exv10w1







EXHIBIT 10.1




MONITORING AGREEMENT




     This Monitoring Agreement (the “Agreement”) is entered into as of November 30, 2007,
by and among Milagro Holdings, LLC, a Delaware limited liability (the “Company,” and
together with its direct and indirect subsidiaries, the “Companies”) and Acon Funds
Management, L.L.C., a Delaware limited liability company, and its affiliates and designees
(“Acon”), Guggenheim Corporate Funding, LLC, a Delaware limited liability company, and its
affiliates and designees (“Guggenheim”) and West Coast Energy Management Partners LLC, a
Delaware limited liability company, and its affiliates and designees (“West Coast Energy”).
Acon, Guggenheim and West Coast Energy shall collectively be referred to as the “Managers”
and each and individually as a “Manager.” 



     WHEREAS, the Company will indirectly purchase a one hundred percent (100%) interest in certain
oil and gas assets of Petrohawk Energy Corporation and certain of its subsidiaries for a total
Purchase Price of approximately $825 million (the “Transaction”) pursuant to a Purchase and
Sale Agreement, dated October 15, 2007 (the “Purchase and Sale Agreement”);



     WHEREAS, affiliates of Acon, Guggenheim and West Coast Energy, as well as certain
co-investors, are making an equity investment in the Company in connection with the Transaction;
and



     WHEREAS, the Companies wish to retain the Managers to provide certain management and advisory
services to the Companies, and the Managers are willing to provide such services on the terms set
forth below.



     NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:



     1. Services. Each Manager hereby agrees that, during the term of this Agreement (the
“Term”) it will provide to the Companies, to the extent appropriate and reasonably
requested by the Companies, by and through itself and/or its successors, assigns, affiliates,
officers, employees and/or representatives and third parties (collectively hereinafter referred to
as the “Manager Designees”), as the Managers in their sole discretion may designate from
time to time, management, advisory and consulting services in relation to the affairs of the
Companies, which services shall, unless the Managers specifically agree to provide additional
services, include and be limited to:



          (a) advice in connection with the negotiation and consummation of agreements, contracts,
documents and instruments necessary to provide the Companies with financing on terms and conditions
satisfactory to the Companies;




          (b) advice in connection with acquisition, disposition and change of control transactions involving
any of the Companies or any of their respective successors;




          (c) advice in connection with the Companies’ commodity risk management strategy;





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          (d) financial, managerial and operational advice in connection with day-to-day operations,
including, without limitation, advice with respect to the development and implementation of
strategies for improving the operating, marketing and financial performance of the Companies; and




          (e) such other services (which may include financial and strategic planning and analysis,
consulting services, human resources and executive recruitment services and other services) as the
Managers and the Companies may from time to time agree in writing.




     The Managers and the Manager Designees will devote such time and efforts to the
performance of the services contemplated hereby as is reasonably necessary or appropriate;
provided, however, that no minimum number of hours is required to be devoted by the
Managers or the Manager Designees on a weekly, monthly, annual or other basis. The Companies
acknowledge that each of the services are not exclusive to the Companies and that the Managers and
the Manager Designees may render similar services to other persons and entities. The Managers and
the Companies understand that the Companies may at times engage one or more investment bankers or
financial advisers to provide services in addition to, but not in lieu of, services provided by the
Managers and the Manager Designees under this Agreement; provided that any such engagement
will be made in accordance with the terms of the Amended and Restated Limited Liability Operating
Agreement of the Company (the “LLC Agreement”). In providing services to the Companies, the
Managers and Manager Designees will act as independent contractors and it is expressly understood
and agreed that this Agreement is not intended to create, and does not create, any partnership,
agency, joint venture or similar relationship and that no party has the right or ability to
contract for or on behalf of any other party or to effect any transaction for the account of any
other party.



     2. Payment of Fees.



          (a) On the date hereof, the Companies, jointly and severally, will pay to the Managers (or
their designees) an aggregate equity commitment fee (the “Equity Commitment Fee”) equal to
eight million two hundred and fifty thousand dollars ($8,250,000). Such Equity Commitment Fee
shall be divided among the Managers in accordance with Section 2(d) below.




          (b) During the Term, the Companies, jointly and severally, will pay to the Managers (or their
designees) an aggregate annual Monitoring Fee (the “Monitoring Fee”) equal to two million
five hundred thousand dollars ($2,500,000). Such Monitoring Fee shall be payable by the Companies
in four quarterly installments in arrears on the last day of each calendar quarter (beginning with
the calendar quarter ended December 31, 2007) and divided among the Managers in accordance with
Section 2(d) below; provided, that for the calendar quarter ended December 31, 2007, only that
portion of the quarterly amount attributable from the date hereof and ending on December 31, 2007
shall be payable).




          (c) If any Manager transfers all or any portion of its Class A Membership Units of the Company
pursuant to the terms and conditions of the LLC Agreement to a transferee that is not a Manager or
Qualified Affiliate (as defined in the LLC Agreement), such transferee shall have no rights to
receive any portion of the Monitoring Fee (which Monitoring Fee shall be split as between the
non-transferring Managers in accordance with the terms of this Agreement),




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and the Company shall
have no obligation to pay any portion of such Monitoring Fee to such transferee under this
Agreement.




          (d) Each payment made pursuant to this Section 2 shall be paid by wire transfer of immediately
available federal funds to the account specified by each Manager entitled to such payment, or to
such respective other account(s) as the respective Managers may specify to the Companies in writing
prior to such payment. The payment of the Equity Commitment Fee and each payment of Monitoring
Fees, made pursuant to this Section 2 shall be allocated (provided that in no event shall such
allocation affect the aggregate Equity Commitment Fee and Monitoring Fees payable hereunder, which
shall be the amounts set forth in Sections 2(a) and 2(b) above) among each Manager (or its
designee) in accordance with the percentages determined by dividing (i) the number of Class A
Membership Units of the Company owned by such Manager and any of such Manager’s respective
affiliates by (ii) the number of Class A Membership Units of the Company owned by all of the
Managers and their respective affiliates (which percentages shall initially be those specified on
Schedule 1 hereto, and which schedule shall be updated from time to time as directed by the
Managers). In the event that any of the Managers, or their affiliates, ceases to be entitled to
appoint a representative to the board of directors of the Company pursuant to Section 5.01 of the
LLC Agreement, (A) such Manager shall be deemed to own zero Class A Membership Units for the
purposes of clauses (i) and (ii) of this Section 2(c) and (B) the rights and obligations of such
Manager, and the rights and obligations of the Company with respect to such Manager, under this
Agreement shall terminate (provided that in no event shall such termination affect the aggregate
Equity Commitment Fee and Monitoring Fees payable hereunder, which shall be the amounts set forth
in Sections 2(a) and 2(b) above).




     3. [Withheld].



     4. Term. This Agreement will continue in full force and effect until terminated with
the consent of each of the Managers (or Qualified Affiliates) holding Class A Membership Units at
the time of such termination; provided, that the termination of this Agreement will not
relieve a party from liability for any breach of this Agreement on or prior to such termination.
In the event of a termination of this Agreement, the Companies will pay the Managers (or their
respective designees) any unpaid portion of the Equity Commitment Fee (pursuant to Section
2(a) above) and any Monitoring Fees (pursuant to Section 2(b) above) due with respect to periods
prior to the date of termination. This Section 4, Section 5 and Section 9 will survive termination
of this Agreement.



     5. Indemnification. The Companies, jointly and severally, will indemnify, exonerate
and hold the Managers, the Manager Designees and each of their respective partners, shareholders,
members, affiliates, directors, officers, fiduciaries, managers, controlling persons, employees and
agents and each of the partners, shareholders, members, affiliates, directors, officers,
fiduciaries, managers, controlling persons, employees and agents of each of the foregoing
(collectively, the “Indemnitees”) free and harmless from and against any and all claims,
liabilities, losses, damages and costs and out-of-pocket expenses in connection therewith
(including attorneys’ fees and expenses) incurred by the Indemnitees or any of them after the date
of this Agreement (collectively, the “Indemnified Liabilities”), arising out of any action,



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cause of action, suit, arbitration, investigation or claim arising out of, or in any way relating
to this Agreement, the transactions contemplated hereby or the services provided by the Managers or
the Manager Designees hereunder; provided that the foregoing indemnification rights
will not be available to the extent that any such Indemnified Liabilities arose on account of such
Indemnitee’s gross negligence or willful misconduct; and provided, further, that if
and to the extent that the foregoing undertaking may be unavailable or unenforceable for any
reason, the Companies hereby agree to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable law. The rights of
any Indemnitee to indemnification hereunder will be in addition to any other rights any such person
may have under any other agreement or instrument referenced above or any other agreement or
instrument to which such Indemnitee is or becomes a party or is or otherwise becomes a beneficiary
or under applicable law or regulation.




     6. Disclaimer and Limitation of Liability; Opportunities.



          (a) Disclaimer; Standard of Care. Neither of the Managers nor any Manager Designee makes
any representations or warranties, express or implied, in respect of the services to be provided by
the Managers or the Manager Designees hereunder. In no event will the Managers, the Manager
Designees or Indemnitees be liable to the Companies or any of their respective affiliates for any
act, alleged act, omission or alleged omission that does not constitute gross negligence or willful
misconduct of the Managers or the Manager Designees as determined by a final, non-appealable
determination of a court of competent jurisdiction.




          (b) Freedom to Pursue Opportunities. In recognition that the Managers, the Manager
Designees and their respective Indemnitees currently have, and will in the future have or will
consider acquiring, investments in numerous companies with respect to which the Managers, the
Manager Designees or their respective Indemnitees may serve as an advisor, a director or in some
other capacity, and in recognition that each Manager, each Manager Designee and their respective
Indemnitees have myriad duties to various investors and partners, and in anticipation that the
Companies, on the one hand, and each Manager and Manager Designee (or one or more of their
respective affiliates, associated investment funds or portfolio companies), on the other hand, may
engage in the same or similar activities or lines of business and have an interest in the
same areas of corporate opportunities, and in recognition of the benefits to be derived by the
Companies hereunder and in recognition of the difficulties which may confront any advisor who
desires and endeavors fully to satisfy such advisor’s duties in determining the full scope of such
duties in any particular situation, the provisions of this Section 6(b) are set forth to regulate,
define and guide the conduct of certain affairs of the Companies as they may involve the Managers
or the Manager Designees. Except as the Managers or the Manager Designees may otherwise agree in
writing after the date hereof:





          (i) The Managers, the Manager Designees and their respective Indemnitees will
have the right: (A) to directly or indirectly engage in any business (including,
without limitation, any business activities or lines of business that are the same
as or similar to those pursued by, or competitive with, the Companies and their
subsidiaries), (B) to directly or indirectly do business with any client or customer
of the Companies and their subsidiaries, (C) to take any



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other action that a Manager
or a Manager Designee believes in good faith is necessary to or appropriate to
fulfill its obligations as described in the first sentence of this Section 6(b), and
(D) not to present potential transactions, matters or business opportunities to the
Companies or any of their subsidiaries, and to pursue, directly or indirectly, any
such opportunity for itself, and to direct any such opportunity to another Person.




          (ii) The Managers, the Manager Designees and their respective Indemnitees will
have no duty (contractual or otherwise) to communicate or present any corporate
opportunities to the Companies or any of their affiliates or to refrain from any
actions specified in Section 6(b)(i), and the Companies, on their own behalf and on
behalf of their affiliates, hereby renounce and waive any right to require the
Managers, the Manager Designees or any of their respective Indemnitees to act in a
manner inconsistent with the provisions of this Section 6(b).




          (iii) None of the Managers, the Manager Designees nor any of their respective
Indemnitees will be liable to the Companies or any of their affiliates for breach of
any duty (contractual or otherwise) by reason of any activities or omissions of the
types referred to in this Section 6(b) or of any such Person’s participation
therein.



          (c) Limitation of Liability. In no event will a Manager, a Manager Designee or any of
their respective Indemnitees be liable to the Companies or any of their affiliates for any
indirect, special, incidental or consequential damages, including, without limitation, lost profits
or savings, whether or not such damages are foreseeable, or for any third party claims (whether
based in contract, tort or otherwise), relating to the services to be provided by a Manager or a
Manager Designee hereunder.




     7. Assignment. Except as provided below, none of the parties hereto will have
the right to assign this Agreement without the prior written consent of each of the other parties.
Notwithstanding the foregoing, each Manager may assign all or part of its rights and
obligations hereunder to any of its respective affiliates that provides or will provide services
similar to those called for by this Agreement. In the event any Manager assigns all of its rights
and obligations hereunder, such Manager will no longer be entitled to any portion of the Equity
Commitment Fee or Monitoring Fees under Section 2 and will be released of all of its obligations
hereunder and such assignee shall be entitled to such fees under Section 2 and shall assume all of
the obligations of the assigning Manager. The provisions of this Section 7 are for the benefit of
Indemnitees of the Managers will inure to the benefit of such Indemnitees and their successors and
assigns.



     8. Amendments and Waivers. No amendment or waiver of any term, provision or condition
of this Agreement will be effective, unless in writing and executed by the Managers and the
Companies; provided, that any Manager may waive any portion of any fee to which it is
entitled pursuant to this Agreement, and, unless otherwise directed by the Manager, such waived
portion will revert to the Companies. No waiver on any one occasion will extend to or effect or be
construed as a waiver of any right or remedy on any future occasion. No course of dealing of



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any
person nor any delay or omission in exercising any right or remedy will constitute an amendment of
this Agreement or a waiver of any right or remedy of any party hereto.




     9. Governing Law; Jurisdiction. THE PARTIES HEREBY AGREE THAT THIS AGREEMENT, AND THE
RESPECTIVE RIGHTS, DUTIES AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL ALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO PRINCIPLES
OF CONFLICTS OF LAWS THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE
PARTIES HEREBY (i) IRREVOCABLY CONSENT AND AGREES THAT ANY LEGAL OR EQUITABLE ACTION OR PROCEEDINGS
ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT EXCLUSIVELY IN THE COURTS OF
THE UNITED STATES OF AMERICA FOR THE SOURTHERN DISTRICT OF NEW YORK; AND (ii) BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, IRREVOCABLY SUBMITS TO AND ACCEPTS, WITH RESPECT TO ANY SUCH ACTION OR
PROCEEDINGS, FOR ITSELF AND IN RESPECT OF ITS PROPERTIES AND ASSETS, FOR PURPOSES OF THIS
AGREEMENT, THE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE
IN SUCH COURTS.



     10. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY.



     11. Entire Agreement. This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes any prior communication or agreement with
respect thereto.



     12. Notice. Unless otherwise specified herein, all notices, consents, approvals,
reports, designations, requests, waivers, elections and other communications authorized or
required to be given pursuant to this Agreement shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by personal hand-delivery, by
facsimile transmission, by electronic mail, by mailing the same in a sealed envelope, registered
first-class mail, postage prepaid, return receipt requested, or by Federal Express, DHL or UPS or
other comparably reputable air courier guaranteeing overnight delivery, sent to the Member at the
following addresses (or such other address as such Member may specify by notice to the Company):



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if to the Company, to:



Milagro Holdings, LLC

1401 McKinney, Suite 925

Houston, Texas 77010

Attention: Richard W. Piacenti

Fax: 713-307-7071



and a copy (which shall not constitute notice) to:



Porter & Hedges, L.L.P.

1000 Main Street, Suite 3600

Houston, Texas 77002

Attention: Robert G. Reedy

Fax: 713-226-6274



if to Acon, to:



Acon Funds Management, L.L.C.

1133 Connecticut Avenue, NW

Suite 700

Washington, DC 20036

Attention: Jonathan Ginns

Fax: 202-473-3578



and a copy (which shall not constitute notice) to:



Cleary Gottlieb Steen & Hamilton LLP

One Liberty Plaza

New York, NY 10006

Attention: Richard J. Cooper, Esq.

Fax: 212-225-3999




if to Guggenheim, to



Guggenheim Corporate Funding LLC

135 East 57th Street, 7th Floor

New York, New York 10022





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Attn: Todd Boehly

Fax: (212) 644-8396



and a copy (which shall not constitute notice) to:



Guggenheim Partners, LLC

Fulbright Tower

1301 McKinney, Suite 3105

Houston, Texas 77010

Attn: Mr. Tim Murray

Fax: 713-300-1339



and



Haynes and Boone, LLP

1221 McKinney St., Suite 2100

Houston, Texas 77010

Attn: Buddy Clark, Esq.

Fax: 713.236.5577



if to West Coast Energy, to



West Coast Energy Partners, LLC

1250 Fourth Street

Santa Monica, California 90401

Attention: Adam Cohn



and a copy (which shall not constitute notice) to:



David S. Kyman

Maron & Sandler

1250 Fourth Street, Suite 550

Santa Monica, California 90401

Fax: 310.570.4901




     Unless otherwise specified herein, such notices or other communications will be deemed
effective, (a) on the date received, if personally delivered or sent by facsimile or electronic
mail during normal business hours, (b) on the business day after being received if sent by
facsimile or electronic mail other than during normal business hours, (c) one business day after
being sent by Federal Express, DHL or UPS or other comparably reputable air courier guaranteeing
overnight delivery and (d) five business days after being sent by registered or certified mail.
Each of the parties hereto will be entitled to specify a different address by giving notice as
aforesaid to each of the other parties hereto.



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     13. Severability. If in any proceedings a court will refuse to enforce any provision
of this Agreement, then such unenforceable provision will be deemed eliminated from this Agreement
for the purpose of such proceedings to the extent necessary to permit the remaining provisions to
be enforced. To the full extent, however, that the provisions of any applicable law may be waived,
they are hereby waived to the end that this Agreement be deemed to be valid and binding agreement
enforceable in accordance with its terms, and in the event that any provision hereof will be found
to be invalid or unenforceable, such provision will be construed by limiting it so as to be valid
and enforceable to the maximum extent consistent with and possible under applicable law.



     14. Counterparts. This Agreement may be executed in any number of counterparts and by
each of the parties hereto in separate counterparts, each of which when so executed will be deemed
to be an original and all of which together will constitute one and the same agreement.



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     IN WITNESS WHEREOF, each of the parties has duly executed this Agreement as of the date first above
written.



[Executed Signature Pages to Follow]






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	 	MILAGRO HOLDINGS, LLC

 	 
	 	By:  	/s/ Richard W. Piacenti
 	 
	 	 	Name:  	Richard W. Piacenti 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	ACON FUNDS MANAGEMENT, LLC

 	 
	 	By:  	/s/ Jonathan Ginns
 	 
	 	 	Name:  	Jonathan Ginns 	 
	 	 	Title:  	 	 
	 
	 	GUGGENHEIM CORPORATE FUNDING, LLC

 	 
	 	By:  	/s/ Todd Boehly
 	 
	 	 	Name:  	Todd Boehly 	 
	 	 	Title:  	Managing Partner 	 
	 
	 	WEST COAST ENERGY MANAGEMENT PARTNERS LLC

 	 
	 	By:  	/s/ Adam Cohn
 	 
	 	 	Name:  	Adam Cohn 	 
	 	 	Title:  	Managing Director 	 
	 




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Schedule 1




CLASS A MEMBERSHIP UNITS OWNED BY THE MANAGERS




	 	 	 	 	 	 	 
	 	 	Membership Units	 	Proportional
	Manager	 	Issued	 	Ownership1
	Acon Milagro
	 	 	 	 	 	 
	Investors, LLC

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Guggenheim Corporate 

Funding, LLC
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	West Coast Energy 

Management Partners, 

LLC
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Total

	 	 	 	 	100	%








 




			
	1	 	For the purpose of calculating the pro rata
share of the Fees in Section 2 hereof only.






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