Exhibit 10.4

 

LIMITED LIABILITY COMPANY AGREEMENT

OF

ANTERO RESOURCES MIDSTREAM LLC

 

a Delaware limited liability company

 

This LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) of ANTERO RESOURCES
MIDSTREAM LLC, dated as of October 1, 2013, is adopted, executed and agreed to
by the Members (as defined below).

 

1.              Formation.  Antero Resources Midstream LLC (the “Company”) has
been formed as a Delaware limited liability company under and pursuant to the
Delaware Limited Liability Company Act (the “Act”). Alvyn A. Schopp, as an
authorized person within the meaning of the Act, has executed, delivered and
filed the certificate of formation of the Company, and such execution, delivery
and filing is hereby authorized, confirmed, adopted and ratified.

 

2.                                      Term.  The Company shall have perpetual
existence, until cancellation of the certificate of formation of the Company as
provided in the Act.

 

3.                                      Purposes.  The purposes of the Company
are to carry on any lawful business, purpose or activity for which limited
liability companies may be formed under the Act.

 

4.                                      Interests.  The Company shall have two
classes of members and associated interests in the Company, with such interests
being referred to as “Common Economic Interests” and “Special Interests”. The
Common Economic Interests shall represent the right to a 100% share of the
Company’s distributions and shall have such other designations, preferences and
rights as are expressly specified in this Agreement. The Special Interests shall
represent the right to cause the Company to take the actions specified in
Section 16 hereof and shall have such other designations, preferences and other
rights as are expressly specified in this Agreement (but shall not, for the
avoidance of doubt, entitle any holder thereof to share in the Company’s
distributions).

 

5.                                      Members.  Antero Resources Midstream
Management LLC, a Delaware limited liability company (“Antero Midstream
Management”), and Antero Resources Corporation (“Antero” and with Antero
Midstream Management, the “Initial Members”), shall be the initial members of
the Company (the “Members”). No additional Members shall be admitted to the
Company without the written consent of Antero Midstream Management.

 

6.                                      Issuance of Initial Interests.  All of
the authorized Common Economic Interests have been issued to Antero and all of
the authorized Special Interests have been issued to Antero Midstream
Management.

 

7.                                      Allocations.  All items of income, gain,
loss deduction and credit of the Company shall be allocated among the Members
holding Common Economic Interests in proportion to their holdings of such Common
Economic Interests.

 

8.                                      Distributions.  Distributions
(including, without limitation, liquidating distributions) made by the Company
shall be allocated among the Members holding Common Economic Interests in
proportion to their holdings of such Common Economic Interests. Notwithstanding
any provision to the contrary contained in this Agreement, the Company shall not
be required to make a

 

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distribution to a Member or any holder of Common Economic Interests on account
of its interest in the Company if such distribution would violate the Act or any
other applicable law.

 

9.                                      Management.  Subject to the rights and
limitations set forth in Section 16 hereof, the management of the Company shall
be exclusively vested in Antero (or any successor Member holding Common Economic
Interests), and the Company shall not have “managers,” as that term is used in
the Act. Except as set forth in this Agreement, the powers of the Company shall
be exercised by or under the authority of, and the business and affairs of the
Company shall be managed under the direction of, Antero (or any successor Member
holding Common Economic Interests). For the avoidance of doubt, except pursuant
to Section 16, no initial public offering of equity securities of the Company or
any successor thereto may be effected without the written agreement of each of
the Members.

 

10.                               Officers.  Antero may designate one or more
persons to be officers of the Company.  Officers are not “managers,” as that
term is used in the Act. Any officers who are so designated shall have such
titles and authority and perform such duties as Antero may delegate to them.
Unless the authority of an officer is limited by Antero, any officer so
appointed shall have the same authority to act for the Company as a
corresponding officer of a Delaware corporation would have to act for a Delaware
corporation in the absence of a specific delegation of authority. Any decision
or act of an officer within the scope of the officer’s designated or delegated
authority shall control and shall bind the Company (and any business entity for
which the Company exercises direct or indirect executory authority).

 

11.                               Dissolution.  The Company shall dissolve and
its affairs shall be wound up at such time, if any, as Antero may elect, subject
to the approval of Antero Midstream Management. To the fullest extent permitted
by applicable law, no other event will cause the Company to dissolve.
Notwithstanding any other provision of this Agreement, the bankruptcy (as such
term is used in the Act) of a Member shall not cause such Member to cease to be
a member of the Company.

 

12.                               Governing Law.  THIS AGREEMENT IS GOVERNED BY
AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
(EXCLUDING ITS CONFLICT-OF-LAWS RULES).

 

13.                               Amendments.  This Agreement may not be
modified, altered, supplemented or amended except by a written agreement
executed and delivered by each of the Members.

 

14.                               Liability.  The Members and the officers of
the Company shall not have any liability for the obligations, debts or
liabilities of the Company except to the extent provided in the Act.

 

15.                               Duties, Exculpation and Indemnity.

 

(a)                                 Notwithstanding any other provisions of this
Agreement, whether express or implied, or any obligation or duty at law or in
equity, to the fullest extent permitted by applicable law, the Members shall
have no fiduciary or other duties (including any duty of disclosure) to the
Company, the other Members or any other person or entity that is a party to or
bound by this Agreement. To the fullest extent permitted by applicable law,
neither any Member, nor their partners, members or equityholders nor any of
their respective directors, managers, officers or employees (individually, a
“Member Covered Person” and, collectively, the “Member Covered Persons”) shall,
in their capacities as Member Covered Persons, be liable or accountable in

 

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damages or otherwise to the Company or any other person or entity that is a
party to or bound by this Agreement for any act or omission done or omitted by
any Member Covered Person unless such act or omission constituted fraud or
willful misconduct. To the fullest extent permitted by applicable law, the
Company shall indemnify and hold harmless each Member Covered Person against any
loss, liability, damage, judgment, demand, claim, cost or expense incurred by or
asserted against such Member Covered Person (including, without limitation,
reasonable attorneys’ fees and disbursements incurred in the defense thereof)
arising out of any act or omission of any Member Covered Person in its capacity
as a Member Covered Person in connection with the Company, unless there has been
a final and non-appealable judgment entered by a court of competent jurisdiction
determining that, in respect of such act or omission, and taking into account
the acknowledgements and agreements set forth in this Agreement, such Member
Covered Person engaged in fraud or willful misconduct. Notwithstanding the
preceding sentence, the Company shall be required to indemnify a Member Covered
Person in connection with a proceeding (or part thereof) commenced by such
Member Covered Person only if the commencement of such proceeding (or part
thereof) by the Member Covered Person was authorized in the specific case by the
Members of the Company. Reasonable expenses, including reasonable attorneys’
fees and disbursements, incurred by any Member Covered Person and relating to
any proceeding in connection with which indemnification is sought under this
Section 15 shall be advanced by the Company upon written demand by such Member
Covered Person; provided that such Member Covered Person shall reimburse the
Company for such expenses if it is finally determined that such Member Covered
Person is not entitled to indemnification hereunder.

 

(b)                                 To the fullest extent permitted by
applicable law, the Company shall indemnify and hold harmless (i) each officer
of the Company and (ii) each person who is or was an employee of the Company or
a director, officer or employee of any subsidiary of the Company who Antero
expressly designates as being entitled to the rights to indemnification set
forth in this Section 15(b) in a written resolution (individually, an “O&E
Covered Person” and, collectively, the “O&E Covered Persons”) against any loss,
liability, damage, judgment, demand, claim, cost or expense incurred by or
asserted against the O&E Covered Person (including, without limitation,
reasonable attorneys’ fees and disbursements incurred in the defense thereof)
arising out of any act or omission of the O&E Covered Person in its capacity as
an O&E Covered Person in connection with the Company to the same extent as if
the Company were a corporation organized under the laws of the State of Delaware
that indemnified and held harmless its directors, officers, employees and agents
to the fullest extent permitted under Section 145 of the General Corporation Law
of the State of Delaware as in effect on date of this Agreement (but including
any expansion of rights to indemnification thereunder from and after the date of
this Agreement), unless there has been a final and non-appealable judgment
entered by a court of competent jurisdiction determining that, in respect of
such act or omission, and taking into account the acknowledgements and
agreements set forth in this Agreement, such O&E Covered Person would not be so
entitled to be indemnified and held harmless if the Company were a corporation
organized under the laws of the State of Delaware that indemnified and held
harmless its directors, officers, employees and agents to the fullest extent
permitted under Section 145 of the General Corporation Law of the State of
Delaware as in effect on date of this Agreement (but including any expansion of
rights to indemnification thereunder from and after the date of this Agreement).
Notwithstanding the preceding sentence, the Company shall be required to
indemnify an O&E Covered Person in connection with a proceeding (or part
thereof) commenced by such O&E Covered Person only if the commencement of such
proceeding (or part thereof) by the O&E Covered Person was authorized in the
specific case by the Members of the Company. Reasonable expenses, including
reasonable attorneys’ fees and disbursements,

 

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incurred by a O&E Covered Person and relating to any proceeding in connection
with which indemnification is sought under this Section 15 shall be advanced by
the Company upon written demand by such O&E Covered Person; provided that such
O&E Covered Person shall reimburse the Company for such expenses if it is
finally determined that such O&E Covered Person is not entitled to
indemnification hereunder.

 

16.                               Special Interests.  The holders of the Special
Interests may, in their sole discretion and acting unanimously, but without the
consent of any other Member or other person or entity, deliver a written notice
to the Company and each other Member of their intent to initiate a Qualified
Public Offering pursuant to this Section 16 and may, without the consent of any
other Member or other person or entity, thereafter cause the Company to convert
into, or exchange all of the Company’s outstanding limited liability company
interests for, interests in a limited partnership organized pursuant to the laws
of the State of Delaware (the “MLP Issuer”), and to initiate and approve an
underwritten initial public offering of the MLP Issuer in the form of a master
limited partnership or similar structure (a “Qualified Public Offering”). In
connection with a Qualified Public Offering, (i) the Special Interests will
convert in accordance with this Section 16 solely into a non-economic general
partner interest in the MLP Issuer and all of the incentive distribution rights
(the “IDRs”) in the MLP Issuer and (ii) the Common Economic Interests will be
exchanged for or convert solely into all of the common units of the MLP Issuer
(including any subordinated common units) and other limited partner interests
(if any) of the MLP Issuer that are not sold to the public in the Qualified
Public Offering (collectively, the “IPO Conversion”). Notwithstanding anything
to the contrary in this Agreement, at any time after delivering such written
notice, the holders of the Special Interests shall be solely entitled and
authorized to approve all transactions necessary to effect the IPO Conversion
and the Qualified Public Offering, including: (i) determining the terms of the
initial and the amended and restated organizational documents of the MLP Issuer;
(ii) the formation of any entities required or necessary in connection with the
IPO Conversion or the Qualified Public Offering; and (iii) causing to be
transferred any assets between or among the Company, Antero, the MLP Issuer and
any of the Company’s subsidiaries. If the holders of the Special Interests elect
to exercise the right to initiate a Qualified Public Offering under this
Section 16, each of the Members shall (i) take such actions as may be reasonably
requested in connection with consummating the IPO Conversion and (ii) use
commercially reasonable efforts to cooperate with the other Initial Member so
that the IPO Conversion is undertaken in as tax-efficient a manner as reasonably
practicable. Any Qualified Public Offering (and the terms of the interests in
the MLP Issuer) shall be substantially consistent with the terms set forth on
Annex A hereto. Each Member hereby irrevocably makes, constitutes and appoints
Antero Midstream Management as its true and lawful agent and attorney-in-fact,
with full power of substitution to its affiliates and full power and authority
in its name, place and stead, to make, execute, sign, acknowledge, swear to,
record and file all instruments required or necessary to effect an IPO
Conversion or Qualified Public Offering, including any instruments related to
any subscription by the Member in any MLP Issuer, and all other instruments
required or necessary to facilitate a Qualified Public Offering in accordance
with this Section 16.

 

Prior to a Qualified Public Offering, the Company may not sell, transfer or
otherwise dispose of any of Antero’s or the Company’s midstream assets without
the written consent of Antero Midstream Management. The Company shall not amend
or modify any agreement between the Company on the one hand, and Antero on the
other, without the written consent of Antero Midstream Management.

 

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Unless a clear contrary intention appears, all references in this Section 16 and
in Annex A to Antero Midstream Management shall be deemed to be references to
the holder or holders of the Special Interests in the event of any permitted
transfer of such interests prior to a Qualified Public Offering.

 

17.                               Transfers of Limited Liability Company
Interests.  Prior to the consummation of a Qualified Public Offering, other than
as may be required in connection with an IPO Conversion, no Member may directly
or indirectly transfer or otherwise dispose of all or any portion of such
Member’s interests in the Company without the prior unanimous consent of each of
the other Members; provided that Antero Midstream Management (or any of its
permitted transferees of its interests in the Company) may, without the consent
of any other person or entity, transfer all or a portion of its Special
Interests to any person or entity that directly or indirectly Controls, is
Controlled by or is under common Control with, Antero Midstream Management (or
such permitted transferee). For purposes of this Agreement “Control” (and
correlative forms thereof) means possession, directly or indirectly (through one
or more intermediaries), of the power to direct or cause the direction of
management or policies (whether through ownership of securities or any
partnership or other ownership interest, by contract or otherwise) of a person
or entity.  Any permitted transferee of liability company interests in the
Company shall be automatically admitted to the Company as a Member (holding the
applicable class of interests transferred) upon the delivery to the Company of a
joinder agreement pursuant to which such person or entity ratifies this
Agreement, agrees to be bound by this Agreement to the same extent as if the
transferee were an original party to this Agreement and shall assume all
obligations of a Member (holding the applicable class of interests transferred)
under this Agreement. If a Member transfers all of its interests in the Company
in accordance with this Section 17, such Member shall cease to be a member of
the Company immediately after the admission of the permitted transferee as a
Member of the Company.

 

18.                               Reimbursement for Services.  Prior to the
consummation of a Qualified Public Offering, Antero shall provide to the Company
customary management and general administrative services. The Company, or a
Member on the Company’s behalf, shall reimburse Antero at cost for the direct
expenses incurred on the Company’s behalf and a proportionate amount for the
indirect expenses incurred on the Company’s behalf, including, but not limited
to, compensation expenses. After any Qualified Public Offering, such services
will be provided for, and reimbursed in accordance with, the terms set forth on
Annex A hereto.

 

19.                               Severability; Counterparts.  Each provision of
this Agreement shall be considered severable and if for any reason any provision
or provisions herein are determined to be invalid, unenforceable or illegal
under any existing or future law, such invalidity, unenforceability or
illegality shall not impair the operation of or affect those portions of this
Agreement which are valid, enforceable and legal. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original of this
Agreement and all of which together shall constitute one and the same
instrument.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the undersigned, being the Initial Members of the Company,
have caused this Limited Liability Company Agreement to be duly executed as of
the date first set forth above.

 

 

ANTERO RESOURCES CORPORATION

 

 

 

 

 

 

 

 

By:

/s/ Alvyn A. Schopp

 

 

Name:

Alvyn A. Schopp

 

 

Title:

Authorized Person

 

 

 

 

ANTERO RESOURCES MIDSTREAM

 

MANAGEMENT LLC

 

 

 

 

 

 

 

 

By:

/s/ Alvyn A. Schopp

 

 

Name:

Alvyn A. Schopp

 

 

Title:

Authorized Person

 

SIGNATURE PAGE TO
LIMITED LIABILITY COMPANY AGREEMENT OF ANTERO RESOURCES MIDSTREAM LLC

 

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ANNEX A: SUMMARY OF PRINCIPAL TERMS OF QUALIFIED PUBLIC OFFERING

 

Master Limited Partnership:

 

Antero Resources Midstream LLC, a Delaware limited liability company, will
convert into a Delaware limited partnership (the “Partnership”).

 

 

 

Capital Structure:

 

Common units, subordinated units, non-economic general partner interest and
incentive distribution rights (“IDRs”).

 

 

 

Common Units:

 

50% of the outstanding limited partner interests (other than the incentive
distribution rights) in the Partnership. All of the common units will be held by
Antero Resources Corporation (“Antero”) prior to the consummation of the
Qualified Public Offering. Common units will accrue arrearages in quarters in
which the minimum quarterly distribution (the “MQD”) is not paid.

 

 

 

Subordinated Units:

 

50% of the outstanding limited partner interests (other than the incentive
distribution rights) in the Partnership. Subordinated units will initially all
be held by Antero. During the subordination period, subordinated units will not
be entitled to receive distributions until the common units have received the
MQD plus any arrearages in the payment of the MQD from prior quarters.
Subordinated units will not accrue arrearages.

 

 

 

Subordination Period:

 

Three years from the closing date of the initial public offering of the
Partnership, with the possibility of ending earlier if customary earn and pay
tests are met.

 

 

 

General Partner:

 

Antero Resources Midstream Management LLC (“Antero Midstream Management”).

 

 

 

General Partner Interest:

 

Antero Midstream Management will hold a non-economic general partner interest in
the Partnership. The non-economic general partner interest will allow Antero
Midstream Management to manage the Partnership’s business and affairs, but will
not be entitle it to receive any cash distributions.

 

 

 

Pricing Terms:

 

Antero Midstream Management will have the sole ability to establish the terms on
which the Partnership securities may be offered in an initial public offering,
including but not limited to, (i) the aggregate number of shares of Common
Units, Subordinated Units and IDRs to be offered, (ii) the price at which the
Common Units will be sold by the Partnership and (iii) the underwriting
discounts and

 

ANNEX A-1

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commissions to be paid to any underwriter of the initial public offering.

 

 

 

Incentive Distribution Rights:

 

Right to receive an increasing percentage of quarterly distributions of
available cash in excess of the MQD when certain target distribution levels have
been achieved. These target distribution levels will be set at 115%, 125% and
150% of the MQD. All incentive distribution rights will be held by Antero
Midstream Management. The IDRs will have customary splits for distributions as
follows:

 

 

 

 

 

 

 

Marginal Percentage
Interest
in Distributions

 

 

 

 

 

Unitholders

 

Incentive
Distribution
Rights

 

 

 

Minimum Quarterly Distribution

 

 

 

 

 

 

 

115% of Minimum Quarterly Distribution

 

100.0

%

15.0

%

 

 

125% of Minimum Quarterly Distribution

 

85.0

%

25.0

%

 

 

150% of Minimum Quarterly Distribution

 

75.0

%

50.0

%

 

 

 

Distributions:

 

Subject to applicable law, the Partnership will distribute all available cash
generated each quarter, with “available cash” defined as cash flow from
operations for the quarter, less cash needed for maintenance capital
expenditures, debt service and other capital obligations, and reserves for
future operating or capital needs that the board of directors of the General
Partner of the Partnership deems appropriate.

 

 

 

Minimum Quarterly Distribution:

 

The MQD will be based on a customary coverage based on the forecast included in
the final prospectus for the Qualified Public Offering, to be determined in the
discretion of Antero Midstream Management.

 

 

 

Provision of Services:

 

Antero shall provide customary management and general administrative services to
the Partnership. The General Partner shall reimburse Antero at cost for its
direct expenses incurred on behalf of the Partnership and a proportionate amount
of its indirect expenses incurred on behalf of the Partnership, including, but
not limited to, compensation expenses.

 

ANNEX A-2

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