SUBSEQUENT EVENTS

Ergon Transactions

Membership Interest Purchase Agreement

On July 19, 2016, the Partnership announced that Ergon, Inc. (“Ergon”) has agreed to purchase 100% of the outstanding voting stock of Blueknight GP Holding, L.L.C., which owns 100% of the capital stock of the Partnership’s general partner, pursuant to a Membership Interest Purchase Agreement dated July 19, 2016 among CB-Blueknight, LLC (“CBB”), an indirect wholly-owned subsidiary of Charlesbank, Blueknight Energy Holding, Inc. (“BEHI”), an indirect wholly-owned subsidiary of Vitol, and Ergon Asphalt Holdings, LLC, a wholly owned subsidiary of Ergon.

Contribution Agreement

In addition, Ergon has agreed (i) to contribute nine asphalt terminals it currently owns plus $22.1 million in cash to the Partnership in return for total consideration of approximately $130.9 million, which consists of the issuance of 18,312,968 of the Partnership’s Series A preferred units in a private placement, and (ii) to acquire an aggregate of $5.0 million of common units for cash in a private placement, pursuant to a Contribution Agreement between the Partnership, Blueknight Terminal Holding, L.L.C., and three indirect wholly-owned subsidiaries of Ergon. The asphalt terminals are located in (i) Wolcott, Kansas, (ii) Ennis, Texas, (iii) Chandler, Arizona, (iv) Mt. Pleasant, Texas, (v) Pleasanton, Texas, (vi) Birmingport, Alabama, (vii) Memphis, Tennessee, (viii) Nashville, Tennessee and (ix) Yellow Creek, Mississippi and include approximately 2.0 million barrels of storage capacity. Upon closing of the transactions contemplated by the Contribution Agreement, the Partnership will own a network of 54 asphalt terminals in 26 states with a combined capacity of 10.2 million barrels of asphalt and residual fuel oil storage.

Preferred Unit Purchase Agreement

Pursuant to a Preferred Unit Purchase Agreement dated July 19, 2016 among the Partnership, CBB and BEHI, the Partnership has agreed to purchase 6,667,695 Series A preferred units from each of Vitol and Charlesbank in a private placement for an aggregate purchase price of approximately $95.3 million. Vitol and Charlesbank will each retain 2,488,789 Series A preferred units upon completion of these transactions.

Ergon’s purchase of Blueknight GP Holding, L.L.C., Ergon’s contribution of the asphalt terminals and cash to the Partnership and the Partnership’s repurchase of Series A preferred units from Vitol and Charlesbank (collectively, the “Transactions”) are each conditioned upon the simultaneous closing of the other transactions, and a number of other closing conditions, including expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other regulatory approvals and the distribution to holders of Series A preferred units of an information statement on Schedule 14C. The Transactions are expected to close on or before September 30, 2016.

Credit Facility Amendment

On July 19, 2016, the Partnership entered into a Second Amendment to Amended and Restated Credit Agreement (the “Credit Agreement Amendment”), which amended the Amended and Restated Credit Agreement, dated as of June 28, 2013, with Wells Fargo Bank, National Association as administrative agent and the several lenders from time to time party thereto, as amended.

The Credit Agreement Amendment amends the Partnership’s credit agreement to, among other things:

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permit the Transactions by amending (i) the definition of Change of Control (as defined in the Credit Agreement) to permit Ergon to purchase all of the membership interests of the Partnership’s general partner and, after such purchase, require Ergon to retain at least 50% of the issued and outstanding voting equity interests of the Partnership’s general partner and (ii) the negative covenant contained in the Partnership’s credit agreement that restricts the Partnership from repurchasing the Partnership’s outstanding partnership interests, such that the Partnership may repurchase approximately 13,335,390 of the Partnership’s outstanding Series A preferred units simultaneously with the closing of the Transactions;


•	amend the maximum permitted consolidated total leverage ratio such that

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prior to the date on which the Partnership issues qualified senior notes (as defined in the Partnership’s credit agreement, but generally being unsecured indebtedness with no required principal payments prior to June 28, 2019) in an aggregate principal amount (when combined with all other qualified senior notes previously or concurrently issued) that equals or exceeds $200.0 million (the “Qualified Senior Notes Date”), the maximum permitted consolidated total leverage ratio will be 5.00 to 1.00 for the fiscal quarters ending June 30, 2016 and September 30, 2016 and 4.75 to 1.00 for each fiscal quarter ending thereafter; provided, that, the maximum permitted consolidated total leverage ratio will be 5.25 to 1.00 for certain quarters based on the occurrence of a specified acquisition (as defined in the Partnership’s credit agreement, but generally being an acquisition for which the aggregate consideration is $15.0 million or more, which will include the acquisition of the nine asphalt terminals from Ergon);


•	from and after the Qualified Senior Notes Date, the maximum permitted consolidated total leverage ratio will be 5.00 to 1.00; provided, that, the maximum permitted consolidated total leverage ratio will be 5.50 to 1.00 for certain quarters based on the occurrence of a specified acquisition;


•	require that the Partnership and its subsidiaries execute certain account control agreements;

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require that, to the extent (i) the Partnership’s consolidated total leverage ratio as of the end of the prior fiscal quarter was greater than 4.75 to 1.00 and (ii) the Partnership and its subsidiaries have cash and cash equivalents (subject to certain exceptions) exceeding $20.0 million for four consecutive business days, the Partnership prepay the Partnership’s outstanding obligations under the Partnership’s credit agreement in the amount of such excess; and


•	restrict the Partnership from borrowing funds under the Partnership’s credit agreement if, after giving effect to such borrowing and the prompt use of the proceeds thereof, the Partnership and its subsidiaries would have cash and cash equivalents (subject to certain exceptions) exceeding $20.0 million.

The Partnership was in compliance with all covenants of its credit agreement as of June 30, 2016.