$	26,488	$	24,315

On August 31, 2016, we completed the sale of our Fuel business pursuant to the terms of the Restated Purchase Agreement. The purchase price was $167.7 million , subject to adjustment based on actual working capital conveyed at closing. The following escrow accounts were established at closing:


•	$7 million of the sales price was withheld as a general escrow associated with certain indemnification obligations. Any unutilized escrow balance, plus any accrued interest thereon, will be paid 54 months from the closing date;


•	$4 million of the sales price was withheld as a hydrotreater escrow to satisfy any cost overruns of the Birmingham hydrotreater completion. Any unutilized escrow balance, along with any accrued interest thereon, will be paid 60 days after the substantial completion of the Birmingham hydrotreater;


•	$2.25 million of the sales price was withheld as the Renewable Fuel Standard (“RFS") escrow account. The unutilized RFS escrow will be released, along with any accrued interest thereon, no later than four months from the closing date; and


•	$1 million of the sales price was withheld as a pipeline escrow account. Any unutilized escrow balance, along with any accrued interest thereon, will be released with the general escrow.

The following table represents the estimated gain on sale from the Fuel business recognized in the third quarter of 2016 (in thousands). These amounts will be adjusted as more information becomes available during the the third quarter of 2016.



Purchase price	$	167,736
Adjustments:
Working capital true-up	3,398
Other adjustments	(2,911		)
General escrow	(7,000		)
Hydrotreater escrow	(4,000		)
Other escrow	(3,250		)
Net proceeds	153,973
Less:
Net book value of assets and liabilities sold	(127,757		)
Escrow receivable	10,597
Transaction costs including commissions	(7,320		)
Gain on sale of Fuel business	$	29,493

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3. OTHER FINANCIAL DATA

Assets held for sale

We consider assets to be held for sale when management commits to a formal plan to actively market the assets for sale at a price reasonable in relation to fair value, the asset is available for immediate sale in its present condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, the sale of the asset is expected to be completed within one year and it is unlikely that significant changes will be made to the plan. Upon designation as held for sale, we record the carrying value of the assets at the lower of its carrying value or its estimated fair value, less costs to sell. In accordance with generally accepted accounting principles, assets held for sale are not depreciated. We will periodically evaluate the carrying value of our property, plant and equipment based upon the estimated cash flows to be generated by the related assets. If impairment is indicated, a loss will be recognized.

Discontinued Operations

The results of discontinued operations are presented separately, net of tax, from the results of ongoing operations for all periods presented. The expenses included in the results of discontinued operations are the direct operating expenses incurred by the discontinued segment that may be reasonably segregated from the costs of the ongoing operations of the Company. The assets and liabilities have been accounted for as discontinued operations in our Condensed Consolidated Balance Sheets for all periods presented. The operating results related to these lines of business have been included in discontinued operations in our Condensed Consolidated Statements of Operations for all periods presented. See Note 2 - Discontinued Operations for further detail.

Allowance for Doubtful Accounts

The allowance for doubtful accounts was $3.8 million and $1.9 million at June 30, 2016 and December 31, 2015 , respectively. Of these amounts, allowance for doubtful accounts for continuing operations totaled $3.2 million and $1.4 million at June 30, 2016 and December 31, 2015 , respectively.

Inventories

Inventories for continuing operations consisted of the following:



	June 30, 2016		December 31, 2015

	($ in thousands)
Sand finished goods	$	13,378	$	12,224
Sand work in process	6,731		17,796
Sand raw materials and supplies	196		142
Total	$	20,305	$	30,162

During the first quarter of 2016, we wrote down $5.4 million of our sand inventory based on our lower or cost or market analysis. We attribute this write down to declining market conditions and a significant decline in prices.

We classified $8.8 million and $12.5 million of our inventories related to our Fuel business to assets held for sale as of June 30, 2016 and December 31, 2015 , respectively. See Note 2 - Discontinued operations for further information.

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Property, Plant and Equipment

Property, plant and equipment for continuing operations consisted of the following:



	June 30, 2016		December 31, 2015

	($ in thousands)
Machinery and equipment (1)	$	88,057	$	87,357
Buildings and improvements (1)	66,280		66,215
Land and improvements (1)	45,065		45,065
Mineral reserves	30,181		30,181
Construction in progress	2,694		2,532
Capitalized reclamation costs	2,445		2,445
Total cost	234,722		233,795
Accumulated depreciation and depletion	62,527		54,275
Net property, plant and equipment	$	172,195	$	179,520

(1) Includes assets under capital lease

We classified $59.4 million and $54.1 million of our property, plant and equipment related to our Fuel business to assets held for sale as of June 30, 2016 and December 31, 2015 , respectively. See Note 2 - Discontinued operations for further information.

We recognized $9.1 million and $10.3 million of depreciation and depletion expense for the six months ended June 30, 2016 and 2015 , respectively. Of these amounts, depreciation and depletion expense for continuing operations totaled $8.3 million and $8.5 million at June 30, 2016 and 2015 , respectively.

Property, plant and equipment that have been included as part of the assets held for sale are no longer depreciated from the time that they are classified as such. We will periodically evaluate the carrying value of its property, plant and equipment based upon the estimated cash flows to be generated by the related assets. If impairment is indicated, a loss will be recognized.

Intangible Assets Other Than Goodwill

Our intangible assets for continuing operations consisted of the following:



	Cost		Accumulated Amortization		Net

	($ in thousands)
June 30, 2016:
Patents	$	7,443	$	1,698	$	5,745
Supply and transportation agreements	569		55		514
Non-compete agreement	100		19		81
Total	$	8,112	$	1,772	$	6,340

December 31, 2015:
Patents	$	7,000	$	234	$	6,766
Supply and transportation agreements	471		—		471
Non-compete agreement	100		14		86
Total	$	7,571	$	248	$	7,323

We classified $22.7 million and $24.1 million of our intangible assets other than goodwill related to our Fuel business to assets held for sale as of June 30, 2016 and December 31, 2015 , respectively. See Note 2 - Discontinued operations for further information.

We recognized $3.0 million and $3.5 million of amortization expense for the six months ended June 30, 2016 and 2015 , respectively. Of these amounts, amortization expense for continuing operations totaled $1.5 million and $0 million for the six months June 30, 2016 and 2015 , respectively.

Other Assets, Net

Other assets, net for continuing operations consisted of the following:

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	June 30, 2016		December 31, 2015

	($ in thousands)
Prepaid lease assets, net of current portion (1)	$	10,285	$	11,796
Deferred lease asset (2)	8,851		—
Other	1,922		1,434
Total	$	21,058	$	13,230


(1)	The cost to transport leased railcars from the manufacturer to our site for initial placement in service is capitalized and amortized over the term of the lease (typically five to seven years). This balance reflects the non-current portion of these capitalized costs.

(2)

During the first six months of 2016, we completed negotiations with various railcar lessors pursuant to which we terminated a future order of railcars, deferred future railcar deliveries and reduced and deferred payments on existing leases. The related rent expense is recorded on a straight-line basis over the lease term. The cumulative excess of rent expense over rent payments is recorded as a deferred lease asset and recorded in “Other assets” in the accompanying Condensed Consolidated Balance Sheets.

We classified $43 thousand of our other assets, net related to our Fuel business to assets held for sale as of June 30, 2016 and December 31, 2015 . See Note 2 - Discontinued operations for further information.

Accrued Liabilities

Accrued liabilities for continuing operations consisted of the following:



	June 30, 2016		December 31, 2015

	($ in thousands)
Current portion of business acquisition obligations	$	1,913	$	2,843
Logistics	1,840		2,486
Sales, excise, property and income taxes	1,045		198
Accrued interest	887		947
Deferred compensation	848		1,191
Derivative contract liability	729		472
Salaries and other employee-related	635		491
Mining	429		—
Sand purchases and royalties	242		520
Current portion of contract termination	160		135
Maintenance	40		—
Purchase of intangible assets	—		2,500
Other	2,392		1,511
Total	$	11,160	$	13,294

We classified $6.0 million and $5.1 million of our accrued liabilities related to our Fuel business to liabilities held for sale as of June 30, 2016 and December 31, 2015 , respectively. See Note 2 - Discontinued operations for further information.

Other Long-term Liabilities

Other Long-term Liabilities for continuing operations consisted of the following:



	June 30, 2016		December 31, 2015

	($ in thousands)
Long-term promissory note	$	8,064	$	—
Contract and project terminations	5,130		1,162
Asset retirement obligation due	2,612		2,570
Other	2,604		1,000
Total	$	18,410	$	4,732

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Long-term Promissory Note

During the second quarter of 2016, we negotiated significant concessions on the majority of our railcar leases pursuant to which we cancelled or deferred deliveries on rail cars and reduced cash payments on a substantial portion of the existing rail cars in our fleets. In exchange of these concessions, we issued at par an Unsecured Promissory Note in the aggregate principal amount of $8 million (the “PIK Note”) for delivery deferrals. The PIK Note bears interest at a rate of 10% per annum payable in cash or, in certain situations, in-kind, when certain financial metrics have been met. The PIK Note will mature on June 2, 2020. We also issued warrants to purchase 370,000 common units representing limited partnership interests in the Partnership in exchange of these concessions during the second quarter of 2016. This note is included in Other long-term liabilities in our Condensed Consolidated Balance Sheets.

Contract and Project Terminations

In 2014 and 2015, we began development of sand processing facilities in Independence, Wisconsin and other small projects in Ohio and Missouri. Due to a number of complications, such as an increase in projected operating costs and a decline in the market price and demand for frac sand in early 2015, we determined that these projects were no longer economically viable. In 2015, we recorded a $9.3 million charge to earnings, of which $9.2 million related to the Independence, Wisconsin facilities. This charge to earnings included items such as engineering, legal and other professional service fees, site preparation costs, and writedowns of assets to estimated net realizable value.

Management committed to a plan to discontinue these projects in April 2015. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 420, Exit or Disposal Cost Obligations, any contract termination charges and estimated values of continuing contractual obligations for which we will receive no future value will be recognized as a charge to earnings as of the contract termination date or cease-use date. We estimated these contract termination charges to be approximately $1.4 million . These liabilities will be reviewed periodically and may be adjusted when necessary, but we do not expect any such adjustments to be significant.

During the first half of 2016, we negotiated concessions on the majority of our railcar leases pursuant to which we cancelled or deferred deliveries on rail cars and reduced cash payments on a substantial portion of the existing rail cars in our fleets. In exchange for these concessions, we incurred a contract termination charge of $4 million . We issued at par an Unsecured Promissory Note in the aggregate principal amount of $4 million with interest payable in cash or, in certain situations, in-kind, when certain financial metrics have been met. This note bears interest at a rate of five percent per annum and are is due and payable within 30 days following the date on which financial statements are publicly available covering the first date on which these financial metrics have been met.

The following table illustrates the various contract termination liabilities and exit and disposal reserves included in Accrued liabilities and Other long-term liabilities in our Condensed Consolidated Balance Sheets:



	($ in thousands)
Balance at December 31, 2015	$	1,297
Contract termination charges	4,000
Accretion	84
Payments	(24		)
Balance at June 30, 2016	$	5,357

Mining and Wet Sand Processing Agreement

In April 2014, a five -year contract with a sand processor (“Processor”) became effective to support our Sand business in Wisconsin. Under this contract, the Processor financed and built a wet wash processing plant near our Wisconsin operations. As part of the agreement, the Processor wet washes our sand, creates stockpiles of washed sand and maintains the plant and equipment. During the term of the agreement the Processor will own the wet plant along with the equipment and other temporary structures used to support this activity. At the end of the five -year term of the agreement or following a default under the contract by the Processor, we have the right to take ownership of the wet plant and other equipment without charge. Subject to certain conditions, ownership of the plant and equipment will transfer to us at the expiration of the term. We accounted for the wet plant as a capital lease obligation. The original capitalized lease asset and corresponding capital lease obligation totaled $3.3 million .

Fair Value of Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, restricted cash and equivalents, accounts receivable, accounts payable and debt instruments. The carrying amounts of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable and accounts payable are representative of their fair values due to their short maturities. The carrying amounts

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of our revolving credit facility approximates fair value because the underlying instrument includes provisions that adjust our interest rates based on current market rates.

On June 2, 2016, we issued warrants to lessors to purchase 370,000 common units representing limited partnership interests in the partnership for concessions on various long-term leases. These warrants may be exercised at any time and from time to time during next five years , at an exercise price per common unit equal to $4.77 . These fair value of these warrants was calculated at $2.45 per unit based on a Black Scholes valuation model, utilizing Level 2 inputs based on the hierarchy established in ASC 820, Fair Value Measurement.

Retirement Plan

We sponsor a 401(k) plan for substantially all employees that provides for us to match 100% of participant contributions up to 5% of the participant’s pay. Additionally, we can make discretionary contributions as deemed appropriate by management. Our employer contributions to these plans for continuing operations totaled $177 thousand and $299 thousand for the six months ended June 30, 2016 and 2015 , respectively. We classified $118 thousand and $157 thousand to Income from discontinued operations, net of taxes for the six months ended June 30, 2016 and 2015 , respectively. As of July 1, 2016, we have suspended all employer contributions to this plan.

Seasonality

For our Sand business, winter weather affects the months during which we can wash and wet-process sand in Wisconsin. Seasonality is not a significant factor in determining our ability to supply sand to our customers because we accumulate a stockpile of wet sand feedstock during non-winter months. During the winter, we process the stockpiled sand to meet customer requirements. However, we sell sand for use in oil and natural gas production basins where severe weather conditions may curtail drilling activities. This is particularly true in drilling areas located in the northern U.S. and western Canada. If severe winter weather precludes drilling activities, our frac sand sales volume may be adversely affected. Generally, severe weather episodes affect production in the first quarter with effects possibly continuing into the second quarter.

Concentration of Credit Risk

We provide credit, in the normal course of business, to customers located throughout the United States and Canada. We encounter a certain amount of credit risk as a result of a concentration of receivables among a few significant customers. We perform ongoing credit evaluations of our customers and generally do not require collateral. The trade receivables (as a percentage of total trade receivables) as of June 30, 2016 and December 31, 2015 from such significant customers are set forth below:



	June 30, 2016		December 31, 2015
Customer A	18	%	11	%
Customer B	13	%	*
Customer C	*		12	%
Customer D	*		12	%

An asterisk indicates balance is less than ten percent.

For continuing operations, the trade receivables (as a percentage of total trade receivables) as of June 30, 2016 and December 31, 2015 from such significant customers are set forth below:



	June 30, 2016		December 31, 2015
Customer A	35	%	16	%
Customer D	*		17	%
Customer E	13	%	10	%
Customer F	10	%	*
Customer G	*		13	%
Customer B	25	%	*
Customer C	*		18	%

An asterisk indicates balance is less than ten percent.

Significant customers

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No individual customer represented 10% of total revenues for the six months ended June 30, 2016 , while one customer represented 10% of revenues for the six months ended June 30, 2015 .

The table shows our significant customers for our continuing operations for the three months ended June 30, 2016 and 2015 .



	June 30, 2016		June 30, 2015
Customer A	35	%	*
Customer G	16	%	18	%
Customer H	*		19	%
Customer C	*		24	%

An asterisk indicates revenue is less than ten percent.

Geographical Data

Although we own no long-term assets outside the United States, our Sand business began selling product in Canada during 2013. We recognized $8.0 million and $22.9 million of revenues in Canada for the six months ended June 30, 2016 and 2015 , respectively. All other sales have occurred in the United States.

Interim Indicators of Impairment

Goodwill

The $29.3 million balance of goodwill at June 30, 2016 is related solely to our Fuel business. At June 23, 2016, we entered into a Purchase and Sale Agreement to sell our Fuel business. Accordingly, Goodwill is classified as held for sale on the Condensed Consolidated Balance Sheets.

Long-Lived Assets

We believe the decrease in our common units’ market value is attributable primarily to our Sand business’ decreasing profits and the frac sand industry’s downturn. Therefore, we have assessed the recoverability of long-lived assets for our Sand business, and determined that the carrying values are recoverable from our forecasted cash flows as of June 30, 2016 .

Recent Accounting Pronouncements

In May 2014, August 2015 and May 2016, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers , ASU 2015-14, Revenue from Contracts with Customers, Deferral of the Effective Date , and ASU 2016-12, Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients , respectively, as a new Topic, Accounting Standards Codification Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This guidance is effective for annual periods beginning after December 15, 2017 with early adoption permitted on January 1, 2017 and shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. We are evaluating the effect of adopting this new accounting guidance.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern . This ASU requires an entity to evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity's ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. The new guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. We are evaluating the effect of adopting this new accounting guidance but do not expect adoption will have a material impact on our financial position, results of operations or cash flows.

In February 2016, the FASB issued ASU 2016-02, Leases. This ASU requires lessees to recognize lease assets and lease liabilities generated by contracts longer than a year on their balance sheet. The ASU also requires companies to disclose in the footnotes to their financial statements information about the amount, timing, and uncertainty for the payments they make for the lease agreements. ASU 2016-02 is effective for public companies for annual periods and interim periods within those annual periods beginning after December 31, 2018. Early adoption is permitted for all entities. We are evaluating the effect of adopting this new accounting guidance.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting . This ASU affects entities that issue share-based payment awards to their employees. The ASU is designed to simplify several aspects of accounting for share-based payment award transactions which include the income tax consequences, classification of awards as either equity

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or liabilities, classification on the statement of cash flows and forfeiture rate calculations. ASU 2016-09 is effective for public companies for annual periods and interim periods within those annual periods beginning after December 15, 2016. We adopted this ASU as of January 1, 2016. As a result, we changed our accounting policy to recognize forfeitures as they occur. The adoption of ASU 2016-09 did not have a material effect on our consolidated financial statements.

4. LONG-TERM DEBT

Following is a summary of our long-term debt:



	June 30, 2016			December 31, 2015

	($ in thousands)
Revolving credit facility:
Principal	$	312,959		$	302,063
Deferred financing costs	(8,796		)	(6,125		)
Total long-term debt	$	304,163		$	295,938

Revolving Credit Facility

On June 27, 2014, we entered into an amended and restated revolving credit and security agreement (as amended, the “Credit Agreement”) among Emerge Energy Services LP, as parent guarantor, each of its subsidiaries, as borrowers (the “Borrowers”), and PNC Bank, National Association, as administrative agent and collateral agent (the “agent”), and the lenders thereto. The Credit Agreement matures on June 27, 2019 and, prior to giving effect to the amendments described below, consisted of a $350 million revolving credit facility, which includes a sub-limit of up to $30 million for letters of credit. Substantially all of the assets of the Borrowers are pledged as collateral under the Credit Agreement.

Borrowings under the Credit Agreement accrue interest at a rate equal to either, at our option, (i) the London interbank offered rate (LIBOR) plus 4.25% or (ii) a base rate, which will be the base commercial lending rate of the agent, as publicly announced to be in effect from time to time, plus 3.25% . At June 30, 2016, our outstanding borrowings under the Credit Agreement bore interest at a weighted-average rate of 6.02% . We also incur a commitment fee of 0.375% on committed amounts that are neither used for borrowings nor under letters of credit.

The Credit Agreement contains various covenants and restrictive provisions and requires maintenance of certain financial covenants. For periods prior to June 30, 2018 or such earlier time as our total leverage ratio (as defined in the Credit Agreement) is less than 3.50 to 1.00 as of the end of any two consecutive fiscal quarters (the “ratio compliance date”), we will be subject to the following covenants and restrictions:


•	the $350 million total aggregate commitment under the Credit Agreement will be reduced in an amount equal to the net proceeds of any notes offerings we may make in the future;


•	we will be required to maintain at least $25 million of excess availability (as defined in the Credit Agreement) under the Credit Agreement; and


•	we will be required to generate consolidated EBITDA in certain minimum amounts beginning with the quarter ending December 31, 2015 and rolling forward thereafter.

After the ratio compliance date, we will be required to maintain the following financial covenants in lieu of the covenants and restrictions in place prior to the ratio compliance date: (i) an interest coverage ratio (as defined in the Credit Agreement) of not less than 3.00 to 1.00 and (ii) a total leverage ratio (as defined in the Credit Agreement) of not greater than 3.50 to 1.00. As of June 30, 2016, our total leverage ratio exceeded the threshold of 3.50 to 1.00.

In addition, the Credit Agreement places restrictions on our ability to commence certain other actions, including:


•	our subsidiaries’ ability to make distributions to us (to permit us to make distributions to unitholders) if, after giving pro forma effect to such distribution, our total leverage ratio would be greater than or equal to 4.00 to 1.00, or the excess availability under the Credit Agreement would be less than the greater of $43.75 million or 12.5% of the total aggregate commitments;


•	our ability to enter into certain substantial acquisition or merger agreements with third-party businesses or making certain other investments; and


•	our ability to make capital expenditures for growth and maintenance through March 31, 2019 above certain amounts per quarter.

On March 1, 2016, we entered into Amendment No. 3 to the Credit Agreement to permit us to incur certain second lien obligations.

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As of March 31, 2016, we had undrawn availability under the Credit Agreement totaling $23.6 million and, as a result, we were not in compliance with the financial covenant to maintain at least $25 million of excess availability. On April 20, 2016, we notified the agent of this event of default under the Credit Agreement and began discussions with the agent to obtain a waiver regarding the event of default and to otherwise arrive at a long-term solution to the Partnership’s liquidity requirements, including the reduction of outstanding borrowings under the Credit Agreement through the sale of our Fuel business. At June 30, 2016 , we had undrawn availability under the Credit Facility totaling $2.8 million .

On May 20, 2016, we, the Borrowers, the lenders and the agent entered into Amendment No. 4 to the Credit Agreement to permit the Partnership and the Borrowers to issue an unsecured promissory note and warrants to one of our lessors in return for concessions and various long-term leases. On May 20, 2016, we, the Borrowers, the lenders and the agent also entered into Amendment No. 5 to the Credit Agreement. Amendment No. 5, among other things, provided a limited waiver of the event of default under the Credit Agreement for failure to maintain financial covenants as of March 31, 2016 and provided a period of covenant relief with respect to the requirements to maintain $25 million of excess availability under the Credit Agreement or to generate the minimum amounts of consolidated EBITDA for the quarter ended March 31, 2016. The limited waiver and covenant relief provided in Amendment No. 5 continued until the earlier of July 8, 2016 or the execution of a definitive agreement for the sale of our Fuel business (as subsequently amended, the “Covenant Reversion Date”).

Prior to the Covenant Reversion Date, we were subject to the following covenants and restrictions:


•	we were restricted from making dividends or distributions to our unitholders, and the Borrowers were restricted from making dividends or distributions to us; and


•	we were restricted from making capital expenditures in our Sand business in excess of $570,000 in the aggregate or from making capital expenditures in our Fuel business for purposes other than completing installation of hydro treaters at the facilities.

In addition, Amendment No. 5 increased the interest rates applicable to borrowings under the Credit Agreement to either, at our option, (i) LIBOR plus 5.00% or (ii) the base rate plus 4.00% and also provided for the following revisions:


•	the total aggregate commitment under the Credit Agreement was reduced from $350 million to $325 million and the sublimit on letters of credit was reduced from $30 million to $20 million ;


•	the dominion period (as defined in the Credit Agreement), whereby our and our subsidiaries’ cash receipts are swept on a daily basis and used to reduce outstanding borrowings, was extended until the revolving credit facility matures; and


•	the threshold amounts for an event of default upon the occurrence of judicial actions, judgments or cross defaults were decreased from $10 million to $5 million .

On May 27, 2016, June 10, 2016, June 15, 2016 and June 17, 2016, we, the Borrowers, the lenders and the agent entered into Amendments No. 6, 7, 8 and 9, respectively, to the Credit Agreement to delay the onset of the Covenant Reversion Date while we negotiated a purchase and sale agreement for the Fuel business. We reached a definitive agreement for the sale of the Fuel business on June 23, 2016. On June 30, 2016, we, the Borrowers, the lenders and the agent entered into Amendment No. 10 to the Credit Agreement for the purpose of further extending the Covenant Reversion Date until the earlier of September 2, 2016 or the closing of the sale of the Fuel business.

On August 31, 2016, we closed the sale of the Fuel business, used the net proceeds therefrom to repay outstanding borrowings under the Credit Agreement and entered into Amendment No. 11 to the Credit Agreement with the Borrowers, the lenders and the agent. Amendment No. 11, among other things, restated the Credit Agreement and provided a full waiver for all defaults or events of default arising out of our failure to comply with the financial covenant to generate minimum amounts of adjusted EBITDA during the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016 and the covenant to maintain the minimum amount of excess availability for any date prior to September 1, 2016.

Pursuant to Amendment No. 11, the Credit Agreement now provides for a maximum $200 million revolving credit facility with a $20 million sublimit on letters of credit, and requires the Partnership to maintain the following financial covenants:


•	a covenant to maintain $20 million of excess availability (as defined in the Credit Agreement), subject to decrease to $15 million upon the satisfaction of certain conditions;


•	a covenant to limit capital expenditures (as defined in the Credit Agreement) to certain maximum amounts for each quarter through March 31, 2019;


•	beginning with the quarter ending June 30, 2017, a covenant to generate consolidated EBITDA (as defined in the Credit Agreement) in certain minimum amounts;

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•	beginning with the quarter ending March 31, 2018, a covenant to maintain an interest coverage ratio (as defined in the Credit Agreement) of not less than 2.00 to 1.00, which is scheduled to increase to 3.00 to 1.00 for the fiscal quarter ending March 31, 2019; and


•	a covenant to raise at least $31.2 million of net proceeds from the issuance and sale of common equity by November 30, 2016.

Following our entry into Amendment No. 11, we believe that we will be able to maintain compliance with the covenants and restrictions under the Credit Agreement, as amended, for at least the next 12 months.

5. COMMITMENTS AND CONTINGENCIES

Contractual Obligations

The following table represents the remaining minimum contractual obligations as of June 30, 2016 .



	Railcar Leases (1)		Other Operating Leases (2)		Royalty Commitments (3)		Purchase Commitments (4)

	($ in thousands)
Remainder of 2016	$	17,151	$	593	$	115	$	7,418
2017	27,921		597		230		20,839
2018	37,027		332		230		24,053
2019	37,995		259		230		22,439
2020	39,560		254		230		21,342
Thereafter	296,630		2,592		1,710		48,614
Total	$	456,284	$	4,627	$	2,745	144,705
Less amount representing interest							(1,176		)
Total less interest							$	143,529

(1)


(2)	Includes lease agreements for land, facilities and equipment.


(3)	Represents minimum royalty payments for various sand mining locations. The amounts paid will differ based on amounts extracted.


(4)	Includes minimum amounts payable under a business acquisition agreement, long-term rail transportation agreements, transload facility agreements, and other purchase commitments.

Environmental Matter

On November 21, 2013, the EPA issued a General Notice Letter and Information Request (“Notice”) under Section 104(e) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”), to one of our subsidiaries operating within the Fuel business. The Notice provides that the subsidiary may have incurred liability with respect to the Reef Environmental site in Alabama, and requested certain information in accordance with Section 107(a) of CERCLA. We timely responded to the Notice. At this time, no specific claim for cost recovery has been made by the EPA (or any other potentially responsible party) against us. There is uncertainty relating to our share of environmental remediation liability, if any, because our allocable share of wastewater is unknown and the total remediation cost is also unknown. Consequently, management is unable to estimate the possible loss or range of loss, if any. We have not recorded a loss contingency accrual as of June 30, 2016 or December 31, 2015 . In the opinion of management, the outcome of such matters will not have a material adverse effect on our financial position, liquidity or results of operations.

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In January 2016, AEC experienced a leak in its proprietary fuel pipeline that connects the bulk storage terminal to the transmix facility located in Birmingham, Alabama. AEC management notified the controlling governmental agencies of this condition, and commenced efforts to locate the leak, determine the cause of the leak, repair the leak, and remediate known contamination to the proximate soils and sub-grade. These efforts remain in progress, and management does not expect the costs to repair and remediate these conditions to have a material impact on our financial position, results of operations, or cash flows.

Property Value Guarantees

In December 2015, we entered into an agreement to purchase certain properties and assume leases and other related agreements for future development of sand mining and processing facilities in Wisconsin. Given the current challenging market conditions for proppant demand, we do not plan to begin development until the North American oil and gas markets improve. Under a mining agreement with a local town, we have assumed contingent obligations to indemnify owners of approximately 141 properties for diminution of value associated with mine operations and limited moving expenses when each landowner decides to sell a property, even if no mine is yet in operation. As these contingent liabilities cannot be reasonably estimated, no liability has been recorded.

6. RELATED PARTY TRANSACTIONS

Related party transactions included in our Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations are summarized in the following table:



	Six Months Ended June 30,
	2016		2015

	($ in thousands)
Wages and employee-related costs (1)	$	9,148	$	16,032
Lease expense	$	13	$	13



	June 30, 2016		December 31, 2015

	($ in thousands)
Accounts receivable	$	40	$	295
Accounts payable and accrued liabilities	$	788	$	553


(1)	We do not have any employees. Our general partner manages our human resource assets, including fringe benefits and other employee-related charges. We routinely and regularly reimburse our general partner for any employee-related costs paid on our behalf, and report such costs as operating expenses.

7. EQUITY-BASED COMPENSATION

Effective May 14, 2013, we adopted our 2013 Long-Term Incentive Plan (the “LTIP”) for providing long-term incentives for employees, directors, and consultants who provide services to us, and provides for the issuance of an aggregate of up to 2,321,968 common units to be granted either as options, restricted units, phantom units, distribution equivalent rights, unit appreciation rights, unit award, profits interest units, or other unit-based award granted under the plan. All of our outstanding grants will be settled through issuance of limited partner common units.

For phantom units granted to employees in 2013, we currently assume a 43 -month vesting period, which represents management’s estimate of the amount of time until all vesting conditions have been met. Concurrent with the closing of a secondary offering in June 2014 and the exercise of the underwriters’ over-allotment in July 2014, 90,686 of these phantom units vested and common units were issued. For other phantom units granted to employees, we assume a 36 to 48 -month vesting period. Restricted units are awarded to our independent directors on each anniversary of our IPO, each with a vesting period of one year. Regarding distributions for independent directors and other employees, distributions are credited to a distribution equivalent rights account for the benefit of each participant and become payable generally within 45 days following the date of vesting. As of June 30, 2016 , the unpaid liability for distribution equivalent rights totaled $1.5 million .

In 2016, we granted 21,000 time based phantom units to certain officers to vest in equal installments on each anniversary date of the grant over a period of two years.

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The following table summarizes awards granted during the six months ended June 30, 2016 .



	Total Units		Phantom Units		Restricted Units		Fair Value per Unit at Award Date
Outstanding at December 31, 2015	225,000		216,804		8,196		$	21.22
Granted	96,756		21,000		75,756		$	3.81
Vested	(10,196	)	(2,000	)	(8,196	)	$	40.01
Forfeitures	(44,091	)	(44,091	)	—		$	20.19
Outstanding at June 30, 2016	267,469		191,713		75,756		$	14.38

For the six months ended June 30, 2016 and 2015 , we recorded non-cash equity-based compensation expense of $0.1 million and $3.2 million , respectively, in selling, general and administrative expenses. Non-cash equity-based compensation expense for continuing operations was $(0.1) million and $2.8 million for the six months ended June 30, 2016 and 2015 , respectively.

As of June 30, 2016 , the unrecognized compensation expense related to the grants discussed above amounted to $3.5 million to be recognized over a weighted average of 0.91 years.

8. INCOME TAXES

Continuing operations

Our provision for income taxes for continuing operations relates to: (i) Texas margin taxes for the Partnership, and (ii) an insignificant amount of Canadian income taxes on SSS earnings in Canada (most of our earnings are exempted under a U.S/Canada tax treaty). For federal income tax purposes, we report our income, expenses, gains, and losses as a partnership not subject to income taxes. As such, each partner is responsible for his or her share of federal and state income tax. Net earnings for financial statement purposes may differ significantly from taxable income reportable to each partner because of differences between the tax basis and financial reporting basis of assets and liabilities.

The composition of our provision for income taxes for continuing operations is as follows:



	Six Months Ended June 30,
	2016		2015

	($ in thousands)
Texas margin tax	$	20	$	251
Canadian income tax	1		17
Total provision for income taxes	$	21	$	268

We are responsible for our portion of the Texas margin tax that is included in our subsidiaries’ consolidated Texas franchise tax returns. For our operations in Texas, the effective margin tax rate is approximately 0.95% as defined by applicable state law. The margin tax qualifies as an income tax under GAAP, which requires us to recognize the impact of this tax on the temporary differences between the financial statement assets and liabilities and their tax basis attributable to such tax.

Discontinued operations

Our provision for income taxes for discontinued operations relates to (i) Texas margin taxes for Direct Fuels, and (ii) federal and state income taxes for Emerge Energy Distributors Inc. (“Distributor”). Distributor reports its income, expenses, gains, and losses as a corporation and is subject to both federal and state income taxes. Federal and state income tax expense for discontinued operations for the six months ended June 30, 2016 and 2015 was $11 thousand and $201 thousand , respectively.

Effective Income Tax Rate

Distributor began operations in May 2013. For the six months ended June 30, 2016 , Distributor’s effective income tax rate was 21% . For Distributor, there were no significant differences between book and taxable income.

9. EARNINGS PER COMMON UNIT

We compute basic earnings (loss) per unit by dividing net income (loss) by the weighted-average number of common units outstanding including participating securities. Participating securities include unvested equity-based payment awards that contain non-forfeitable rights to distributions.

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Diluted earnings per unit is computed by dividing net income by the weighted-average number of common units outstanding, including participating securities, and increased further to include the number of common units that would have been outstanding had potential dilutive units been exercised. The dilutive effect of restricted units is reflected in diluted net income per unit by applying the treasury stock method. Under FASB ASC 260-10-45, Contingently Issuable Shares , 132,667 of our outstanding phantom units are not included in basic or diluted earnings per common unit calculations as of June 30, 2016 . We incurred a net loss for the three and six months ended June 30, 2016 , and therefore excluded all potentially dilutive restricted units from the diluted earnings per unit calculation for these periods as their effect would have been anti-dilutive.

Basic and diluted earnings per unit are computed as follows:



	Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015		2016			2015

	($ in thousands, except per unit data)
Net income (loss) from continuing operations	$	(28,150	)	$	687	$	(62,591	)	$	9,442
Net income (loss) from discontinued operations	5,253			2,197		5,479			2,933
Net Income (loss)	$	(22,897	)	$	2,884	$	(57,112	)	$	12,375

Weighted average common units outstanding	24,129,418			23,930,483		24,125,320			23,825,306
Weighted average phantom units deemed participating securities	59,187			200,819		59,518			304,358
Weighted average number of common units outstanding including participating securities (basic)	24,188,605			24,131,302		24,184,838			24,129,664
Weighted average potentially dilutive units outstanding	—			2,511		—			2,018
Weighted average number of common units outstanding (diluted)	24,188,605			24,133,813		24,184,838			24,131,682

Basic earnings (loss) per unit:
Earnings (loss) per common unit from continuing operations	$	(1.17	)	$	0.03	$	(2.59	)	$	0.39
Earnings (loss) per common unit from discontinued operations	0.22			0.09		0.23			0.12
Basic earnings (loss) per common unit	$	(0.95	)	$	0.12	$	(2.36	)	$	0.51

Diluted earnings (loss) per unit:
Earnings (loss) per common unit from continuing operations	$	(1.17	)	$	0.03	$	(2.59	)	$	0.39
Earnings (loss) per common unit from discontinued operations	0.22			0.09		0.23			0.12
Diluted earnings (loss) per common unit	$	(0.95	)	$	0.12	$	(2.36	)	$	0.51

10. SEGMENT INFORMATION

Segment Information

We follow segment reporting in accordance with FASB ASC 280-10, Disclosures about Segments of an Enterprise and Related Information . On June 23, 2016, we entered into the Purchase Agreement for our Fuel business. Accordingly, we have discontinued segment reporting. The assets and liabilities of the fuel business have been accounted for as assets held for sale in our consolidated balance sheets for all periods presented. The operating results related to these lines of business have been included in discontinued operations in our consolidated statements of operations for all periods presented.

11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We follow FASB ASC 820, Fair Value Measurement , which defines fair value, establishes a framework for measuring fair value, and specifies disclosures about fair value measurements. This guidance establishes a hierarchy for disclosure of the inputs to valuations used to measure fair value. The hierarchy prioritizes the inputs into three broad levels as follows.

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•	Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.


•	Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.


•	Level 3 inputs are measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources.

Our valuation models consider various inputs including (a) mark to market valuations, (b) time value and, (c) credit worthiness of valuation of the underlying measurement.

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.

The following table shows the three interest rate swap agreements we entered into during 2013 to manage interest rate risk associated with our variable rate borrowings.



Agreement Date	Effective Date	Maturity Date	Notional Amount	Fixed Rate	Variable Rate
Nov. 1, 2013	Oct. 14, 2014	Oct. 16, 2017	$25,000,000	1.33200%	1 Month LIBOR
Nov. 7, 2013	Oct. 14, 2014	Oct. 16, 2017	$25,000,000	1.25500%	1 Month LIBOR
Nov. 21, 2013	Oct. 14, 2014	Oct. 16, 2017	$20,000,000	1.21875%	1 Month LIBOR

Our Fuel business utilizes financial hedging arrangements whereby we hedge a portion of our gasoline and diesel inventory, which reduces our commodity price exposure on some of our activities. The derivative commodity instruments we utilize consist mainly of futures traded on the New York Mercantile Exchange. As of June 30, 2016 and December 31, 2015 , we had 0 and 2 open commodity derivative contracts, respectively, to manage fuel price risk.

We do not designate our derivative instruments as hedges under GAAP. As a result, we recognize derivatives at fair value on the consolidated balance sheet with resulting gains and losses reflected in interest expense in continuing operations (for interest rate swap agreements) and cost of goods sold for discontinued operations (for derivative commodity instruments), as reported in the condensed consolidated statements of operations. Our derivative instruments serve the same risk management purpose whether designated as a hedge or not. We derive fair values principally from published market interest rates and fuel price quotes (Level 2 inputs). The precise level of open position commodity derivatives is dependent on inventory levels, expected inventory purchase patterns, and market price trends. We do not use derivative financial instruments for trading or speculative purposes.

The fair values of outstanding derivative instruments and their classifications within our Condensed Consolidated Balance Sheets are summarized as follows:



	June 30, 2016		December 31, 2015		Classification

	($ in thousands)
Derivative assets:
Commodity derivative contracts	$	61	$	621	Assets held for sale
Derivative liabilities:
Interest rate swaps	$	729	$	472	Accrued liabilities
Commodity derivative contracts	$	—	$	152	Liabilities held for sale

The effect of derivative instruments, none of which has been designated for hedge accounting, on our Condensed Consolidated Statements of Operations was as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015		Classification

	(expense $ in thousands)
Interest rate swaps	$	152	$	101	$	563	$	681	Interest expense, net
Commodity derivative contracts	682		583		701		1,154		Income from discontinued operations
	$	834	$	684	$	1,264	$	1,835

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12. SUPPLEMENTAL CASH FLOW DISCLOSURES

The following supplemental disclosures may assist in the understanding of our Condensed Consolidated Statements of Cash Flows:



	Six Months Ended June 30,
	2016			2015

	($ in thousands)
Cash paid for interest	$	11,438		$	4,774
Cash paid for income taxes, net of refunds	$	(67	)	$	484
Distribution equivalent rights accrued, net of payments	$	—		$	477
Purchases of PP&E accrued but not paid at period-end	$	180		$	1,847
Purchases of PP&E accrued in a prior period and paid in the current period	$	3,364		$	5,238

13. SUBSEQUENT EVENTS

On August 8, 2016, we entered into a Securities Purchase Agreement with an institutional investor to issue and sell in a private placement an aggregate principal amount of $20 million of the Partnership’s Series A Preferred Units and warrants that may be exercised to purchase common units representing limited partner interests in the Partnership (the “Private Placement”). The Securities Purchase Agreement contains certain customary representations and warranties accompanied by certain indemnification rights and certain customary and other closing conditions. The Private Placement closed on August 15, 2016.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a publicly-traded limited partnership formed in 2012 by management and affiliates of Insight Equity Management Company LLC and its affiliates (collectively “Insight Equity”) to own, operate, acquire and develop a diversified portfolio of energy service assets.

Accordingly, the results of operations of the Fuel business have been classified as discontinued operations for all periods presented and we now operate our continuing business in a single Sand business. Through our Sand business, we are engaged in the businesses of mining, processing, and distributing silica sand, a key input for the hydraulic fracturing of oil and gas wells. We conduct our Sand operations through our subsidiary SSS, and we believe our SSS brand has name recognition and enjoys a positive reputation with our customers.

The following discussion analyzes our financial condition and results of operations and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2015 , as well as historical condensed consolidated financial statements and notes included elsewhere in this Quarterly Report.

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Results of Operations

The following table summarizes our consolidated operating results.



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015

	($ in thousands)
Revenues	$	24,825		$	68,118		$	54,495		$	164,362

Operating expenses:
Cost of goods sold (excluding depreciation, depletion and amortization)	38,354			50,738			82,144			116,993
Depreciation, depletion and amortization	4,870			4,721			9,777			8,522
Selling, general and administrative expenses	4,459			6,872			11,234			14,589
Contract and project terminations	10			2,693			4,036			9,412
Total operating expenses	47,693			65,024			107,191			149,516
Operating income (loss)	(22,868		)	3,094			(52,696		)	14,846
Other expense (income):
Interest expense	5,283			2,328			9,877			5,165
Other	(2		)	(8		)	(3		)	(29		)
Total other expense	5,281			2,320			9,874			5,136
Income (loss) before provision for income taxes	(28,149		)	774			(62,570		)	9,710
Provision for income taxes	1			87			21			268
Net income (loss) from continuing operations	(28,150		)	687			(62,591		)	9,442
Income (loss) from discontinued operations, net of taxes	5,253			2,197			5,479			2,933
Net income (loss)	$	(22,897	)	$	2,884		$	(57,112	)	$	12,375

Adjusted EBITDA (a)	$	(10,683	)	$	16,968		$	(20,196	)	$	45,382

(a) See “Adjusted EBITDA” below for a discussion of Adjusted EBITDA and a reconciliation to net income (loss) and cash flows from operations.

Major Factors Impacting Comparability Between Prior and Future Periods

Market Trends

Beginning in late 2014, the market prices for crude oil and refined products began a steep and protracted decline which has continued into 2016. This has greatly impacted the demand for frac sand as drilling and completion of new oil and natural gas wells has been significantly curtailed in North America. As a result, we have experienced significant downward pressure on pricing. We expect drilling and well completion activity levels, based on indications from our customers and other industry sources, will be weak for the remainder of 2016. While we ultimately expect a recovery in the frac sand market, we believe that conditions will not significantly improve until early to mid-2017.

Sale of Fuel Business

In order to improve our competitive positioning and retain upside for the eventual recovery in the oil and gas cycle, we divested our Fuel business to reduce our debt burden. Please see Note 2 to our financial statements for a detailed discussion of the sale of the Fuel business.

Cost Reductions

To conserve liquidity and respond to the industry downturn, we have become increasingly focused on prudently reducing costs while maintaining our ability to quickly respond to increased demand when the market begins to recover in the future. We have already implemented plans, but will continue to aggressively contain costs in the future. As the market trends have had the most impact on our frac sand business, we have concentrated our efforts on the Sand business. Such measures include:


•	We reduced permanent headcount, with most of these reductions occurring in the fourth quarter of 2015.

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•	We are minimizing the overall cost of sand sold by finding the lowest cost combinations of sand source, production location and transportation providers wherever possible.


•	We began shutting down our more expensive wet plants for winter earlier than normal in 2015, and we delayed opening our mines later than usual for the 2016 mining season.


•	We have temporarily idled our Wisconsin wet plants with the highest cost per ton, and we have strategically shifted sourcing of wet sand from higher cost sources to lower cost sources as demand for our frac sand has decreased.


•	In 2016, we have temporarily idled or significantly scaled back operations at two of our Wisconsin dry plants.


•	We began using new mining techniques at two of our Wisconsin mines in the third quarter of 2015, and introduced these techniques to our Kosse mine in July 2016. We expect to see over $1 per ton savings for frac sand sourced from these mines as these techniques are fully implemented and the resulting finished sand is sold.


•	We have negotiated, and continue to negotiate, price concessions and purchase commitment concessions from our major vendors, such as railcar lessors, rail transportation providers, mine operators, transload facilities operators, and professional services providers.


•	In 2016, we have minimized our capital expenditures to include only those projects with the potential for rapid returns, and comply with our bank covenants that limit capital expenditures.

Development of Sand Distribution System

In 2013 and 2014, we developed our sand distribution system through the addition of third-party transload facilities in the basins in which our customers operate. We are able to charge higher prices for these in-basin sales than for FOB-plant sales to provide this additional service and convenience to our customers and to cover related transportation and other services costs. However, these additional markups for in-basin sales have also been cut due to pricing pressures during this industry down-cycle, and we expect these logistics-based service markups to remain weak until the frac sand industry recovers.

Increasing Fixed Costs for Sand

During 2014, our rapidly expanding frac sand business required us to contract for numerous railcars to be delivered and leased in the future as well as contracting for new transload facilities discussed above. As our railcar fleet and distribution system has expanded while sales volumes contracted and sand prices declined, our fixed costs per ton have increased. We have negotiated concessions with several of our vendors and continue to press for relief on certain of our fixed costs similar to the pricing relief that we provided to our own customers. It is not certain if we will be successful in reducing these costs.

Expansion of Sand Resources

In December 2015, we acquired the rights to mine high quality northern white silica sand reserves in Jackson County, Wisconsin from a subsidiary of Performance Technologies, L.L.C (“PTL”), which is wholly-owned by Seventy Seven Energy Inc. (NYSE: SSE). We have not engaged an expert to assess the volume and quality of these sand reserve rights. The assets acquired include certain owned and leased land, sand deposit leases and related prepaid royalties, and transferable mining and reclamation permits. This transaction strengthens our position in the marketplace with a leading pressure pumper across a number of shale plays in North America. In consideration for the assets, PTL and SSS amended and restated the existing supply agreement between the parties and entered into a new sand purchase option agreement that provide PTL with a market-based discount on sand purchased from SSS. Under the new agreements with PTL, SSS has the option to supply the contracted tons from its existing footprint of northern white sand operations or construct a new sand mine and dry plant in Jackson County, Wisconsin. Given the current challenging market conditions for proppant demand, we currently have no plans to develop this property.

Technology Driven Proppant Products.

In November 2015, we acquired 11 patents and other intellectual property assets from AquaSmart Enterprises LLC for their Self-Suspending Proppant technology. The product brand is marketed as SandMaxx™. While subject to field testing and data validation, this new technology offers the potential to increase productivity and completion efficiencies in oil and gas wells while improving pump time, and well site economics. At our Barron dry plant, we recently completed the construction of a pilot production circuit to produce in excess of 175,000 tons per year of SandMaxx™ product. This pilot production circuit uses proprietary and patented technology to coat all grades of standard frac sand. We are awaiting production data from our initial test wells. While market acceptance of SandMaxx™ proppant is subject to the successful completion of field trial testing, we are developing plans for a coating plant that will be necessary in order to produce commercially viable volumes of SandMaxx™ proppant.

We will continue to work toward transforming our Sand business from a commodity business to a more value-driven approach by developing capabilities and products that assist in enabling us to increase our presence in larger, more profitable markets.

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Contract and Project Terminations

Management committed to a plan to discontinue these projects in April 2015. In accordance with FASB ASC 420, Exit or Disposal Cost Obligations, any contract termination charges and estimated values of continuing contractual obligations for which we will receive no future value will be recognized as a charge to earnings as of the contract termination date or cease-use date. We estimated these contract termination charges to be approximately $1.4 million . These liabilities will be reviewed periodically and may be adjusted when necessary, but we do not expect any such adjustments to be significant.

During the first half of 2016, we negotiated significant concessions on the majority of our railcar leases pursuant to which we cancelled or deferred deliveries on rail cars and reduced cash payments on a substantial portion of the existing rail cars in our fleets. In return for these concessions, we incurred a contract termination charge of $4 million. We issued a an unsecured note for $4 million with interest payable in-kind until certain financial metrics have been met. This notes accrues interest of five percent per annum and are due and payable within 30 days following the date on which financial statements are publicly available covering the first date on which these financial metrics have been met.

Diesel Fuel

As discussed in our Annual Report on Form 10-K for the year ended December 31, 2015 , railroads must begin purchasing Tier 4 locomotives, which only accept 15 ppm sulfur diesel, starting in 2015. As a result, 500 ppm sulfur diesel was phased out of the railroad market beginning in the middle of 2015. However, the settlement agreement allows us and other transmix process to sell 500 ppm diesel produced to certain marine markets with no phase-out date. During the quarter ended June 30, 2015, we adopted business practices to accommodate the shift in product mix from our railroad customers. We have worked with the suppliers of our transmix to mitigate the impact to our bottom line going forward. To remediate this condition long term, we began construction of two hydrotreaters designed to remove sulfur to the level of 15 ppm. At 15 ppm sulfur, diesel we derive from transmix can be sold for any legal use including railroads and on-road transportation. We installed one unit at our Dallas-Fort. Worth, Texas facility which became operational in May 2016, and are installing a second unit at our Birmingham, Alabama facility which will be operational later this year. We planned to invest approximately $17 million for both units, of which we had already paid $12.9 million as of June 30, 2016 . These hydrotreaters have been sold to Sunoco with the sale of the Fuel business.

Interim Indicators of Impairment

Goodwill

The $29.3 million balance of goodwill at June 30, 2016 is related solely to our fuel reporting unit. On June 23, 2016, we entered into the Purchase Agreement for our Fuel business. Accordingly, Goodwill is classified as held for sale on the Consolidated Balance Sheet.

Long-lived assets

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Continuing Operations



	Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015		2016			2015

	($ in thousands)
Revenues	$	24,825		$	68,118	$	54,495		$	164,362
Operating expenses:
Cost of goods sold (excluding depreciation, depletion and amortization)	38,354			50,738		82,144			116,993
Depreciation, depletion and amortization	4,870			4,721		9,777			8,522
Selling, general and administrative expenses	4,459			6,872		11,234			14,589
Contract and project terminations	10			2,693		4,036			9,412
Operating income (loss)	$	(22,868	)	$	3,094	$	(52,696	)	$	14,846
Adjusted EBITDA (a)	$	(17,631	)	$	11,591	$	(30,613	)	$	35,913

Volume of sand sold (tons in thousands)	399			861		838			2,012
Volume of sand produced by dry plant (tons in thousands):
Arland, Wisconsin facility	—			248		—			653
Barron, Wisconsin facility	391			353		711			850
New Auburn, Wisconsin facility	11			178		180			483
Kosse, Texas facility	26			59		43			129
Total volume of sand produced	428			838		934			2,115

(a) See “Adjusted EBITDA” below for a discussion of Adjusted EBITDA and a reconciliation to net income (loss) and operating cash flows.

Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015

Revenues

Sand revenues decrease d by $43.3 million , primarily due to significant price decreases and a 54% decrease in total volumes sold as a result of the downturn in market demand for frac sand. However, we have increased the volumes sold through transload sites from 39% to 57% of total volumes sold. We typically charge higher prices for sales from transload sites in order to cover the additional transportation costs.

The major changes from 2015 to 2016 are as follows:


•	$23.6 million decrease in sales of Northern White sand (excluding estimated transportation markups and shortfall revenues), relating primarily to a 53% decrease in volumes sold as well as decreased pricing in light of current market conditions for frac sand;


•	an estimated $15.1 million decrease for significant reductions in markups per ton sold through transload sites;


•	$2.2 million decrease in sales of native Texas sand (from our Kosse plant) due to decreased volumes; and


•	$1.8 million of business interruption insurance proceeds received in the second quarter of 2015 to reimburse us for lost sales during a time of equipment failure in 2014.

Cost of goods sold (excluding depreciation, depletion and amortization)

Our cost of goods sold consists primarily of direct costs such as processing plant wages, royalties, mining, purchased sand, and transportation to the plant or to transload facilities, as well as indirect costs such as plant repairs and maintenance. Our direct costs of producing sand and our logistics costs for finished product decreased with our decreased sales. The most significant components of the $12.4 million decrease are:


•	$4.1 million decrease in the total cost to acquire and produce wet and dry sand, due mainly to lower sales volumes and lower-cost sources for wet sand;


•	$8.5 million decrease in rail transportation-related expense, primarily due to:


•	$10.9 million decreased rail shipping costs due to decreased volumes sold in-basin; offset by


•	$1.9 million increased rail lease expense; and

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•	$0.5 million increase railcar storage costs.


•	$0.2 million increase in costs of transload facilities.

Selling, general and administrative expenses

The $2.4 million decrease in selling, general and administrative expenses is attributable primarily to:


•	$1.4 million decrease in employee related costs primarily due to head count reductions;


•	$1.1 million in decreased equity-based compensation expenses; and


•	$0.2 million decrease in bad debt expense; offset by


•	$0.6 million increase in outside professional services.

Contract and project terminations

During the second quarter of 2015, we recorded a $2.7 million charge to earnings for contract terminations and other non-recoverable costs incurred for an uncompleted construction project in Independence, Wisconsin. See Note 3 to our Condensed Consolidated Financial Statements for further discussion.

Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015

Revenues

Sand revenues decrease d by $109.9 million , primarily due to significant price decreases and a 58.3% decrease in total volumes sold as a result of the downturn in market demand for frac sand. However, we have increased the volumes sold through transload sites from 35% to 59% of total volumes sold. We typically charge higher prices for sales from transload sites in order to cover the additional transportation costs. We also sold 16,000 tons of SandMaxx™ during the six months of 2016.

The major changes from 2015 to 2016 are as follows:


•	$63.3 million decrease in sales of Northern White sand (excluding estimated transportation markups and shortfall revenues), relating primarily to a 58% decrease in volumes sold as well as decreased pricing in light of current market conditions for frac sand;


•	an estimated $40.1 million decrease for significant reductions in markups per ton sold through transload sites;


•	$4.5 million decrease in sales of native Texas sand (from our Kosse plant) due to decreased volumes; and


•	$1.8 million of business interruption insurance proceeds received in the second quarter of 2015 to reimburse us for lost sales during a time of equipment failure in 2014.

Cost of goods sold (excluding depreciation, depletion and amortization)


•	$21.2 million decrease in the total cost to acquire and produce wet and dry sand, due mainly to lower sales volumes and lower-cost sources for wet sand;


•	$19.8 million decrease in rail transportation-related expense, primarily due to:


•	$24.7 million decreased rail shipping costs due to decreased volumes sold in-basin; offset by


•	$3.9 million increased rail lease expense; and


•	$1.0 million increase railcar storage costs.


•	$0.7 million increase in costs of transload facilities; and


•	$5.4 million write down of sand inventory in the first quarter of 2016 based on our lower of cost or market analysis. This write down is attributed to declining market conditions and a significant decline in prices.

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Depreciation, depletion and amortization

Depreciation, depletion and amortization increase d by $1.3 million due to amortization of intangible assets added in December 2015 and the first six months of 2016.

Selling, general and administrative expenses

The $3.4 million decrease in selling, general and administrative expenses is attributable primarily to:


•	$1.5 million increase in bad debt expense; offset by


•	$3.1 million in decreased equity-based compensation expense;


•	$1.6 million decrease in employee related costs; and


•	$0.2 million decrease in outside professional services.

Contract and project terminations

During the first half of 2016, we negotiated various railcar lease contracts. As part of these negotiations, we paid $4.0 million as contract termination fees to a railcar lease vendor. During the six months ended June 30, 2015, we recorded a $9.4 million charge to earnings for non-recoverable costs incurred for an uncompleted construction project. See Note 3 to our Condensed Consolidated Financial Statements for further discussion.

Discontinued Operations



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015

	($ in thousands)
Revenues	$	101,982		$	132,734		$	182,463		$	240,451
Cost of goods sold (excluding depreciation, depletion and amortization)	93,844			126,195			169,544			228,270
Depreciation and amortization	—			2,634			2,354			5,273
Selling, general and administrative expenses	2,194			1,307			3,792			3,193
Interest expense, net	686			302			1,283			590
Other	—			(5		)	—			(9		)
Income from discontinued operations before provision for income taxes	5,258			2,301			5,490			3,134
Provision for income taxes	5			104			11			201
Income from discontinued operations, net of taxes	$	5,253		$	2,197		$	5,479		$	2,933
Adjusted EBITDA (a)	$	6,948		$	5,377		$	10,417		$	9,469

Volume of refined fuels sold (gallons in thousands)	61,549			63,402			123,771			119,797
Volume of terminal throughput (gallons in thousands)	39,874			43,331			57,424			82,562
Volume of transmix refined (gallons in thousands)	24,936			25,245			49,384			46,599
Refined transmix as a percent of total refined fuels sold	40.5		%	39.8		%	39.9		%	38.9		%

(a) See “Adjusted EBITDA” below for a discussion of Adjusted EBITDA and a reconciliation to net income (loss).

Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015

Revenues

The major components of the $30.8 million decrease in Fuel business revenues are:


•	$28.6 million decrease due to lower average fuel sales prices; and


•	$3.5 million decrease for lower volumes of fuel sold; offset by


•	$0.9 million increase in excise and other transaction taxes.

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Cost of goods sold (excluding depreciation, depletion and amortization)

Our cost of goods sold consists primarily of direct costs associated with the purchase of refined fuels, transmix feedstock, plant labor and burden, and costs to operate our transmix and terminal facilities. The primary components of the $32.4 million decrease in costs of goods sold are:


•	$29.9 million decrease for lower average fuel purchase prices; and


•	$3.2 million decrease for lower volumes of fuel sold; offset by


•	$0.9 million increase in excise and other transaction taxes.

Selling, general and administrative expenses

The $0.9 million increase in selling, general and administrative expenses is attributable primarily to the selling expenses of the Fuel business.

Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015

Revenues

The major components of the $58.0 million decrease in Fuel business revenues are:


•	$67.3 million decrease due to lower average fuel sales prices;offset by


•	$7.1 million increase for higher volumes of fuel sold; and


•	$2.2 million increase in excise and other transaction taxes.

Cost of goods sold (excluding depreciation, depletion and amortization)


•	$67.3 million decrease for lower average fuel purchase prices;offset by


•	$6.5 million increase for higher volumes of fuel sold; and


•	$2.2 million increase in excise and other transaction taxes.

Liquidity and Capital Resources

Sources of Liquidity

Our principal liquidity requirements are to finance current operations, fund capital expenditures, including acquisitions from time to time, to service our debt and to pay distributions to partners. Our sources of liquidity generally include cash generated by our operations, borrowings under our revolving credit and security agreement and issuances of equity and debt securities. We depend on the Credit Agreement for both short-term and long-term capital needs and may use borrowings under our Credit Agreement to fund our operations and capital expenditures to the extent cash generated by our operations is insufficient in any period. Following the sale of our Fuel business, the use of proceeds therefrom to repay outstanding borrowings under the Credit Agreement and our entry into Amendment No. 11 to the Credit Agreement (described below), we believe that cash generated from our liquidity sources will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months.

In addition to our continued focus on generating and preserving cash from operations and maintaining availability under the Credit Agreement, we plan to seek access to the capital markets for additional liquidity through equity and debt offerings. Any new issuances may take the form of public or private offerings for cash, equity issued to consummate acquisitions or equity issued in exchange for a portion of our outstanding debt. We may also from time to time seek to retire or purchase outstanding debt through cash purchases and/or exchanges for equity or other debt securities, in open market purchases, privately negotiated transactions or otherwise. However, there can be no assurance that we will be able to complete any of these transactions on favorable terms or at all.

Revolving Credit Facility

On June 27, 2014, we entered into the Credit Agreement which matures on June 27, 2019 and, prior to giving effect to the amendments described below, consisted of a $350 million revolving credit facility, which includes a sub-limit of up to $30 million for letters of credit. Substantially all of the assets of the Borrowers are pledged as collateral under the Credit Agreement.

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Borrowings under the Credit Agreement accrued interest at a rate equal to either, at our option, (i) LIBOR plus 4.25% or (ii) a base rate plus 3.25%. At June 30, 2016, our outstanding borrowings under the Credit Agreement bore interest at a weighted-average rate of 6.02% . We also incur a commitment fee of 0.375% on committed amounts that are neither used for borrowings nor under letters of credit.

The Credit Agreement contains various covenants and restrictive provisions and requires maintenance of certain financial covenants. For periods prior to the ratio compliance date, we will be subject to the following covenants and restrictions:


•	the $350 million total aggregate commitment under the Credit Agreement will be reduced in an amount equal to the net proceeds of any notes offerings we may make in the future;


•	we will be required to maintain at least $25 million of excess availability (as defined in the Credit Agreement) under the Credit Agreement; and


•	we will be required to generate consolidated EBITDA in certain minimum amounts beginning with the quarter ending December 31, 2015 and rolling forward thereafter.

In addition, the Credit Agreement places restrictions on our ability to commence certain other actions, including our ability to make distributions to our unitholders, our ability to consummate acquisitions and our ability to make capital expenditures. Please see Note 4 to our financial statements for the three months ended June 30, 2016 for more information on the restrictions placed on our operations pursuant to the Credit Agreement.

On May 20, 2016, we entered into Amendment No. 4 to the Credit Agreement to permit us to issue an unsecured promissory note and warrants to one of our lessors in return for concessions and various long-term leases. Also on May 20, 2016, we entered into Amendment No. 5 to the Credit Agreement that, among other things, provided a limited waiver until the Covenant Reversion Date for the event of default under the Credit Agreement for failure to maintain financial covenants as of March 31, 2016 and provided a period of covenant relief with respect to the requirements to maintain excess availability under the Credit Agreement or to generate the minimum amounts of consolidated EBITDA for the quarter ended March 31, 2016. We are also restricted from making distributions to our unitholders. In addition, Amendment No. 5 (i) increased the interest rates applicable to borrowings under the Credit Agreement to either, at our option, LIBOR plus 5.00% or the base rate plus 4.00%, (ii) extended the dominion period under the Credit Agreement whereby our and our subsidiaries’ cash receipts are swept on a daily basis and used to reduce outstanding borrowings and also (iii) reduced the aggregate commitment under the Credit Facility from $350 million to $325 million.

We entered into Amendments No. 6, 7, 8, 9, and 10 to the Credit Agreement to delay the onset of the Covenant Reversion Date until we were able to execute a definitive agreement for the sale of the Fuel business on June 23, 2016. On June 30, 2016, we entered into Amendment No. 10 to the Credit Agreement to further extend the Covenant Reversion Date until the earlier of September 2, 2016 or the closing of the sale of the Fuel business. Please see Note 4 to our financial statements for the three months ended June 30, 2016 for more information on Amendments No. 4 through 10 to the Credit Agreement.

On August 31, 2016, we closed the sale of the Fuel business, used the net proceeds therefrom to repay outstanding borrowings under the Credit Agreement and entered into Amendment No. 11 to the Credit Agreement with the Borrowers, the lenders and the agent. Amendment No. 11, among other things, restated the Credit Agreement and provided a full waiver for all defaults or events of default arising out of our failure to comply with the financial covenant to generate minimum amounts of adjusted EBITDA during the quarters ended March 31, 2016 and June 30, 2016 and the quarter ending September 30, 2016 and the covenant to maintain the minimum amount of excess availability for any date prior to September 1, 2016.


•	a covenant to maintain $20 million of excess availability (as defined in the Credit Agreement), subject to decrease to $15 million upon the satisfaction of certain conditions;


•	a covenant to limit capital expenditures (as defined in the Credit Agreement) to certain maximum amounts for each quarter through March 31, 2019;

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•	beginning with the quarter ending June 30, 2017, a covenant to generate consolidated EBITDA (as defined in the Credit Agreement) in certain minimum amounts;


•	beginning with the quarter ending March 31, 2018, a covenant to maintain an interest coverage ratio (as defined in the Credit Agreement) of not less than 2.00 to 1.00, which is scheduled to increase to 3.00 to 1.00 for the fiscal quarter ending March 31, 2019; and


•	a covenant to raise at least $31.2 million of net proceeds from the issuance and sale of common equity by November 30, 2016.

Liquidity Trends

Beginning in the second half of 2014 and continuing through the first quarter of 2016, prices for natural gas, crude oil and refined fuels have been extremely volatile and decreased significantly. Our cash flows from operating activities are subject to significant quarterly variations as these volatile commodity prices negatively impact demand for our frac sand as well as our Fuel business’ exposure to partially-unhedged commodity price risk for refined products. In addition, upon closing the sale of our Fuel business we will become more dependent on the volatility in demand for frac sand without the benefit of stable cash flows generated by our Fuel business in periods of stable commodity prices. Therefore, the cash generated by our operations are driven by a number of factors beyond our control, including global and regional product supply and demand, weather, product distribution, refining and processing capacity and other supply chain dynamics, among other factors. In this current environment, we anticipate that our liquidity needs will not be met solely by cash generated from operations, and we expect to rely more heavily on borrowings under the Credit Agreement and issuance of equity and debt securities as sources of future liquidity.

However, our ability to comply with the restrictions and covenants of the Credit Agreement is uncertain and will be affected by the amount of cash flow from our operations and events or circumstances beyond our control, including events and circumstances that may stem from the condition of financial markets and commodity price levels. If in the future we are unable to comply with the financial covenants of the Credit Agreement and the lenders are unwilling to provide us with additional flexibility or a waiver, we may be forced to repay or refinance amounts then outstanding under the Credit Agreement and seek alternative sources of capital to fund our business and anticipated capital expenditures. Any such alternative sources of capital, such as equity transactions or debt financing, may be on terms less favorable or at higher costs than our current financing sources, depending on future market conditions and other factors.

Cash Flow Summary

The table below summarizes our cash flows.



	Six Months Ended June 30,
	2016			2015

	($ in thousands)
Cash flows from operating activities	$	(13,032	)	$	39,913
Cash flows from investing activities	$	(11,012	)	$	(15,543	)
Cash flows from financing activities	$	6,332		$	(28,005	)
Cash and cash equivalents at beginning of period	$	20,870		$	6,876
Cash and cash equivalents at end of period	$	3,158		$	3,241

Operating cash flows

Cash flows from operating activities has generally trended the same as our net income (loss) adjusted for non-cash items of depreciation, depletion and amortization, equity-based compensation, amortization of deferred financing costs, contract termination costs, and unrealized losses on derivative instruments. The changes in our operating assets and liabilities were also significantly impacted by lower accounts receivable balances resulting from lower sales of sand and fuel during the first six months of 2016, a build-up of inventories in 2015, lower accounts payables and accrued liabilities balances due to lower cost of fuel in 2016 and extended aging of our payables.

Investing cash flows

As a result of the current market conditions, we have significantly curtailed our capital expenditures to include only those projects with the potential for rapid returns, and comply with our bank covenants that limit capital expenditures.

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Financing cash flows

The main categories of our financing cash flows can be summarized as follows:



	Six Months Ended June 30,
	2016			2015

	($ in thousands)
Net debt proceeds (payments)	$	10,894		$	31,947
Distributions to owners	—			(58,164		)
Other	(4,562		)	(1,788		)
Total	$	6,332		$	(28,005	)

Contractual Obligations

The following table presents the remaining minimum contractual obligations as of June 30, 2016 .



	Payments Due By Period
	Total		< 1 Year		1 - 3 Years		3 - 5 Years		> 5 Years

	($ in thousands)
Long-term debt (1)	$	370,549	$	9,872	$	38,454	$	322,223	$	—
Railcar leases (2)	456,284		17,151		64,948		77,555		296,630
Unsecured notes (2)	16,607		—		—		16,607		—
Other operating leases (3)	4,627		593		929		513		2,592
Purchase commitments (4)	144,705		7,418		44,892		43,781		48,614
Minimum royalty payments (5)	2,745		115		460		460		1,710
Total	$	995,517	$	35,149	$	149,683	$	461,139	$	349,546


(1)	Assumes balances outstanding as of June 30, 2016 will be paid at maturity and includes interest using interest rates in effect at June 30, 2016 .

(2)

Includes minimum amounts payable under various operating leases for railcars as well as estimated costs to transport leased railcars from the manufacturer to our site for initial placement in service. During the first six months of 2016, we completed negotiations with various railcar lessors pursuant to which we terminated a future order of railcars, deferred future railcar deliveries and reduced and deferred payments on existing leases. In exchange for these concessions, we issued at par an Unsecured Promissory Note in the aggregate principal amount of $4 million for contract termination with interest payable in cash or, in certain situations, in-kind, when certain financial metrics have been met. These notes bears interest at a rate of five percent per annum and are due and payable within 30 days following the date on which financial statements are publicly available covering the first date on which these financial metrics have been met. We also issued at par the PIK Note in the aggregate principal amount of $8 million for delivery deferrals. The PIK Note bears interest at a rate of 10% per annum payable in cash or, in certain situations, in-kind, when certain financial metrics have been met. The PIK Note will mature on June 2, 2020. These liabilities are included in Other long-term liabilities in our Condensed Consolidated Balance Sheets. We also issued warrants to purchase 370,000 common units representing limited partnership interests in the partnership in exchange of these concessions during the second quarter of 2016. These amounts include the impact of all concessions.


(3)	Includes lease agreements for land, facilities and equipment.


(4)	Includes minimum amounts payable under a business acquisition agreement, long-term rail transportation agreements, transload facility agreements, asset purchase/construction agreements, and other purchase commitments.


(5)	Represents minimum royalty payments for various sand mining locations. The amounts paid will differ based on amounts extracted.

Property Value Guarantees

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diminution of value associated with mine operations and limited moving expenses when each landowner decides to sell a property, even if no mine is yet in operation. As these contingent liabilities cannot be reasonably estimated, no liability has been recorded.

ADJUSTED EBITDA

Adjusted EBITDA is defined in our Credit Agreement as: net income (loss) plus consolidated interest expense (net of interest income), income tax expense, depreciation, depletion and amortization expense, non-cash charges and losses that are unusual or non-recurring less income tax benefits and gains that are unusual or non-recurring and other adjustments allowable under our existing credit agreement. Adjusted EBITDA is used as a supplemental financial measure by our management and external users of our financial statements, such as investors and commercial banks, to assess:


•	the financial performance of our assets without regard to the impact of financing methods, capital structure or historical cost basis of our assets;


•	the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities;


•	our liquidity position and the ability of our assets to generate cash sufficient to make debt payments and to make distributions;


•	our operating performance as compared to those of other companies in our industry without regard to the impact of financing methods and capital structure; and


•	our debt covenant compliance. Adjusted EBITDA is a key component of critical covenants to our Credit Agreement.

We believe that Adjusted EBITDA provides useful information to investors because, when viewed with our GAAP results and the accompanying reconciliations, it provides a more complete understanding of our performance than GAAP results alone. We also believe that external users of our financial statements benefit from having access to the same financial measures that management uses in evaluating the results of our business. In addition, the lenders under our credit facility use a metric similar to Adjusted EBITDA to measure our compliance with certain financial covenants.

Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP. Moreover, our Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

Reconciliation of Net Income (Loss) and Operating Cash Flows to Adjusted EBITDA

The following tables present a reconciliation of net income (loss) to Adjusted EBITDA for the three months ended June 30, 2016 and 2015 .



	Continuing					Discontinued				Consolidated

	Three Months Ended June 30,
	2016			2015		2016		2015		2016			2015

	($ in thousands)
Net income (loss)	$	(28,150	)	$	687	$	5,253	$	2,197	$	(22,897	)	$	2,884
Interest expense, net	5,283			2,328		686		302		5,969			2,630
Depreciation, depletion and amortization	4,870			4,721		—		2,634		4,870			7,355
Provision for income taxes	1			87		5		104		6			191
EBITDA	(17,996		)	7,823		5,944		5,237		(12,052		)	13,060
Equity-based compensation expense	(335		)	832		131		103		(204		)	935
Contract and project terminations	10			2,693		—		—		10			2,693
Provision for doubtful accounts	—			221		38		37		38			258
Accretion expense	30			20		—		—		30			20
Retirement of assets	—			—		67		—		67			—
Fuel division selling expenses	—			—		679		—		679			—
Other state and local taxes	483			—		89				572			—
Non-cash deferred lease expense	4			—		—		—		4			—
Other adjustments allowable under our existing credit agreement	173			2		—				173			2
Adjusted EBITDA	$	(17,631	)	$	11,591	$	6,948	$	5,377	$	(10,683	)	$	16,968

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The following tables present a reconciliation of net income (loss) to Adjusted EBITDA for the six months ended June 30, 2016 and 2015 .



	Continuing					Discontinued				Consolidated

	Six Months Ended June 30,

	2016			2015		2016		2015		2016			2015

	($ in thousands)
Net income (loss)	$	(62,591	)	$	9,442	$	5,479	$	2,933	$	(57,112	)	$	12,375
Interest expense, net	9,877			5,165		1,283		590		11,160			5,755
Depreciation, depletion and amortization	9,777			8,522		2,354		5,273		12,131			13,795
Provision for income taxes	21			268		11		201		32			469
EBITDA	(42,916		)	23,397		9,127		8,997		(33,789		)	32,394
Equity-based compensation expense	(98		)	2,838		234		389		136			3,227
Write down of sand inventory	5,394			—		—		—		5,394			—
Contract and project terminations	4,036			9,412		—		—		4,036			9,412
Provision for doubtful accounts	1,672			221		74		75		1,746			296
Accretion expense	59			39		—		—		59			39
Retirement of assets	—			—		67		8		67			8
Reduction in force	76			—		—		—		76			—
Fuel division selling expenses	—			—		679		—		679			—
Other state and local taxes	952			—		236		—		1,188			—
Non-cash deferred lease expense	4			—		—		—		4			—
Other adjustments allowable under our existing credit agreement	208			6		—		—		208			6
Adjusted EBITDA	$	(30,613	)	$	35,913	$	10,417	$	9,469	$	(20,196	)	$	45,382

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The following table reconciles Consolidated Adjusted EBITDA to our operating cash flows for the three and six months ended June 30, 2016 and 2015 :



	Three Months Ended June 30,						Six Months Ended June 30,

	2016			2015			2016			2015

	($ in thousands)
Adjusted EBITDA	$	(10,683	)	$	16,968		$	(20,196	)	$	45,382
Non-cash interest expense, net	(4,347		)	(2,334		)	(8,989		)	(4,809		)
Non-cash income tax expense	(578		)	(191		)	(1,220		)	(469		)
Contract and project terminations - non-cash	—			(728		)	(25		)	(728		)
Reduction in force	—			—			(76		)	—
Write down of sand inventory	—			—			(5,394		)	—
Other adjustments allowable under our existing credit agreement	(173		)	(2		)	(208		)	(6		)
Fuel division selling expenses	(679		)	—			(679		)	—
Cost to retire assets	9			—			9			—
Non-cash deferred lease expense	(4		)	—			(4		)	—
Change in other operating assets and liabilities	5,714			(2,962		)	23,750			543
Cash flows from operating activities:	$	(10,741	)	$	10,751		$	(13,032	)	$	39,913

Cash flows from investing activities:	$	(6,099	)	$	(6,606	)	$	(11,012	)	$	(15,543	)

Cash flows from financing activities:	$	8,637		$	(7,388	)	$	6,332		$	(28,005	)

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information about market risks for the six months ended June 30, 2016 , does not differ materially from that discussed under Item 7A of our Annual Report on Form 10-K for 2015 .

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2016 . Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act during the quarter ended June 30, 2016 that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Although we are, from time to time, involved in litigation and claims arising out of our operations in the normal course of business, we do not believe that we are a party to any litigation that could have a material adverse impact on our financial condition or results of operations. We are not aware of any undisclosed significant legal or governmental proceedings against us, or contemplated to be brought against us. We maintain such insurance policies with insurers in amounts and with coverage and deductibles as our general partner believes are reasonable and prudent. However, we cannot assure you that this insurance will be adequate to protect

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us from all material expenses related to potential future claims for personal and property damage or that these levels of insurance will be available in the future at acceptable prices.

Environmental Matter

On November 21, 2013, the EPA issued a General Notice Letter and Information Request (“Notice”) under Section 104(e) of CERCLA to one of our subsidiaries operating within the Fuel business. The Notice provides that the subsidiary may have incurred liability with respect to the Reef Environmental site in Alabama, and requested certain information in accordance with Section 107(a) of CERCLA. We timely responded to the Notice. At this time, no specific claim for cost recovery has been made by the EPA (or any other potentially responsible party) against us. There is uncertainty relating to our share of environmental remediation liability, if any, because our allocable share of wastewater is unknown and the total remediation cost is also unknown. Consequently, management is unable to estimate the possible loss or range of loss, if any. We have not recorded a loss contingency accrual in our financial statements. In the opinion of management, the outcome of such matters will not have a material adverse effect on our financial position, liquidity or results of operations.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 , which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

If we cannot meet the New York Stock Exchange (“NYSE”) continued listing requirements, the NYSE may delist our common units which would have an adverse impact on the liquidity and market price of our common units.

Our common stock is currently listed on the NYSE. In the future, we may not be able to meet the continued listing requirements of the NYSE. As previously disclosed in our press release dated May 20, 2016 and our Notification of Late Filing on Form 12b-25 filed with the Securities and Exchange Commission on May 11, 2016, we were not able to file our Quarterly Report on Form 10-Q for the period ended March 31, 2016 in a timely manner. On May 17, 2016, we received a letter from the New York Stock Exchange Regulation, Inc. informing us that, as a result of our failure to timely file our Form 10-Q for the period ended March 31, 2016, we are subject to the procedures specified in Section 802.01E (SEC Annual Report Timely Filing Criteria) of the NYSE’s Listed Company Manual. We believe that the filing of our Form 10-Q for the period ended March 31, 2016 and the Form 10-Q for the period ended June 30, 2016 satisfies the NYSE requirements. In addition, the continued listing requirements on the NYSE require, among other things; (i) that the average closing price of our common units be above $1.00 over 30 consecutive trading days and (ii) that our market capitalization be not less than $15 million over 30 consecutive trading days. If we are unable to satisfy the NYSE criteria for continued listing, our common units would be subject to delisting. A delisting of our common units could negatively impact us by reducing the liquidity and market price of our common units, reducing the number of investors willing to hold or acquire our common units, which could negatively impact our ability to raise equity financing.

Divestitures and discontinued operations could negatively impact our business, requires additional attention and resources that could divert our management’s focus from continuing operations, and retained liabilities from businesses that we sell could adversely affect our financial results.

In the first quarter of 2016, we began the process of divesting our Fuel business and related product lines, entered into a definitive agreement for the sale on June 23, 2016 and closed the transaction on August 31, 2016. Divestitures pose risks and challenges that could negatively impact our business, including required separation or carve-out activities and costs and disputes with buyers or third parties, and also require additional management attention that distract from continuing operations even after closing. Dispositions also involve continued financial involvement, as we are required to retain responsibility for, or agree to indemnify buyers against, contingent liabilities related to our Fuel business, such as lawsuits, tax liabilities, working condition of assets and environmental matters. Under these types of arrangements, performance by the divested business or other conditions outside our control could affect our future financial results.

We have a history of losses and expect our revenues to decrease in the near-term.

For the six months ended June 30, 2016 , we have incurred aggregate losses of $57.1 million . Our loss from continuing operations for the six months ended June 30, 2016 was $62.6 million and our income from discontinued operations was $5.5 million . There

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is no assurance that we will operate profitably or will generate positive cash flow in the future. In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control, such as the demand for our products, and the level of competition and general economic conditions. As we transition our business after the close of the sale of our Fuel business to operating solely in the frac sand industry, we expect a significant decrease in our revenues. Consequently, we expect to continue to incur operating losses and negative cash flow until we generate significant revenue from the sale of our continuing products.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

On June 2, 2016, we issued five warrants to purchase an aggregate of 370,000 common units at an exercise price of $4.77 to a lessor and its affiliates in consideration for concessions on various long-term leases. The warrants, which expire on June 2, 2021, were exercisable immediately upon issuance and contain a cashless exercise provision.

The issuance of the warrants was made in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended, by Section 4(2) thereof. The issuance of the warrants did not involve a public offering and were made without general solicitation or advertising. Each of the holders of the warrants represented that, among other things, it is an accredited investor, as such term is defined under the securities laws.

The foregoing description is not complete and is qualified in its entirety by reference to the full text of the warrant and the accompanying schedule of substantially identical warrants omitted pursuant to Instruction 2 to Item 601 of Regulation S-K, which is filed as Exhibit 10.8 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

ITEM 4. MINE SAFETY DISCLOSURES

We adhere to a strict occupational health program aimed at controlling exposure to silica dust, which includes dust sampling, a respiratory protection program, medical surveillance, training and other components. We designed our safety program to ensure compliance with the standards of our Occupational Health and Safety Manual and U.S. Federal Mine Safety and Health Administration (“MSHA”) regulations. For both health and safety issues, extensive training is provided to employees. We have organized safety committees at our plants made up of both salaried and hourly employees. We perform annual internal health and safety audits and conduct semi-annual crisis management drills to test our abilities to respond to various situations. Our corporate health and safety department administers the health and safety programs with the assistance of plant environmental, health and safety coordinators.

All of our production facilities are classified as mines and are subject to regulation by MSHA under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). MSHA inspects our mines on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. Following passage of The Mine Improvement and New Emergency Response Act of 2006, MSHA significantly increased the numbers of citations and orders charged against mining operations. The dollar penalties assessed for citations issued has also increased in recent years. Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this Quarterly Report on Form 10-Q.

ITEM 5. OTHER INFORMATION

As previously reported, on April 20, 2016, we notified the agent of an event of default under the Credit Agreement for failure to maintain $25 million of excess availability under the Credit Agreement and began discussions with the agent to obtain a waiver regarding the event of default and to otherwise arrive at a long-term solution to the Partnership’s liquidity requirements, including the reduction of outstanding borrowings under the Credit Agreement through the possible sale of our Fuel business.

Prior to the Covenant Reversion Date, we were subject to the following covenants and restrictions:


•	we were restricted from making dividends or distributions to our unitholders, and the Borrowers were restricted from making dividends or distributions to us; and

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•	we were restricted from making capital expenditures in our Sand business in excess of $570,000 in the aggregate or from making capital expenditures in our Fuel segment for purposes other than completing installation of hydro treaters at the facilities.


•	the total aggregate commitment under the Credit Agreement was reduced from $350 million to $325 million and the sublimit on letters of credit was reduced from $30 million to $20 million;

the dominion period (as defined in the Credit Agreement), whereby our and our subsidiaries’ cash receipts are swept on a daily basis and used to reduce outstanding borrowings, was extended until the revolving credit facility matures; and


•	the threshold amounts for an event of default upon the occurrence of judicial actions, judgments or cross defaults were decreased from $10 million to $5 million.

The foregoing descriptions of the amendments to the Credit Agreement are not complete and are qualified in their entirety by reference to the full text of Amendment No. 4, Amendment No. 5, Amendment No. 6, Amendment No. 7, Amendment No. 8, Amendment No. 9 and Amendment No. 10, which are filed as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6 and 10.7, respectively, to this Quarterly Report on Form 10-Q and incorporated herein by reference.

Warrants

PIK Note Issuance

On June 2, 2016, Superior Silica Sands LLC, our indirect wholly owned subsidiary, issued at par an Unsecured Promissory Note in the aggregate principal amount of $8 million (the “PIK Note”) to Trinity Industries Leasing Company. The PIK Note bears interest at a rate of 10% per annum, payable in cash or, in certain situations, in-kind. The PIK Note will mature on June 2, 2020.

The foregoing description of the PIK Note is not complete and is qualified in its entirety by reference to the full text of the PIK Note, which is filed as Exhibit 10.9 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

ITEM 6. EXHIBITS



Exhibit Number		Description

3.1		Certificate of Limited Partnership of Emerge Energy Services LP (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-187487).

3.2		Amendment to Certificate of Limited Partnership of Emerge Energy Services LP (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-187487).

3.3		First Amended and Restated Limited Partnership Agreement of Emerge Energy Services LP, dated as of May 14, 2013 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on May 20, 2013).

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3.4		Certificate of Limited Formation of Emerge Energy Services GP LLC (incorporated by reference to Exhibit 3.5 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-187487).

3.5		Amendment to Certificate of Formation of Emerge Energy Services GP LLC (incorporated by reference to Exhibit 3.6 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-187487).

3.6		Amended and Restated Limited Liability Company Agreement of Emerge Energy Services GP, LLC, dated as of May 14, 2013 (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on May 20, 2013).

10.1*		Amendment No. 4 to Amended and Restated Revolving Credit and Security Agreement, dated May 20, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.2*		Amendment No. 5 to Amended and Restated Revolving Credit and Security Agreement, dated May 20, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.3*		Amendment No. 6 to Amended and Restated Revolving Credit and Security Agreement, dated May 27, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.4*		Amendment No. 7 to Amended and Restated Revolving Credit and Security Agreement, dated June 10, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.5*		Amendment No. 8 to Amended and Restated Revolving Credit and Security Agreement, dated June 15, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.6*		Amendment No. 9 to Amended and Restated Revolving Credit and Security Agreement, dated June 17, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.7*		Amendment No. 10 to Amended and Restated Revolving Credit and Security Agreement, dated June 30, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.8*		Warrant to Purchase Common Units Representing Limited Partner Interests in Emerge Energy Services LP, dated June 2, 2016, by and between Emerge Energy Services LP and Trinity Industries Leasing Company and Schedule of Substantially Identical Warrants Omitted Pursuant to Instruction 2 to Item 601 of Regulation S-K.

10.9*		Unsecured Promissory Note of Superior Silica Sands LLC, dated June 2, 2016.

10.10		Amendment to Amended Employment Letter, dated April 15, 2016, by and between Emerge Energy Services GP LLC and Rick Shearer (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 15, 2016).

31.1*		Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

95.1*		Mine Safety Disclosure Exhibit.

101*		Interactive Data Files - XBRL.

* Filed herewith (or furnished in the case of Exhibits 32.1 and 32.2).

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: September 9, 2016



	EMERGE ENERGY SERVICES LP

	By:	EMERGE ENERGY SERVICES GP LLC, its general partner

	By:	/s/ Rick Shearer
		Rick Shearer
		President and Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Deborah Deibert
		Deborah Deibert
		Chief Financial Officer
		(Principal Financial Officer)

Table of Contents

INDEX TO EXHIBITS



Exhibit Number		Description

3.1		Certificate of Limited Partnership of Emerge Energy Services LP (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-187487).

3.2		Amendment to Certificate of Limited Partnership of Emerge Energy Services LP (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-187487).

3.3		First Amended and Restated Limited Partnership Agreement of Emerge Energy Services LP, dated as of May 14, 2013 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on May 20, 2013).

3.4		Certificate of Limited Formation of Emerge Energy Services GP LLC (incorporated by reference to Exhibit 3.5 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-187487).

3.5		Amendment to Certificate of Formation of Emerge Energy Services GP LLC (incorporated by reference to Exhibit 3.6 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-187487).

3.6		Amended and Restated Limited Liability Company Agreement of Emerge Energy Services GP, LLC, dated as of May 14, 2013 (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on May 20, 2013).

10.1*		Amendment No. 4 to Amended and Restated Revolving Credit and Security Agreement, dated May 20, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.2*		Amendment No. 5 to Amended and Restated Revolving Credit and Security Agreement, dated May 20, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.3*		Amendment No. 6 to Amended and Restated Revolving Credit and Security Agreement, dated May 27, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.4*		Amendment No. 7 to Amended and Restated Revolving Credit and Security Agreement, dated June 10, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.5*		Amendment No. 8 to Amended and Restated Revolving Credit and Security Agreement, dated June 15, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.6*		Amendment No. 9 to Amended and Restated Revolving Credit and Security Agreement, dated June 17, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.7*		Amendment No. 10 to Amended and Restated Revolving Credit and Security Agreement, dated June 30, 2016, among Emerge Energy Services LP, as parent guarantor, the Borrowers party thereto, PNC Bank, National Association, as administrative agent and collateral agent, and the Lenders party thereto.

10.8*		Warrant to Purchase Common Units Representing Limited Partner Interests in Emerge Energy Services LP, dated June 2, 2016, by and between Emerge Energy Services LP and Trinity Industries Leasing Company and Schedule of Substantially Identical Warrants Omitted Pursuant to Instruction 2 to Item 601 of Regulation S-K.

10.9*		Unsecured Promissory Note of Superior Silica Sands LLC, dated June 2, 2016.

10.10		Amendment to Amended Employment Letter, dated April 15, 2016, by and between Emerge Energy Services GP LLC and Rick Shearer (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 15, 2016).

31.1*		Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

95.1*		Mine Safety Disclosure Exhibit.

Table of Contents




101*		Interactive Data Files - XBRL.

* Filed herewith (or furnished in the case of Exhibits 32.1 and 32.2).

Exhibit 10.1

AMENDMENT NO. 4 TO AMENDED AND RESTATED
REVOLVING CREDIT AND SECURITY AGREEMENT

THIS AMENDMENT NO. 4 (this “ Amendment ”), dated as of May 20, 2016, to the Credit Agreement (as defined below) is entered into by and among the Lenders signatory hereto, PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Lenders (in such capacity, the “ Agent ”), EMERGE ENERGY SERVICES LP, a Delaware limited partnership (the “ Parent Guarantor ”), and each of the undersigned Borrowers. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement defined below.

RECITALS

B. The Required Lenders, Agent, Parent Guarantor and Borrowers, pursuant to Section 16.2(b) of the Credit Agreement, now wish to amend the Credit Agreement on the terms and conditions set forth herein.

AGREEMENT

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

1. Amendments and Waivers . Effective as of the Effective Date, the Credit Agreement is hereby amended as follows:

(a)
Section 1.2 is hereby amended by adding the following definitions to such Section, in alphabetical order:

“ Amendment No. 4 ” shall mean Amendment No. 4 to this Agreement, dated May 20, 2016.

“ Amendment No. 4 Effective Date ” shall mean the date of effectiveness of Amendment No. 4 pursuant to the terms thereof.

“ Specified Documents ” shall have the meaning set forth on Schedule 1.2(f) hereto.

“ Specified Leases ” shall have the meaning set forth on Schedule 1.2(f) hereto.

“ Specified Note ” shall have the meaning set forth on Schedule 1.2(f) hereto.

(b)
The definition of “Applicable Number” set forth in Section 1.2 is hereby amended by adding the following before the period at the end of the sentence: “; provided , further , that from and after the Amendment No. 4 Effective Date, the Applicable Number shall mean four (4) with respect to Field Examinations and two (2) with respect to appraisals of Sand Reserves for any period of four fiscal quarters”.

(c)
Clause (b)(v) of the definition of “Consolidated EBITDA” set forth in Section 1.2 is hereby amended by (i) replacing “(x)” with “(w)”, “(y)” with “(x)”, and “and (z)” with “, (y)”, (ii) adding “and (z) the execution and delivery of Amendment No. 4 and the Specified Documents (including legal expenses) in an aggregate amount under this subclause (z) not to exceed $1,000,000” immediately before clause (b)(vi), (iii) replacing the “and” between clauses (b)(ix) and (b)(x) with a comma and adding the following before “, minus (c)”: “and (xi) solely for purposes of Section 6.5, non-cash expenses in respect of such period for the Specified Documents”, (iv) replacing clause (c) after “ minus ” with the following: “(i) to the extent included in determining Consolidated Net Income for such period, (A) Tax benefits for such period, (B) extraordinary or non-recurring gains for such period and (C) non-cash items of income for such period and (ii) solely for purposes of Section 6.5, cash payments made in respect of such period under the Specified Leases in excess of the amount of expenses in respect of the Specified Leases already included in determining Consolidated Net Income for such period.”

(d)
The definition of “Total Leverage Ratio” set forth in Section 1.2 is hereby amended by adding “(other than the Specified Note)” between “(ii)” and “, (iv)”.

(e)
Section 7.6 is hereby amended by adding the following before the period at the end of such Section: “and (n) the Specified Note, including interest payments thereon by the increase in the principal amount hereof in accordance with the terms of the Specified Note”.

(f)
Section 7.12 is hereby amended by adding the following paragraph after paragraph (b):

“(c) Amend, modify or waive any term or provision of any Specified Document in a manner material and adverse to Agent or any Lender; provided that the following amendments and modifications are deemed to be material and adverse to the Agent and the Lenders: (i) any increase in the interest rate under the Specified Note other than as a result of the imposition of the default rate provided for therein as of the Amendment No. 4 Effective Date, (ii) any modification or amendment which makes any payment date under the Specified Documents earlier than such payment date set forth in the Specified Documents as of the Amendment No. 4 Effective Date and (iii) any modification or amendment which restricts or removes the ability to pay interest in kind.”

(g)
Section 7.14 is hereby amended by adding the following paragraph after paragraph (c):

“(d) At any time make any cash payments in respect of the Specified Note unless Consolidated EBITDA for the period of four consecutive fiscal quarters ended immediately prior to such payment for which financial statements required by Section 9.7 or 9.8(a) have been delivered, as set forth in the Compliance Certificate delivered for such period, is at least $40,000,000.”

(h)
Schedule 1.2(f) hereto is hereby incorporated into the Credit Agreement as Schedule 1.2(f) thereto.

2.
Effectiveness of this Amendment . The following conditions shall have been satisfied, as determined by Agent, before this Amendment is effective (the date of such effectiveness, the “ Effective Date ”):

(a)
Agent shall have received this Amendment, fully executed by each Credit Party, Agent and Lenders constituting the Required Lenders.

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(b)
Agent shall have received a closing certificate signed by an Authorized Officer of each Credit Party dated as of the Effective Date stating that each of the representations and warranties set forth in Section 3 of this Amendment are true and correct on such date.

(c)
All fees and expenses of the Agent and its affiliates required to be paid or reimbursed at or prior to the Effective Date shall have been paid in full, and all fees and expenses of Cahill Gordon & Reindel LLP in connection with the Credit Agreement and this Amendment shall have been paid in full.

(d)
All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded, as required by Agent.

3.
Representations and Warranties . Each Credit Party represents and warrants as follows:

(a)
Authority . Such Credit Party has the requisite corporate power and authority to execute and deliver this Amendment, and to perform its obligations hereunder and under the Other Documents (as amended or modified hereby) to which it is a party. The execution, delivery and performance by such Credit Party of this Amendment have been duly approved by all necessary corporate action and no other corporate proceedings are necessary to consummate such transactions.

(b)
Enforceability . This Amendment has been duly executed and delivered by each Credit Party. This Amendment and each Other Document (as amended or modified hereby) is the legal, valid and binding obligation of each Credit Party, enforceable against each Credit Party in accordance with its terms, and is in full force and effect.

(c)
Due Execution . The execution, delivery and performance of this Amendment are within the power of each Credit Party, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on any Credit Party.

(d)
No Default . No Event of Default or Default has occurred and is continuing, other than (i) the Event of Default under Section 10.5(i) of the Credit Agreement caused by the breach of the covenant set forth in Section 6.5(d) of the Credit Agreement, as described in the letter to the Parent Guarantor, signed by the Agent, April 22, 2016, and (ii) the potential Event of Default that may have been caused by a potential breach of the covenant set forth in Section 6.5(c) of the Credit Agreement, as described in the letter to the Parent Guarantor, signed by the Agent, April 21, 2016.

(e)
Other Representations and Warranties . Each of the representations and warranties made by any Credit Party in or pursuant to the Credit Agreement and the Other Documents are true and correct in all material respects (or, if such representation and warranty is, by its terms, limited by materiality (including a Material Adverse Effect), then such representation and warranty are true in all respects) on and as of the date hereof as if made on and as of the date hereof (except to the extent any such representation or warranty specifically relates to a certain prior date).

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4.
Choice of Law . This Amendment shall be governed by and construed in accordance with the laws of the State of New York applied to contracts to be performed wholly within the State of New York.

5.
Counterparts; Electronic Signatures . This Amendment may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile or other similar method of electronic transmission shall be deemed to be an original signature hereto.

6.
Reference to and Effect on the Other Documents .

(a)
Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof” or words of like import referring to the Credit Agreement, and each reference in the Other Documents to “the Credit Agreement,” “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby.

(b)
Except as specifically amended above, the Credit Agreement and all Other Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrowers to Agent and the Lenders.

(c)
The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agent and/or the Lenders under any of the Other Documents, nor constitute a waiver of any provision of any of the Other Documents.

(d)
To the extent that any terms and conditions in any of the Other Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby.

7.
Estoppel . To induce Agent and the Lenders to enter into this Amendment and to continue to make advances to Borrowers under the Credit Agreement, each Credit Party hereby acknowledges and agrees that, as of the date hereof, there exists no right of offset, defense, counterclaim or objection in favor of the Borrowers as against Agent or any Lender with respect to the Obligations.

8.
Integration . This Amendment, together with the Credit Agreement and the Other Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof.

9.
Severability . If any part of this Amendment is contrary to, prohibited by, or deemed invalid under Applicable Laws or regulations, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given effect so far as possible.

10.
Submission of Amendment . The submission of this Amendment to the parties or their agents or

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attorneys for review or signature does not constitute a commitment by Agent or the Lenders to modify the Credit Agreement, and this Amendment shall have no binding force or effect until all of the conditions to the effectiveness of this Amendment have been satisfied as set forth herein.

11.
Guarantors’ Acknowledgment . With respect to the amendments to the Credit Agreement effected by this Amendment, each Guarantor hereby acknowledges and agrees to this Amendment and confirms and agrees that its Guaranty and each Security Document to which it is a party (as modified and supplemented in connection with this Amendment) is and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that, upon the effectiveness of, and on and after the date of this Amendment, each reference in such Guaranty and Security Document to the Credit Agreement, “thereunder,” “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended or modified by this Amendment. Although Agent and the Lenders have informed the Guarantors of the matters set forth above, and each Guarantor has acknowledged the same, each Guarantor understands and agrees that neither Agent nor any Lender has any duty under the Credit Agreement, the Guaranty or any other agreement with any Guarantor to so notify any Guarantor or to seek such an acknowledgement, and nothing contained herein is intended to or shall create such a duty as to any transaction hereafter. Each Credit Party hereby ratifies and reaffirms the validity, enforceability and perfection of the Liens and security interests granted to the Agent for the benefit of the Secured Parties to secure any of the Obligations (as defined in the Credit Agreement and including after giving effect to this Amendment) by each Credit Party pursuant to the Other Documents to which any Credit Party is a party and agrees that the Liens and security interests granted pursuant to the Other Documents shall continue to secure Obligations under the Credit Agreement as amended by this Amendment.

12.
General Release; Indemnity .

(a)
In consideration of, among other things, Agent’s and the Lenders’ execution and delivery of this Amendment, each Borrower and each other Credit Party, on behalf of itself and its agents, representatives, officers, directors, advisors, employees, subsidiaries, affiliates, successors and assigns (collectively, “ Releasors ”), hereby forever agrees and covenants not to sue or prosecute against any Releasee (as hereinafter defined) and hereby forever waives, releases and discharges, to the fullest extent permitted by law, each Releasee from any and all claims (including, without limitation, crossclaims, counterclaims, rights of set-off and recoupment), actions, causes of action, suits, debts, accounts, interests, liens, promises, warranties, damages and consequential damages, demands, agreements, bonds, bills, specialties, covenants, controversies, variances, trespasses, judgments, executions, costs, expenses or claims whatsoever, that such Releasor now has or hereafter may have, of whatsoever nature and kind, whether known or unknown, whether now existing or hereafter arising, whether arising at law or in equity (collectively, the “ Claims ”), against any or all of the Secured Parties in any capacity and their respective affiliates, subsidiaries, shareholders and “controlling persons” (within the meaning of the federal securities laws), and their respective successors and assigns and each and all of the officers, directors, employees, agents, attorneys, advisors and other representatives of each of the foregoing (collectively, the “ Releasees ”), based in whole or in part on facts, whether or not now known, existing on or before the Effective Date, that relate to, arise out of or otherwise are in connection with: (i) any or all of the Credit Agreement or any Other Documents or transactions contemplated thereby or any actions or omissions in connection therewith, (ii) any aspect of the dealings or relationships between or among the Borrowers and the other Credit Parties, on the one hand, and any or all of the Secured Parties, on the other hand, relating to any or all of the documents, transactions, actions or omissions referenced in clause (i) hereof, or (iii) any aspect of the dealings or relationships between or among any or all of Insight Equity Management Company LLC and its affiliates, on the one hand, and the Lenders, on the other hand, but only to the extent such dealings or relationships relate to any or all of the documents, transactions, actions or omissions referenced in clause (i) hereof. The receipt by any Borrower or any other Credit Party of any Loans or other financial accommodations made by any Secured Party after the date hereof shall constitute a ratification, adoption, and confirmation by such party of the foregoing general release of all Claims against the Releasees that are based in whole or in part on facts, whether or not now known or unknown, existing on or prior to the date of receipt of any such Loans or other financial accommodations. In entering into this Agreement, each Borrower and each other Credit Party consulted

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with, and has been represented by, legal counsel and expressly disclaims any reliance on any representations, acts or omissions by any of the Releasees and hereby agrees and acknowledges that the validity and effectiveness of the releases set forth above do not depend in any way on any such representations, acts and/or omissions or the accuracy, completeness or validity thereof. The provisions of this Section 12 shall survive the termination of this Amendment, the Credit Agreement, the Other Documents and payment in full of the Obligations.

(b)
Each Borrower and each other Credit Party hereby agrees that the Releasees shall each be an Indemnified Party and entitled to the benefits of Section 16.5 of the Credit Agreement, including, without limitation, with respect to any Claims arising from or in connection with the negotiation, preparation, execution, delivery, performance, administration and enforcement of this Amendment or any other document executed and/or delivered in connection therewith.

(c)
Each Borrower and each other Credit Party, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Releasee that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee, and will not assert in any proceeding any counterclaim or crossclaim against any Releasee, in each case on the basis of any Claim released, remised and discharged by any Borrower or any other Credit Party pursuant to Section 8(a) hereof. If any Borrower, any other Credit Party or any of its successors, assigns or other legal representatives violates the foregoing covenant, each Borrower and each other Credit Party, each for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys' fees and costs incurred by any Releasee as a result of such violation.

[signature pages follow]

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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.



PARENT GUARANTOR:	EMERGE ENERGY SERVICES LP By: EMERGE ENERGY SERVICES GP LLC, its General Partner By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President
BORROWERS:	EMERGE ENERGY SERVICES OPERATING LLC By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President
	ALLIED ENERGY COMPANY LLC DIRECT FUELS LLC SUPERIOR SILICA SANDS LLC By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President
	ALLIED RENEWABLE ENERGY, LLC By: ALLIED ENERGY COMPANY LLC, its sole member By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President

Signature Page to Amendment No. 4 to Emerge Revolving Credit and Security Agreement



	EMERGE ENERGY DISTRIBUTORS INC. By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President

Signature Page to Amendment No. 4 to Emerge Revolving Credit and Security Agreement



AGENT AND LENDER:	PNC BANK, NATIONAL ASSOCIATION By: /s/ Ron Eckhoff Name: Ron Eckhoff Title: Vice President

Signature Page to Amendment No. 4 to Emerge Revolving Credit and Security Agreement



A LENDER:	BANK OF AMERICA, N.A. By: /s/ Tyler Ellis Name: Tyler Ellis Title: Senior Vice President



A LENDER:	WELLS FARGO BANK, N.A. By: /s/ Daniel M. Smith Name: Daniel M. Smith Title: Vice President
A LENDER:	BRANCH BANKING AND TRUST COMPANY By: /s/ David A. White Name: David A. White Title: Senior Vice President
A LENDER:	SANTANDER BANK, N.A. By: /s/ Aidan Lanigan Name: Aidan Lanigan Title: Senior Vice President By: /s/ Payal Shah Name: Payal Shah Title: Vice President

Signature Page to Amendment No. 4 to Emerge Revolving Credit and Security Agreement



A LENDER:	ROYAL BANK OF CANADA By: /s/ H. Christopher DeCotiis, CFA Name: H. Christopher DeCotiis, CFA Title: Attorney-in-Fact
A LENDER:	AMEGY BANK a division of ZB, N.A. By: /s/ Jesse Greadington, III Name: Jessee Greadington, III Title: Vice President
A LENDER:	MORGAN STANLEY BANK, N.A. By: /s/ Kevin Newman Name: Kevin Newman Title: Authorized Signatory
A LENDER:	STIFEL BANK & TRUST By: /s/ John H. Phillips Name: John H. Phillips Title: Executive Vice President
A LENDER:	MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Kevin Newman Name: Kevin Newman Title: Vice President

Signature Page to Amendment No. 4 to Emerge Revolving Credit and Security Agreement

Schedule 1.2(f)

“ Specified Documents ” shall mean the definitive documentation governing the Specified Note, the Specified Leases, the deferral of delivery and reduction of payments thereunder, and any related documentation executed in connection therewith, including any guaranty, warrants or letter agreements.

“ Specified Leases ” shall mean those certain leases under that certain Trinity Industries Leasing Company Railroad Car Lease Agreement, dated as of September 5, 2013 (as amended or modified from time to time prior to the Amendment No. 4 Effective Date and as amended or modified from time to time after the Amendment No. 4 Effective Date in compliance with Section 7.12(c)), by and between SSS, as lessee and Trinity, as the lessor.

“ Specified Note ” shall mean that certain unsecured promissory note dated June 2, 2016, in the aggregate principal amount of $8,000,000 (subject to increases for PIK interest, to a maximum principal amount of $12,000,000) made by SSS in favor of Trinity Industries Leasing Company (“ Trinity ”), as payment for the deferral of delivery and reduction of payments in connection with the Specified Leases.

Exhibit 10.2

AMENDMENT NO. 5 TO AMENDED AND RESTATED
REVOLVING CREDIT AND SECURITY AGREEMENT

THIS AMENDMENT NO. 5 (this “ Amendment ”), dated as of May 20, 2016, to the Credit Agreement (as defined below) is entered into by and among the Lenders signatory hereto, PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Lenders (in such capacity, the “ Agent ”), EMERGE ENERGY SERVICES LP, a Delaware limited partnership (the “ Parent Guarantor ”), and each of the undersigned Borrowers. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement defined below.

RECITALS

A. The Lenders, Agent, Parent Guarantor and Borrowers have previously entered into that certain Amended and Restated Revolving Credit and Security Agreement, dated as of June 27, 2014, as amended by Amendment No. 1, dated as of April 6, 2015, Amendment No. 2, dated as of November 20, 2015, Amendment No. 3, dated as of March 1, 2016 and Amendment No. 4, dated as of May 20, 2016 (as further amended, modified and supplemented from time to time, the “ Credit Agreement ”), pursuant to which the Lenders have made certain loans and financial accommodations available to Borrowers.

B. The Lenders, Agent, Parent Guarantor and Borrowers, pursuant to Section 16.2(b) of the Credit Agreement, now wish to amend the Credit Agreement on the terms and conditions set forth herein.

AGREEMENT

1. Amendments and Waivers . Effective as of the Effective Date, the Credit Agreement is hereby amended as follows:

(a)
Section 1.2 is hereby amended by deleting the definition of “Accordion Increase” in such Section.

(b)
Section 1.2 is hereby amended by adding the following definitions to such Section, in alphabetical order:

“ Amendment No. 5 ” shall mean Amendment No. 5 to this Agreement, dated May 20, 2016.

“ Amendment No. 5 Effective Date ” shall mean the date of effectiveness of Amendment No. 5 pursuant to the terms thereof.

“ Applicable Amount ” shall mean the amount specified on Schedule 2.11(c).

“ Covenant Relief Period ” shall mean the period commencing on the Amendment No. 5 Effective Date and terminating upon the Covenant Reversion Date.

“ Covenant Reversion Date ” shall have the meaning set forth on Schedule 1.2(g).

“ Disposition ” shall have the meaning set forth in Section 7.1(b) hereof.

“ Fuels Division Sale ” shall mean the sale of the fuels division of the Borrowers.

“ Fuels Division Sale Closing Date ” shall mean the date of consummation of the Fuels Division Sale.

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“ Net Cash Proceeds ” shall mean, with respect to the Fuels Division Sale, proceeds received by any Credit Party or any Restricted Subsidiary from or in respect of such Disposition, less (i) any foreign, federal, state or local income taxes paid or payable in respect of such Disposition, (ii) any customary and reasonable transaction fees and expenses incurred in connection with such Disposition (including financial advisory fees, legal fees and accountants’ fees), (iii) transaction bonuses payable to employees of the Borrowers in respect of such Disposition provided that, the aggregate amount of such transaction bonuses shall not exceed $500,000 and (iv) the amount of any reasonable reserve established in accordance with GAAP against any liabilities associated with the assets that are the subject of such Disposition and retained by any Credit Party or any Restricted Subsidiary thereof.

(c)
The definition of “Applicable Margin” set forth in Section 1.2 is hereby amended by replacing “as of the Amendment No. 2 Effective Date and thereafter, an amount equal to” with “from and after the Amendment No. 5 Effective Date, (i) 4.00 percentage points for Revolving Advances consisting of Domestic Rate Loans and (ii) 5.00 percentage points for Revolving Advances consisting of LIBOR Rate Loans, (II) from and after the Amendment No. 2 Effective Date and prior to the Amendment No. 5 Effective Date,” and replacing “(II)” with “(III)”.

(d)
Clause (d) of the definition of “Change of Control” set forth in Section 1.2 is hereby amended and restated as follows: “(d) a “change of control” (or similarly defined event) shall occur under the documentation governing any other Indebtedness of the Parent Guarantor or any of its Subsidiaries of more than $5,000,000 in principal amount.”

(e)
The definition of “Consolidated EBITDA” set forth in Section 1.2 is hereby amended by replacing clause (b)(v)(z) with the following: “the execution and delivery of Amendment No. 4, Amendment No. 5, the Specified Documents and documentation relating to the Fuels Division Sale (including legal expenses) in an aggregate amount under this subclause (z) not to exceed $1,000,000”.

(f)
The definition of “Dominion Period” set forth in Section 1.2 is hereby amended by (i) adding “(I) prior to the Amendment No. 5 Effective Date,” after “shall mean” and (ii) adding the following before the period at the end of the sentence: “and (II) on and after the Amendment No. 5 Effective Date, the period commencing on the Amendment No. 5 Effective Date and ending on the Termination Date”.

(g)
The definition of “Letter of Credit Sublimit” set forth in Section 1.2 is hereby amended by replacing “$30,000,000” with “$20,000,000”.

(h)
The definition of “Line Cap” set forth in Section 1.2 is hereby amended by replacing “at any time” with “(a) at any time during the Covenant Relief Period, the Maximum Revolving Advance Amount and (b) at all other times”.

(i)
The definition of “Maximum Revolving Advance Amount” set forth in Section 1.2 is hereby

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amended by (i) replacing “$350,000,000” with “$325,000,000” and (ii) deleting the following: “(a) increased pursuant to an Accordion Increase or (b)”.

(j)
The definition of “Payment Condition” set forth in Section 1.2 is hereby amended by adding the following before the period at the end of the sentence: “; provided that the Payment Condition shall be deemed not satisfied at any time during the Covenant Relief Period”.

(k)
The definition of “Permitted Acquisition” set forth in Section 1.2 is hereby amended by adding (i) “and while the Covenant Relief Period is not in effect” immediately after “(A) prior to the Ratio Trigger Date” and (ii) “or during the Covenant Relief Period,” immediately after “(B) on or after the Ratio Trigger Date”.

(l)
Section 2.1 is hereby amended by adding the following between “does not exceed” and “the lesser of (a)”: “(X) during the Covenant Relief Period, the Maximum Revolving Advance Amount and (Y) at all other times,”.

(m)
Section 2.5 is hereby amended by adding the following paragraph after paragraph (d):

“(e) On the Fuels Division Sale Closing Date, Borrowers shall repay Revolving Advances in an aggregate amount equal to (x) the Applicable Amount plus (y) 80% of the amount (if any) by which the Net Cash Proceeds of the Fuels Division Sale exceeds the Applicable Amount.”

(n)
Section 2.6 is hereby amended by adding the following between Protective Advance),” and “the Borrower”: “including (for the avoidance of doubt) as a result of the reduction of the Maximum Revolving Advance Amount pursuant to Section 2.11,”.

(o)
Section 2.8(b)(i) is hereby amended by replacing “lesser of (i) the Maximum Revolving Advance Amount, or (ii) the Formula Amount and, in each case,” with “Line Cap and”.

(p)
Section 2.11 is hereby amended as follows:

i.
Paragraph (a) is hereby amended by deleting the phrase “no more than once during each period of twelve months”.

ii.
The following paragraph shall be added after paragraph (b):

“(c) On the Fuels Division Sale Closing Date, the Maximum Revolving Advance Amount shall be reduced by an amount equal to (x) the Applicable Amount plus (y) 80% of the amount (if any) by which the Net Cash Proceeds of the Fuels Division Sale exceeds the Applicable Amount.”

iii.
Paragraph (c) is hereby amended by replacing “(c)” with “(d)”.

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(q)
Section 2.16(a) is hereby amended by adding “(subject to the proviso to Section 8.2(b))” between “in its sole discretion” and “, elect to make” in the first sentence.

(r)
Section 3.4 is hereby amended as follows:

i.
The section heading shall be retitled: “Other Fees” and “(a)” shall be added before “Borrowers”.

ii.
The following paragraph shall be added:

“(b) On the Fuels Division Sale Closing Date, Borrowers shall pay Agent, for the ratable account of the Lenders, a consent fee equal to 0.50% of each such Lenders’ Commitment Amount (after giving effect to the reduction pursuant to Section 2.11(c)).”

(s)
Section 4.9 shall be hereby amended by adding “(including discounted cash flow analyses)” between “appraisals of the Sand Reserves” and “and no more”.

(t)
Section 4.10 is hereby amended by replacing “Formula Amount” with “Line Cap”.

(u)
The following section shall be added as Section 5.25:

“5.25. Bid Letters . The Borrower Representative has provided to the Agent true and complete copies of all bid letters and letters of intent (from all bidders) relating to the Fuels Division Sale, except that the name of the bidder and other identifying information may be redacted.”

(v)
Section 6.5 is hereby amended as follows:

i.
The table set forth below paragraph (c) is hereby amended by (i) replacing “$10,838,000” with “N/A” and (ii) adding the following sentence immediately before paragraph (d): “For the avoidance of doubt, this covenant shall not be tested for the Building Period ended on March 31, 2016.”

ii.
Paragraph (d) is hereby amended by adding the following between “shall not apply” and “on or after the Ratio Trigger Date”: “(i) during the period commencing on the Amendment No. 5 Effective Date and ending on June 30, 2016 or (ii)”.

iii.
Paragraph (e) is hereby amended by adding the following at the end of the last paragraph: “Notwithstanding anything to the contrary, during the Covenant Relief Period, in no event shall any Credit Party make, or cause or permit any Restricted Subsidiary to make, any Capital Expenditure other than the Capital Expenditures set forth on Schedule 6.5(e).”

(w)
Section 6.6(a)(v) is hereby amended by replacing “within 120 days after the Amendment No. 3

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Effective Date” with “by the Covenant Reversion Date” and replacing “120 days after the Amendment No. 3 Effective Date” with “the Covenant Reversion Date”.

(x)
The following section shall be added as Section 6.14:

“6.14. Fuels Division Sale . Cause to be satisfied the milestones with respect to the Fuels Division Sale set forth on Schedule 6.14.”

(y)
Section 7.1(b) is hereby amended to add the following immediately before the period at the end of the first sentence: “and (xvi) the Fuels Division Sale in accordance with Section 6.14”.

(z)
Section 7.5 is hereby amended as follows:

i.
The period at the end of paragraph (f) shall be replaced with a semicolon.

ii.
The following shall be added to the end of such Section:

“provided that during the Covenant Relief Period, no Restricted Payment shall be permitted pursuant to Section 7.5(a) or (b).”

(aa)
Section 8.2(b) is hereby amended by replacing the phrase “in its sole discretion (but subject to the Required Lenders not having notified the Agent that it shall no longer permit such Advances)” with “with the prior written consent of the Required Lenders (which shall be effective until revoked in writing by the Required Lenders)”.

(bb)
Section 9.2 is hereby amended to add the following at the end of paragraph (a): “provided that during the Covenant Relief Period, in no event shall a Borrowing Base Certificate be required to be delivered;”.

(cc)
Section 9.8 is hereby amended as follows:

i.
The section heading shall be retitled: “Quarterly, Monthly and Weekly Reporting”.

ii.
The following paragraphs shall be added after paragraph (b):

“(c) During the Covenant Relief Period, furnish Agent (for distribution to the Lenders) within 10 Business Days after the end of each month, commencing with the first month ending on or after the Amendment No. 5 Effective Date, a report of all Capital Expenditures made during such month and during the period elapsed from the beginning of the fiscal year to the end of such month, and a comparison against the projected operating budget and cash flow.

(d) During the Covenant Relief Period, on or before Friday of each week (the “Cash Flow Forecast Deadline”), furnish Agent (for distribution to the Lenders) (i) a cash flow forecast of Parent Guarantor and its Subsidiaries for the 13-week period commencing on the Sunday following the Cash Flow Forecast Deadline, in form and substance reasonably satisfactory to Agent, (ii) if the cash flow forecast

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delivered pursuant to clause (i) for any week within the 13-week period is changed from the cash flow forecast for such week previously delivered, a comparison showing such changes, (iii) a comparison of (x) the actual cash flows of Parent Guarantor and its Subsidiaries for the week prior to the week in which the Cash Flow Forecast Deadline occurs (for example, if the Cash Flow Forecast Deadline is May 13, 2016 the actual cash flows for the week commencing May 1, 2016) with (y) the forecasted cash flows for such week as last previously provided to Agent (including a calculation of the variance between actual and projected cash receipts and disbursements), (iv) a comparison of (x) the actual cash flows of Parent Guarantor and its Subsidiaries for the period commencing on April 24, 2016 and ending with the week referred to in clause (iii) with (y) the forecasted cash flows for such period as previously provided to Agent (including a calculation of the variance between actual and projected cash receipts and disbursements), and (v) if requested by Agent, a report from Parent Guarantor’s management setting forth explanations for any variances in actual results as compared to forecasted performance.”

(dd)
Sections 10.4, 10.6 and 10.11 are hereby amended by replacing the amount “$10,000,000” each time such amount appears in such sections with “$5,000,000”.

(ee)
Section 16.2(viii) is hereby amended by replacing “Formula Amount” with “Line Cap” each time such term is used.

(ff)
Section 16.9 is hereby amended as follows:

i.
“(A)” shall be added before beginning of the first sentence.

ii.
Clauses (e) and (f) shall be replaced with the following: “(e) in connection with any advice given to Agent or any Lender with respect to its rights and obligations under this Agreement and the Other Documents or (f) without limiting the foregoing, in ensuring compliance with Article IV and Section 6.6, and all of the foregoing may be charged to Borrowers’ Account and shall be part of the Obligations.”

iii.
The following paragraph shall be added after the first paragraph:

“(B) At any time after the Amendment No. 5 Effective Date, Agent may retain a financial advisor to Agent and the Lenders (the “Financial Advisor”) to conduct a detailed review of the financial statements, financial projections, existing business model, operations and long-term credit structure of the Parent Guarantor and its Subsidiaries and such other matters relating to the Parent Guarantor and its Subsidiaries as Agent shall determine. The Credit Parties shall cooperate with the Financial Advisor and provide the Financial Advisor all such information reasonably requested by it. Without limiting Section 16.9(A), the Credit Parties shall be responsible for, and timely pay, all reasonable and documented fees and reasonable out-of-pocket expenses and disbursements of the Financial Advisor, including, if requested by the Financial Advisor and approved by Agent, a retainer to be applied to such fees and expenses.”

(gg)
Section 16.22(v) is hereby amended by deleting the word “other” each time such word appears before “Other Document”.

(hh)
Schedule 1.2(a) of the Credit Agreement is replaced in its entirety with Schedule 1.2(a) hereto.

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(ii)
Schedules 2.11(c), 6.5(e) and 6.14 hereto are hereby incorporated into the Credit Agreement as Schedules 2.11(c), 6.5(e) and 6.14 thereto.

(jj)
The Lenders hereby waive all Defaults and Events of Default arising out of the Credit Parties’ failure to comply with Section 6.5(c) of the Credit Agreement (as in effect prior to this Amendment) for the period ended March 31, 2016 and Sections 6.5(d) and 10.5(i) of the Credit Agreement (as in effect prior to this Amendment) for the period prior to the Effective Date.

(a)
Agent shall have received this Amendment, fully executed by each Credit Party, Agent and each Lender.

(c)
Agent shall have received a certificate of an Authorized Officer of each Credit Party dated as of the Effective Date certifying (i) to the effect that (A) attached thereto is a true and complete copy of the Organizational Documents of such Credit Party certified as of a recent date by the Secretary of State of the state of its organization, or in the alternative, certifying that such Organizational Documents have not been amended since the Closing Date, (B) attached thereto is a true and complete copy of resolutions duly adopted by the board of directors, board of managers or member, as the case may be, of each Credit Party authorizing the execution, delivery and performance of this Amendment, and that such resolutions have not been modified, rescinded or amended, and there are no plans to modify rescind or amend, and that such resolutions are in full force and effect or in the alternative, certifying that the resolutions delivered to the Agent on the Closing Date by such Credit Party have not been modified, rescinded or amended, and there are no plans to modify rescind or amend, and that such previously delivered resolutions are in full force and effect and (C) attached thereto is a true and complete copy of the good standing certificates for each Credit Party dated not more than thirty (30) days prior to the Effective Date, issued by the Secretary of State or other appropriate official of each Credit Party’s jurisdiction of organization and (ii) as to the incumbency and specimen signature of each Authorized Officer executing this Amendment and any Other Document on behalf of any Credit Party and signed by another officer as to the incumbency and specimen signature of the Authorized Officer executing the certificate pursuant to this clause.

(d)
The Parent Guarantor shall have paid to the Agent for the account of each Lender party hereto, a consent fee equal to 0.50% of such Lender’s Commitment as of the date hereof (after giving effect to the effectiveness of this Amendment and the revised Schedule 1.2(a) of the Credit Agreement).

(e)
All fees and expenses of the Agent and its affiliates required to be paid or reimbursed at or prior to the Effective Date pursuant to the Fee Letter, dated as of April 28, 2016 by and among the Parent Guarantor, the Agent and PNC Capital Markets LLC shall have been paid in full, and all fees and expenses of Cahill Gordon & Reindel LLP in connection with the Credit Agreement and this Amendment shall have been paid in full.

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(f)
All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded, as required by Agent.

3.
Representations and Warranties . Each Credit Party represents and warrants as follows:

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Amendment have been duly approved by all necessary corporate action and no other corporate proceedings are necessary to consummate such transactions.

(d)
No Default . After giving effect to this Amendment, no Event of Default or Default has occurred and is continuing.

4.
Choice of Law . This Amendment shall be governed by and construed in accordance with the laws of the State of New York applied to contracts to be performed wholly within the State of New York.

6.
Reference to and Effect on the Other Documents .

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10.
Submission of Amendment . The submission of this Amendment to the parties or their agents or attorneys for review or signature does not constitute a commitment by Agent or the Lenders to modify the Credit Agreement, and this Amendment shall have no binding force or effect until all of the conditions to the effectiveness of this Amendment have been satisfied as set forth herein.

12.
General Release; Indemnity .

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directors, advisors, employees, subsidiaries, affiliates, successors and assigns (collectively, “ Releasors ”), hereby forever agrees and covenants not to sue or prosecute against any Releasee (as hereinafter defined) and hereby forever waives, releases and discharges, to the fullest extent permitted by law, each Releasee from any and all claims (including, without limitation, crossclaims, counterclaims, rights of set-off and recoupment), actions, causes of action, suits, debts, accounts, interests, liens, promises, warranties, damages and consequential damages, demands, agreements, bonds, bills, specialties, covenants, controversies, variances, trespasses, judgments, executions, costs, expenses or claims whatsoever, that such Releasor now has or hereafter may have, of whatsoever nature and kind, whether known or unknown, whether now existing or hereafter arising, whether arising at law or in equity (collectively, the “ Claims ”), against any or all of the Secured Parties in any capacity and their respective affiliates, subsidiaries, shareholders and “controlling persons” (within the meaning of the federal securities laws), and their respective successors and assigns and each and all of the officers, directors, employees, agents, attorneys, advisors and other representatives of each of the foregoing (collectively, the “ Releasees ”), based in whole or in part on facts, whether or not now known, existing on or before the Effective Date, that relate to, arise out of or otherwise are in connection with: (i) any or all of the Credit Agreement or any Other Documents or transactions contemplated thereby or any actions or omissions in connection therewith, (ii) any aspect of the dealings or relationships between or among the Borrowers and the other Credit Parties, on the one hand, and any or all of the Secured Parties, on the other hand, relating to any or all of the documents, transactions, actions or omissions referenced in clause (i) hereof, or (iii) any aspect of the dealings or relationships between or among any or all of Insight Equity Management Company LLC and its affiliates, on the one hand, and the Lenders, on the other hand, but only to the extent such dealings or relationships relate to any or all of the documents, transactions, actions or omissions referenced in clause (i) hereof. The receipt by any Borrower or any other Credit Party of any Loans or other financial accommodations made by any Secured Party after the date hereof shall constitute a ratification, adoption, and confirmation by such party of the foregoing general release of all Claims against the Releasees that are based in whole or in part on facts, whether or not now known or unknown, existing on or prior to the date of receipt of any such Loans or other financial accommodations. In entering into this Agreement, each Borrower and each other Credit Party consulted with, and has been represented by, legal counsel and expressly disclaims any reliance on any representations, acts or omissions by any of the Releasees and hereby agrees and acknowledges that the validity and effectiveness of the releases set forth above do not depend in any way on any such representations, acts and/or omissions or the accuracy, completeness or validity thereof. The provisions of this Section 12 shall survive the termination of this Amendment, the Credit Agreement, the Other Documents and payment in full of the Obligations.

[signature pages follow]

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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.



PARENT GUARANTOR:	EMERGE ENERGY SERVICES LP By: EMERGE ENERGY SERVICES GP LLC, its General Partner By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President
BORROWERS:	EMERGE ENERGY SERVICES OPERATING LLC By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President
	ALLIED ENERGY COMPANY LLC DIRECT FUELS LLC SUPERIOR SILICA SANDS LLC By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President
	ALLIED RENEWABLE ENERGY, LLC By: ALLIED ENERGY COMPANY LLC, its sole member By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President

Signature Page to Amendment No. 5 to Emerge Revolving Credit and Security Agreement



	EMERGE ENERGY DISTRIBUTORS INC. By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President

Signature Page to Amendment No. 5 to Emerge Revolving Credit and Security Agreement



AGENT AND LENDER:	PNC BANK, NATIONAL ASSOCIATION By: /s/ Ron Eckhoff Name: Ron Eckhoff Title: Vice President

Signature Page to Amendment No. 5 to Emerge Revolving Credit and Security Agreement



A LENDER:	BANK OF AMERICA, N.A. By: /s/ Tyler Ellis Name: Tyler Ellis Title: Senior Vice President



A LENDER:	WELLS FARGO BANK, N.A. By: /s/ Daniel M. Smith Name: Daniel M. Smith Title: Vice President
A LENDER:	BRANCH BANKING AND TRUST COMPANY By: /s/ David A. White Name: David A. White Title: Senior Vice President
A LENDER:	SANTANDER BANK, N.A. By: /s/ Aidan Lanigan Name: Aidan Lanigan Title: Senior Vice President By: /s/ Payal Shah Name: Payal Shah Title: Vice President

Signature Page to Amendment No. 5 to Emerge Revolving Credit and Security Agreement



A LENDER:	ROYAL BANK OF CANADA By: /s/ H. Christopher DeCotiis, CFA Name: H. Christopher DeCotiis, CFA Title: Attorney-in-Fact
A LENDER:	AMEGY BANK a division of ZB, N.A. By: /s/ Jesse Greadington, III Name: Jessee Greadington, III Title: Vice President
A LENDER:	MORGAN STANLEY BANK, N.A. By: /s/ Kevin Newman Name: Kevin Newman Title: Authorized Signatory
A LENDER:	STIFEL BANK & TRUST By: /s/ John H. Phillips Name: John H. Phillips Title: Executive Vice President
A LENDER:	MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Kevin Newman Name: Kevin Newman Title: Vice President

Signature Page to Amendment No. 5 to Emerge Revolving Credit and Security Agreement

Schedule 1.2(a)

COMMITMENTS



Lender	Commitment Amount		Commitment Percentage
PNC Bank, National Association		$78,928,571.43	24.29	%
Bank of America, N.A.		$51,071,428.57	15.71	%
Wells Fargo Bank, National Association		$51,071,428.57	15.71	%
Branch Banking & Trust Company		$32,500,000.00	10.00	%
Santander Bank, N.A.		$32,500,000.00	10.00	%
Royal Bank of Canada		$23,214,285.71	7.14	%
Amegy Bank National Association		$18,571,428.57	5.71	%
Morgan Stanley Bank, N.A.		$18,571,428.57	5.71	%
Stifel Bank & Trust		$13,928,571.43	4.29	%
Morgan Stanley Senior Funding, Inc.		$4,642,857.14	1.43	%
TOTAL:		$325,000,000.00	100	%

Schedule 1.2(g)

“ Covenant Reversion Date ” means the earlier of (i) the Fuels Division Sale Closing Date and (ii) July 8, 2016.

Schedule 2.11(c)

“ Applicable Amount ” shall mean $100,000,000.

Schedule 6.5(e)

Capital Expenditures with respect to the sand division of the Borrowers not to exceed $570,000.

Capital Expenditures with respect to the fuels division of the Borrower limited to those Capital Expenditures necessary to complete the hydro treaters located at the Credit Parties’ facilities located in Birmingham, Alabama and Dallas-Fort Worth, Texas.

Schedule 6.14

(a) Direct potential interested parties in the Fuels Division Sale to submit bona fide good faith bids no later than April 29, 2016;

(b) Enter into definitive documentation for the Fuels Division Sale no later than May 27, 2016, which documentation shall provide (i) that filings under the HSR Act shall be made no later than June 3, 2016 and (ii) for the purchase price to be (x) in such amount that would generate Net Cash Proceeds to the Borrowers of at least the Applicable Amount and (y) paid in cash at the time of consummation of the Fuels Division Sale;

(d) Consummate the Fuels Division Sale no later than the last day of the Covenant Relief Period.

Exhibit 10.3

AMENDMENT NO. 6 TO AMENDED AND RESTATED
REVOLVING CREDIT AND SECURITY AGREEMENT

THIS AMENDMENT NO. 6 (this “ Amendment ”), dated as of May 27, 2016, to the Credit Agreement (as defined below) is entered into by and among the Lenders signatory hereto, PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Lenders (in such capacity, the “ Agent ”), EMERGE ENERGY SERVICES LP, a Delaware limited partnership (the “ Parent Guarantor ”), and each of the undersigned Borrowers. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement defined below.

RECITALS

A. The Lenders, Agent, Parent Guarantor and Borrowers have previously entered into that certain Amended and Restated Revolving Credit and Security Agreement, dated as of June 27, 2014, as amended by Amendment No. 1, dated as of April 6, 2015, Amendment No. 2, dated as of November 20, 2015, Amendment No. 3, dated as of March 1, 2016, Amendment No. 4, dated as of May 20, 2016 and Amendment No. 5, dated as of May 20, 2016 (as further amended, modified and supplemented from time to time, the “ Credit Agreement ”), pursuant to which the Lenders have made certain loans and financial accommodations available to Borrowers.

AGREEMENT

1. Amendment . Effective as of the Effective Date, the Credit Agreement is hereby amended as follows: Schedule 6.14 of the Credit Agreement is replaced in its entirety with Schedule 6.14 hereto.

(a)
Agent shall have received this Amendment, fully executed by each Credit Party, Agent and Lenders constituting the Required Lenders.

(d)
All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded, as required by Agent.

3.
Representations and Warranties . Each Credit Party represents and warrants as follows:

(d)
No Default . No Event of Default or Default has occurred and is continuing.

4.
Choice of Law . This Amendment shall be governed by and construed in accordance with the laws of the State of New York applied to contracts to be performed wholly within the State of New York.

6.
Reference to and Effect on the Other Documents .

12.
General Release; Indemnity .

[signature pages follow]

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.



PARENT GUARANTOR:	EMERGE ENERGY SERVICES LP By: EMERGE ENERGY SERVICES GP LLC, its General Partner By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President
BORROWERS:	EMERGE ENERGY SERVICES OPERATING LLC By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President
	ALLIED ENERGY COMPANY LLC DIRECT FUELS LLC SUPERIOR SILICA SANDS LLC By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President
	ALLIED RENEWABLE ENERGY, LLC By: ALLIED ENERGY COMPANY LLC, its sole member By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President



	EMERGE ENERGY DISTRIBUTORS INC. By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President



AGENT AND LENDER:	PNC BANK, NATIONAL ASSOCIATION By: /s/ Ron Eckhoff Name: Ron Eckhoff Title: Vice President



A LENDER:	BANK OF AMERICA, N.A. By: /s/ Tyler Ellis Name: Tyler Ellis Title: Senior Vice President



A LENDER:	SANTANDER BANK, N.A. By: /s/ Aidan Lanigan Name: Aidan Lanigan Title: Senior Vice President By: /s/ Puiki Lok Name: Puiki Lok Title: Vice President
A LENDER:	ROYAL BANK OF CANADA By: /s/ H. Christopher DeCotiis, CFA Name: H. Christopher DeCotiis, CFA Title: Attorney-in-Fact
A LENDER:	MORGAN STANLEY BANK, N.A. By: /s/ Kevin Newman Name: Kevin Newman Title: Authorized Signatory
A LENDER:	STIFEL BANK & TRUST By: /s/ Matthew L. Diehl Name: Matthew L. Diehl Title: Senior Vice President
A LENDER:	MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Kevin Newman Name: Kevin Newman Title: Vice President

Schedule 6.14

(a) Direct potential interested parties in the Fuels Division Sale to submit bona fide good faith bids no later than April 29, 2016;

(b) Enter into definitive documentation for the Fuels Division Sale no later than June 10, 2016, which documentation shall provide (i) that filings under the HSR Act shall be made no later than June 17, 2016 and (ii) for the purchase price to be (x) in such amount that would generate Net Cash Proceeds to the Borrowers of at least the Applicable Amount and (y) paid in cash at the time of consummation of the Fuels Division Sale;

(d) Consummate the Fuels Division Sale no later than the last day of the Covenant Relief Period.

Exhibit 10.4

AMENDMENT NO. 7 TO AMENDED AND RESTATED
REVOLVING CREDIT AND SECURITY AGREEMENT

THIS AMENDMENT NO. 7 (this “ Amendment ”), dated as of June 10, 2016, to the Credit Agreement (as defined below) is entered into by and among the Lenders signatory hereto, PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Lenders (in such capacity, the “ Agent ”), EMERGE ENERGY SERVICES LP, a Delaware limited partnership (the “ Parent Guarantor ”), and each of the undersigned Borrowers. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement defined below.

RECITALS

A. The Lenders, Agent, Parent Guarantor and Borrowers have previously entered into that certain Amended and Restated Revolving Credit and Security Agreement, dated as of June 27, 2014, as amended by Amendment No. 1, dated as of April 6, 2015, Amendment No. 2, dated as of November 20, 2015, Amendment No. 3, dated as of March 1, 2016, Amendment No. 4, dated as of May 20, 2016, Amendment No. 5, dated as of May 20, 2016 and Amendment No. 6, dated as of May 27, 2016 (as further amended, modified and supplemented from time to time, the “ Credit Agreement ”), pursuant to which the Lenders have made certain loans and financial accommodations available to Borrowers.

AGREEMENT

1. Amendment . Effective as of the Effective Date, paragraph (b) of Schedule 6.14 of the Credit Agreement is hereby replaced in its entirety with the following:

“(b) Enter into definitive documentation for the Fuels Division Sale no later than June 15, 2016, which documentation shall provide for the purchase price to be (x) in such amount that would generate Net Cash Proceeds to the Borrowers of at least the Applicable Amount and (y) paid in cash at the time of consummation of the Fuels Division Sale;”.

(a)
Agent shall have received this Amendment, fully executed by each Credit Party, Agent and Lenders constituting the Required Lenders.

(d)
All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded, as required by Agent.

3.
Representations and Warranties . Each Credit Party represents and warrants as follows:

(d)
No Default . No Event of Default or Default has occurred and is continuing.

4.
Choice of Law . This Amendment shall be governed by and construed in accordance with the laws of the State of New York applied to contracts to be performed wholly within the State of New York.

6.
Reference to and Effect on the Other Documents .

12.
General Release; Indemnity .

[signature pages follow]

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.



PARENT GUARANTOR:	EMERGE ENERGY SERVICES LP By: EMERGE ENERGY SERVICES GP LLC, its General Partner By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President
BORROWERS:	EMERGE ENERGY SERVICES OPERATING LLC By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President
	ALLIED ENERGY COMPANY LLC DIRECT FUELS LLC SUPERIOR SILICA SANDS LLC By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President
	ALLIED RENEWABLE ENERGY, LLC By: ALLIED ENERGY COMPANY LLC, its sole member By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President



	EMERGE ENERGY DISTRIBUTORS INC. By: /s/ Warren Bonham Name: Warren Bonham Title: Vice President



AGENT AND LENDER:	PNC BANK, NATIONAL ASSOCIATION By: /s/ Ron Eckhoff Name: Ron Eckhoff Title: Vice President



A LENDER:	WELLS FARGO BANK, N.A. By: /s/ Daniel M. Smith Name: Daniel M. Smith Title: Vice President
A LENDER:	BRANCH BANKING AND TRUST COMPANY By: /s/ David A. White Name: David A. White Title: Senior Vice President
A LENDER:	SANTANDER BANK, N.A. By: /s/ Aidan Lanigan Name: Aidan Lanigan Title: Senior Vice President By: /s/ Puiki Lok Name: Puiki Lok Title: Vice President
A LENDER:	ROYAL BANK OF CANADA By: /s/ H. Christopher DeCotiis, CFA Name: H. Christopher DeCotiis, CFA Title: Attorney-in-Fact
A LENDER:	ZB, N.A dba AMEGY BANK By: /s/ James C. Day Name: James C. Day Title: Senior Vice President
A LENDER:	MORGAN STANLEY BANK, N.A. By: /s/ Kevin Newman Name: Kevin Newman Title: Authorized Signatory
A LENDER:	STIFEL BANK & TRUST By: /s/ John H. Phillips Name: John H. Phillips Title: Executive Vice President
A LENDER:	MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Kevin Newman Name: Kevin Newman Title: Vice President

Exhibit 10.5

AMENDMENT NO. 8 TO AMENDED AND RESTATED
REVOLVING CREDIT AND SECURITY AGREEMENT

THIS AMENDMENT NO. 8 (this “ Amendment ”), dated as of June 15, 2016, to the Credit Agreement (as defined below) is entered into by and among the Lenders signatory hereto, PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Lenders (in such capacity, the “ Agent ”), EMERGE ENERGY SERVICES LP, a Delaware limited partnership (the “ Parent Guarantor ”), and each of the undersigned Borrowers. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement defined below.

RECITALS

A. The Lenders, Agent, Parent Guarantor and Borrowers have previously entered into that certain Amended and Restated Revolving Credit and Security Agreement, dated as of June 27, 2014, as amended by Amendment No. 1, dated as of April 6, 2015, Amendment No. 2, dated as of November 20, 2015, Amendment No. 3, dated as of March 1, 2016, Amendment No. 4, dated as of May 20, 2016, Amendment No. 5, dated as of May 20, 2016, Amendment No. 6, dated as of May 27, 2016 and Amendment No. 7, dated as of June 10, 2016 (as further amended, modified and supplemented from time to time, the “ Credit Agreement ”), pursuant to which the Lenders have made certain loans and financial accommodations available to Borrowers.

AGREEMENT

1. Amendment . Effective as of the Effective Date, Schedule 6.14 of the Credit Agreement is hereby amended as follows:

(a)
paragraph (b) of Schedule 6.14 is replaced in its entirety with the following: “(b) Enter into definitive documentation for the Fuels Division Sale no later than June 17, 2016, which documentation shall provide for the purchase price to be (x) in such amount that would generate Net Cash Proceeds to the Borrowers of at least the Applicable Amount and (y) paid in cash at the time of consummation of the Fuels Division Sale;”; and

(b)
paragraph (c) of Schedule 6.14 is replaced in its entirety with the following: “(c) Make filings under the HSR Act no later than June 21, 2016; and”.

(a)
Agent shall have received this Amendment, fully executed by each Credit Party, Agent and Lenders constituting the Required Lenders.

(d)
All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded, as required by Agent.

3.
Representations and Warranties . Each Credit Party represents and warrants as follows:

(d)
No Default . No Event of Default or Default has occurred and is continuing.

4.
Choice of Law . This Amendment shall be governed by and construed in accordance with the laws of the State of New York applied to contracts to be performed wholly within the State of New York.

6.
Reference to and Effect on the Other Documents .

12.
General Release; Indemnity .

[signature pages follow]

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.



PARENT GUARANTOR:	EMERGE ENERGY SERVICES LP By: EMERGE ENERGY SERVICES GP LLC, its General Partner By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President
BORROWERS:	EMERGE ENERGY SERVICES OPERATING LLC By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President
	ALLIED ENERGY COMPANY LLC DIRECT FUELS LLC SUPERIOR SILICA SANDS LLC By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President
	ALLIED RENEWABLE ENERGY, LLC By: ALLIED ENERGY COMPANY LLC, its sole member By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President



	EMERGE ENERGY DISTRIBUTORS INC. By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President



AGENT AND LENDER:	PNC BANK, NATIONAL ASSOCIATION By: /s/ Ron Eckhoff Name: Ron Eckhoff Title: Vice President



A LENDER:	WELLS FARGO BANK, N.A. By: /s/ Daniel M. Smith Name: Daniel M. Smith Title: Vice President
A LENDER:	BRANCH BANKING AND TRUST COMPANY By: /s/ David A. White Name: David A. White Title: Senior Vice President
A LENDER:	ROYAL BANK OF CANADA By: /s/ H. Christopher DeCotiis, CFA Name: H. Christopher DeCotiis, CFA Title: Attorney-in-Fact
A LENDER:	ZB, N.A. DBA AMEGY BANK By: /s/ James C. Day Name: James C. Day Title: Senior Vice President
A LENDER:	MORGAN STANLEY BANK, N.A. By: /s/ Kevin Newman Name: Kevin Newman Title: Authorized Signatory
A LENDER:	MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Kevin Newman Name: Kevin Newman Title: Vice President
A LENDER:	STIFEL BANK & TRUST By: /s/ John H. Phillips Name: John H. Phillips Title: Executive Vice President

Exhibit 10.6

AMENDMENT NO. 9 TO AMENDED AND RESTATED
REVOLVING CREDIT AND SECURITY AGREEMENT

THIS AMENDMENT NO. 9 (this “ Amendment ”), dated as of June 17, 2016, to the Credit Agreement (as defined below) is entered into by and among the Lenders signatory hereto, PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Lenders (in such capacity, the “ Agent ”), EMERGE ENERGY SERVICES LP, a Delaware limited partnership (the “ Parent Guarantor ”), and each of the undersigned Borrowers. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement defined below.

RECITALS

A. The Lenders, Agent, Parent Guarantor and Borrowers have previously entered into that certain Amended and Restated Revolving Credit and Security Agreement, dated as of June 27, 2014, as amended by Amendment No. 1, dated as of April 6, 2015, Amendment No. 2, dated as of November 20, 2015, Amendment No. 3, dated as of March 1, 2016, Amendment No. 4, dated as of May 20, 2016, Amendment No. 5, dated as of May 20, 2016, Amendment No. 6, dated as of May 27, 2016, Amendment No. 7, dated as of June 10, 2016 and Amendment No. 8, dated as of June 15, 2016 (as further amended, modified and supplemented from time to time, the “ Credit Agreement ”), pursuant to which the Lenders have made certain loans and financial accommodations available to Borrowers.

AGREEMENT

1. Amendment . Effective as of the Effective Date, Schedule 6.14 of the Credit Agreement is hereby amended as follows:

(a)
paragraph (b) of Schedule 6.14 is replaced in its entirety with the following: “(b) Enter into definitive documentation for the Fuels Division Sale no later than June 24, 2016, which documentation shall provide for the purchase price to be (x) in such amount that would generate Net Cash Proceeds to the Borrowers of at least the Applicable Amount and (y) paid in cash at the time of consummation of the Fuels Division Sale;”; and

(b)
paragraph (c) of Schedule 6.14 is replaced in its entirety with the following: “(c) Make filings under the HSR Act no later than June 28, 2016; and”.

(a)
Agent shall have received this Amendment, fully executed by each Credit Party, Agent and Lenders constituting the Required Lenders.

(d)
All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded, as required by Agent.

3.
Representations and Warranties . Each Credit Party represents and warrants as follows:

(d)
No Default . No Event of Default or Default has occurred and is continuing.

4.
Choice of Law . This Amendment shall be governed by and construed in accordance with the laws of the State of New York applied to contracts to be performed wholly within the State of New York.

6.
Reference to and Effect on the Other Documents .

12.
General Release; Indemnity .

[signature pages follow]

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.



PARENT GUARANTOR:	EMERGE ENERGY SERVICES LP By: EMERGE ENERGY SERVICES GP LLC, its General Partner By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President
BORROWERS:	EMERGE ENERGY SERVICES OPERATING LLC By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President
	ALLIED ENERGY COMPANY LLC DIRECT FUELS LLC SUPERIOR SILICA SANDS LLC By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President
	ALLIED RENEWABLE ENERGY, LLC By: ALLIED ENERGY COMPANY LLC, its sole member By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President



	EMERGE ENERGY DISTRIBUTORS INC. By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President



AGENT AND LENDER:	PNC BANK, NATIONAL ASSOCIATION By: /s/ Ron Eckhoff Name: Ron Eckhoff Title: Vice President



A LENDER:	BRANCH BANKING AND TRUST COMPANY By: /s/ David A. White Name: David A. White Title: Senior Vice President
A LENDER:	SANTANDER BANK, N.A. By: /s/ Aidan Lanigan Name: Aidan Lanigan Title: Senior Vice President By: /s/ Puiki Lok Name: Puiki Lok Title: Vice President
A LENDER:	ROYAL BANK OF CANADA By: /s/ H. Christopher DeCotiis, CFA Name: H. Christopher DeCotiis, CFA Title: Attorney-in-Fact
A LENDER:	ZB, N.A. DBA AMEGY BANK By: /s/ James C. Day Name: James C. Day Title: Senior Vice President
A LENDER:	MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Kevin Newman Name: Kevin Newman Title: Vice President
A LENDER:	MORGAN STANLEY BANK, N.A. By: /s/ Kevin Newman Name: Kevin Newman Title: Authorized Signatory
A LENDER:	STIFEL BANK & TRUST By: /s/ John H. Phillips Name: John H. Phillips Title: Executive Vice President

Exhibit 10.7

AMENDMENT NO. 10 TO AMENDED AND RESTATED
REVOLVING CREDIT AND SECURITY AGREEMENT

THIS AMENDMENT NO. 10 (this “ Amendment ”), dated as of June 30, 2016, to the Credit Agreement (as defined below) is entered into by and among the Lenders signatory hereto, PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Lenders (in such capacity, the “ Agent ”), EMERGE ENERGY SERVICES LP, a Delaware limited partnership (the “ Parent Guarantor ”), and each of the undersigned Borrowers. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement defined below.

RECITALS

A. The Lenders, Agent, Parent Guarantor and Borrowers have previously entered into that certain Amended and Restated Revolving Credit and Security Agreement, dated as of June 27, 2014, as amended by Amendment No. 1, dated as of April 6, 2015, Amendment No. 2, dated as of November 20, 2015, Amendment No. 3, dated as of March 1, 2016, Amendment No. 4, dated as of May 20, 2016, Amendment No. 5, dated as of May 20, 2016, Amendment No. 6, dated as of May 27, 2016, Amendment No. 7, dated as of June 10, 2016, Amendment No. 9, dated as of June 15, 2016 and Amendment No. 10, dated as of June 17, 2016 (as further amended, modified and supplemented from time to time, the “ Credit Agreement ”), pursuant to which the Lenders have made certain loans and financial accommodations available to Borrowers.

AGREEMENT

1. Amendments and Waiver . Effective as of the Effective Date, the Credit Agreement is hereby amended or waived, as applicable, as follows:

(a)
Section 6.5(d) of the Credit Agreement is replaced in its entirety with the following:

“ Minimum Excess Availability . Cause Excess Availability to be at least $25,000,000 at all times; provided that this covenant shall not apply (i) during the period commencing on the Amendment No. 5 Effective Date and ending on the Covenant Reversion Date or (ii) on or after the Ratio Trigger Date.”

(b)
Schedule 1.2(g) of the Credit Agreement is replaced in its entirety with Schedule 1.2(g) hereto.

(c)
Until the Covenant Reversion Date, all Defaults and Events of Default arising out of the Credit Parties’ failure to comply with Section 6.5(c) of the Credit Agreement for the Building Period ended June 30, 2016 are hereby waived. For the avoidance of doubt, this waiver shall expire on the occurrence of the Covenant Reversion Date, and an Event of Default shall occur on the Covenant Reversion Date under Section 6.5(c) unless such covenant is amended so that the covenant would not be breached or such covenant is further waived.

(a)
Agent shall have received this Amendment, fully executed by each Credit Party, Agent and Lenders constituting the Required Lenders.

(d)
All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded, as required by Agent.

3.
Representations and Warranties . Each Credit Party represents and warrants as follows:

(d)
No Default . No Event of Default or Default has occurred and is continuing.

4.
Choice of Law . This Amendment shall be governed by and construed in accordance with the laws of the State of New York applied to contracts to be performed wholly within the State of New York.

6.
Reference to and Effect on the Other Documents .

12.
General Release; Indemnity .

[signature pages follow]

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.



PARENT GUARANTOR:	EMERGE ENERGY SERVICES LP By: EMERGE ENERGY SERVICES GP LLC, its General Partner By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President
BORROWERS:	EMERGE ENERGY SERVICES OPERATING LLC By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President
	ALLIED ENERGY COMPANY LLC DIRECT FUELS LLC SUPERIOR SILICA SANDS LLC By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President
	ALLIED RENEWABLE ENERGY, LLC By: ALLIED ENERGY COMPANY LLC, its sole member By: EMERGE ENERGY SERVICES OPERATING LLC, its sole member By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President



	EMERGE ENERGY DISTRIBUTORS INC. By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President



AGENT AND LENDER:	PNC BANK, NATIONAL ASSOCIATION By: /s/ Ron Eckhoff Name: Ron Eckhoff Title: Vice President



A LENDER:	WELLS FARGO BANK, N.A. By: /s/ Daniel M. Smith Name: Daniel M. Smith Title: Vice President
A LENDER:	BRANCH BANKING AND TRUST COMPANY By: /s/ David A. White Name: David A. White Title: Senior Vice President
A LENDER:	ROYAL BANK OF CANADA By: /s/ H. Christopher DeCotiis, CFA Name: H. Christopher DeCotiis, CFA Title: Attorney-in-Fact
A LENDER:	ZB, N.A. DBA AMEGY BANK By: /s/ James C. Day Name: James C. Day Title: Senior Vice President
A LENDER:	MORGAN STANLEY BANK, N.A. By: /s/ Kevin Newman Name: Kevin Newman Title: Authorized Signatory
A LENDER:	MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Kevin Newman Name: Kevin Newman Title: Vice President
A LENDER:	STIFEL BANK & TRUST By: /s/ John H. Phillips Name: John H. Phillips Title: Executive Vice President

Schedule 1.2(g)

“ Covenant Reversion Date ” means the earlier of (i) the Fuels Division Sale Closing Date and (ii) September 2, 2016.

Exhibit 10.8

WARRANT

TO PURCHASE COMMON UNITS REPRESENTING

LIMITED PARTNER INTERESTS IN

EMERGE ENERGY SERVICES LP

Dated June 2, 2016


SECTION 1	TERM; EXERCISE OF WARRANT 1


1.1	Time of Exercise 1


1.2	Manner of Exercise 2


1.3	Cashless Exercise 2


1.4	Exchange of Warrant 3


1.5	Taxes 3


SECTION 2	RESTRICTIONS ON TRANSFER; LEGENDS 3


2.1	Registration or Exemption Required 4


2.2	Restrictive Legend 4


2.3	Removal of Restrictive Legends 4


2.4	Listing on Securities Exchange 5


SECTION 3	REPRESENTATIONS AND WARRANTIES OF THE HOLDER 5


3.1	Acquisition of Warrant for Personal Account 5


3.2	Rule 144 5


3.3	Accredited Investor 5


3.4	Opportunity to Discuss; Information 5


SECTION 4	OTHER MATTERS 6


4.1	Binding Effect 6


4.2	Notices 6


4.3	Governing Law; Consent to Jurisdiction; Waiver of Jury Trial 6


4.4	Parties Bound and Benefited 7


4.5	Confidentiality 7


4.6	Identity of Transfer Agent 7


4.7	Amendment; Waiver 7


4.8	Assignment 7


4.9	Holder as Owner 7


4.10	Rights of Holder 8


4.11	Indemnification 8


4.12	Lost Certificates 8


4.13	Severability 8


4.14	Office of the Partnership; Maintenance of Books 8


4.15	Section Headings 8


4.16	Disclosure 8


4.17	Common Unit Split-Ups and Combinations 9


4.18	Adjustments for Dividends in Common Units, Securities or Property 9


4.19	Information Rights 9


4.20	Unrestricted Person 9


SECTION 5	CONSOLIDATION, MERGER, ETC 9


SECTION 6	NO IMPAIRMENT 10


SECTION 7	NOTICES OF PARTNERSHIP ACTION 10


SECTION 8	REPRESENTATIONS AND WARRANTIES 11


8.1	Representations and Warranties of the Partnership 11


SECTION 9	NO EFFECT ON LENDER OR LESSOR RELATIONSHIP 11


SECTION 10	CERTAIN DEFINITIONS 12

THIS SECURITY HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED OR SOLD UNLESS (I) THIS SECURITY MAY BE SOLD PURSUANT TO RULE 144 OF THE ACT OR (II) AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION UNDER THE APPLICABLE PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS APPLIES. THEREFORE, NO SALE OR TRANSFER OF THIS SECURITY SHALL BE MADE, NO ATTEMPTED SALE OR TRANSFER SHALL BE VALID, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE ANY EFFECT TO ANY SUCH TRANSACTION UNLESS (A) THIS SECURITY MAY BE SOLD PURSUANT TO RULE 144 OF THE ACT OR (B) THE ISSUER HAS FIRST RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH REGISTRATION, QUALIFICATION OR APPROVAL IS NOT REQUIRED. COMMON UNITS ISSUABLE HEREUNDER ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THE FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF THE PARTNERSHIP, AS AMENDED FROM TIME TO TIME (THE “ PARTNERSHIP AGREEMENT ”), A COPY OF WHICH MAY BE OBTAINED FROM THE PARTNERSHIP AT ITS PRINCIPAL EXECUTIVE OFFICES. BY ACQUIRING THIS SECURITY, THE HOLDER AGREES TO BECOME BOUND BY THE PROVISIONS OF THE PARTNERSHIP AGREEMENT.

No. of Common Units: 220,000 Warrant No. 1

WARRANT

To Purchase Common Units Representing Limited Partner Interests in

EMERGE ENERGY SERVICES LP

THIS IS TO CERTIFY that, for value received, Trinity Industries Leasing Company, a Delaware corporation, or its successors or registered assigns (the “ Holder ”), is entitled, subject to the terms and conditions hereinafter set forth, to purchase 220,000 common units (the “ Warrant Units ”) representing limited partner interests (“ Common Units ”) in Emerge Energy Services LP, a Delaware limited partnership (the “ Partnership ”), from the Partnership (the “ Warrant ”) at an exercise price per Common Unit equal to $4.77 (the “ Exercise Price ”).

SECTION 1 TERM; EXERCISE OF WARRANT.

1.1
Time of Exercise . This Warrant may be exercised at any time and from time to time during the period commencing as of 9:00 a.m., Central Time, on June 2, 2016 (the “ Issue Date ”) and ending as of 5:00 p.m., Central Time, on June 2, 2021, at which time this Warrant shall become void and all rights hereunder shall cease.

1.2
Manner of Exercise .

1.2.1.
The Holder may exercise this Warrant, in whole or in part, upon surrender of this Warrant, with the duly executed exercise notice, in the form attached hereto as Appendix B , to the Partnership at its corporate office in Southlake, Texas, and upon payment to the Partnership of the Exercise Price for each Warrant Unit to be purchased in lawful money of the United States, or by certified or cashier’s check, wired funds, cancellation of indebtedness or by cashless exercise as provided in Section 1.3 below.

1.2.2.
Upon receipt of this Warrant with the duly executed exercise notice and accompanied by payment of the aggregate Exercise Price for the Warrant Units for which this Warrant is then being exercised (unless this Warrant is being exercised on a cashless basis, as provided in Section 1.3 below, or in exchange for cancellation of indebtedness), the Partnership shall cause such Warrant Units to be issued and delivered to the Holder within a reasonable time, not exceeding three (3) trading days after this Warrant

shall have been so exercised, including the delivery of the duly executed exercise notice and payment of the aggregate Exercise Price, by requesting that the Partnership’s transfer agent credit the Warrant Units to the account of the Holder’s prime broker with The Depository Trust Company through its Deposit / Withdrawal At Custodian system. In the event the Holder elects to pay the Exercise Price by the cancellation of indebtedness of the Partnership or any of subsidiary of the Partnership, it shall give written notice thereof to the Partnership and the indebtedness to be cancelled in connection therewith, and the aggregate Exercise Price of such Warrant Units shall be credited against the principal amount of and accrued interest on such indebtedness as if such Exercise Price constituted a prepayment thereof by the Partnership or such subsidiary.

1.2.3.
In case the Holder shall exercise this Warrant with respect to less than all of the Warrant Units that may be purchased under this Warrant, the Partnership shall execute a new Warrant for the balance of the Warrant Units that may be purchased upon exercise of this Warrant and deliver such new Warrant to the Holder.

1.2.4.
The Partnership covenants and agrees that it will pay when due and payable any and all taxes which may be payable in respect of the issue of this Warrant, or the issue of any Warrant Units upon the exercise of this Warrant. The Partnership shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance or delivery of this Warrant or of the Warrant Units in a name other than that of the Holder at the time of surrender, and until the payment of such tax the Partnership shall not be required to issue such Warrant Units. The Holder shall be responsible for any income tax due under federal, state or other law as a result of owning this Warrant or any Warrant Units issued upon the exercise of this Warrant.

1.3
Cashless Exercise . Notwithstanding any other provision contained herein to the contrary, the Holder may elect to receive, without the payment by the Holder of the aggregate Exercise Price in respect of the number of Common Units to be acquired, Common Units of equal value to the value of this Warrant, or any specified portion hereof, by the surrender of this Warrant (or such portion of this Warrant being so exercised) together with a Net Issue Election Notice, in the form annexed hereto as Appendix C , duly executed, to the Partnership. Thereupon, the Partnership shall issue to the Holder such number of fully paid, validly issued and nonassessable Common Units as is computed using the following formula:

X = y(A-B)

where

X = the number of Common Units to which the Holder is entitled upon such cashless exercise;

Y = the total number of Common Units covered by this Warrant for which the Holder has surrendered purchase rights at such time for cashless exercise (including both Common Units to be issued to the Holder and Common Units as to which the purchase rights are to be cancelled as payment therefor);

A = the Market Price of one Common Unit as of the date the net issue election is made, where “ Market Price ” shall mean the average of the closing sales prices per Common Unit of the class of Warrant Units for the ten consecutive trading days ending on the day that is two trading days prior to the applicable date of determination; and

B = the Exercise Price in effect under this Warrant at the time the net issue election is made.



	2

1.4
Exchange of Warrant . Upon the request of the Holder, this Warrant may be divided into, combined with or exchanged for another warrant or warrants of like tenor (collectively, the “ Warrants ”) to purchase a like aggregate number of Warrant Units. If the Holder desires to divide, combine or exchange this Warrant, the Holder shall make such request in writing delivered to the Partnership at its corporate office and shall surrender this Warrant and any other Warrants to be so divided, combined or exchanged. The Partnership shall execute and deliver to the person entitled thereto a Warrant or Warrants, as the case may be, as so requested. The Partnership shall not be required to effect any division, combination or exchange which will result in the issuance of a Warrant entitling the Holder to purchase upon exercise a fraction of a Warrant Unit. As to any fraction of a Common Unit which a Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Partnership shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Market Price per Common Unit on the date of exercise. The Partnership shall prepare, issue and deliver at its own expense the new Warrant or Warrants under this Section 1 .

1.5
Taxes . The Partnership and the Holder agree (a) the Warrant is properly treated, for U.S. federal income tax purposes, as a noncompensatory option (as defined in U.S. Treasury regulation section 1.721-2(f)); (b) the Warrant will not be treated as exercised, for U.S. federal income tax purposes, upon issuance and, thus, the Holder will not receive any allocation of income, gain, loss or deduction prior to the receipt of Common Units acquired upon exercise of the Warrant; (c) to follow the U.S. Treasury regulations regarding the exercise of noncompensatory options (as defined in U.S. Treasury regulation section 1.721-2(f)) with respect to the U.S. federal income tax treatment of the Warrant and the capital account treatment with respect to the Common Units acquired upon exercise of the Warrant, including with respect to a capital account reallocation in connection with the revaluation of property in accordance with U.S. Treasury regulation section 1.704-1(b)(2)(iv)(s) and (d) if, as a result of the exercise of a Warrant, a capital account reallocation is required under U.S. Treasury regulation section 1.704-1(b)(2)(iv)(s), the General Partner shall make corrective allocations pursuant to U.S. Treasury regulation section 1.704-1(b)(4)(x).

SECTION 2
RESTRICTIONS ON TRANSFER; LEGENDS.

2.1
Registration or Exemption Required . Assuming the accuracy of the representations and warranties of the Holder in Section 3 , this Warrant has been issued in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the “ Act ”), and exempt from state registration or qualification under applicable state laws. Neither this Warrant nor the Warrant Units may be pledged, transferred, sold or assigned except pursuant to an effective registration statement or an exemption to the registration requirements of the Act and applicable state laws. At the time of the surrender of this Warrant in connection with any transfer of this Warrant, or upon surrender of the Warrant Units for transfer, the transfer of this Warrant, or where applicable the Warrant Units, the Partnership shall require, as a condition of allowing such transfer, (i) that the Holder or transferee of this Warrant or the Warrant Units, as the case may be, furnish to the Partnership a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Partnership an investment letter in form and substance reasonably acceptable to the Partnership and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) promulgated under the Act or a “qualified institutional buyer” as defined in Rule 144A(a) under the Act in a transaction pursuant to Rule 144A.

2.2
Restrictive Legend . The Holder understands that until such time as the Warrant Units may be sold pursuant to Rule 144 under the Act or an exemption from registration under the Act without any restriction as to the number of securities as of a particular date that can then be immediately sold, this Warrant and the Warrant Units, as applicable, shall bear a restrictive legend in substantially the form set forth on the cover page of this Warrant (and a stop-transfer order may be placed against transfer of such securities).



	3

2.3
Removal of Restrictive Legends . The Warrant Units shall not contain any legend restricting the transfer thereof: (A) following any sale of such Warrant Units pursuant to Rule 144, (B) if such Warrant Units are eligible for sale under Rule 144(b)(1), or (C) if such legend is not required under applicable requirements of the Act (including judicial interpretations and pronouncements issued by the staff of the Securities and Exchange Commission (the “ Commission ”)) and the Partnership shall have received an opinion of counsel to the Holder in form reasonably acceptable to the Partnership to such effect (collectively, the “ Unrestricted Conditions ”). In any such case, the Partnership shall cause its counsel to issue a legal opinion to its transfer agent if required by the transfer agent to effect the issuance of the Warrant Units, as applicable, without a restrictive legend or removal of the legend hereunder. The Partnership agrees that, at such time as the Unrestricted Conditions are met, it will, no later than seven (7) trading days following the delivery by the Holder to the Partnership of notice that the Unrestricted Conditions have been met, deliver or cause to be delivered to such Holder such Warrant Units that free from all restrictive and other legends or remove or cause to be removed the legend hereunder, as applicable.

2.4
Listing on Securities Exchange . The Partnership will, at its expense, list on the New York Stock Exchange (or any other national securities exchange upon which the Common Units are trading) all Common Units issued or, to the extent permissible under the applicable securities exchange rules, issuable upon the exercise of this Warrant so long as any other Common Units shall be so listed during the period in which this Warrant may be exercised.

SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE HOLDER.

Each Holder of a Warrant represents and warrants to the Partnership as follows:

3.1
Acquisition of Warrant for Personal Account . The Holder is acquiring this Warrant and the Warrant Units (collectively the “ Securities ”) for investment for its own account and not with a present view to, or for resale in connection with, any public resale or distribution thereof. The Holder understands that the Securities have not been registered under the Act by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent as expressed herein. The Holder further understands that the Securities have not been passed upon or the merits thereof endorsed or approved by any state or federal authorities.

3.2
Rule 144 . The Holder acknowledges that the Securities it is purchasing are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Partnership in a transaction not involving a public offering and must be held indefinitely unless an exemption from such registration is available. The Holder represents that it is knowledgeable with respect to Rule 144 promulgated under the Act.

3.3
Accredited Investor . As of the date hereof, the Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act. The Holder is sophisticated in financial matters, and is able to evaluate the risks and benefits of an investment in the Securities for an indefinite period of time.

3.4
Opportunity to Discuss; Information . The Holder has been afforded the opportunity to ask questions of, and receive answers from, the officers and/or directors of the Partnership acting on its behalf concerning the terms and conditions of this transaction and to obtain any additional information, to the extent that the Partnership possesses such information or can acquire it without unreasonable effort or expense, necessary to verify the accuracy of the information furnished; and has availed itself of the opportunity to the extent the Holder considers appropriate in order to permit it to evaluate the merits and risks of an investment in the Partnership.



	4

SECTION 4
OTHER MATTERS.

4.1
Binding Effect . All the covenants and provisions of this Warrant by or for the benefit of the Partnership and the Holder, and shall bind and inure to the benefit of their respective successors and permitted assigns hereunder.

4.2
Notices . Notices or demands pursuant to this Warrant to be given or made by the Holder to or on the Partnership shall be sufficiently given or made if sent by certified or registered mail, return receipt requested, postage prepaid, or facsimile and addressed, until another address is designated in writing by the Partnership, as follows:

Emerge Energy Services LP
180 State Street, Suite 250
Southlake, TX 76092
Telephone No.: (817) 865-5830
Attn: Chief Financial Officer

Latham & Watkins LLP
811 Main Street, Suite 3700
Houston, TX 77002
Telephone No.: (713) 546-7420
Attn: Ryan J. Maierson

Notices or demands pursuant to this Warrant to be given or made by the Partnership to or on the Holder shall be sufficiently given or made if sent by certified or registered mail, return receipt requested, postage prepaid, or facsimile and addressed, until another address is designated in writing by the Holder, as follows:

Trinity Industries Leasing Company
2525 N. Stemmons Freeway
Dallas, TX 75207
Attention: Legal Department
Phone: 214-631-4420
Fax: 214-589-8824

Vedder Price, P.C.
222 North LaSalle Street, Suite 2600
Chicago, Illinois 60601
Attention: John T. Bycraft
Phone: 312-609-7580
Fax: 312-609-5005

4.3
Governing Law; Consent to Jurisdiction; Waiver of Jury Trial . This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of Texas, without reference to the choice of law provisions thereof. The Partnership and, by accepting this Warrant, the Holder, each irrevocably submits to the exclusive jurisdiction of the courts of the Dallas County, State of Texas for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Warrant. Each of the Partnership and, by accepting this Warrant, the Holder irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each of the Partnership and, by accepting this Warrant, the Holder irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives



	5

any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTNERSHIP AND, BY ITS ACCEPTANCE HEREOF, THE HOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

4.4
Parties Bound and Benefited . Nothing in this Warrant expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the Partnership and the Holder any right, remedy or claim under any promise or agreement hereof, and all covenants, conditions, stipulations, promises and agreements contained in this Warrant shall be for the sole and exclusive benefit of the Partnership and its successors and of the Holder and its successors and permitted assigns.

4.5
Confidentiality . Except as required by applicable law, the Holder agrees to maintain, and to require its representatives to maintain, all confidential information obtained from the Partnership on a confidential basis, which, among other things, precludes the use of such confidential information for the purposes of trading on the Warrant Units.

4.6
Identity of Transfer Agent . The transfer agent for the Common Units is American Stock Transfer & Trust Company, LLC. Upon the appointment of any subsequent transfer agent for the Common Units or other units of the Partnership’s capital stock issuable upon the exercise of the rights of purchase represented by the Warrant, the Partnership will mail to the Holder a statement setting forth the name and address of such transfer agent.

4.7
Amendment; Waiver . Any term of this Warrant may be amended or waived upon the written consent of the Partnership and the Holder.

4.8
Assignment . Any assignment or transfer of any portion or all of this Warrant shall be made by surrender of this Warrant to the Partnership at its principal office with the form of assignment attached as Appendix A hereto duly executed. In such event, the Partnership shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and the portion of this Warrant assigned to the assignee shall promptly be cancelled.

4.9
Holder as Owner . Prior to the surrender, transfer or assignment of this Warrant, the Partnership may deem and treat the Holder as the absolute owner of this Warrant (notwithstanding any notation of ownership or other writing hereon) for the purpose of any exercise hereof and for all other purposes, and the Partnership shall not be affected by any notice to the contrary.

4.10
Rights of Holder . Nothing contained in this Warrant shall be construed as conferring upon the Holder, prior to the exercise of this Warrant, the right to vote, consent or receive notice as a unitholder in respect of any meetings of unitholders for the election of directors of the Partnership’s general partner or any other matter, or as having any rights whatsoever as a unitholder of the Partnership.

4.11
Indemnification . The Partnership agrees to indemnify and hold harmless the Holder and its Affiliates from and against any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys’ fees, expenses and disbursements of any kind which may be imposed upon, incurred by or asserted against the Holder or its Affiliates in any manner relating to or arising out of (i) the Holder’s exercise of this Warrant or



	6

ownership of any Warrant Units issued in consequence thereof, or (ii) any litigation to which the Holder is made a party in its capacity as a unitholder of the Partnership; provided , however , that the Partnership will not be liable hereunder to the extent that any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys’ fees, expenses or disbursements are found in a final nonappealable judgment by a court to have resulted from the Holder’s gross negligence, bad faith or willful misconduct in its capacity as a unitholder or warrantholder of the Partnership.

4.12
Lost Certificates . If this Warrant is lost, stolen, mutilated or destroyed, the Partnership shall, on such reasonable terms as to indemnity as it may impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as, and in substitution for, this Warrant, which shall thereupon become void. Any such new Warrant shall constitute an additional contractual obligation of the Partnership, whether or not the Warrant so lost, stolen, destroyed or mutilated shall be at any time enforceable by anyone.

4.13
Severability . Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant.

4.14
Office of the Partnership; Maintenance of Books . As long as any of the Warrants remain outstanding, the Partnership shall maintain an office or agency (which may be the principal executive offices of the Partnership) where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. The Partnership agrees to maintain, at its aforesaid office or agency, books for the registration and the registration of transfer of the Warrants.

4.15
Section Headings . The section headings in this Warrant are for the convenience of the Partnership and the Holder and in no way alter, modify, amend, limit or restrict the provisions hereof.

4.16
Disclosure . The Partnership acknowledges that the number of Warrant Units and the initial Exercise Price have been determined based on the average trading price of Common Units, and the Partnership hereby represents and warrants that the disclosures in its filings with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 have included true and correct disclosure regarding the Partnership’s outstanding Common Units and rights to purchase or convert derivative securities into Common Units.

4.17
Common Unit Dividends, Split-Ups and Combinations . If, after the date hereof, the number of outstanding Common Units is increased by a dividend payable in Common Units, or by a split-up of Common Units, or decreased by a combination of Common Units, or other similar event, then, on the effective date of such dividend, split-up, combination or similar event, the Exercise Price shall be increased or decreased, as may be appropriate, in proportion to such increase or decrease in outstanding Common Units.

4.18
Adjustments for Dividends in Common Units, Securities or Property . If, while this Warrant, or any portion hereof, remains outstanding and unexpired, the holders of Common Units at the time shall have received, or, on or after the record date fixed for the determination of eligible holders of Common Units, shall have become entitled to receive, without payment therefor, other or additional Common Units or Other Securities or property (other than Common Units referred to in Section 4.17 ) of the Partnership by way of dividend or other distribution, then and in each case this Warrant shall represent the right to acquire, in addition to the number of Common Units receivable upon



	7

exercise of this Warrant, and without payment of any additional consideration therefor, the amount of such other or additional or other Common Units or Other Securities or property (other than cash) of the Partnership that the Holder would hold on the date of such exercise had this Warrant had been exercised immediately prior to such event, upon payment of an Exercise Price that has been adjusted to reflect the economics of such event to the Holder, and had thereafter, during the period from the date of such event to and including the date of such exercise, retained such Common Units during such period, giving effect to all adjustments called for during such period by the provisions of this Section 4 .

4.19
Information Rights . In the event the Partnership ceases to have a class of securities registered under the Securities Exchange Act of 1934, as amended, the Partnership shall deliver to the Holder the same information at the same time as it delivers such information to holders of Common Units pursuant to the Partnership Agreement.

4.20
Unrestricted Person . By execution of this Warrant on behalf of the Partnership, the General Partner hereby designates the Holder and each of its Affiliates as an Unrestricted Person as such term is defined in the Partnership Agreement.

SECTION 5
CONSOLIDATION, MERGER, ETC.

If after the date hereof the Partnership (a) shall consolidate with or merge into any other Person and shall not be the continuing or surviving Person of such consolidation or merger, (b) shall permit any other Person to consolidate with or merge into the Partnership and the Partnership shall be the continuing or surviving Person but, in connection with such consolidation or merger, the Warrant Units and/or Common Units shall be changed into or exchanged for cash, securities of any other Person or any other property, (c) shall transfer all or substantially all of its properties or assets to any other Person or (d) shall effect a capital reorganization or reclassification of the Warrant Units and/or its Common Units then, and in the case of each such transaction, proper provision shall be made so that upon the basis and the terms and in the manner provided in this Warrant, the Holder, upon the exercise hereof at any time after the consummation of such transaction, shall be entitled to receive (after giving effect to the payment of the aggregate Exercise Price in effect at the time of such consummation) for all Warrant Units issuable upon such exercise immediately prior to such consummation), in lieu of the Warrant Units issuable upon such exercise prior to such consummation, the greatest amount of cash, securities or other property to which such Holder would actually have been entitled as an equity holder upon such consummation if such Holder had exercised the rights represented by this Warrant immediately prior thereto, subject to adjustments (subsequent to such consummation) as nearly equivalent as possible to the adjustments provided for in Section 4 .

SECTION 6
NO IMPAIRMENT.

The Partnership shall not, by amendment of its Partnership Agreement or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against any such impairment. Without limiting the generality of the foregoing, the Partnership will take all such action as may be reasonably necessary or appropriate in order that the Partnership may validly and legally issue the Warrant Units.

SECTION 7
NOTICES OF PARTNERSHIP ACTION.

If at any time prior to the expiration date of the Warrants and prior to the exercise of the Warrants in full, any one or more of the following events shall occur:



	8

(a)
any taking by the Partnership of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any right to subscribe for, purchase or otherwise acquire any Securities of the Partnership or any Other Securities or property, or to receive any other right;

(b)
any capital reorganization of the Partnership, any reclassification or recapitalization of any Securities of the Partnership or any consolidation or merger involving the Partnership and any other Person or sale or other transfer of all or substantially all the assets of the Partnership to any other Person; or

then the Partnership will mail to the Holder a notice specifying (i) the date or expected date on which any such record is to be taken for the purpose of such right, and the amount and character of such right, (ii) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is to take place, (iii) the time, if any such time is to be fixed, as of which the holders of record of Common Units (or Other Securities) shall be entitled to exchange their Common Units (or Other Securities) for cash, Other Securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, sale, transfer, dissolution, liquidation or winding up, and a description in reasonable detail of the transaction and (iv) the date of such issuance, together with a description of the Other Securities so issued and the consideration received by the Partnership therefor. Such notice shall be delivered at least ten (10) Business Days to the date therein specified.

SECTION 8
REPRESENTATIONS AND WARRANTIES.

8.1
Representations and Warranties of the Partnership . The Partnership hereby represents and warrants to the Holder as of the date hereof and as of the date of each exercise of this Warrant as follows:

(a)
Organization and Qualification . The Partnership is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware.

(b)
Authority; Enforceability . The Partnership has all requisite power and authority to execute and deliver this Warrant and to perform its obligations hereunder and to consummate the transactions contemplated hereby, and any action required on the part of the General Partner or the Partnership for such execution, delivery and performance has been duly and validly taken. Assuming due execution and delivery by the Holder, this Warrant constitutes the legal, valid and binding obligation of the Partnership, enforceable against it in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws affecting creditors’ rights generally and by general equitable principles.

(c)
Consents and Approvals . No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the General Partner of the obligations of the Partnership under this Warrant.



	9

(d)
No Conflict . Neither the execution and delivery of the Warrant nor the performance by the General Partner of the obligations of the Partnership hereunder shall violate or breach the Partnership Agreement, the constituent documents of the General Partner or any agreement, contract or instrument to which either of them or any of their respective assets is bound or any law, order or decree applicable to either of them.

SECTION 9
NO EFFECT ON LENDER OR LESSOR RELATIONSHIP.

The Partnership acknowledges and agrees that, notwithstanding anything in this Warrant to the contrary, nothing contained in this Warrant shall affect, limit or impair the rights and remedies of the Holder or any of its Affiliates (a) in its or their capacity as a lender or lessor of railcars to the Partnership or any of its subsidiaries pursuant to any agreement under which the Partnership or any of its subsidiaries has borrowed money or leased railcars, or (b) in its or their capacity as a lender or lessor to any other Person who has borrowed money or leased railcars. Without limiting the generality of the foregoing, any such Person, in exercising its rights as a lender or lessor, including making its decision on whether to foreclose on any collateral security or terminate any lease, will have no duty to consider (x) its or any of its Affiliates’ status as a holder of a Warrant, (y) the interests of the Partnership or its subsidiaries as a holder of a Warrant or (z) any duty it may have to any of any other partners of the Partnership, except as may be required by commercial law applicable to creditors generally. No consent, approval, vote or other action taken or required to be taken by the Holder in such capacity shall in any way impact, affect or alter the rights and remedies of the Holder or any of its Affiliates as a lender or lessor.

SECTION 10
MOST FAVORED NATIONS.

In the event that at any time or from time to time after the date hereof, (a) the Partnership shall propose to issue any warrant to any Person to purchase or otherwise acquire any Common Units and (b) such warrant contains any terms that are more favorable to such Person than those set forth in this Warrant (collectively, the “ More Favorable Warrants ”), the Partnership shall give written notice thereof to the Holder not less than thirty (30) days prior to the issuance of such More Favorable Warrant, which notice shall include a copy of such More Favorable Warrant, and, upon notice to the Partnership within sixty (60) days after the receipt of such notice, the Holder shall have the right, at no cost to the Holder, to exchange this Warrant for a warrant that contains all or certain of such more favorable terms and such other amendment to this Warrant as may be necessary to cause its terms to be consistent with such more favorable terms, in each case, as reasonably determined by the Holder, which later-mentioned warrant shall become the “Warrant” as such term is used herein. A “More Favorable Warrant” shall not include any warrant that has an exercise price per Common Unit that is lower than the Exercise Price set forth in this Warrant or that is issued on any terms to an institutional lender or in connection with any bona fide transaction to raise capital for the Partnership. For greater clarity, a More Favorable Warrant shall include any warrant granted to any lessor or other vendor of the Partnership.

SECTION 11
CERTAIN DEFINITIONS.

As used herein:

(a)
“ Affiliate ” shall mean any entity that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the specified party.

(b)
“ Business Day ” means any day other than a Saturday or Sunday or other day on which banks in Dallas, Texas are authorized or required to be closed.



	10

(c)
“ Control ” (including, with correlative meanings, the terms “controlled by” and “under common control with”) means the ownership or control of securities possessing at least 50% of the voting power of all outstanding voting securities of an entity or the power otherwise to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting stock or otherwise. For purposes of this definition, partnerships, joint ventures or similar entities where a majority in interest of the partners, venturers or other members are a party hereto and/or Affiliates of a party hereto also shall be deemed to be Affiliates of such party.

(d)
“ Other Securities ” means any equity units (other than Common Units) of the Partnership or any other Person (a) that the Holder of this Warrant at any time shall be entitled to receive, or shall have received, upon the exercise of this Warrant, in lieu of or in addition to Common Units and (b) that at any time shall be issuable or shall have been issued in exchange for or in replacement of Warrant Units.

(e)
“ Person ” shall mean any individual, sole proprietorship, general partnership, corporation, business trust, trust, joint venture, limited liability company, association, joint stock company, bank, unincorporated organization or any other form of entity.

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.]
SIGNATURE PAGE FOLLOWS.

IN WITNESS WHEREOF , each of the Partnership and the Holder has caused this Warrant to be executed and delivered as of the Issue Date by an officer thereunto duly authorized.



	EMERGE ENERGY SERVICES LP By: Emerge Energy Services GP LLC, its general partner
	By: /s/ Warren B. Bonham Name: Warren B. Bonham Title: Vice President
	TRINITY INDUSTRIES LEASING COMPANY By: /s/ Jared S. Richardson Name: Jared S. Richardson Title: Vice President

APPENDIX A
ASSIGNMENT OF WARRANT

FOR VALUE RECEIVED , _______________________ hereby sells, assigns and transfers unto _____________________________ Warrant No. 1 dated June 2, 2016 (the “ Warrant ”) and the rights represented thereby, and does hereby irrevocably constitute and appoint _______________________________ Attorney, to transfer said Warrant on the books of Emerge Energy Services LP, with full power of substitution.



Dated:
Signed:
Signature guaranteed:

APPENDIX B
WARRANT EXERCISE FORM

To Emerge Energy Services LP (the “ Partnership ”):

The undersigned hereby irrevocably elects to exercise the right of purchase represented by Warrant No. 1 dated June 2, 2016 (the “ Warrant ”) for, and to purchase thereunder by the payment of the Exercise Price (as defined in the Warrant) and surrender of the Warrant, ___________ common units representing limited partner interests (“ Warrant Units ”) in the Partnership provided for therein, and requests that the Warrant Units be issued through the facilities of The Depository Trust Company as follows:



Name
Address
Federal Tax ID or Social Security No.

DWAC Instructions:___________________

and, if the number of Warrant Units shall not be all the Warrant Units purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Units purchasable upon exercise of this Warrant be registered in the name of the undersigned Holder or the undersigned’s Assignee as below indicated and delivered to the address stated below.



Dated:
Signature:
Name (please print)
Address
Federal Tax ID or Social Security No.
Assignee:

APPENDIX C
CANCELLATION OF INDEBTEDNESS ELECTION NOTICE

To Emerge Energy Services LP (the “ Partnership ”):

Date:_________________________

The undersigned hereby elects under Section 1.2.2 of Warrant No. 1 dated June 2, 2016 (the “ Warrant ”) to surrender the right to purchase _____________ common units (the “ Warrant Units ”) representing limited partner interests in the Partnership (“ Common Units ”) pursuant to this Warrant and hereby requests the issuance of ______________ Common Units and to pay the Exercise Price therefor by crediting an amount equal to the aggregate Exercise Price of such Units against the principal amount of and accrued interest on _____________. The Common Units issuable upon such election shall be issued through the facilities of The Depository Trust Company in the name of the undersigned or as otherwise indicated below.



Signature
Name for Registration
Mailing Address



Dated:
Signature:
Name (please print)
Address
Federal Tax ID or Social Security No.
Assignee:

APPENDIX D
NET ISSUE ELECTION NOTICE

To Emerge Energy Services LP (the “ Partnership ”):

Date:_________________________

The undersigned hereby elects under Section 1.3 of Warrant No. 1 dated June 2, 2016 (the “ Warrant ”) to surrender the right to purchase _____________ common units (the “ Warrant Units ”) representing limited partner interests in the Partnership (“ Common Units ”) pursuant to this Warrant and hereby requests the issuance of ______________ Common Units. The Common Units issuable upon such net issue election shall be issued through the facilities of The Depository Trust Company in the name of the undersigned or as otherwise indicated below.



Signature
Name for Registration
Mailing Address



Dated:
Signature:
Name (please print)
Address
Federal Tax ID or Social Security No.
Assignee:

SCHEDULE OF SUBSTANTIALLY IDENTICAL ASSET PURCHASE AGREEMENTS

OMITTED PURSUANT TO INSTRUCTION 2 TO ITEM 601 OF REGULATION S-K



Material Details in Which Omitted Warrants Differ from the Warrant to Purchase Common Units Representing Limited Partner Interests in Emerge Energy Services LP, dated as of June 2, 2016, by and among Emerge Energy Services LP and Trinity Industry Leasing Company
	Warrant No.	Holder of the Warrant	No. of Common Units subject to the Warrant
Warrant to Purchase Common Units Representing Limited Partner Interests in Emerge Energy Services LP, dated as of June 2, 2016, by and among Emerge Energy Services LP and Trinity Industry Leasing Company	1	Trinity Industries Leasing Company	220,000
Warrant to Purchase Common Units Representing Limited Partner Interests in Emerge Energy Services LP, dated as of June 2, 2016, by and among Emerge Energy Services LP and Trinity Industry Leasing Company	2	Trinity Industries Leasing Company	89,944
Warrant to Purchase Common Units Representing Limited Partner Interests in Emerge Energy Services LP, dated as of June 2, 2016, by and among Emerge Energy Services LP and TRIP Rail Master Funding LLC	3	TRIP Rail Master Funding LLC	27,420
Warrant to Purchase Common Units Representing Limited Partner Interests in Emerge Energy Services LP, dated as of June 2, 2016, by and among Emerge Energy Services LP and Element Rail Leasing I LLC	4	Element Rail Leasing I LLC	1,057
Warrant to Purchase Common Units Representing Limited Partner Interests in Emerge Energy Services LP, dated as of June 2, 2016, by and among Emerge Energy Services LP and Element Rail Leasing II LLC	5	Element Rail Leasing II LLC	31,579



	11

Exhibit 10.9

UNSECURED PROMISSORY NOTE

$8,000,000.00 June 2, 2016

Superior Silica Sands LLC, a Texas limited liability company (the “ Company ”), for value received, hereby promises to pay to the order of Trinity Industries Leasing Company, a Delaware corporation, its successors and permitted assigns (the “ Holder ”), the principal sum of Eight Million and No/100 dollars ($8,000,000.00) or such lesser amount as shall equal the unpaid aggregate balance of the Delivery Deferral Fee (as defined below), together with interest thereon at the rate per annum described below, in lawful money of the United States of America and in immediately available funds, on or before the Maturity Date (as defined below).

1. The Delivery Deferral Fee . In consideration of the promises and covenants contained in (a) that certain Railroad Car Lease Agreement dated September 5, 2013, Riders One (1) through Five (5), Eight (8) through Twenty-One (21), and Twenty-Three (23) through Thirty-Four (34) thereto, and any future Riders attached to the Railroad Car Lease Agreement, in each case as amended (collectively, the “ Lease Documents ”) and (b) that certain Omnibus Agreement dated as of the date hereof between Emerge (as defined below) and the Holder (the “ Omnibus Agreement ”) this Note evidences the Company’s agreement to pay a delivery deferral fee to the Holder in the aggregate principal amount of Eight Million and No/100 dollars ($8,000,000.00) (as such principal amount may be increased pursuant to Section 2.1 hereof, the “ Delivery Deferral Fee ”).

2.
Terms of this Note .

2.1
Interest . Interest shall accrue on the then outstanding principal balance of this Note at the rate of 10% per annum (the “ Base Rate ”). Interest on this Note shall be due and payable in arrears in cash on each Interest Payment Date applicable thereto; provided , however , that, with respect to any Interest Payment Date, if Consolidated EBITDA (as defined in the Credit Agreement for this purpose) is not at least $40,000,000 for the period of four consecutive fiscal quarters ending immediately prior to such Interest Payment Date for which financial statements of Emerge have been publicly filed, interest shall not be payable in cash, but instead shall be added to the aggregate principal balance of this Note (and, for avoidance of doubt, capitalized interest added to the aggregate principal balance of this Note shall thereafter accrue interest as provided herein); provided further , however , that, if the principal of this Note is prepaid, in whole or in part, at any time after the date hereof, all accrued and unpaid interest with respect to such principal amount prepaid shall be due and payable on the date of such prepayment. Interest will accrue from and including the period commencing on the date of this Note and will be computed on a per annum basis of a year of 360 days and the actual number of days (including the first day but excluding the last day) elapsed, unless such computation would exceed the maximum rate of nonusurious interest allowed by law as of the date hereof, in which case such interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year). As used herein, “ Interest Payment Date ” means the last Business Day of each March, June, September and December and the Maturity Date, “ Credit Agreement ” means the Amended and Restated Revolving Credit and Security Agreement dated as of June 27, 2014 among Emerge and certain of its subsidiaries, as borrowers, the lenders party thereto and PNC Bank, National Association, as administrative agent and collateral agent, as amended, supplemented, modified, refinanced or replaced from time to time; provided , however , that, in the event the Credit Agreement is terminated, and not replaced or refinanced, for any reason after the date hereof, or the Credit Agreement is amended, supplemented, modified, replaced or refinanced and thereafter does not use the term Consolidated EBITDA, or a functionally equivalent term, for any reason, the term Consolidated EBITDA shall have the meaning assigned to such term in the Credit Agreement as of the day immediately prior to the date it is so amended, supplemented, modified, terminated, replaced or refinanced, and “ Note Obligations ” means all principal, interest (including interest which accrues after the commencement of any case or proceeding in bankruptcy of the Company), fees, charges, expenses, reasonable counsel fees and any other sum chargeable to the Company pursuant to the terms of this Note.

2.2
Principal . The principal balance of this Note will be due and payable in immediately available funds in its entirety on June 2, 2020 (the “ Maturity Date ”). Principal amounts repaid under this Note may not be reborrowed.

2.3
Payments . All payments on or in respect of this Note, including principal and interest, will be made in in United States dollars, by wire transfer of immediately available funds to the Holder’s account as directed below or, at the option of the Holder, in such manner and at such other place in the United States as the Holder shall have designated to the Company in writing pursuant to the provisions of this Note.

Credit Bank:    Wilmington Trust Company
City, State:    Wilmington, DE
ABA# of Credit Bank:    ###-###-###
Name of Account:    Trinity Industry Leasing
Account #:    ####-####
Reference:    Emerge

2.4
Conformance with Laws . It is the intention of the parties hereto that the Holder shall conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated hereby would be usurious as to the Holder under laws applicable to it (including the laws of the United States of America and the State of Texas or any other jurisdiction whose laws may be mandatorily applicable to the Holder notwithstanding the other provisions of this Note), then, in that event, notwithstanding anything to the contrary in this Note or any agreement entered into in connection with or as security for this Note, it is agreed as follows: (a) the aggregate of all consideration which constitutes interest under law applicable to the Holder that is contracted for, taken, reserved, charged or received by the Holder under this Note or agreements or otherwise in connection herewith shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be canceled automatically and if theretofore paid shall be credited by the Holder on the principal amount of the Delivery Deferral Fee (or, to the extent that the principal amount of the Delivery Deferral Fee shall have been or would thereby be paid in full, refunded by the Holder to the Company); and (b) in the event that the maturity of this Note is accelerated by reason of an election of the Holder or automatically by reason of the occurrence of any Event of Default under this Note, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to the Holder may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Note or otherwise shall be canceled automatically by the Holder as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by the Holder on the principal amount of the Delivery Deferral Fee (or, to the extent that the principal amount of the Delivery Deferral Fee shall have been or would thereby be paid in full, refunded by the Holder to the Company). All sums paid or agreed to be paid to the Holder for the use, forbearance or detention of sums due hereunder that constitute interest under applicable law shall, to the extent permitted by law applicable to the Holder, be amortized, prorated, allocated and spread throughout the stated term of the Delivery Deferral Fee until payment in full so that the rate or amount of interest on account of the Delivery Deferral Fee hereunder does not exceed the maximum amount allowed by such applicable law. If at any time and from time to time (i) the amount of interest payable to the Holder on any date shall be computed at the Highest Lawful Rate applicable to the Holder pursuant to this Section 2.4 and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to the Holder would be less than the amount of interest payable to the Holder computed at the Highest Lawful Rate applicable to the Holder, then the amount of interest payable to the Holder in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to the Holder until the total amount of interest payable to the Holder shall equal the total amount of interest which would have been payable to the Holder if the total amount of interest had been computed without giving effect to this Section 2.4 . To the extent that Chapter 303 of the Texas Finance Code is relevant for the purpose of determining the Highest Lawful Rate applicable to the Holder, the Holder elects to determine the applicable rate ceiling under such Chapter by the weekly ceiling from time to time in effect. Chapter 346 of the Texas Finance Code does not apply to the Company’s obligations hereunder. As used herein, “ Highest Lawful Rate ” shall mean, with respect to the Holder, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Note under laws applicable to the Holder which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws allow as of the date hereof. The Loans are not primarily for personal, family or household use.

2.5
Prepayment . This Note may be prepaid by the Company, in whole or in part, at any time hereafter without premium or penalty. Any prepayment will be applied first against accrued and unpaid expenses owing under this Note (if any), then against accrued and unpaid interest then payable pursuant to the provisions of this Note, and then against unpaid principal.

2.6
Waivers . The Company waives diligence, presentment, demand, protest, notice of intent to accelerate the maturity hereof, notice of acceleration of the maturity hereof, and notice of every kind whatsoever. The failure of the Holder to exercise any of its rights under this Note in any particular instance will not constitute a waiver of the same or of any other right in that or any subsequent instance.

2.7
Unsecured . This Note is unsecured.

3.
Events of Default and Remedies .

3.1
Events of Default . An “ Event of Default ” will exist if any of the following occurs and is continuing:

(a)
the Company fails to make any payment of principal or interest on this Note or on any other Note Obligation, when and as such principal and interest or other Note Obligation becomes due and payable, in each case whether by acceleration or otherwise;

(b)
(i) the Company shall breach or otherwise fail to perform or observe in any respect any other obligation, covenant or agreement set forth in this Note and such default shall continue for a period of ten (10) days after the earlier of the date the Company first obtains knowledge of such default or the Holder gives written notice thereof to the Company, or (ii) the Company or Emerge shall breach or otherwise fail to perform or observe in any respect any obligation, covenant or agreement set forth in any other Related Document (as defined below) and such breach or failure under such other Related Document shall continue beyond any applicable cure period in such Related Document or, if no cure period is specified, for a period of more than ten (10) days after the earlier of the date the Company or Emerge, first obtains knowledge of such default or the Holder gives written notice thereof to the Company;

(c)
any representation or warranty of any party (other than the Holder) contained in any Related Document or in any document required to be furnished to the Holder pursuant to such Related Document is false or misleading in any material respect on the date made or furnished;

(d)
there shall occur any Change of Control;

(e)
the Borrowers (as defined in the Credit Agreement) shall (i) fail to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of the Credit Agreement, beyond any grace period provided with respect thereto, or (ii) fail to observe or perform any other agreement or condition relating to the Credit Agreement, or any other event occurs, in each case, if such default or other event shall have resulted in the acceleration of the payment of the indebtedness thereunder; provided, however, that, in the event the Credit Agreement is terminated, and not replaced or refinanced, for any reason after the date hereof, it shall be an Event of Default if the Company, Emerge or the GP shall default in the performance of any one or more agreements evidencing indebtedness for borrowed money if the effect of such default is to cause an amount exceeding Eight Million Dollars ($8,000,000) in the aggregate to become due prior to the stated maturity thereof;

(f)
the Company, Emerge or the GP shall fail to maintain or preserve its existence in its jurisdiction of organization and shall not cure such failure within twenty (20) days after the occurrence thereof;

(g)
the voluntary commencement of any Insolvency Proceeding (as defined below); or

(h)
the involuntary commencement of any Insolvency Proceeding if such proceeding is not stayed within 60 days of the commencement thereof.

3.2
Certain Definitions . As used herein:

(a)
“ Affiliate ” shall mean any entity that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the specified party.

(b)
“ Business Day ” means any day other than a Saturday or Sunday or other day on which banks in Dallas, Texas are authorized or required to be closed.

(d)
“ Change of Control ” shall mean: (a) any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) (other than any Permitted Holder) shall have acquired (i) beneficial ownership of 50% or more on a fully diluted basis of the voting or economic Equity Interests of GP in the aggregate, or (ii) the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of GP; (b) GP shall cease to be the sole general partner of Emerge; (c) Emerge shall cease to beneficially own and control, directly or indirectly, 100%, on a fully diluted basis, of the economic and voting interest in the Equity Interests of the Company; and (d) Emerge sells, leases or otherwise transfers all or substantially all of its assets in any transaction or series of transactions other than the sale of the fuels division of Emerge.

(e)
“ Equity Interests ” shall mean, with respect to any Person, any and all capital stock and all rights to purchase, options, warrants, participation or other equivalents of or interest in (regardless of how designated) equity of such capital stock, but excluding debt securities exchangeable for or convertible into capital stock. For purposes of the definition of “Change of Control,” Equity Interests include all of the following rights relating to such Equity Interests, whether arising under the organizational documents of the Person issuing such Equity Interests (the “ issuer ”) or under the applicable laws of such issuer’s jurisdiction of organization relating to the formation, existence and governance of corporations, limited liability companies or partnerships or business trusts or other legal entities, as the case may be: (i) all economic rights (including all rights to receive dividends and distributions) relating to such Equity Interests; (ii) all voting rights and rights to consent to any particular action(s) by the applicable issuer; (iii) all management rights with respect to such issuer; (iv) in the case of any Equity Interests consisting of a general partner interest in a partnership, all powers and rights as a general partner with respect to the management, operations and control of the business and affairs of the applicable issuer; (v) in the case of any Equity Interests consisting of the membership/limited liability company interests of a managing member in a limited liability company, all powers and rights as a managing member with respect to the management, operations and control of the business and affairs of the applicable issuer; (vi) all rights to designate or appoint or vote for or remove any officers, directors, manager(s), general partner(s) or managing member(s) of such issuer and/or any members of any board of members/managers/partners/directors that may at any time have any rights to manage and direct the business and affairs of the applicable issuer under its organizational documents as in effect from time to time or under applicable law; (vii) all rights to amend the organizational documents of such issuer, (viii) in the case of any Equity Interests in a partnership or limited liability company, the status of the holder of such Equity Interests as a “partner,” general or limited, or “member” (as applicable) under the applicable organizational documents and/or applicable law; and (ix) all certificates evidencing such Equity Interests, but in any case, excluding debt securities convertible into or exchangeable for Equity Interests.

(f)
“ Emerge ” shall mean Emerge Energy Services LP, a Delaware limited partnership.

(g)
“ Exchange Act ” shall mean the Securities Exchange Act of 1934.

(h)
“ GP ” shall mean Emerge Energy Services GP LLC, a Delaware limited liability company.

(i)
“ Insolvency Proceeding ” shall mean any insolvency, receivership, bankruptcy, dissolution, liquidation or reorganization proceeding, or any other proceeding, whether voluntary or involuntary, by or against the Company, Emerge or the GP, under any bankruptcy or insolvency law or other similar laws, including any federal or state law relating to the relief of debtors of any jurisdiction, or involving any custodian, liquidator or trustee, whether now or hereafter in effect, and any out-of-court composition, assignment for the benefit of creditors, readjustment of indebtedness, reorganization, extension or other debt arrangement of any kind.

(j)
“ Permitted Holders ” shall mean any of Insight Equity I LP, Insight Equity (Tax-Exempt) I LP, Insight Equity (Cayman) I LP, Insight Equity (Affiliated Coinvestors) I LP and/or any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with such Persons on the date hereof.

(k)
“ Person ” shall mean any individual, sole proprietorship, general partnership, corporation, business trust, trust, joint venture, limited liability company, association, joint stock company, bank, unincorporated organization or any other form of entity.

(l)
“ Related Documents ” means the Omnibus Agreement, the Lease Documents and all exhibits, schedules to such agreement and documents and the other agreements and documents referred to therein.

3.3
Remedies .

(a)
If an Event of Default specified in any of Section 3.1(a) through 3.1(f) has occurred and is continuing, the Holder will have the right to accelerate payment of the entire principal of, and all interest accrued on, this Note and the other Note Obligations, and, upon such acceleration, this Note and the other Note Obligations will thereupon become forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are expressly waived, and the Company will forthwith pay to the Holder the entire outstanding principal of, and interest accrued on, this Note and the other Note Obligations. With respect to an Event of Default under Section 3.1(g) or (h) , acceleration will be automatic.

(b)
Upon the occurrence and during the continuance of an Event of Default interest on the unpaid principal amount of this Note outstanding from time to time shall accrue at the rate of the sum of the Base Rate plus 2% per annum, which interest shall be due and payable upon demand by the Holder.

(c)
The Company shall pay to the Holder on demand all reasonable attorneys’ fees and other out-of-pocket costs incurred by the Holder during the continuance of an Event of Default in collecting or attempting to collect the amounts due under this Note and the other Note Obligations.

4.
Miscellaneous .

4.1
Amendment and Waiver . This Note may be amended, and the observance of any term of this Note may be waived or consented to, with and only with the written consent of the Company and the Holder.

4.2
No Waiver of Noncompliance . Any waiver or failure to insist upon strict compliance with any obligation, covenant, agreement or condition of this Note will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. No course of dealing on the part of the Holder or any delay or failure on the part of the Holder to exercise any right will operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers and remedies. Any waiver of any provision of this Note shall be made pursuant to the provisions of Section 4.1 .

4.3
Entire Agreement . THIS NOTE AND THE RELATED DOCUMENTS CONSTITUTE THE ENTIRE FINAL AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES PERTAINING TO THE SUBJECT MATTER HEREOF AND THEREOF, AND SUPERSEDE ALL PRIOR AND CONTEMPORANEOUS AGREEMENTS, UNDERSTANDINGS, NEGOTIATIONS AND DISCUSSIONS, WHETHER ORAL OR WRITTEN, OF THE PARTIES WITH RESPECT TO THIS SUBJECT MATTER HEREOF AND THEREOF, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENT OF THE PARTIES.

4.4
Notices . Unless otherwise provided herein, any notice, request, consent, instruction or other document to be given hereunder by any party hereto to the other party hereto shall be in writing and will be deemed given (a) when received if delivered personally or by courier; or (b) on the date receipt is acknowledged if delivered by certified mail, postage prepaid, return receipt requested; or (c) one day after transmission if sent by facsimile transmission with confirmation of transmission; or (d) one day after deposit with an overnight delivery service if sent by overnight delivery service, as follows:

If to Holder, addressed to:

Trinity Industries Leasing Company
2525 N. Stemmons Freeway
Dallas, TX 75207
Attention: Legal Department
Phone: 214-631-4420
Fax: 214-589-8824

If to the Company, addressed to:

Emerge Energy Services LP
180 State Street, Suite 225
Southlake, Texas 76092
Attention:    Deborah Deibert
Telephone:    (817) 865-5834
Facsimile:    (817) 488-7739

or to such other place and with such other copies as either party may designate as to itself by written notice to the others in accordance with this Section 4.4 .

4.5
Binding Effects Assignment; Third-Party Beneficiaries . This Note will be binding upon and inure to the benefit of the Company and its successors and permitted assigns, but neither this Note nor any of its rights, interests or obligations under this Note may be assigned by the Company without the prior written consent of the Holder. This Note will be binding upon and inure to the benefit of the Holder and its successors and assigns and may be assigned in in whole or in part with the prior written consent of Emerge and the Company; provided, such consent shall not be unreasonably withheld or delayed, and such consent shall not be conditioned on the payment of cash consideration; provided, further, that no such written consent of Emerge and the Company shall be required if such assignment or transfer is made (i) during the occurrence and continuation of an Event of Default, (ii) to an affiliate or subsidiary of the Holder, or (iii) in connection with the sale, assignment or disposition of all or substantially all of the Holder's rail-related assets or business.

4.6
Governing Law . THIS NOTE SHALL BE CONSTRUED AND INTERPRETED AND THE RIGHTS OF THE PARTIES GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW THEREOF THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.

4.7
Waiver of Jury Trial. EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE HOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS NOTE AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

4.8
Venue . WITH RESPECT TO ANY CLAIM, SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE, THE COMPANY HEREBY CONSENTS AND IRREVOCABLY (A) SUBMITS TO THE JURISDICTION OF THE COURTS IN AND FOR DALLAS COUNTY, TEXAS, (B) WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE ASSERTION OF JURISDICTION BY THE COURTS IN AND FOR DALLAS COUNTY, TEXAS, (C) WAIVES ANY CLAIM THAT VENUE IN DALLAS COUNTY, TEXAS IS INAPPROPRIATE FOR ANY REASON, AND (D) WAIVES ANY CLAIM THAT A FORUM IN DALLAS COUNTY, TEXAS IS INCONVENIENT.

4.9
Headings; Internal References . The article and section headings contained in this Note are solely for reference, and will not affect in any way the meaning or interpretation of this Note. Any references in this Note to an article, section, paragraph, clause or schedule will be deemed to be a reference to the article, section, paragraph, clause or schedule contained in this Note unless expressly stated otherwise. As used in this Note, “including” means “including without limitation,” and “or” is not exclusive.

4.10
Severability . If any term, provision, covenant, agreement or restriction of this Note is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants, agreements and restrictions of this Note will continue in full force and effect and will in no way be affected, impaired or invalidated.

4.11
Lost or Destroyed Note . Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and in case of any such mutilation, upon surrender and cancellation of this Note, the Company will issue a replacement Note of like tenor to the Holder in lieu of this Note.

4.12
Time . Time is of the essence hereof. Upon the occurrence and during the continuance of any Event of Default hereunder, the Holder may exercise all rights and remedies provided for herein or in any Related Documents and by law or equity.

4.13
Remedies . The remedies of the Holder as provided herein or in any Related Document, or any one or more of them, at law or in equity, shall be cumulative and concurrent, and may be pursued singularly, successively or together at the sole discretion of the Holder, and may be exercised as often as occasion therefor shall occur. Without limiting the generality of the foregoing, upon the occurrence and during the continuance of an Event of Default, the Holder shall be entitled to exercise all of its remedies against the Company under this Note or any other document without first proceeding against Emerge, the GP or any collateral that secures payment of this Note, if any, or any of the Note Obligations.

4.14
Indemnification . THE COMPANY SHALL INDEMNIFY AND HOLD THE HOLDER AND ITS AFFILIATES HARMLESS AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, COSTS AND EXPENSES OF ANY KIND (INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING, WHETHER OR NOT THE HOLDER OR ANY OF ITS AFFILIATES SHALL BE DESIGNATED A PARTY THERETO) WHICH MAY BE INCURRED BY THE HOLDER OR ANY OF ITS AFFILIATES RELATING TO OR ARISING OUT OF (A) ANY EVENT OF DEFAULT UNDER THIS NOTE OR ANY OF THE RELATED DOCUMENTS OR THE ENFORCEMENT BY THE HOLDER OF ITS RIGHTS UNDER THIS NOTE OR ANY OF THE RELATED DOCUMENTS OR (B) ANY EVENT OF DEFAULT UNDER AND AS DEFINED IN THE CREDIT AGREEMENT; PROVIDED THAT THE HOLDER SHALL HAVE NO RIGHT TO BE INDEMNIFIED HEREUNDER FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS DETERMINED BY A FINAL, NONAPPEALABLE JUDGMENT OF A COURT OF COMPETENT JURISDICTION. THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH INDEMNIFIED LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF ANY INDEMNITEE.

[remainder of page intentionally left blank]



	COMPANY: SUPERIOR SILICA SANDS LLC By: /s/ Richard Shearer ________________ Name: Richard Shearer Title: Chief Executive Officer

EXHIBIT 31.1

CERTIFICATION

I, Rick Shearer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Emerge Energy Services LP;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.





Date: September 9, 2016	/s/ Rick Shearer
	Rick Shearer
	President and Chief Executive Officer of Emerge Energy Services GP LLC (the general partner of Emerge Energy Services LP) (Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION

I, Deborah Deibert, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Emerge Energy Services LP;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: September 9, 2016	/s/ Deborah Deibert
	Deborah Deibert
	Chief Financial Officer of Emerge Energy Services GP LLC (the general partner of Emerge Energy Services LP) (Principal Financial Officer)

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Emerge Energy Services LP (the “Partnership”) on Form 10-Q for the quarterly period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Rick Shearer, President and Chief Executive Officer of Emerge Energy Services GP LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.



Date: September 9, 2016


	By:	/s/ Rick Shearer
		Rick Shearer
		President and Chief Executive Officer of Emerge Energy Services GP LLC (the general partner of Emerge Energy Services LP)

The foregoing certification is being furnished to the U.S. Securities and Exchange Commission as an exhibit to the Report.

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Emerge Energy Services LP (the “Partnership”) on Form 10-Q for the quarterly period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Deborah Deibert, Chief Financial Officer of Emerge Energy Services GP LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.



Date: September 9, 2016


	By:	/s/ Deborah Deibert
		Deborah Deibert
		Chief Financial Officer of Emerge Energy Services GP LLC (the general partner of Emerge Energy Services LP)

The foregoing certification is being furnished to the U.S. Securities and Exchange Commission as an exhibit to the Report.

Exhibit 95.1

MINE SAFETY DISCLOSURES

The following disclosures are provided pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K, which requires certain disclosures by companies required to file periodic reports under the Securities Exchange Act of 1934, as amended, that operate mines regulated under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”).

Mine Safety Information

Whenever MSHA believes a violation of the Mine Act, any health or safety standard or any regulation has occurred, it may issue a citation which describes the alleged violation and fixes a time within which the U.S. mining operator must abate the alleged violation. In some situations, such as when MSHA believes that conditions pose a hazard to miners, MSHA may issue an order to remove miners from the area of the mine affected by the condition until the alleged hazards are corrected. When MSHA issues a citation or order, it generally proposes a civil penalty, or fine, as a result of the alleged violation, that the operator is ordered to pay. Citations and orders can be contested and appealed, and as part of that process, may be reduced in severity and amount, and are sometimes dismissed. The number of citations, orders and proposed assessments vary depending on the size and type (underground or surface) of the mine as well as by the MSHA inspector(s) assigned.

Mine Safety Data

The following provides additional information about references used in the table below to describe the categories of violations, orders or citations issued by MSHA under the Mine Act:

· Section 104 S&S Citations : Citations received from MSHA under section 104 of the Mine Act for violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard.

· Section 104(b) Orders : Orders issued by MSHA under section 104(b) of the Mine Act, which represents a failure to abate a citation under section 104(a) within the period of time prescribed by MSHA. This results in an order of immediate withdrawal from the area of the mine affected by the condition until MSHA determines that the violation has been abated.

· Section 104(d) Citations and Orders : Citations and orders issued by MSHA under section 104(d) of the Mine Act for unwarrantable failure to comply with mandatory health or safety standards.

· Section 110(b)(2) Violations : Flagrant violations issued by MSHA under section 110(b)(2) of the Mine Act.

· Section 107(a) Orders : Orders issued by MSHA under section 107(a) of the Mine Act for situations in which MSHA determined an “imminent danger” (as defined by MSHA) existed.

The following table sets out information required by the Dodd-Frank Act for the three months ended June 30, 2016 . The mine data retrieval system maintained by MSHA may show information that is different than what is provided herein. Any such difference may be attributed to the need to update that information on MSHA’s system and/or other factors. The table also displays pending legal actions before the Federal Mine Safety and Health Review Commission (the “Commission”) that were initiated during the three months ended June 30, 2016 as well as total pending legal actions that were pending before the Commission as of June 30, 2016 , which includes the legal proceedings before the Commission as well as all contests of citations and penalty assessments which are not before an administrative law judge. Any such pending legal actions constitute challenges by us of citations issued by MSHA.



Mine or Operating Name and MSHA Identification Number	Section 104 S&S Citations (#)	Section 104(b) Orders (#)	Section 104(d) Citations and Orders (#)	Section 110(b)(2) Violations (#)	Section 107(a) Orders (#)	Total Dollar Value of MSHA Assessments Proposed ($)	Total Number of Mining Related Fatalities (#)	Received Notice of Pattern of Violations Under Section 104(e) (yes/no)	Received Notice of Potential to Have Pattern Under Section 104(e) (yes/no)	Legal Actions Pending as of Last Day of Period (#)	Legal Actions Initiated During Period (#)	Legal Actions Resolved During Period (#)
Independence Mine (#4703728)	—	—	—	—	—	$—	—	No	No	—	—	—
Arland Wet Plant (#4703662) (Midwest Frac)	—	—	—	—	—	$—	—	No	No	—	—	—
Thompson Hills (#4703718)	—	—	—	—	—	$—	—	No	No	—	—	—
Dry Plant (#4703620) (New Auburn)	—	—	—	—	—	$—	—	No	No	—	—	3
FLS Mine/Wet Plant (#4703670) (Barron/Clinton)	—	—	—	—	—	$—	—	No	No	—	—	—
Clinton Dry Plant (#4703671) (Barron/Clinton)	1	—	—	—	—	$469	—	No	No	2	2	3
Kosse Mine (#4104312)	—	—	—	—	—	$—	—	No	No	6	—	—
LP Mine Site and Wet Plant (#4703707)	—	—	—	—	—	$—	—	No	No	—	—	—
Arland Dry Plant (#4703720)	—	—	—	—	—	$—	—	No	No	—	—	—
Chippewa Sand (#4703607) (New Auburn)	—	—	—	—	—	$—	—	No	No	—	—	—