1286131--3/16/2010--STONEMOR_PARTNERS

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Risk Factors Related to Our Business We may not have sufficient cash from operations to pay the minimum quarterly distribution after we have paid our expenses, including the expenses of our general partner, funded merchandise and perpetual care trusts and established necessary cash reserves. Our substantial level of indebtedness could materially adversely affect our ability to generate sufficient cash for distribution to our partners, to fulfill our debt obligations and to operate our business. Restrictions in our existing and future debt agreements could limit our ability to make distributions to you or capitalize on acquisition and other business opportunities. Current economic conditions may result in a decrease in cemetery merchandise and services revenues. Adverse conditions in the financial markets have reduced the principal and may reduce the earnings of the investments held in merchandise and perpetual care trusts and adversely affect our revenues and cash flow. Pre-need sales typically generate low or negative cash flow in the periods immediately following sales which could adversely affect our ability to make distributions to our partners. Because fixed costs are inherent in our business, a decrease in our revenues can have a disproportionate effect on our cash flow and profits. Our failure to attract and retain qualified sales personnel and management could have an adverse effect on our business and financial condition. We may not be able to identify, complete, fund or successfully integrate additional cemetery acquisitions which could have an adverse affect on our results of operations. If the trend toward cremation in the United States continues, our revenues may decline which could have an adverse effect on our business and financial condition. Declines in the number of deaths in our markets can cause a decrease in revenues. The financial condition of third-party insurance companies that fund our pre-need funeral contracts may impact our financial condition, results of operations, or cash flows. If state laws or interpretations of existing state laws change or if new laws are enacted, we may be required to increase trust deposits or to alter the timing of withdrawals from trusts, which may have a negative impact on our revenues and cash flow. If state laws or their interpretations change, or new laws are enacted relating to the ownership of cemeteries and funeral homes, our business, financial condition and results of operations could be adversely affected. We are subject to legal restrictions on our marketing practices that could reduce the volume of our sales which could have an adverse effect on our business, operations and financial condition. We are subject to environmental and health and safety regulations that may adversely affect our operating results. Risks Inherent in an Investment in Us Our general partner and its affiliates have conflicts of interest and limited fiduciary duties, which may permit them to favor their own interests to your detriment. Holders of our common units have limited voting rights and are not entitled to elect our general partner or its directors, which could reduce the price at which the common units will trade. Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units. Our general partner can transfer its ownership interest in us without unitholder consent under certain circumstances, and the control of our general partner may be transferred to a third party without unitholder consent. We may issue additional common units without your approval, which would dilute your existing ownership interests. Cost reimbursements due our general partner may be substantial and will reduce the cash available for distribution to you. In establishing cash reserves, our general partner may reduce the amount of available cash for distribution to you. Our general partner has a limited call right that may require you to sell your common units at an undesirable time or price. You may be required to repay distributions that you have received from us. Tax Risks to Common Unitholders Audit adjustments to the taxable income of our corporate subsidiaries for prior taxable years may reduce the net operating loss carryforwards of such subsidiaries and thereby increase their tax liabilities for future taxable periods. Changes in the ownership of our units, including the changes occurring as a result of our initial public offering may result in annual limitations on our use of net operating losses available to reduce taxable income, which could increase our tax liabilities and decrease cash available for distribution in future taxable periods. Our tax treatment depends on our status as a partnership for federal income tax purposes, as well as our not being subject to a material amount of additional entity-level taxation by individual states. If the IRS treats us as a corporation for federal tax purposes or we become subject to additional entity-level taxation for state tax purposes, it would reduce the amount of cash available for distribution to you. We have subsidiaries that will be treated as corporations for federal income tax purposes and subject to corporate-level income taxes. If the IRS contests the federal income tax positions we take, the market for our common units may be adversely impacted, and the cost of any IRS contest will reduce our cash available for distribution to you. You may be required to pay taxes on income from us even if you do not receive any cash distributions from us. Tax gain or loss on disposition of our common units could be more or less than expected. Tax-exempt entities and non- U.S. persons face unique tax issues from owning common units that may result in adverse tax consequences to them. We treat each purchaser of common units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units. We have adopted certain valuation methodologies that may result in a shift of income, gain, loss and deduction between the general partner and the unitholders. The IRS may challenge this treatment, which could adversely affect the value of the common units. The sale or exchange of 50% or more of our capital and profits interests during any twelve-month period will result in the termination of our partnership for federal income tax purposes. You will likely be subject to state and local taxes and filing requirements in jurisdictions where you do not live as a result of an investment in units. A unitholder whose units are loaned to a short seller to cover a short sale of units may be considered as having disposed of those units. If so, the unitholder would no longer be treated for tax purposes as a partner with respect to those units during the period of the loan and may recognize gain or loss from the disposition. We prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders. The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis.

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1286131--3/16/2010--STONEMOR_PARTNERS_LP