Document:

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                                                                 EXHIBIT (10)(c)
            SERVICE REQUEST

                   PLATINUM
---------------------------
                   INVESTOR
---------------------------
     THE UNITED STATES LIFE

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PLATINUM INVESTOR--FIXED DIVISION                               Neuberger Berman Advisers Management Trust
                                                                ------------------------------------------
 . Division 148 - USL Declared Fixed Interest Account
                                                                . Division 184 - Mid-Cap Growth
PLATINUM INVESTOR--VARIABLE DIVISIONS
                                                                North American Funds Variable Product Series I
AIM Variable Insurance Funds                                    ----------------------------------------------
----------------------------
                                                                . Division 152 - International Equities
 . Division 150 - AIM V.I. International Equity
                                                                . Division 153 - MidCap Index
 . Division 151 - AIM V.I. Value
                                                                . Division 149 - Money Market
American Century Variable Portfolios. Inc.
------------------------------------------                      . Division 167 - Nasdaq-100 Index

 . Division 166 - VP Value                                       . Division 168 - Science & Technology

Ayco Series Trust                                               . Division 169 - Small Cap Index
-----------------
                                                                . Division 154 - Stock Index
 . Division 250 - Ayco Large Cap Growth Fund I
                                                                PIMCO Variable Insurance Trust
Dreyfus Investment Portfolios                                   ------------------------------
-----------------------------
                                                                . Division 186 - PIMCO Real Return Bond
 . Division 251 - MidCap Stock
                                                                . Division 185 - PIMCO Short-Term Bond
Dreyfus Variable Investment Fund
--------------------------------                                . Division 187 - PIMCO Total Return Bond

 . Division 156 - Quality Bond                                   Putnam Variable Trust
                                                                ---------------------
 . Division 155 - Small Cap
                                                                . Division 161 - Putnam VT Diversified Income
Fidelity Variable Insurance Products Fund
-----------------------------------------                       . Division 162 - Putnam VT Growth and Income

 . Division 255 - VIP Asset Manager                              . Division 163 - Putnam VT Int'l Growth and Income

 . Division 254 - VIP Contrafund                                 SAFECO Resource Series Trust
                                                                ----------------------------
 . Division 252 - VIP Equity-Income
                                                                . Division 164 - Equity
 . Division 253 - VIP Growth
                                                                . Division 165 - Growth Opportunities
Janus Aspen Series - Service Shares
-----------------------------------                             The Universal Institutional Funds, Inc.
                                                                ---------------------------------------
 . Division 258 - Aggressive Growth
                                                                . Division 159 - Equity Growth
 . Division 256 - International Growth
                                                                . Division 160 - High Yield
 . Division 257 - Worldwide Growth
                                                                Vanguard Variable Insurance Fund
J.P. Morgan Series Trust II                                     --------------------------------
---------------------------
                                                                . Division 188 - High Yield Bond
 . Division 179 - J.P. Morgan Small Company
                                                                . Division 189 - REIT Index
MFS Variable Insurance Trust
----------------------------                                    Van Kampen Life Investment Trust
                                                                --------------------------------
 . Division 181 - MFS Capital Opportunities
                                                                . Division 158 - Strategic Stock
 . Division 157 - MFS Emerging Growth
                                                                Warburg Pincus Trust
 . Division 182 - MFS New Discovery                              --------------------

 . Division 180 - MFS Research                                   . Division 190 - Small Company Growth

USL 8993 REV 0900
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 Complete and return this request to:             THE UNITED STATES LIFE Insurance Company
        Administrative Center                          In The City of New York ("USL")
 PO Box 4880 Houston, TX 77210-4880                 Administrative Center: Houston, TX
          (800) 251-3720
Hearing Impaired (TDD): (888) 436-5258
    Toll-Free Fax: (877) 445-3098            VARIABLE UNIVERSAL LIFE INSURANCE SERVICE REQUEST
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  [_]  POLICY                  1. | POLICY #:____________________________________________ INSURED:__________________________________
       IDENTIFICATION             | ADDRESS:________________________________________________________________ New Address (yes) (no)
                                  | Primary Owner (if other than insured):__________________________________
    COMPLETE THIS SECTION FOR     | Address:________________________________________________________________ New Address (yes) (no)
          ALL REQUESTS.           | Primary Owner's S.S. No.or Tax I.D. No.______________ Phone Number:(   )_____-_________________
                                  | Joint Owner (if applicable):___________________________________________________________________
                                  | Address:________________________________________________________________ New Address (yes) (no)
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  [_]  NAME                    2. | Change Name Of: (Circle One)     Insured    Owner   Payor   Beneficiary
       CHANGE                     |
                                  | Change Name From: (First, Middle, Last)               Change Name To: (First, Middle, Last)
Complete this section if the name | __________________________________________________    __________________________________________
 of the Insured, Owner, Payor or  |
Beneficiary has changed. (Please  | Reason for Change: (Circle One)   Marriage     Divorce     Correction     Other
 note, this does not change the   |                    (Attach copy of legal proof)
    Insured, Owner, Payor or      |
    Beneficiary designation)      |
------------------------------------------------------------------------------------------------------------------------------------
  [_]  CHANGE IN               3. | INVESTMENT DIVISION               PREM %  DED %  INVESTMENT DIVISION              PREM %  DED %
       ALLOCATION                 | (148) USL Declared Fixed                         Neuberger Berman Advisers
       PERCENTAGES                |       Interest Account            ______ ______  Management Trust
                                  |                                                  (184) Mid-Cap Growth             ______  ______
  Use this section to indicate    | AIM Variable Insurance Funds
     how premiums or monthly      | (150) AIM V.I.International Equity______ ______  North American Funds Variable
 deductions are to be allocated.  | (151) AIM V.I. Value              ______ ______  Product Series I
 Total allocation in each column  |                                                  (152) International Equities     ______  ______
     must equal 100%; whole       | American Century Variable                        (153) MidCap Index               ______  ______
         numbers only.            | Portfolios, Inc.                                 (149) Money Market               ______  ______
                                  | (166) VP Value                    ______ ______  (167) Nasdaq-100 Index           ______  ______
                                  |                                                  (168) Science & Technology       ______  ______
                                  | Ayco Series Trust                                (169) Small Cap Index            ______  ______
                                  | (250) Ayco Large Cap Growth Fund I______ ______  (154) Stock Index                ______  ______
                                  |
                                  | Dreyfus Investment Portfolios                    PIMCO Variable Insurance Trust
                                  | (251) MidCap Stock                ______ ______  (186) PIMCO Real Return Bond     ______  ______
                                  |                                                  (185) PIMCO Short-Term Bond      ______  ______
                                  | Dreyfus Variable Investment Fund                 (187) PIMCO Total Return Bond    ______  ______
                                  | (156) Quality Bond                ______ ______
                                  | (155) Small Cap                   ______ ______  PUTNAM Variable Trust
                                  |                                                  (161) Putnam VT Diversified
                                  | Fidelity Variable Insurance                            Income                     ______  ______
                                  | Products Fund                                    (162) Putnam VT Growth
                                  | (255) VIP Asset Manager           ______ ______        and Income                 ______  ______
                                  | (254) VIP Contrafund              ______ ______  (163) Putnam VT Int'l Growth
                                  | (252) VIP Equity-Income           ______ ______        and Income                 ______  ______
                                  | (253) VIP Growth                  ______ ______
                                  |                                                  SAFECO Resource Series Trust
                                  | Janus Aspen Series - Service Shares              (164) Equity                     ______  ______
                                  |                                                  (165) Growth Opportunities       ______  ______
                                  | (258) Aggressive Growth           ______ ______
                                  | (256) International Growth        ______ ______  The Universal Institutional
                                  | (257) Worldwide Growth            ______ ______  Funds, Inc.
                                  |                                                  (159) Equity Growth              ______  ______
                                  | J.P Morgan Series Trust II                       (165) High Yield                 ______  ______
                                  | (179) J.P Morgan Small Company    ______ ______
                                  |                                                  Vanguard Variable Insurance Fund
                                  | MFS Variable Insurance Trust                     (188) High Yield Bond            ______  ______
                                  | (181) MFS Capital Opportunities   ______ ______  (189) REIT Index                 ______  ______
                                  | (157) MFS Emerging Growth         ______ ______
                                  | (182) MFS New Discovery           ______ ______  Van Kampen Life Investment Trust
                                  | (180) MFS Research                ______ ______  (158) Strategic Stock            ______  ______
                                  |
                                  |                                                  Warburg Pincus Trust
                                  |                                                  (190) Small Company Growth       ______  ______
                                  |
                                  |                                                  Other:_______________________    ______  ______
                                  |                                                                                    100%    100%
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USL 8993 REV 0900                                              PAGE 2 OF 5
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  [_]  MODE OF                 4. | Indicate frequency and premium amount desired: $______ Annual $_____ Semi-Annual $____ Quarterly
       PREMIUM                    |                                                $_____ Monthly (Bank Draft Only)
       PAYMENT/BILLING            |
       METHOD CHANGE              | Indicate billing method desired: _____Direct Bill  _____Pre-Authorized Bank Draft (attach a
                                  | Bank Draft Authorization Form and "Void"  Check)
  Use this section to change the  |
 billing frequency and/or method  |
  of premium payment.  Note,      | Start Date: ________/ _______/ _________
however, that USL will not bill   |
   you on a direct monthly basis. |
 Refer to your policy and its     |
 related prospectus for further   |
 information concerning minimum   |
  premiums and billing options.   |
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  [_]  LOST POLICY             5. | I/We hereby certify that the policy of insurance for the listed policy has been
       CERTIFICATE                |  ______LOST ______DESTROYED ______OTHER.
                                  |
Complete this section if applying | Unless I/We have directed cancellation of the policy, I/we request that a:
for a Certificate of Insurance or |
 duplicate policy to replace a    |             _______Certificate of Insurance at no charge
 lost or misplaced policy. If a   |
 full duplicate policy is being   |             _______Full duplicate policy at a charge of $25
requested, a check or money order |
 for S25 payable to USL must be   | be issued to me/us. If the original policy is located, I/we will return the Certificate
  submitted with this request.    | or duplicate policy to USL for cancellation.
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  [_]  DOLLAR COST             6. | DESIGNATE the day of the month for transfers: _______(choose a day from 1-28)
       AVERAGING                  | Frequency of transfers (check one): _____Monthly _____Quarterly _____Semi-Annually _____Annually
                                  | I want: $_______________ ($100 minimum) taken from the Money Market Division (149) and
     ($5,000 minimum initial      | transferred to the following Divisions:
accumulation value) An amount may |
be deducted periodically from the | AIM Variable Insurance Funds                    Neuberger Berman Advisers Management Trust
Money Market Division and placed  | (150) AIM V.I. International Equity  $________  (181) Mid-Cap Growth                   $________
 in one or more of the Divisions  | (151) AIM V.I. Value                 $________
 listed. The USL Declared Fixed   |                                                 North American Funds Variable Product
Interest Account is not available | American Century Variable Portfolios, Inc.      Series I
for Dollar Cost Averaging. Please | (166) VP Value                       $________  (152) International Equities           $________
refer to the prospectus for more  |                                                 (153) MidCap Index                     $________
 information on the Dollar Cost   | Ayco Series Trust                               (167) Nasdaq-100 Index                 $________
       Averaging Option.          | (250) Ayco Large Cap Growth Fund I   $________  (168) Science & Technology             $_______
                                  |                                                 (169) Small Cap Index                  $________
                                  | Dreyfus Investment Portfolios                   (154) Stock Index                      $________
                                  | (251) Midcap Stock                   $________
                                  |                                                 PIMCO Variable Insurance Trust
                                  | Dreyfus Variable Investment Fund                (186) PIMCO Real Return Bond           $________
                                  | (156) Quality Bond                   $________  (185) PIMCO Short-Term Bond            $________
                                  | (155) Small Cap                      $________  (187) PIMCO Total Return Bond          $________
                                  |
                                  | Fidelity Variable Insurance Products Fund       Putnam Variable Trust
                                  | (255) VIP Asset Manager              $________  (161) Putnam VT Diversified Income     $________
                                  | (254) VIP Contrafund                 $________  (162) Putnam VT Growth and Income      $________
                                  | (252) VIP Equity-Income              $________  (163) Putnam VT Int'l Growth and Income$________
                                  | (253) VIP Growth                     $________
                                  |                                                  SAFECO Resource Series Trust
                                  | Janus Aspen Series - Service Shares              (164) Equity                          $________
                                  | (258) Aggressive Growth              $________   (165) Growth Opportunities            $________
                                  | (256) International Growth           $________
                                  | (257) Worldwide Growth               $________   The Universal Institutional Funds, Inc.
                                  |                                                  (159) Equity Growth                   $________
                                  | J.P Morgan Series Trust II                       (160) High Yield                      $________
                                  | (179) J.P Morgan Small Company       $________
                                  |                                                  Vanguard Variable Insurance Fund
                                  | MFS Variable Insurance Trust                     (188) High Yield Bond                 $________
                                  | (181) MFS Capital Opportunities      $________   (189) REIT Index                      $________
                                  | (157) MFS Emerging Growth            $________
                                  | (182) MFS New Discovery              $________   Van Kampen Life Investment Trust
                                  | (180) MFS Research Division          $________   (158) Strategic Stock                 $________
                                  |
                                  |                                                  Warburg Pincus Trust
                                  |                                                  (190) Small Company Growth            $________
                                  |
                                  |                                                  Other:__________________________      $________
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USL 8993 REV 0900                                              PAGE 3 OF 5
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 [_]  CORRECT AGE              7. | Name of Insured for whom this correction is submitted:_________________________________________
                                  |
 Use this section to correct the  |
 age of any person covered under  | Correct DOB: _________/____________ /_____________
this policy. Proof of the correct |
date of birth must accompany this |
            request.              |
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 [_]  TRANSFER OF              8. |                                     (Division Name or Number)         (Division Name or Number)
      ACCUMULATED                 |
      VALUES                      | Transfer $_______ or %_______ from ____________________________ to _____________________________
                                  |
  Use this section if you want to | Transfer $_______ or %_______ from ____________________________ to _____________________________
   move money between divisions.  |
     Withdrawals from the USL     | Transfer $_______ or %_______ from ____________________________ to ____________________________
  Declared Fixed Interest Account |
 are limited to 60 days after the | Transfer $_______ or %_______ from ____________________________ to _____________________________
policy anniversary and to no more |
  than 25% of the total unloaned  | Transfer $_______ or %_______ from ____________________________ to _____________________________
 value of the USL Declared Fixed  |
  Interest Account on the policy  | Transfer $_______ or %_______ from ____________________________ to _____________________________
anniversary. If a transfer causes |
  the balance in any division to  | Transfer $_______ or %_______ from ____________________________ to _____________________________
drop below $500, USL reserves the |
 right to transfer the remaining  | Transfer $_______ or %_______ from ____________________________ to _____________________________
            balance.              |
Amounts to be transferred should  | Transfer $_______ or %_______ from ____________________________ to _____________________________
    be indicated in dollar or     |
  percentage amounts, maintaining | Transfer $_______ or %_______ from ____________________________ to _____________________________
     consistency throughout.      |
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  [_]  AUTOMATIC               9. |
       REBALANCING                | Indicate frequency: ________Quarterly ________Semi-Annually ________Annually
                                  |
   ($5,000 minimum accumulation   |              (Division Name or Number)                        (Division Name or Number)
 value) Use this section to apply |
      for or make changes to      | %_______ : ___________________________________     %_______  : ________________________________
   Automatic Rebalancing of the   |
 variable divisions. Please refer | %_______ : ___________________________________     %_______  : ________________________________
   to the prospectus for more     |
  information on the Automatic    | %_______ : ___________________________________     %_______  : ________________________________
Rebalancing Option. This Option is|
 not available while the Dollar   | %_______ : ___________________________________     %_______  : ________________________________
  Cost Averaging Option is in use.|
                                  | %_______ : ___________________________________     %_______  : ________________________________
                                  |
                                  | %_______ : ___________________________________     %_______  : ________________________________
                                  |
                                  | %_______ : ___________________________________     %_______  : ________________________________
                                  |
                                  | %_______ : ___________________________________     %_______  : ________________________________
                                  |
                                  | %_______ : ___________________________________     %_______  : ________________________________
                                  |
                                  | %_______ : ___________________________________     %_______  : ________________________________
                                  |
                                  | %_______ : ___________________________________     %_______  : ________________________________
                                  |
                                  | %_______ : ___________________________________     %_______  : ________________________________
                                  |
                                  | ________  INITIAL HERE TO REVOKE AUTOMATIC REBALANCING ELECTION.
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USL 8993 REV 0900                                                   PAGE 4 OF 5
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 [_]  REQUEST FOR             10. |
      PARTIAL                     | ______I request a partial surrender of $_____ or %_____ of the net cash surrender value.
      SURRENDER/                  | ______I request a loan in the amount of $_____.
      POLICY LOAN                 | ______I request the maximum loan amount available from my policy.
                                  |
 Use this section to apply for a  |
 partial surrender from or policy | Unless you direct otherwise below, proceeds are allocated according to the deduction allocation
 loan against policy values. For  | percentages in effect, if available; otherwise they are taken pro-rata from the USL Declared
 detailed information concerning  | Fixed Interest Account and Variable Divisions in use.
these two options please refer to |
   your policy and its related    | ________________________________________________________________________________________________
  prospectus. If applying for a   |
  partial surrender be sure to    | ________________________________________________________________________________________________
complete the Notice of Withholding|
 section of this Service Request  | ________________________________________________________________________________________________
  in addition to this section.    |
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 [_]  NOTICE OF               11. | The taxable portion of the distribution you receive from your variable universal life insurance
      WITHHOLDING                 | policy is subject to federal income tax withholding unless you elect not to have withholding
                                  | apply. Withholding of state income tax may also be required by your state of residence. You may
Complete this section if you have | elect not to have withholding apply by checking the appropriate box below. If you elect not to
 applied for a partial surrender  | have withholding apply to your distribution or if you do not have enough income tax withheld,
        in Section 10.            | you may be responsible for payment of estimated tax. You may incur penalties under the
                                  | estimated tax rules, if your withholding and estimated tax are not sufficient.
                                  |
                                  | Check one: ________I do want income tax withheld from this distribution.
                                  |
                                  |            ________I do not want income tax withheld from this distribution.
                                  |
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 [_]  AFFIRMATION/            12. | CERTIFICATION: Under penalties of perjury, I certify: (1) that the number shown on this form is
      SIGNATURE                   | my correct taxpayer identification number and; (2) that I am not subject to backup withholding
                                  | under Section 3406(a)(1)(C) of the Internal Revenue Code.
   Complete this section for      |
         ALL requests.            | The Internal Revenue Service does not require your consent to any provision of this document
                                  | other than the certification required to avoid backup withholding.
                                  |
                                  | Dated at_______________this___________day of______________________________________,__________
                                  |
                                  | X______________________________________________   X__________________________________________
                                  |  SIGNATURE OF OWNER                                SIGNATURE OF WITNESS
                                  |
                                  | X______________________________________________   X__________________________________________
                                  |  SIGNATURE OF JOINT OWNER                          SIGNATURE OF WITNESS
                                  |
                                  | X______________________________________________   X__________________________________________
                                  |  SIGNATURE OF ASSIGNEE                             SIGNATURE OF WITNESS
                                  |
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USL 8993 REV 0900                                              PAGE 5 OF 5
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                                                                    EXHIBIT 10.1

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--------------------------------------------------------------------------------

                          GRYPHON EXPLORATION COMPANY

                       Preferred Stock and Common Stock

                    CONTRIBUTION AND SUBSCRIPTION AGREEMENT

                       Dated as of September 15, 2000

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                 Page
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Section 1.  Definitions.........................................................................................  1
Section 2.  Issuance of Shares; Closings........................................................................  8
       (a)        Initial Contributions by CHEX.................................................................  8
                  (i)      Contribution of Assets...............................................................  8
                  (ii)     Assumption of Liabilities............................................................  8
                  (iii)    Exclusion of Liabilities.............................................................  8
                  (iii)    Exclusion of Liabilities.............................................................  8
                  (iv)     Initial Issuance of Common Stock to CHEX.............................................  9
                  (v)      Payment to CHEX; Issuance of the CHEX Note...........................................  9
                  (vi)     Operating Fee........................................................................ 10
       (b)        Initial Cash Contributions by WPEP and the Management Investors............................... 10
                  (i)      Cash Contributions................................................................... 10
                  (ii)     Initial Issuance of Preferred Stock.................................................. 10
       (c)        Subsequent Financings......................................................................... 10
       (d)        Call Notices.................................................................................. 11
       (e)        Participation Notices......................................................................... 12
       (f)        Eligible Investor Non-Participation in a Subsequent Financing................................. 13
       (g)        Limitation on Capital Calls................................................................... 13
       (h)        Closings...................................................................................... 13
Section 3.  Investors' Conditions of Initial Closing............................................................ 14
       (a)        Initial Closing Conditions of the Investors................................................... 14
                  (i)      Representations and Warranties....................................................... 14
                  (ii)     Performance.......................................................................... 14
                  (iii)    Formation Documents and Stockholders Agreement....................................... 14
                  (iv)     Compliance with Securities Laws...................................................... 15
                  (v)      No Adverse Action or Decision........................................................ 15
                  (vi)     Approvals and Consents............................................................... 15
                  (vii)    Board Nominees....................................................................... 15
                  (viii)   Stock Option Plan.................................................................... 15
                  (ix)     Cancellation of CHEX Securities...................................................... 15
                  (x)      Employment Agreements................................................................ 15
                  (xi)     HSR Act Filings...................................................................... 16
                  (xii)    Company Qualification................................................................ 16
                  (xiii)   Contract Operating Agreement......................................................... 16
                  (xiv)    Stockholders Agreement............................................................... 16
       (b)        WPEP's Initial Closing Conditions............................................................. 16
                  (i)      Opinion of CHEX's Counsel............................................................ 16
                  (ii)     Representations and Warranties....................................................... 16
</TABLE>

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -i-
<PAGE>

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                  (iii)    Performance.......................................................................... 16
                  (iv)     Corporate Documentation.............................................................. 16
                  (v)      Consents............................................................................. 17
       (c)        CHEX's Initial Closing Conditions............................................................. 17
                  (i)      Representations and Warranties....................................................... 17
                  (ii)     Performance.......................................................................... 17
                  (iii)    Corporate Documentation.............................................................. 17
       (d)        Subsequent Closing Conditions................................................................. 17
Sections 4.  The Company's Conditions of Closing................................................................ 18
       (a)        Representations and Warranties................................................................ 18
       (b)        Performance................................................................................... 18
       (c)        Approvals and Consents........................................................................ 18
Section 5.  Covenants........................................................................................... 18
       (a)        Cooperation, Approvals, Further Action........................................................ 19
       (b)        Closing Conditions; Adverse Effect............................................................ 19
       (c)        HSR Act Compliance............................................................................ 19
       (d)        Ongoing Negotiations.......................................................................... 20
       (e)        Access; Confidentiality....................................................................... 21
       (f)        Additional Affirmative Covenants of the Company............................................... 22
                  (i)      Shares to be Reserved................................................................ 22
                  (ii)     Payment of Expenses.................................................................. 22
                  (iii)    Office Space......................................................................... 22
                  (iv)     Override Programs.................................................................... 22
                  (v)      Company Qualification................................................................ 23
                  (vi)     Payment to Fairfield................................................................. 23
       (g)        Additional Affirmative Covenants of CHEX...................................................... 23
                  (i)      Financial Service.................................................................... 23
                  (ii)     Transfer Fees........................................................................ 23
                  (iii)    Taxes................................................................................ 23
                  (iv)     Shark Prospect....................................................................... 24
       (h)        Oil and Gas Lease OCS-G 21549................................................................. 24
Section 6.  Representations and Warranties of the Company....................................................... 24
       (a)        Organization; Qualification and Authority..................................................... 24
       (b)        Authorized Shares and Related Matters......................................................... 25
       (c)        Defaults; Outstanding Debt.................................................................... 25
       (d)        No Violation.................................................................................. 25
       (e)        Offering of Shares............................................................................ 26
Section 7.  Representations, and Warranties of the Investors.................................................... 26
       (a)        Investment Matters............................................................................ 26
       (b)        Authority..................................................................................... 27
       (c)        No Conflicts.................................................................................. 27
Section 8.  Representations and Warranties of CHEX.............................................................. 27
       (a)        Organization; Qualification and Authority..................................................... 27
       (b)        Defaults; Outstanding Debt.................................................................... 28
       (c)        No Violation.................................................................................. 28
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                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                     -ii-
<PAGE>

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       (d)        Governmental Consents......................................................................... 29
       (e)        Investment Company Status..................................................................... 29
       (f)        Taxes......................................................................................... 29
       (g)        Compliance with Law........................................................................... 29
       (h)        Proceedings................................................................................... 29
       (i)        Environmental Matters......................................................................... 30
       (j)        Title......................................................................................... 30
       (k)        Contracts..................................................................................... 30
       (l)        Permits....................................................................................... 30
       (m)        Consents, Preferential Rights, etc............................................................ 31
       (n)        No Other Activities........................................................................... 31
Section 9.  Termination......................................................................................... 31
       (a)        Termination................................................................................... 31
       (b)        Effect of Termination......................................................................... 32
Section 10.  Miscellaneous...................................................................................... 32
       (a)        Indemnification............................................................................... 32
       (b)        Consent to Amendments......................................................................... 33
       (c)        Restrictive Legend............................................................................ 33
       (d)        Survival of Representations and Warranties.................................................... 33
       (e)        Successors and Assigns; No Third Party........................................................ 33
       (f)        Notices....................................................................................... 33
       (g)        Descriptive Headings.......................................................................... 34
       (h)        Satisfaction Requirement...................................................................... 34
       (i)        Governing Law................................................................................. 34
       (j)        Entire Agreement.............................................................................. 34
       (k)        Severability.................................................................................. 34
</TABLE>

__________________

Appendix 2(a)(i)    Assets Contributed by Cheniere Energy, Inc.

Appendix 2(a)(ii)   Liabilities Assumed by Gryphon Exploration Company

Appendix 3(a)(v)    Required Consents

Appendix 3(a)(viii) Initial Stock Option Grants under the Gryphon Exploration
                    Company 2000 Stock Incentive Plan

Appendix 3(a)(ix)   Former Cheniere Energy, Inc. Employees Joining Gryphon
                    Exploration Company

Appendix 5(d)       Prospective Prospects/Contract Rights

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                     -iii-
<PAGE>

Exhibit A      Forms of Conveyance Documentation

Exhibit B      Form of CHEX Note

Exhibit C      Form of Call Notice

Exhibit D      Form of Certificate of Incorporation of Gryphon Exploration
               Company

Exhibit E      Form of Certificate of Designations, Preferences and Rights of
               Series A Convertible Preferred Stock of Gryphon Exploration
               Company

Exhibit F      Form of Amended and Restated Bylaws of Gryphon Exploration
               Company

Exhibit G      Form of Stockholders Agreement

Exhibit H      Form of Gryphon Exploration Company 2000 Stock Incentive Plan

Exhibit I      Form of Equity Cancellation Agreement

Exhibit J      Form of Employment Agreement by and between Michael Harvey and
               Gryphon Exploration Company

Exhibit K      Form of Employment Agreement by and between Ron Krenzke and
               Gryphon Exploration Company

Exhibit L      Form of Contract Operating Agreement

Exhibit M      Form of Opinion Letter from Counsel to Cheniere Energy, Inc. to
               the Investors

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                     -iv-
<PAGE>

                          GRYPHON EXPLORATION COMPANY

                    CONTRIBUTION AND SUBSCRIPTION AGREEMENT

     This CONTRIBUTION AND SUBSCRIPTION AGREEMENT dated as of September 15, 2000
(this "Agreement"), is entered into by and among Gryphon Exploration Company, a
Delaware corporation (the "Company"), and each of the other parties executing
this Agreement as of the date hereof (collectively, the "Investors").

     WHEREAS, subject to terms and conditions of this Agreement, Cheniere
Energy, Inc. ("CHEX") has agreed to contribute certain assets to the Company in
exchange for the issuance of Common Stock of the Company to Cheniere-Gryphon
Management, Inc. ("CHEX Sub"), as designee of CHEX, and the assumption of
certain liabilities by the Company;

     WHEREAS, subject to the terms and conditions of this Agreement, WPEP and
the Management Investors (each as defined herein) have agreed to contribute cash
to the Company in exchange for Preferred Stock of the Company; and

     WHEREAS, the parties hereto agree that the contributions contemplated by
the foregoing clauses are intended to constitute a transaction described in
Section 351(a) of the Internal Revenue Code of 1986, as amended.

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

Section 1.  Definitions.  For the purpose of this Agreement, and in addition to
            -----------
terms defined elsewhere in this Agreement, the following terms shall have the
following meanings.  In addition, all terms of an accounting character not
specifically defined herein shall have the meanings assigned thereto by the
Financial Accounting Standards Board and generally accepted accounting
principles.

     "Additional Capital Contribution" shall have the meaning set forth in
      -------------------------------
Section 2(c) hereof.

     "Affiliate" shall have the meaning set forth in the Stockholders Agreement.
      ---------

     "Agreement" shall mean this Contribution and Subscription Agreement dated
      ---------
as of September 15, 2000.

     "Approvals" shall mean any approvals, authorizations, grants of authority,
      ---------
consents, orders, qualifications, permits, licenses, variances, exemptions,
franchises, concessions, certificates, filings or registrations or any waivers
of the foregoing, or any notices, statements or other communications required to
be filed with, delivered to or obtained from any Governmental Entity or any
other Person.

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement
<PAGE>

     "Assumed Liabilities" shall mean the obligations of CHEX to be assumed by
      -------------------
the Company, as set forth in Appendix 2(a)(ii) hereto, and any other liabilities
expressly defined as Assumed Liabilities elsewhere in this Agreement.

     "Board" means the board of directors of the Company.
      -----

     "Business Day" shall mean any day which is not a Saturday, Sunday or day on
      ------------
which banks are authorized by law to close in the State of Texas.

     "Call Closing Date" shall have the meaning set forth in Section 2(d)
      -----------------
hereof.

     "Call Notice" shall have the meaning set forth in Section 2(d) hereof.
      -----------

     "CHEX" shall mean Cheniere Energy, Inc.
      ----

     "CHEX Change of Control" shall have the meaning set forth in the
      ----------------------
Stockholders Agreement.

     "CHEX Notes" shall have the meaning set forth in Section 2(a) hereof.
      ----------

     "CHEX Sub" shall mean Cheniere-Gryphon Management, Inc.
      --------

     "Closing" shall mean the Initial Closing or any Subsequent Closing.
      -------

     "Closing Date" shall mean the Initial Closing Date or any Subsequent
      ------------
Closing Date.

     "Commission" shall mean the United States Securities and Exchange
      ----------
Commission.

     "Common Stock" means the common stock, par value $0.01 per share, of the
      ------------
Company.

     "Company" shall mean Gryphon Exploration Company
      -------

     "Contracts" shall have the meaning set forth in Section 8(k) hereof.
      ---------

     "Contributed Assets" shall mean the assets to be contributed by CHEX as set
      ------------------
forth in Appendix 2(a)(i) hereto and any other assets expressly defined as
Contributed Assets elsewhere in this Agreement.

     "Contribution" shall have the meaning set forth in Section 2(a)(i) hereof.
      ------------

     "Customary Filings" shall mean rights to consent which require notices to,
      -----------------
filings with, or other actions by Governmental Entities in connection with the
sale or conveyance of oil and gas leases or interests therein if they are
customarily obtained subsequent to the sale or conveyance.

     "Defensible Title" shall mean title in and to the Contributed Assets that,
      ----------------
subject to Permitted Encumbrances:

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -2-
<PAGE>

          (a)  entitles CHEX or, after the Initial Closing, the Company to
receive throughout the duration of the productive life of any lease (after
satisfaction of all royalties, overriding royalties, nonparticipating royalties,
net profits interests or other similar burdens on or measured by production of
oil and gas), not less than the "net revenue interest" share shown in Appendix
2(a)(i) of all oil, gas and/or other minerals produced, saved and marketed from
such lease except for prospective decreases in connection with those operations
in which CHEX or, after the Initial Closing, the Company may be a non-consenting
co-owner, prospective decreases resulting from the establishment or amendment of
pools or units, and except as otherwise set forth on Appendix 2(a)(i);

          (b)  obligates CHEX or, after the Initial Closing, the Company to bear
a percentage of the costs and expenses for the maintenance and development of,
and operations relating to, such lease not greater than the "working interest"
shown in Appendix 2(a)(i) without increase throughout the productive life
thereof, except as stated in Appendix 2(a)(i) and except increases resulting
from contribution requirements with respect to defaulting co-owners under
applicable operating agreements and increases that are accompanied by at least a
proportionate increase in CHEX's or, after the Initial Closing, the Company's
net revenue interest; and

          (c)  is free and clear of Liens, encumbrances, obligations or defects,
other than the Permitted Encumbrances.

     "Director" means any member of the Board of the Company.
      --------

     "Effective Date" means August 1, 2000.
      --------------

     "Eligible Investors" shall have the meaning set forth in Section 2(c)
      ------------------
hereof.

     "Environmental Laws" shall mean all federal, state and local laws and
      ------------------
regulations relating to pollution or protection of human health or the
environment, including without limitation, laws relating to Releases or
threatened Releases of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
disposal, transport or handling of Hazardous Materials and all laws and
regulations with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Materials.

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
      ------------

     "Excluded Liabilities" shall have the meaning set forth in Section
      --------------------
2(a)(iii) hereof.

     "Fairfield" means Fairfield Industries Incorporated.
      ---------

     "Fairfield Agreement" means that certain Master License Agreement, dated
      -------------------
June 9, 1999, between Fairfield and CHEX, as supplemented from time to time.

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -3-
<PAGE>

     "Fully-Diluted Common Stock" shall have the meaning set forth in the
      --------------------------
Stockholders Agreement.

     "Governmental Entity" shall mean any court or tribunal in any jurisdiction
      -------------------
(domestic or foreign) or any public, governmental, or regulatory body, agency,
department, commission, board, bureau or other authority or instrumentality
(domestic or foreign).

     "Hazardous Materials" shall mean all substances defined as Hazardous
      -------------------
Substances, Oil, Pollutants or Contaminants in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. (S) 300.5, or defined as such
by, or regulated as such under, any Environmental Law, including without
limitation, PCBs, mercury and NORM, or which otherwise may be the basis for any
person (including, without limitation, any federal, state, local or foreign
government, and natural persons) to require cleanup, removal, treatment or
remediation.

     "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
      -------
1976, as amended.

     "Indebtedness" shall mean any obligation for borrowed money (including
      ------------
notes payable and drafts accepted representing extensions of credit whether or
not representing obligations for borrowed money).

     "Initial Closing" shall have the meaning set forth in Section 2(h)(i)
      ---------------
hereof.

     "Initial Closing Date" shall have the meaning set forth in Section 2(h)(i)
      --------------------
hereof.

     "Initial Option Grants" shall have the meaning set forth in Section
      ---------------------
3(a)(viii) hereof.

     "Investment Company Act" shall mean the Investment Company Act of 1940, as
      ----------------------
amended.

     "Investors" shall mean CHEX, the Eligible Investors and the Management
      ---------
Investors.

     "Key Geologists/Geophysicists" shall means those Persons marked with an
      ----------------------------
asterisk on Appendix 3(a)(ix) hereto.

     "Law" shall mean any statute, law, rule or regulation or any judgment,
      ---
order, writ, injunction or decree of any Governmental Entity.

     "Lien" shall mean any mortgage, pledge, security interest, encumbrance,
      ----
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of or agreement to give any financing
statement or like instrument under the laws of any jurisdiction).

     "Management Agreements" shall mean the Management Employment Agreements and
      ---------------------
the Management Purchase Agreement.

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -4-
<PAGE>

     "Management Employment Agreements" shall have the meaning set forth in
      --------------------------------
Section 3(a)(x) hereof.

     "Management Investors" shall mean Michael Harvey and Ron Krenzke.
      --------------------

     "Material Adverse Change" shall mean any change, event or occurrence which
      -----------------------
has a Material Adverse Effect.

     "Material Adverse Effect" shall mean any material adverse effect on the
      -----------------------
business, properties, prospects, assets or condition, financial or otherwise, of
the Company and its subsidiaries, taken as a whole, or, with respect to the
Initial Closing, on the Contributed Assets.

     "MDCK" shall mean Mayor, Day, Caldwell & Keeton, L.L.P., counsel to CHEX.
      ----

     "Officer's Certificate" shall mean a certificate signed in the name of the
      ---------------------
Company, by an officer of the Company.

     "Participation Notice" shall have the meaning set forth in Section 2(e)
      --------------------
hereof.

     "Person" shall have the meaning set forth in the Stockholders Agreement.
      ------

     "Permits" shall mean licenses, permits, variances, exemptions, orders,
      -------
franchises, approvals and other authorizations of or from Governmental Entities.

     "Permitted Encumbrances" shall mean:
      ----------------------

          (a)  lessors' royalties and any overriding royalties, reversionary
interests and other similar burdens to the extent that they do not, individually
or in the aggregate, reduce the Company's net revenue interest below that shown
in Appendix 2(a)(i) or increase the Company's working interest above that shown
in Appendix 2(a)(i) without a corresponding increase in the net revenue
interest;

          (b)  all leases, contracts, unit agreements, pooling agreements,
operating agreements, platform use agreements, and other contracts, agreements
and instruments applicable to the Contributed Assets, to the extent that they do
not, individually or in the aggregate, reduce the Company's net revenue
interests below that shown in Appendix 2(a)(i) or increase the Company's working
interest above that shown in Appendix 2(a)(i) without a corresponding increase
in the net revenue interest;

          (c)  Liens for taxes or assessments that are not yet delinquent or, if
delinquent, are being contested in good faith by appropriate actions;

          (d)  materialmen's, mechanic's, repairman's, employee's, contractor's,
operator's and other similar Liens or charges arising in the ordinary course of
business for amounts that are not

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -5-
<PAGE>

yet delinquent (including any amounts being withheld as provided by law), or if
delinquent, are being contested in good faith by appropriate actions;

          (e)  Customary Filings;

          (f)  rights of reassignment arising upon final intention to abandon or
release the Contributed Assets, or any of them;

          (g)  easements, rights-of-way, servitudes, permits, surface leases and
other rights in respect of surface operations arising or incurred in the
ordinary course of business;

          (h)  all rights reserved to or vested in any Governmental Entities to
control or regulate any of the Contributed Assets in any manner and all
obligations and duties under all applicable laws, rules and orders of any such
Governmental Entities or under any franchise, grant, license or permit issued by
any Governmental Entities;

          (i)  any matters shown on Appendix 2(a)(ii) to the extent that they do
not, individually or in the aggregate, reduce the Company's net revenue
interests below that shown in Appendix 2(a)(i) or increase the Company's working
interest above that shown in Appendix 2(a)(i) without a corresponding increase
in the net revenue interest;

          (j)  any other encumbrances, defects or irregularities that do not,
individually or in the aggregate, materially detract from the value of or
materially interfere with the use or ownership of the Contributed Assets subject
thereto or affected thereby and that would be accepted by a reasonably prudent
purchaser engaged in the business of owning and operating oil and gas
properties; and

          (k)  the Mortgage, Assignment, Security Agreement, Fixture Filing and
Financing Statement, dated as of September 1, 1999, from CHEX, as Mortgagor, to
EnCap Energy Capital Fund III, LP, as Mortgagee, recorded in Cameron Parish,
Louisiana on September 3, 1999 in Mortgage Book 245, File No. 261733, as amended
by that certain First Amendment to Mortgage, Assignment, Security Agreement,
Fixture Filing and Financing Statement recorded in Cameron Parish, Louisiana on
September 9, 1999 in Mortgage Book 245, File No. 2618017, as amended by that
certain Second Supplement and Amendment to Mortgage, Assignment, Security
Agreement, Fixture Filing and Financing Statement recorded in Cameron Parish,
Louisiana on October 26, 1999 in Mortgage Book 246, File No. 262290, and as
further amended by that certain Third Supplement and Amendment to Mortgage,
Assignment, Security Agreement, Fixture Filing and Financing Statement, dated as
of February 29, 2000 (as amended, the "Mortgage"), and Original Financing
Statement No. 261734 filed on September 3, 1999 with the Parish Clerk of Cameron
Parish, Louisiana, as amended (the "Financing Statement"); provided that,
insofar and only insofar as the Mortgage and Financing Statement cover the
Contributed Assets, the Mortgage and Financing Statement shall be released on or
before the Initial Closing Date.

     "Petrie Parkman" shall mean Petrie Parkman & Co., Inc.
      --------------

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -6-
<PAGE>

     "Preferred Stock" means the Series A Convertible Preferred Stock, par value
      ---------------
$0.01 per share, of the Company.

     "Pro Rata Portion" with respect to any Investor shall mean, as of the date
      ----------------
of determination, 100% times a fraction, the numerator of which is the
Investor's ownership of the Company's Fully-Diluted Common Stock and the
denominator of which is the total amount of the Company's Fully-Diluted Common
Stock held by Eligible Investors.

     "Proceedings" shall mean all proceedings, actions, claims, suits,
      -----------
investigations and inquiries by or before any arbitrator or Governmental Entity.

     "Prospective Prospects/Contract Rights" shall have the meaning set forth in
      -------------------------------------
Section 5(d) hereof.

     "Related Agreements" shall mean the Stockholders Agreement and the
      ------------------
Management Agreements.

     "Release" shall mean any release, spill, emission, discharge, leaking,
      -------
pumping, injection, deposit, disposal, dispersal, leaching or migration into the
indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or into or out of
any property, including the movement of Hazardous Materials through or in air,
soil, surface water, groundwater or property.

     "Required Consents" shall mean all approvals and consents required to be
      -----------------
obtained by the Company, CHEX or CHEX Sub with respect to the consummation of
each of the transactions contemplated by this Agreement, including, without
limitation, those set forth on Appendix 3(a)(v) hereto.

     "Required Holders" shall have the meaning set forth in the Stockholders
      ----------------
Agreement.

     "Securities Act" shall mean the Securities Act of 1933, as amended.
      --------------

     "Shares" shall mean the shares of Preferred Stock and Common Stock.
      ------

     "Stock Option Plan" shall mean the Gryphon Exploration Company 2000 Stock
      -----------------
Incentive Plan.

     "Stockholder" shall have the meaning set forth in the Stockholders
      -----------
Agreement.

     "Stockholders Agreement" shall mean the Stockholders Agreement among the
      ----------------------
Company and the Company's stockholders in the form attached hereto as Exhibit G,
as amended and in effect from time to time.

     "Subsequent Closing" shall have the meaning set forth in Section 2(h)(ii)
      ------------------
hereof.

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -7-
<PAGE>

     "Subsequent Financing" shall have the meaning set forth in Section 2(c)
      --------------------
hereof.

     "Target Blocks" shall have the meaning assigned to that term in the 2000
      -------------
Program Agreement dated March 1, 2000 between CHEX and Samson Offshore Company.

     "Taxes" means all federal, state, county, local, foreign or other taxes,
      -----
charges, fees, levies, imposts, duties, licenses or other governmental
assessments, together with any interest, penalties, additions to tax or
additional amounts imposed with respect thereto.

     "WPEP" shall mean Warburg, Pincus Equity Partners, L.P., Warburg Pincus
      ----
Netherlands Equity Partners I, C.V., Warburg Pincus Netherlands Equity Partners
II, C.V. and Warburg Pincus Netherlands Equity Partners III, collectively;
provided, however, that any action to be taken by WPEP under this Agreement may
be taken by Warburg, Pincus Equity Partners, L.P. individually on behalf of the
other entities named in this definition.

     "WPEP Cash" shall have the meaning set forth in Section 2(b) hereof.
      ---------

     "Zydeco Agreement" shall mean that certain Exploration Agreement, dated
      ----------------
April 4, 1996, between Zydeco Exploration, Inc. and FX Energy, Inc. (now known
as Cheniere Energy Operating Co., Inc.), as amended.

Section 2.  Issuance of Shares; Closings.
            ----------------------------

               (a)  Initial Contributions by CHEX.
                    -----------------------------

                    (i)    Contribution of Assets. Subject to the terms and
                           ----------------------
               conditions of this Agreement, at the Initial Closing, CHEX shall
               contribute, convey, assign, transfer and deliver to the Company
               all of its right, title and interest at the time of the Initial
               Closing in and to the Contributed Assets (the "Contribution").
               The Contribution will be effected by delivery by CHEX to the
               Company of duly executed documents of conveyance in the form
               attached hereto as Exhibit A together with such additional
               assignments as may be required by Governmental Entities to effect
               the assignment to the Company of CHEX's interest in the leases
               included in the Contributed Assets.

                    (ii)   Assumption of Liabilities.  Subject to the terms and
                           -------------------------
               conditions of this Agreement, at the Initial Closing the Company
               will assume the Assumed Liabilities.

                    (iii)  Exclusion of Liabilities.  Notwithstanding any other
                           ------------------------
               provision of this Agreement, the Company shall not assume or have
               any liability hereunder with respect to any other liabilities or
               obligations of CHEX not specifically included in the Assumed
               Liabilities, whether known or unknown, liquidated or
               unliquidated, contingent or fixed (the "Excluded Liabilities"),
               including, without limitation:

                           (A) liabilities arising out of the business operation
                    of CHEX or its ownership of the Contributed Assets prior to
                    the Effective Date;

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -8-
<PAGE>

                         (B)  liabilities to the extent arising out of any
                    businesses operated and assets owned by CHEX other than the
                    Contributed Assets, whether incurred before or after the
                    Effective Date; and

                         (C)  liabilities or obligations for CHEX to pay any
                    taxes of any kind or nature, including any interest or
                    penalties imposed with respect hereto, and including any
                    taxes incurred by CHEX arising out of its business operation
                    or its ownership of the Contributed Assets prior to the
                    Effective Date.

                    (iv) Initial Issuance of Common Stock to CHEX.  In
                         ----------------------------------------
               consideration for all of the foregoing, at the Initial Closing,
               subject to the terms and conditions of this Agreement, the
               Company will issue to CHEX 145,590 shares of Common Stock.

                    (v)  Payment to CHEX; Issuance of the CHEX Notes.  On the
                         -------------------------------------------
               date hereof, WPEP shall deliver to CHEX, by wire transfer of
               immediately available funds to an account or accounts designated
               by CHEX, the amount of $2,000,000 in exchange for the execution
               and delivery of a note, in the form attached hereto as Exhibit B,
               in the original principal amount of $2,000,000. In addition, if
               prior to the Initial Closing CHEX elects to participate in the
               completion of a well on the Shark Prospect (as described in
               Appendix 2(a)(i)), then CHEX shall notify WPEP of such election
               and furnish WPEP a copy of an authorization for expenditure
               ("AFE") setting forth the estimated completion costs and CHEX's
               proportionate share thereof. Upon receipt of such an AFE, WPEP,
               within two (2) Business Days, shall either (A) notify CHEX of its
               election not to participate in the well, in which case the well
               shall not be included in the Contributed Assets or (B) deliver to
               CHEX, by wire transfer of immediately available funds, an amount
               equal to CHEX's share of the estimated completion costs as set
               forth in the AFE and CHEX shall execute and deliver a note, in
               the form attached hereto as Exhibit B, in the original principal
               amount equal to such share of completion costs; provided that if
               WPEP has notified CHEX within such two Business Day period that
               it wishes to fund CHEX's share of the completion costs as set
               forth in clause (B) hereof, but CHEX is unable to cause MDCK or
               another counsel reasonably acceptable to WPEP to deliver a legal
               opinion with respect to the note to be issued by CHEX (in form
               and substance substantially similar to the legal opinion given by
               MDCK on the date of this Agreement with respect to the original
               CHEX Note), then CHEX may fund such obligations and, in such
               case, the well will be included in the Contributed Assets subject
               to the Company reimbursing CHEX at the Initial Closing for
               completion costs for the well that have been incurred by CHEX
               prior to the Initial Closing. The note referred to in this first
               sentence of this paragraph and any note with respect to
               completion costs are collectively referred to herein as the "CHEX
               Notes." At the Initial Closing, CHEX will assign, and the Company
               will assume, the CHEX Notes and the CHEX Notes will be included
               in the definition of Assumed Liabilities.

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -9-
<PAGE>

               (vi) Operating Fee.  At the Initial Closing, the Company
                    -------------
          hereby agrees to pay to CHEX an operating fee equal to (A) $50,000
          plus (B) an additional $10,000 for each day from, and including,
          September 1, 2000 to, and including, the Initial Closing Date.  The
          aggregate amount of this fee shall be delivered by the Company to CHEX
          by wire transfer of immediately available funds on the Initial Closing
          Date.

          (b)  Initial Cash Contributions by WPEP and the Management Investors.
               ---------------------------------------------------------------

               (i)  Cash Contributions.  Subject to the terms and conditions
                    ------------------
          of this Agreement, at the Initial Closing, WPEP and the Management
          Investors shall contribute as a capital contribution to the Company,
          and the Company shall accept from the Investors, the following cash
          contributions, where the term "WPEP Cash" shall mean $24,950,000 less
          the principal amount of all CHEX Notes assumed by the Company pursuant
          to Section 2(a)(v) hereof:

     <TABLE>
     <CAPTION>
          Investor                                                    Cash Contribution
          --------                                                    -----------------
          <S>                                                         <C>
          Warburg, Pincus Equity Partners, L.P.                       WPEP Cash * 0.945
          Warburg, Pincus Netherlands Equity Partners I, L.P.          WPEP Cash * 0.03
          Warburg, Pincus Netherlands Equity Partners II, L.P.         WPEP Cash * 0.02
          Warburg, Pincus Netherlands Equity Partners III, L.P.       WPEP Cash * 0.005
          Michael Harvey                                                        $25,000
          Ron Krenzke                                                           $25,000
</TABLE>

          Such contributions shall be made by wire transfer of immediately
          available funds to an account or accounts designated by the Company in
          writing at least two (2) Business Days prior to the Initial Closing.
          In addition, at the Initial Closing, WPEP shall forgive all CHEX Notes
          and any interest accrued thereunder.

               (ii)  Initial Issuance of Preferred Stock.  In consideration of
                     -----------------------------------
          the foregoing, at the Initial Closing, subject to the terms and
          conditions of this Agreement, the Company will issue to WPEP and the
          Management Investors the number of shares of Preferred Stock set forth
          below:

     <TABLE>
     <CAPTION>
                                                                                 Shares of
          Investor                                                         Preferred Stock
          --------                                                         ---------------
          <S>                                                               <C>
          Warburg, Pincus & Co., as nominee                                         24,950
          Michael Harvey                                                                25
          Ron Krenzke                                                                   25
     </TABLE>

          (c)  Subsequent Financings.
               ---------------------

               (i)  CHEX Sub and WPEP (the "Eligible Investors") shall each have
          the option to purchase its Pro Rata Portion of up to 75,000 additional
          shares of Preferred Stock at a purchase price of $1,000 per share as
          called by the Company from time to time pursuant to a Call Notice
          (defined below) delivered in accordance with

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -10-
<PAGE>

          Section 2(d). Each closing of additional funds pursuant to this
          Section 2(c) shall be referred to at times herein as a "Subsequent
          Financing." The purchase price paid in any Subsequent Financing is
          referred to at times herein as an "Additional Capital Contribution."
          All Additional Capital Contributions shall be payable in cash and,
          unless otherwise agreed to by the Board, shall be paid by the wire
          transfer of immediately available United States dollars on or before
          the applicable Call Closing Date (as defined below) to a bank account
          designated by the Company prior to such Call Closing Date. With
          respect to any Subsequent Financing, each of the Eligible Investors'
          respective Pro Rata Portions shall be determined as of the date the
          Board authorized the applicable Call Notice.

               (ii) Notwithstanding Section 2(c)(i) above, each of the
          Management Investors shall be required to purchase one-tenth of one
          percent of WPEP's Pro Rata Portion of any Subsequent Financing in
          which WPEP is participating.  The obligation of each Management
          Investor to purchase Shares pursuant to this Section 2(c)(ii) is
          subject to such Management Investor being an "accredited investor" as
          defined in Rule 501(a) under the Securities Act or the waiver of such
          condition by the Company.  No Management Investor shall be obligated
          to purchase shares pursuant to this Section 2(c)(ii) if his respective
          Management Employment Agreement has been terminated at the time of the
          Subsequent Financing.  To the extent that any Management Investor
          purchases shares pursuant to this Section 2(c)(ii), WPEP's Pro Rata
          Portion of the applicable Subsequent Financing shall be reduced.

          (d)  Call Notices.
               ------------

               (i)  With respect to any proposed Subsequent Financing under
          Section 2(c), the Company shall provide each Investor a written
          notice, substantially in the form attached hereto as Exhibit C (a
          "Call Notice"), which shall (i) specify the date on which the Company
          intends to close on the Subsequent Financing (each such date referred
          to as a "Call Closing Date"); (ii) specify the total amount of the
          Additional Capital Contribution being called and such Eligible
          Investor's Pro Rata Portion thereof; (iii) specify the total number of
          shares of Preferred Stock proposed to be issued (calculated on the
          basis of a price of $1,000 per share of Preferred Stock) in exchange
          for the Additional Capital Contributions; and (iv) include all
          materials, if any, related to the Call Notice that were presented to
          the Directors at the meeting at which such Call Notice was approved,
          for the purpose of evaluating such Call Notice; provided, however,
          that no materials shall be delivered to CHEX or WPEP, respectively, if
          any Director designated by such Investor attended the meeting at which
          the Call Notice was approved and received all materials related to the
          Call Notice presented to Directors thereat.

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -11-
<PAGE>

               (ii) Any Call Notice shall be delivered as follows:

                    (A)  for any Subsequent Financing that is $10,000,000 or
               less, the Company shall deliver the Call Notice no later than 40
               days prior to the Call Closing Date;

                    (B)  for any Subsequent Financing greater than $10,000,000,
               the Company shall deliver the Call Notice no later than 90 days
               prior to the Call Closing Date.

          (e)  Participation Notices.  Upon Receipt of a Call Notice, each
               ---------------------
     Eligible Investor shall provide written notice (a "Participation Notice")
     indicating whether it will participate in the Subsequent Financing
     referenced in such Call Notice to both the Company and the other Eligible
     Investor as follows:

               (i)   for any Subsequent Financing that is $10,000,000 or less,
          each Eligible Investor shall deliver the Investor Participation Notice
          within 10 days of receiving the applicable Call Notice;

               (ii)  for any Subsequent Financing that is more than $10,000,000,
          each Eligible Investor shall deliver the Investor Participation
          Notices within 15 days of receiving the applicable Call Notice.

               (iii) Notwithstanding Section 2(e)(ii) above, if an Eligible
          Investor receives a Call Notice relating to a subsequent Financing
          that is more than $10,000,000 and specifying that such Subsequent
          Financing will fund a strategic acquisition of securities or assets or
          a business that was formally brought to the attention of the Board at
          least 15 days prior to the Board meeting at which such transaction is
          (or was) to be approved, then the Investor shall provide notice of its
          intention to participate within 5 days of receiving the applicable
          Call Notice.  In connection with any transaction governed by this
          Section 2(e)(iii), the Company shall provide to CHEX and WPEP all
          materials relating to such transaction presented to the Board if and
          when they are so presented; provided, however, that no materials shall
          be delivered to CHEX or WPEP, respectively, if any Director designated
          by such Investor attended the meeting at which the Call Notice was
          approved and received all materials related to the Call Notice
          presented to Directors thereat.

               Subject to the conditions set forth in Section 3(d) hereof,
     Eligible Investors agreeing to participate in a Subsequent Financing shall
     fund their committed portion of such Subsequent Financing on the Call
     Closing Date set forth in the applicable Call Notice; provided, however,
     that Eligible Investors agreeing to participate in a Subsequent Financing
     described under Section 2(e)(iii) above shall fund their committed portion
     of such Subsequent Financing at the closing of the strategic acquisition
     referred to therein.

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -12-
<PAGE>

          (f)  Eligible Investor Non-Participation in a Subsequent Financing.
               -------------------------------------------------------------

               (i)  To the extent that any Eligible Investor elects not to
          participate in any Subsequent Financing, such Eligible Investor
          acknowledges that its Pro Rata Portion of any future Subsequent
          Financings may be affected.

               (ii)  In the event that any Eligible Investor elects not to
          participate in a Subsequent Financing, then the other Eligible
          Investor shall have the option to purchase the non-participating
          Eligible Investor's Pro Rata Portion thereof.  This option shall be
          exercisable by written notice to the Company and the non-participating
          Eligible Investor within 5 days of receiving the Participation Notice
          indicating the non-participating Eligible Investor's intent not to
          participate.

               (iii) In the event that an Eligible Investor delivers a
          Participation Notice indicating its intention to participate in a
          Subsequent Financing to the Company and then fails to fund the
          Subsequent Financing on the applicable Call Closing Date, such
          Eligible Investor shall forfeit all rights to participate in any
          future Subsequent Financings unless the failure to fund such
          Subsequent Financing is (A) the result of a written agreement between
          the Company and the participating Eligible Investors, (B) due to the
          failure of any Investor condition to closing set forth in Section 3(d)
          hereof, or (C) cured within 5 Business Days of the Company notifying
          such Eligible Investor of its failure to fund.

               (iv)  If, at any time after a CHEX Change of Control, the Company
          delivers a Call Notice in accordance with Section 2(d) above and CHEX
          elects not to participate in the Subsequent Financing referenced
          therein or fails to fund such Subsequent Financing on the applicable
          Call Closing Date, CHEX shall forfeit all rights to participate in any
          future Subsequent Financings.

          (g)  Limitation on Capital Calls.  Any call for a Subsequent
               ---------------------------
     Financing  shall require approval by the Board.  In no event shall a Call
     Notice be made for an aggregate amount of less than Three Million Dollars
     ($3,000,000).

          (h)  Closings.
               --------

               (i)  The initial issuance and delivery of the Shares to be
          purchased by the Investors shall take place at a closing (the "Initial
          Closing") to be held at the offices of Vinson & Elkins L.L.P. on such
          date (the "Initial Closing Date") which shall be on the day which is
          five (5) consecutive Business Days after the date on which the last of
          the conditions set forth in Sections 3(a), 3(b), 3(c) and 4 is
          fulfilled or waived or is capable of being fulfilled at the Initial
          Closing or at such other time or place as the parties hereto shall
          agree.

               (ii)  On each Call Closing Date, the Company will deliver to each
          Investor participating in the applicable Subsequent Financing
          certificates evidencing the

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -13-
<PAGE>

          shares of Preferred Stock to be purchased by such Investor and
          registered in the name of such Investor against receipt of the
          purchase price therefor by wire transfer of immediately available
          funds to the Company in an account designated by the Company prior to
          such Call Closing Date (each such occurrence, a "Subsequent Closing").

               (iii)  At any Closing, WPEP shall have the option to have all
          shares to be issued to WPEP registered in the name of Warburg, Pincus
          & Co., as nominee.  At the Initial Closing, CHEX shall transfer its
          interest in the Company to CHEX Sub and CHEX hereby consents to the
          Company issuing the securities issuable to CHEX pursuant to Section
          2(a)(iv) above, and registering such securities in the name of, CHEX
          Sub.

Section 3.  Investors' Conditions of Initial Closing.
            ----------------------------------------

          (a)  Initial Closing Conditions of the Investors.  Each Investors'
               -------------------------------------------
     obligation to acquire the Shares to be acquired by them hereunder on the
     Initial Closing Date is subject to the satisfaction or waiver, on or before
     the Initial Closing Date, of the conditions contained in this Section 3(a).

               (i)  Representations and Warranties. The representations and
                    ------------------------------
          warranties of the Company contained in this Agreement that are
          qualified by reference to materiality or Material Adverse Effect shall
          be true and correct, and any such representations and warranties that
          are not so qualified shall be true and correct in all material
          respects at and as of the Initial Closing Date, in each case as if
          made at and as of such date, except that representations and
          warranties made as of a specific date need be true only as of that
          date.

               (ii)  Performance. The Company shall have performed in all
                     -----------
          material respects all of its obligations under this Agreement required
          to be performed by it on or prior to the Initial Closing Date.

               (iii) Formation Documents and Stockholders Agreement.  Each
                     ----------------------------------------------
          Investor shall have received an Officer's Certificate, dated the
          Initial Closing Date, attaching (i) a true and complete copy of the
          Company's Certificate of Incorporation, together with all amendments
          thereto, as filed with the Secretary of State of the State of Delaware
          in the form attached hereto as Exhibit D, (ii) a true and complete
          copy of the Company's Certificate of Designations, Preferences and
          Rights of Series A Convertible Preferred Stock, as filed with the
          Secretary of State of the State of Delaware and in the form attached
          hereto as Exhibit E, (iii) a true and complete copy of the Company's
          Bylaws in effect on the date thereof in the form attached hereto as
          Exhibit F, (iv) a true and complete copy of the Stockholders Agreement
          in the form attached hereto as Exhibit G, (v) certificates of good
          standing of the appropriate officials of the jurisdiction of formation
          of the Company and of each state or other jurisdiction in which the
          Company is qualified to transact business, and is transacting

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -14-
<PAGE>

          business, except those other jurisdictions where the failure to be so
          qualified would not have a Material Adverse Effect, and (vi)
          resolutions of the Directors of the Company authorizing the execution
          and delivery of this Agreement, the Stockholders Agreement and the
          issuance of the Shares.

               (iv)   Compliance with Securities Laws.  The offering and sale
                      -------------------------------
          of the Shares under this Agreement shall have complied with all
          applicable requirements of federal and state securities laws.

               (v)    No Adverse Action or Decision.  There shall be no action,
                      -----------------------------
          suit, investigation or proceeding, pending or to the Company's
          knowledge threatened, against or affecting the Company or any of its
          properties or rights, or any of its affiliates, associates, officers
          or Directors, before any court, arbitrator or administrative or
          governmental body which (i) seeks to restrain, enjoin, prevent the
          consummation of or otherwise affect the transactions contemplated by
          this Agreement or (ii) questions the validity or legality of any such
          transaction or seeks to recover damages or to obtain other relief in
          connection with any such transaction, and to the Company's knowledge
          there shall be no valid basis for any such action, proceeding or
          investigation.

               (vi)   Approvals and Consents.  The Company shall have duly
                      ----------------------
          received all authorizations, consents, approvals, licenses,
          franchises, permits and certificates, other than Customary Filings, by
          or of all Governmental Entities necessary (including those required
          under the HSR Act, if any) for the issuance of the Shares by the
          Company and the consummation of the transactions contemplated hereby,
          and all of the foregoing shall be in full force and effect at the
          Initial Closing Date.

               (vii)  Board Nominees.  The initial members of the Board
                      --------------
          specified in the Stockholders Agreement shall have been appointed
          Directors of the Company effective upon the Initial Closing.

               (viii) Stock Option Plan.  The Company shall have adopted the
                      -----------------
          Stock Option Plan including the attached form of Stock Option
          Agreement in the form attached hereto as Exhibit H and shall have
          granted options thereunder as set forth on Appendix 3(a)(viii) hereto
          (the "Initial Option Grants").

               (ix)   Cancellation of CHEX Securities.  Each former employee of
                      -------------------------------
          CHEX named on Appendix 3(a)(ix) hereto shall have entered into an
          Option and Warrant Cancellation Agreement, substantially in the form
          attached hereto as Exhibit I (a "Cancellation Agreement"), with CHEX
          whereby all options, warrants and other equity interests in CHEX
          granted by CHEX held by such individual have been cancelled (other
          than 150,000 shares of Common Stock held by Ron Krenzke).

               (x)    Employment Agreements.  The Company shall have entered
                      ---------------------
          into employment agreements (collectively, the "Management Employment
          Agreements")

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -15-
<PAGE>

          with Michael Harvey and Ron Krenzke, in the forms attached hereto as
          Exhibit J and Exhibit K, respectively.

               (xi)   HSR Act Filings.  The Company and the Investors shall
                      ---------------
          have filed all reports and submissions required under the HSR Act
          concerning the transactions contemplated hereby and any waiting
          periods related to such filings shall have expired or received early
          termination.

               (xii)  Company Qualification.  The Company shall be duly
                      ---------------------
          qualified to own and hold offshore federal and state of Louisiana oil
          and gas leases.

               (xiii) Contract Operating Agreement.  The Company and CHEX shall
                      ----------------------------
          have entered into a Contract Operating Agreement substantially in the
          form attached hereto as Exhibit L.

               (xiv)  Stockholders Agreement.  The Company and the Investors
                      ----------------------
          shall have entered into the Stockholders Agreement in substantially
          the form attached hereto as Exhibit G.

          (b)  WPEP's Initial Closing Conditions.  In addition to the
               ---------------------------------
     conditions set forth in Section 3(a) above, WPEP's obligation to acquire
     the Shares to be acquired by it hereunder on the Initial Closing Date is
     further subject to the satisfaction or waiver, on or before the Initial
     Closing Date, of the conditions contained in this Section 3(b).

               (i)    Opinion of CHEX's Counsel.  MDCK shall have delivered a
                      -------------------------
          legal opinion dated the Initial Closing Date substantially in the form
          attached hereto as Exhibit M to WPEP.

               (ii)   Representations and Warranties.  The representations and
                      ------------------------------
          warranties of CHEX and CHEX Sub contained in this Agreement that are
          qualified by reference to materiality shall be true and correct, and
          any such representations and warranties that are not so qualified
          shall be true and correct in all material respects at and as of the
          Initial Closing Date, in each case as if made at and as of such date,
          except that representations and warranties made as of a specific date
          need be true only as of that date.

               (iii)  Performance.  CHEX and CHEX Sub shall have performed in
                      -----------
          all material respects all of its obligations under this Agreement
          required to be performed by it on or prior to the Initial Closing
          Date.

               (iv)   Corporate Documentation.  WPEP shall have received all
                      -----------------------
          such counterpart originals or certified or other copies of such
          documents as they may reasonably request.

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -16-
<PAGE>

               (v)  Consents.  WPEP shall have been furnished with evidence of
                    --------
          all Required Consents, other than Customary Filings, the failure of
          which to obtain could be reasonably expected, in the aggregate, to
          result in a Material Adverse Effect, and each such Required Consent
          shall be unconditional or be subject to conditions which have been
          satisfied on or before the Initial Closing Date.

          (c)  CHEX's Initial Closing Conditions.  In addition to the conditions
               ---------------------------------
     set forth in Section 3(a) above, CHEX's obligation to acquire the Shares to
     be acquired by it hereunder on the Initial Closing Date is further subject
     to the satisfaction or waiver, on or before the Initial Closing Date, of
     the conditions contained in this Section 3(c).

               (i)   Representations and Warranties.  The representations and
                     ------------------------------
          warranties of WPEP contained in this Agreement shall be true and
          correct in all material respects at and as of the Initial Closing
          Date, in each case as if made at and as of such date, except that
          representations and warranties made as of a specific date need be true
          only as of that date.

               (ii)  Performance.  WPEP shall have performed in all material
                     -----------
          respects all of its obligations under this Agreement required to be
          performed by it on or prior to the Initial Closing Date.

               (iii) Corporate Documentation.  CHEX shall have received all
                     -----------------------
          such counterpart originals or certified or other copies of such
          documents as they may reasonably request.

          (d)  Subsequent Closing Conditions.  Each Eligible Investor's
               -----------------------------
     obligation to purchase shares of Preferred Stock on a Call Closing Date
     shall be subject to the satisfaction or waiver, on or before each such Call
     Closing Date, of the conditions contained in this Section 3(d).

               (i)   Except as specified in the applicable Call Notice, the
          representations and warranties of the Company contained in Sections
          6(a), (c), (d) and (e) of this Agreement that are qualified by
          reference to materiality or Material Adverse Effect shall be true and
          correct, and any such representations and warranties that are not so
          qualified shall be true and correct in all material respects at and as
          of the applicable Call Closing Date, in each case as if made at and as
          of such date, except that representations and warranties made as of a
          specific date need be true only as of that date.

               (ii)  The Company shall have performed in all material respects
          all of its obligations under this Agreement required to be performed
          by it on or prior to the applicable Call Closing Date.

               (iii) In the event of a Subsequent Closing pursuant to a Call
          Notice, any conditions specified in such Call Notice shall have been
          satisfied.

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -17-
<PAGE>

               (iv)  As of the applicable Call Closing Date, the Company shall
          not be in material  violation of the its Certificate of Incorporation
          or Bylaws or the Stockholders Agreement.

               (v)   As of the applicable Call Closing Date, there shall have
          been no Material Adverse Change since the date of the applicable Call
          Notice, except as specifically set forth in such Call Notice.

               (vi)  As of the applicable Call Closing Date, the authorizations,
          consents, approvals, licenses, franchises, permits and certificates
          necessary to be obtained or made, and all waiting periods required or
          contemplated to expire, prior to the consummation of the transactions
          to be effected on the applicable Call Closing Date described in this
          Agreement under applicable federal, state or local laws, including the
          HSR Act, or applicable laws of any foreign jurisdiction shall have
          been obtained, made or expired, as the case may be, and all such
          regulatory approvals shall be in full force and effect.

               (vii) The Company shall have delivered to each participating
          Eligible Investor an Officer's Certificate, dated the applicable Call
          Closing Date, to the effect of clauses (i) through (vi) above.

Section 4. The Company's Conditions of Closing.  The Company's obligation to
           -----------------------------------
issue the Shares to any Investor hereunder at any Closing is subject to the
satisfaction or waiver, on or before the applicable Closing Date of the
conditions contained in this Section 4.

          (a)  Representations and Warranties.  The representations and
               ------------------------------
     warranties of such Investor purchasing Shares at such Closing contained in
     Section 7 hereof shall be true in all material respects on and as of the
     applicable Closing Date, and such Investor shall have delivered to the
     Company an Officer's Certificate, dated the applicable Closing Date, to
     such effect.

          (b)  Performance.  Such Investor shall have performed in all material
               -----------
     respects all of its obligations under this Agreement required to be
     performed by it on or prior to the applicable Closing Date.

          (c)  Approvals and Consents.  The Company shall have duly received
               ----------------------
     all authorizations, consents, approvals, licenses, franchises, permits and
     certificates by or of Governmental Entities (including those required under
     the HSR Act, if any) for the issuance of the Shares by the Company and the
     consummation of the transactions contemplated hereby at the applicable
     Closing Date.

Section 5.  Covenants.
            ---------

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -18-
<PAGE>

          (a)  Cooperation, Approvals, Further Action.  The Company and the each
               --------------------------------------
     of the Investors covenants and agrees to cooperate and use all commercially
     reasonable efforts to take, or cause to be taken, all action and to do, or
     cause to be done, all things necessary, proper or advisable to consummate
     and make effective the transactions contemplated by this Agreement,
     including cooperating fully with the other parties to obtain all Approvals
     that may be necessary or which may be reasonably requested by the Company
     or the Investors to consummate the transactions contemplated by this
     Agreement and the Related Agreements. In case at any time after the date
     hereof any further action is reasonably necessary or desirable to carry out
     the purposes of this Agreement, the parties shall take all such necessary
     action. Without limiting the foregoing, the parties hereto acknowledge that
     CHEX is responsible for obtaining any Required Consents prior to the
     Initial Closing and CHEX will agree to assist and cooperate with the
     Company in obtaining any approvals of any Governmental Entities with
     respect to the assignment of the oil and gas leases included in the
     Contributed Assets.

          (b)  Closing Conditions; Adverse Effect.  CHEX covenants and agrees,
               ----------------------------------
     from the date hereof until the earlier of the Initial Closing Date or the
     termination of this Agreement, not to take any action that will, or is
     reasonably likely to, (i) cause any breach of the representations and
     warranties of CHEX or CHEX Sub contained herein such that any condition to
     the Initial Closing contained herein would not be satisfied or (ii)
     adversely affect the Contributed Assets, in each case, without the prior
     written consent of WPEP; provided, however, that such consent shall be
     deemed given unless WPEP notifies CHEX to the contrary within 3 Business
     Days of receipt of a written request therefor.

          (c)  HSR Act Compliance.  Each of the parties hereto shall (i) file or
               ------------------
     cause to be filed, as promptly as possible after the execution of this
     Agreement, with the Federal Trade Commission and the United States
     Department of Justice, all reports and other documents required to be filed
     by such party under the HSR Act concerning the transactions contemplated
     hereby and (ii) promptly comply or cause to be complied with the requests
     by the Federal Trade Commission and the United States Department of Justice
     for additional information concerning the transactions contemplated hereby,
     in each case so that the waiting period applicable to this Agreement and
     the transactions contemplated hereby under the HSR Act shall expire as soon
     as practicable after the execution and delivery of this Agreement.  Each
     party hereto agrees to request, and to cooperate with any other party
     requesting, early termination of any applicable waiting period under the
     HSR Act.  If after Initial Closing or and until the date at which the
     shares of Preferred Stock purchased hereunder are fully converted in
     accordance with their terms, further filings are required under the HSR Act
     so that any Investor may acquire the shares of Common Stock underlying such
     Preferred Stock or otherwise acquire securities pursuant to this Agreement
     or the Related Agreements, the Company will upon written request of such
     Investor, and the Investors will upon the  written request of the Company,
     (i) file or cause to be filed, as promptly as practicable after the receipt
     of such notice and in no event later than 15 Business Days after the
     receipt of such notice, with the Federal Trade Commission and the United
     States Department of Justice, all reports and other documents required to
     be filed by such party under the HSR Act concerning the transactions
     contemplated in such notice, (ii)

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -19-
<PAGE>

     promptly comply with or cause to be complied with any requests by the
     Federal Trade Commission or the United States Department of Justice for
     additional information so that the waiting period applicable thereto under
     the HSR Act shall expire as soon as practicable, and (iii) cooperate with
     the other parties hereto in requesting early termination of any applicable
     waiting period under the HSR Act. The Company will reimburse any Investor
     for any filing fees in connection with such filings by such Investor.

          (d)  Ongoing Negotiations.  The Company and the Investors acknowledge
               --------------------
     that CHEX is currently in the process of negotiating with third
     parties for the acquisition of the prospects/leases in, and for farmout
     and/or farmin or other contract rights set forth in Appendix 5(d) hereto
     (the "Prospective Prospects/Contract Rights").  If, prior to the date of
     the Initial Closing, CHEX enters into any agreement regarding the
     Prospective Prospects/Contract Rights or acquires any interest in any such
     Prospective Prospects/Contract Rights or any interest in any oil or gas
     lease or prospect currently being evaluated by CHEX, then CHEX will provide
     to the Company and the other Investors written notice of such agreement or
     acquisition and, if consented to by WPEP, (i) such agreement and/or
     property acquired shall become part of the Contributed Assets hereunder to
     be contributed to the Company hereunder (and the term "Contributed Assets"
     shall be deemed to include such agreement and/or property), (ii) the
     Company will assume the contractual liabilities associated with such
     Prospective Prospects/Contract Rights (and the term "Assumed Liabilities"
     shall be deemed to include such liabilities) and (iii) the Company will
     reimburse CHEX  at the Initial Closing for any out-of-pocket fees or
     expenses (including any consideration paid) incurred in connection with
     obtaining or acquiring such Prospective Prospects/Contract Rights;
     provided, however, that with respect to the Prospective Prospects/Contract
     Rights relating to West Cameron Block 43 and High Island Block 52, WPEP,
     upon the approval of Michael Harvey, will not unreasonably withhold the
     consent referenced above.  In the event that no agreement and/or
     acquisition (or contract for acquisition) with respect to any Prospective
     Prospects/Contract Rights is completed by CHEX prior to the Closing, then
     CHEX agrees that (i) the term "Contributed Assets" shall include all of its
     rights to continue negotiations with respect to any such Prospective
     Prospects/Contract Rights (and Appendix 2(a)(i) shall be revised
     accordingly), (ii) the Company will have the right to enter into any
     agreement resulting from such negotiations and (iii) for a period of two
     years following the Initial Closing Date, neither CHEX nor any Affiliate of
     CHEX (other than the Company and any of its subsidiaries) will engage in
     any further negotiations regarding such Prospective Prospects/Contractual
     Rights, acquire any interest in, or enter into any agreement with respect
     to, such Prospective Prospects/Contract Rights.  If, notwithstanding the
     foregoing, in any transaction (a "Subject Transaction"), CHEX acquires an
     interest in any Prospective Prospects/Contract Rights during such period
     (an "Acquired Interest"), then within fourteen (14) days after such
     acquisition, CHEX shall notify the Company in writing of such acquisition,
     such notice to include (i) a description of such Acquired Interest, (ii)
     the amount and type of consideration paid by CHEX for such Acquired
     Interest, including a statement of the cash value of any consideration paid
     by CHEX for such Acquired Interest other than cash, and (iii) a description
     of any consideration paid by CHEX in the Subject Transaction and any
     transactions directly related thereto that was not allocated to such
     Acquired Interest.  The cash value of any such consideration shall

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -20-
<PAGE>

     be the "Acquisition Cost," unless within 15 days after receipt of CHEX's
     notice, the Company notifies CHEX in writing that the Company in good faith
     disagrees with either the value attributed to any non-cash consideration or
     the allocation of any consideration between the Acquired Interest and any
     other properties/interests involved in the Subject Transaction or any
     transaction directly relating thereto. In such notice, the Company shall
     designate an independent, nationally recognized petroleum engineering firm
     to conduct an appraisal as to the fair valuation or allocation of such
     consideration. The appraisal of the appraiser shall be binding on the
     parties and shall be deemed the "Acquisition Cost". The Company and CHEX
     shall split equally the cost of any such appraiser. The Company shall have
     sixty (60) days after receipt of such notice (or after the receipt of an
     appraisal referred to in the preceding sentence, if later), in which it may
     elect to acquire such Acquired Interest from CHEX by tendering the
     Acquisition Cost, and CHEX shall deliver executed and acknowledged
     assignments of such Acquired Interest to the Company contemporaneously with
     CHEX's receipt of such payment. If the Company does not tender the
     Acquisition Cost for such Acquired Interest within such period, it shall be
     deemed to have elected not to acquire such Acquired Interest, and CHEX
     shall retain such Acquired Interest for its own account and shall have no
     further obligation to the Company with respect thereto.

          (e)  Access; Confidentiality.
               -----------------------

               (i)  At all times from and after the date hereof until the
          Initial Closing, CHEX shall afford WPEP and its counsel and other
          authorized representatives reasonable access to the properties,
          employees and officers of CHEX and subsidiaries thereof and to all
          books, accounts, tax returns, financial and other records, including
          audit work papers, correspondence and contracts of every kind of CHEX
          and any subsidiaries thereof, in each case, as related to the
          Contributed Assets and WPEP may reasonably request to conduct due
          diligence regarding the Contributed Assets.

               (ii) WPEP shall, and shall cause its representatives to, hold
          confidential all information relating to CHEX or any subsidiary
          thereof it has received from CHEX or any of its representatives and
          any information it receives after the date hereof from CHEX or its
          representatives as a result of clause (i) above or WPEP's ownership of
          Shares; provided, however, that the foregoing shall not apply to (A)
          information that is or becomes generally available to the public other
          than as a result of a disclosure by WPEP or any of its Affiliates or
          representatives in violation of this Section 5(e)(ii), (B) information
          that is or becomes available to WPEP or any of its representatives on
          a nonconfidential basis from a source other than CHEX or its
          Affiliates (other than the Company and any of its subsidiaries) or
          representatives, provided that such source is not known by WPEP to be
          bound by a confidentiality agreement with, or other obligation of
          secrecy to, CHEX or any other party, or (C) information that is
          required to be disclosed by WPEP or any of its representatives as a
          result of any applicable Law; provided, further, however, that in the
          event information is required to be disclosed pursuant to clause (C)
          above, the Person proposing such disclosure shall provide CHEX to the
          extent practicable an

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -21-
<PAGE>

          opportunity, reasonably in advance of such disclosure, to review and
          comment on the form and content of the proposed disclosure. The
          provisions of this Section 5(e)(ii) shall terminate on the first
          anniversary of the date that all shares of Preferred Stock purchased
          hereunder have been converted in accordance with their terms.

          (f)  Additional Affirmative Covenants of the Company.  All covenants
               -----------------------------------------------
     contained in this Section 5(f) shall be given independent effect.  The
     provisions of this Section 5(f) are for the benefit of Investors for so
     long as they hold any Shares.

               (i)   Shares to be Reserved.  The Company covenants that (i) all
                     ---------------------
          shares of Common Stock that may be issued upon the conversion of the
          shares of Preferred Stock will, upon issuance and upon full payment
          therefor, be validly issued, fully paid and nonassessable (except to
          the extent specified in the Delaware General Corporation Law) and free
          from all taxes, liens and charges (other than under the Stockholders
          Agreement) with respect to the issuance thereof, (ii) during the
          period within which the shares of Preferred Stock may be converted
          into shares of Common Stock, the Company will at all times have
          authorized and reserved a sufficient number of shares of Common Stock
          to permit the conversion of the shares of Preferred Stock and (iii) so
          long as any Investor has a subscription option under this Agreement,
          the Company shall reserve and set aside a sufficient number of shares
          of Preferred Stock issuable upon the making of any Additional Capital
          Contribution.

               (ii)  Payment of Expenses.  In the event the Initial Closing is
                     -------------------
          consummated, the Company will (i) pay, or reimburse WPEP for the
          payment of, all reasonable out-of-pocket expenses arising in
          connection with the transactions and other agreements and instruments
          contemplated by this Agreement with respect to the Initial Closing,
          including the reasonable fees and expenses of WPEP's counsel, agents,
          advisors and consultants, (ii) pay, or reimburse CHEX for the payment
          of, up to $600,000 of fees and up to $20,000 of expenses of Petrie
          Parkman pursuant to the agreement between CHEX and Petrie Parkman
          previously delivered to the Company and WPEP and (iii) pay, or
          reimburse CHEX for the payment of, up to $75,000 of legal fees and
          expenses of MDCK arising in connection with the transactions and other
          agreements and instruments contemplated by this Agreement with respect
          to the Initial Closing.  The Company will also pay any HSR Act filing
          fees payable in connection with this Agreement.

               (iii) Office Space.  For a period of six months following the
                     ------------
          Initial Closing, the Company shall permit CHEX to continue to use, at
          no cost, the office space currently occupied by CHEX to the extent and
          in the manner presently used by the employees of CHEX that are
          remaining with CHEX following the Initial Closing Date.

               (iv)  Override Programs. The parties hereto acknowledge that
                     -----------------
          the Company shall assign to the Key Geologists/Geophysicists (in the
          aggregate) who remain in the employ of the Company on November 1, 2001
          a proportionally reduced

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -22-
<PAGE>

          overriding royalty interest equal to 1% in each oil and gas lease
          within the Target Blocks (A) acquired by the Company as a Contributed
          Asset hereunder or (B) acquired by the Company through a farmin,
          option or acquisition transaction entered into by the Company, to the
          extent and only to the extent, such farmin, option or acquisition
          transaction is entered into by the Company pursuant to a written
          agreement prior to November 1, 2000. Such assignment shall be
          effective as of the date of acquisition of the burdened lease by the
          Company and each such overriding royalty interest shall be calculated
          and paid on the same basis as the applicable lessor's royalty. The Key
          Geologists/Geophysicists shall share any such overriding royalty
          interest in equal proportions. No other overriding royalty interests
          shall be granted by the Company to any of its directors, officers or
          employees without the approval of the Company's board of directors.

               (v)  Company Qualification.  The Company will take all actions
                    ---------------------
          necessary to become duly qualified to own, hold and operate offshore
          and onshore federal and state oil and gas leases acquired at the
          Initial Closing or thereafter and shall comply with all bonding
          requirements to own, hold and operate such leases.

               (vi) Payment to Fairfield.  At the Initial Closing, the
                    --------------------
          Company will pay to Fairfield the amount of $1,940,210.87, plus
          interest at the rate of 12% per annum on $1,903,156.00 from August 24,
          2000 to and including the Initial Closing Date.

          (g)  Additional Affirmative Covenants of CHEX.  All covenants
               ----------------------------------------
     contained herein shall be given independent effect.  The provisions of this
     Section 5(g) are for the benefit of the Company, WPEP and the Management
     Investors.

               (i)  Financial Service. CHEX covenants that, for a period of six
                    -----------------
          months after the consummation of the Initial Closing, it shall provide
          to the Company, at no cost, financial services as the Company may
          reasonably require, including accounting and cash management services.
          Nothing herein shall obligate CHEX to provide records, financial
          information or other information which is not kept or reported by CHEX
          in the ordinary course of business except as may be required to comply
          with the rules of the Commission in connection with any registered
          public offering of capital stock of the Company. Further, nothing
          herein shall require CHEX to install equipment, hire personnel, or
          expand any systems or services beyond the level provided by CHEX as of
          the date hereof.

               (ii)  Transfer Fees.  CHEX covenants that is fully responsible
                     -------------
          for any and all transfer fees required by this Agreement or arising as
          a result of the transactions contemplated by this Agreement,
          including, without limitation, any transfer fees payable to Fairfield
          in connection with the assignment or transfer of the Fairfield
          Agreement to the Company.

               (iii) Taxes.  CHEX acknowledges that the consideration received
                     -----
          for the Contributed Assets includes amounts for any and all Texas,
          Louisiana or other sales

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -23-
<PAGE>

          and use taxes related to the Contributed Assets and CHEX hereby
          covenants that it will pay all such amounts to the appropriate
          government agency.

               (iv)  Shark Prospect. Prior to the Initial Closing, CHEX shall
                     --------------
          cause the owners of the platform located on West Cameron Block 49 to
          enter into a Production Handling Agreement with CHEX in a form
          assignable to the Company, substantially in the form of Exhibit B to
          the Second Amendment to Joint Operating Agreement, dated effective
          December 1, 1999, between IP Petroleum Company, Inc., as Operator, and
          Cheniere Energy, Inc., et al, as Non-Operators (the "JOA"), with
          respect to production from the Shark Prospect (as such prospect is
          described in Appendix 2(a)(i) hereto) and such Production Handling
          Agreement shall be included in the definition of Contributed Assets.
          CHEX further covenants that, in the event the Company determines that
          additional production handling capacity is required for the Company's
          interest in the Shark Prospect, upon request of the Company, CHEX will
          propose and approve an "Expansion of Capacity," as defined in the JOA,
          and the Company shall bear all costs, risk and expense of such
          Expansion of Capacity, insofar as such costs are attributable to the
          Shark Prospect, and indemnify and hold CHEX harmless from any loss or
          liability in connection therewith

          (h)  Oil and Gas Lease OCS-G 21549.  The parties agree that CHEX
               -----------------------------
     may, prior to the Initial Closing, assign to third parties up to an
     undivided 25% working interest (with a corresponding decrease in CHEX's net
     revenue interest) in Oil and Gas Lease OCS-G 21549, covering West Cameron
     Block 307; provided that any interest retained therein and any proceeds of
     such assignment shall be deemed Contributed Assets.

Section 6.  Representations and Warranties of the Company.  The Company
            ---------------------------------------------
represents and warrants to each  Investor as of the Initial Closing Date that:

          (a)  Organization; Qualification and Authority.  The Company is a
               -----------------------------------------
     corporation duly formed and validly existing in good standing under the
     laws of the State of Delaware.  The Company has been recently incorporated
     and has not engaged in any activities other than those related to this
     Agreement.  Prior to the contributions to be made at the Initial Closing,
     the Company has no subsidiaries.  The Company is duly qualified to transact
     business as a foreign corporation and is in good standing in each
     jurisdiction in which the character of its properties or the nature of its
     business makes such qualification necessary and in which the failure to so
     qualify would have a Material Adverse Effect.  Subject to Customary
     Filings, the Company has the power to own its properties and to carry on
     its business as it is now being conducted.  The Company has all requisite
     power and authority to enter into this Agreement and to issue and sell the
     shares of Preferred Stock and Common Stock, and to issue Common Stock upon
     conversion of the Preferred Stock and has the requisite power and authority
     to carry out the transactions contemplated hereby to be performed by it,
     and the execution, delivery and performance hereof have been duly
     authorized by all necessary action.  This Agreement and each other
     agreement or instrument executed and delivered by the Company pursuant
     hereto or in connection herewith constitutes the legal, valid and binding
     obligations of the Company and, except as may be

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -24-
<PAGE>

     affected by bankruptcy, insolvency, moratorium, reorganization and other
     laws and judicial decisions affecting the rights of creditors generally and
     general principles of equity, are enforceable against the Company in
     accordance with their respective terms.

          (b)  Authorized Shares and Related Matters.  As of the date of this
               -------------------------------------
     Agreement (i) the aggregate authorized Shares of the Company consists of
     4,500,000 Shares, of which 4,000,000 are shares of Common Stock and 500,000
     are shares of Preferred Stock; (ii) prior to the issuances contemplated
     hereby, no shares of Preferred Stock are issued and outstanding and 10
     shares of Common Stock are issued and outstanding; (iii) except for the
     Initial Option Grants, the Company does not have outstanding any Shares or
     other securities convertible into or exchangeable for any Shares, any
     rights to subscribe for or to purchase or any options for the purchase of,
     or any agreements providing for the issuance (contingent or otherwise) of,
     or any calls, commitments or claims of any other character relating to the
     issuance of, any Shares, or any securities convertible into or exchangeable
     for any Shares (except as expressly provided in this Agreement, the
     Stockholders Agreement or the Stock Option Plan); and (v) the Company is
     not subject to any obligation (contingent or otherwise) to repurchase or
     otherwise acquire or retire any Shares.

          (c)  Defaults; Outstanding Debt.  The Company is not in violation of
               --------------------------
     and is not in default under (i) its Certificate of Incorporation or Bylaws
     or the Stockholders Agreement, (ii) any Indebtedness, (iii) any indenture,
     mortgage, lease, or any other contract, agreement or instrument to which
     the Company or any subsidiary thereof is a party or by which it or any of
     its properties are bound or affected, or (iv) with respect to any order,
     writ, injunction or decree of any court or any federal, state, municipal or
     other domestic department, commission, board, bureau, agency or
     instrumentality, which default, in the case of (iii) above, would have a
     Material Adverse Effect, and there exists no condition, event or act which
     constitutes, or which after notice, lapse of time, or both, would
     constitute, such a default under any of the foregoing.

          (d)  No Violation.  The execution and delivery of this Agreement by
               ------------
     the Company and the Investors do not, and the consummation by the Company
     and the Investors of the agreements and transactions contemplated by this
     Agreement (including the Contribution) will not, (i) conflict with, or
     result in any violation of or default or loss of any benefit under, any
     provision of the Certificate of Incorporation and Bylaws of the Company;
     (ii) violate any permit, concession, grant, franchise, law, rule or
     regulation, or any judgment, decree or order to which the Company or any
     subsidiary thereof is a party or to which the Company or any subsidiary
     thereof or any of their respective property is subject; or (iii) conflict
     with, or result in a breach or violation of, or accelerate the performance
     required by, the terms of any agreement, contract, indenture or other
     instrument to which the Company or any subsidiary thereof is a party or to
     which any of their respective property is subject, or constitute a default
     or loss of any right thereunder or an event which, with the lapse of time
     or notice or both, is likely to result in a default or loss of any right
     thereunder or the creation of any Lien upon any of the assets or properties
     of the Company or any subsidiary thereof, excepting in the case of clause
     (iii) above, such conflicts, breaches, violations, accelerations, defaults,
     losses or Liens as would not individually or in the aggregate have a
     Material Adverse Effect.

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -25-
<PAGE>

          (e)  Offering of Shares.  Based in part on the representations and
               ------------------
     warranties of the Investors in Section 7, the offer, sale and issuance of
     the Shares pursuant to this Agreement and the issuance of Common Stock upon
     conversion of  the Preferred  Stock do not require registration of such
     securities under the Securities Act or registration or qualification under
     any applicable state "blue sky" or securities laws.  The Company, directly
     or indirectly, has not taken any action which would subject the issuance or
     sale of any of the Shares to the provisions of Section 5 of the Securities
     Act or violate the provisions of any securities, "blue sky" law or similar
     law of any applicable jurisdiction.

Section 7.  Representations, and Warranties of the Investors.  Each Investor
            ------------------------------------------------
severally but not jointly,  represents and warrants solely with respect to
itself to the Company and to the other Investors as of the Initial Closing Date
that:

          (a)  Investment Matters.
               ------------------

               (i)   it is acquiring the Preferred Stock and Common Stock solely
          for its beneficial account, for investment purposes, and not with a
          view to, or for resale in connection with, any distribution of the
          Preferred Stock and Common Stock in violation of applicable securities
          laws;

               (ii)  it understands that the Preferred  Stock and Common Stock
          have not been registered under the Securities Act or any state
          securities laws by reason of specific exemptions under the provisions
          thereof, the availability of which depend in part upon the bona fide
          nature of its investment intent and upon the accuracy of its
          representations made in this Section 7;

               (iii) it understands that the Company is relying in part upon
          the representations and agreements contained in this Section 7 for the
          purpose of determining whether this transaction meets the requirements
          for such exemptions;

               (iv)  it is an "accredited investor" as defined in Rule 501(a)
          under the Securities Act;

               (v)   it has such knowledge, skill and experience in business,
          financial and investment matters that it is capable of evaluating the
          merits and risks of an investment in the Preferred  Stock and Common
          Stock;

               (vi)  it understands that the Preferred Stock and Common Stock
          are "restricted securities" under applicable federal securities laws
          and that the Securities Act and the rules of the Commission provide in
          substance that it may dispose of the Preferred Stock and Common Stock
          only pursuant to an effective registration statement under the
          Securities Act or an exemption therefrom, and it understands that the
          Company has no obligation or intention to register any of the
          Preferred Stock, the Common Stock or securities issuable upon
          conversion or exercise thereof,

                                      -26-
<PAGE>

          thereunder (except pursuant to the registration rights granted in the
          Stockholders Agreement);

               (vii)  it has been furnished by the Company all information (or
          provided access to all information) regarding the business and
          financial condition of the Company, its expected plans for future
          business activities, the attributes of the Preferred Stock and the
          Common Stock and the merits and risks of an investment in the Shares
          which it has requested or otherwise needs to evaluate the investment
          in the Shares.  In making the proposed investment decision, the
          undersigned is relying solely on such information and on
          investigations made by it and its representatives.  The offer to sell
          the Shares hereunder was communicated to the undersigned in such a
          manner that it was able to ask questions of and receive answers from
          the management of the Company concerning the terms and conditions of
          the proposed transaction and that at no time was it presented with or
          solicited by or through any leaflet, public promotional meeting,
          television advertisement or any other form of general or public
          advertising or solicitation;

          (b)  Authority.
               ---------

               (i)   it has full power and authority to enter into and perform
          its obligations under this Agreement;

               (ii)  this Agreement has been duly authorized, executed and
          delivered by a Person authorized to do so, constitutes the legal,
          valid and binding obligation of such Investor and, except as may be
          affected by bankruptcy, insolvency, moratorium, reorganization and
          other laws and judicial decisions affecting the rights of creditors
          generally and general principles of equity, is enforceable against
          such Investors in accordance with its terms; and

          (c)  No Conflicts.  The execution, delivery and performance by such
               ------------
     Investor of this Agreement and the consummation by such Investor of the
     transactions contemplated hereby will not, without the giving  of notice or
     the lapse of time, or both, (A) violate any provision of law, statute,
     rule, or regulation to which such Investor is subject, (B) violate any
     order, judgment, or decree applicable to such Investor, or (C) conflict
     with, or result in a breach or default under, any term or condition of its
     certificate of incorporation or bylaws, or partnership agreement or other
     organizational document, as applicable, or any agreement or other
     instrument to which such Investor is a party or by which such Investor is
     bound.

Section 8.  Representations and Warranties of CHEX.  In addition to the
            --------------------------------------
representations and warranties contained in Section 7 hereof, CHEX and, only to
the extent of representations and warranties related to itself, CHEX Sub
represent and warrant to the other Investors and the Company as of the Initial
Closing Date that:

          (a)  Organization; Qualification and Authority.  Each of CHEX and
               -----------------------------------------
     CHEX Sub is a corporation duly formed and validly existing in good standing
     under the laws of the State

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -27-
<PAGE>

     of Delaware. Each of CHEX and CHEX Sub is duly qualified to transact
     business as a foreign corporation and is in good standing in each
     jurisdiction in which the character of its properties or the nature of its
     business makes such qualification necessary and in which the failure to so
     qualify would have a Material Adverse Effect. Each of CHEX and CHEX Sub has
     the power to own its properties and to carry on its business as it is now
     being conducted. Each of CHEX and CHEX Sub has all requisite power and
     authority to enter into this Agreement and has the requisite power and
     authority to carry out the transactions contemplated hereby to be performed
     by it, and the execution, delivery and performance hereof have been duly
     authorized by all necessary action. No approval of any CHEX stockholders is
     required for consummation of the transactions contemplated by this
     Agreement or the Related Agreements. This Agreement and each other
     agreement or instrument executed and delivered by CHEX and CHEX Sub
     pursuant hereto or in connection herewith constitutes the legal, valid and
     binding obligations of CHEX and CHEX Sub, respectively, and, except as may
     be affected by bankruptcy, insolvency, moratorium, reorganization and other
     laws and judicial decisions affecting the rights of creditors generally and
     general principles of equity, are enforceable against CHEX and CHEX Sub in
     accordance with their respective terms.

          (b)  Defaults; Outstanding Debt.  Neither CHEX nor CHEX Sub has
               --------------------------
     violated or is in default under (i) its Certificate of Incorporation or
     Bylaws, (ii) any Indebtedness, (iii) any indenture, mortgage, lease, or any
     other contract, agreement or instrument to which CHEX or CHEX Sub is a
     party or by which it or any of its properties are bound or affected (other
     than payment defaults under the Fairfield Agreement), or (iv) with respect
     to any order, writ, injunction or decree of any court or any federal,
     state, municipal or other domestic department, commission, board, bureau,
     agency or instrumentality, which default, in the case of (ii), (iii) and
     (iv) above, would have a Material Adverse Effect, and to CHEX's or CHEX
     Sub's knowledge there exists no condition, event or act which constitutes,
     or which after notice, lapse of time, or both, would constitute, such a
     default under any of the foregoing.

          (c)  No Violation.  The execution and delivery of this Agreement and
               ------------
     the Related Agreements by CHEX and CHEX Sub does not, and the consummation
     of the agreements and transactions contemplated by this Agreement and the
     Related Agreements (including the Contribution) will not, (i) conflict
     with, or result in any violation of or default or loss of any benefit
     under, any provision of the Certificate of Incorporation and Bylaws of
     CHEX, CHEX Sub or any subsidiary thereof; (ii) to CHEX's knowledge, violate
     any permit, concession, grant, franchise, law, rule or regulation, or any
     judgment, decree or order to which the CHEX, CHEX Sub or any subsidiary
     thereof is a party or to which the Company or any subsidiary thereof or any
     of their respective property is subject; or (iii) subject to receipt of the
     Required Consents, conflict with, or result in a breach or violation of, or
     accelerate the performance required by, the terms of any agreement,
     contract, indenture or other instrument (including oil and gas leases) to
     which CHEX, CHEX Sub or any subsidiary thereof is a party or to which any
     of the Contributed Assets are subject, or constitute a default thereunder
     or an event which, with the lapse of time or notice or both, is likely to
     result in a default thereunder or the creation of any Lien upon any of the
     assets or properties of CHEX, CHEX

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -28-
<PAGE>

     Sub or any subsidiary thereof, excepting in the case of clauses (ii) and
     (iii) above, such conflicts, breaches, violations, accelerations, defaults,
     losses or Liens as would not individually or in the aggregate have a
     Material Adverse Effect.

          (d)  Consents.  Neither the nature of CHEX or CHEX Sub nor any of
               --------
     their respective businesses or properties, nor any relationship between
     CHEX or CHEX Sub and any other Person is such as to require on behalf of
     CHEX or CHEX Sub any consent, approval or authorization, other than
     Customary Filings, of any court or administrative or governmental body in
     connection with the valid execution, delivery and performance of this
     Agreement or fulfillment of or compliance with the terms and provisions
     hereof, other than Customary Filings and other filings which have been made
     or consents obtained or are not required to be made until after the Initial
     Closing Date.

          (e)  Investment Company Status.  CHEX is not and, upon the
               -------------------------
     consummation of the transactions contemplated by this Agreement and the
     Related Agreements, will not be, an "investment company" or a company
     "controlled" by an "investment company" within the meaning of the
     Investment Company Act.

          (f)  Taxes.  All ad valorem, property, production, severance and
               -----
     similar taxes and assessments based on or measured by the ownership of
     property or the production or removal of hydrocarbons or the receipt of
     proceeds therefrom and relating to the Contributed Assets, to the extent
     such taxes and assessments have become due and payable, have been timely
     paid and all applicable tax returns required to be filed have been filed
     and there are no material claims by any applicable taxing authority pending
     against CHEX or any subsidiary applicable to the Contributed Assets.

          (g)  Compliance with Law.  To the extent related to the Contributed
               -------------------
     Assets and except for matters which would not reasonably be expected to
     have a Material Adverse Effect, CHEX and any subsidiary thereof (i) has
     complied with, and is in compliance with, all applicable Laws (including
     without limitation Laws relating to environmental matters, securities,
     properties, production, sales, gathering and transportation of
     hydrocarbons, occupational safety and health and product safety); (ii) has
     not received any written notice, which has not been dismissed or otherwise
     disposed of, that it has not so complied; (iii) has not been charged or, to
     the knowledge of CHEX, formally threatened with or, to the knowledge of
     CHEX, under investigation with respect to any violation of any applicable
     Law; and (iv) is not a party to or subject to the provisions of any
     judgment, order, writ, injunction, decree or award of any court,
     arbitrator, board, panel or Governmental Entity.

          (h)  Proceedings.  There are no Proceedings pending or, to the
               -----------
     knowledge of  CHEX, threatened against CHEX or any of its subsidiaries
     relating to the Contributed Assets or against any of the Contributed Assets
     or affecting the Contributed Assets or the Company or any of the Company's
     properties, at law or in equity, or before or by any Governmental Entity or
     before any arbitration board or panel, wherever located.

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -29-
<PAGE>

          (i)  Environmental Matters. Except for matters that would not have
               ---------------------
     a Material Adverse Effect: (i) the properties, operations and activities of
     the Company and of CHEX with respect to the Contributed Assets are in
     compliance with all applicable Environmental Laws; (ii) the Company and its
     properties and operations and the Contributed Assets and the operations
     thereon are not subject to any existing, pending or, to the knowledge of
     CHEX, threatened Proceedings under any Environmental Law; (iii) to CHEX's
     knowledge, all Permits, if any, required to be obtained or filed by CHEX
     with respect to the Contributed Assets or by the Company in connection with
     the business of the Company under any Environmental Law have been obtained
     or filed and are valid and currently in full force and effect; (iv) there
     has been no release of any Hazardous Material, pollutant or contaminant
     into the environment by CHEX on or with respect to the Contributed Assets;
     (v) to CHEX's knowledge, there has been no exposure of any Person or
     property to any Hazardous Material, pollutant or contaminant in connection
     with the properties, operations and activities related to the Contributed
     Assets; and (vi) CHEX has made available to WPEP all internal and external
     environmental audits and studies and all correspondence on substantial
     environmental matters (in each case relevant to the Company or the
     Contributed Assets) in the possession of CHEX.

          (j)  Title.  CHEX has, and on the Initial Closing Date the Company
               -----
     will have, Defensible Title to the Contributed Assets subject to
     conveyances pursuant to Section 5(h) hereof.

          (k)  Contracts. To CHEX's knowledge, the leases (including oil and
               ---------
     gas leases), contracts, agreements, licenses and permits included in the
     Contributed Assets (the "Contracts") are in full force and effect. CHEX is
     not in breach or default (and, to the knowledge of CHEX, no situation
     exists which with the passing of time or giving of notice would create a
     breach or default) of its obligations under the Contracts (other than
     payment defaults under the Fairfield Agreement) and neither the
     Contribution nor the execution or delivery of this Agreement and the
     Related Agreements or the consummation of the transactions contemplated by
     this Agreement or the Related Agreements will result in a breach or default
     of its obligations under the Contracts.  To the knowledge of CHEX, no
     breach or default by any third party (or situation which with the passage
     of time or giving of notice would create a breach or default) exists. CHEX
     has not received any notice of any claimed defaults, offsets or
     cancellations from any lessors with respect to the Contributed Assets.
     CHEX has provided WPEP with copies of all Contracts and any amendments
     thereto.

          (l)  Permits. Except as would not have a Material Adverse Effect,
               -------
     and subject to Customary Filings, CHEX or one of its subsidiaries, as
     applicable, has all Permits necessary or appropriate to own and operate the
     Contributed Assets that it operates as presently being owned and operated,
     and such Permits are in full force and effect, and, except as would not
     have a Material Adverse Effect, to CHEX's knowledge, there have not been
     any violations with respect to any such Permits.  The execution and
     delivery of this Agreement and the consummation of the transactions
     contemplated hereby will not result in any revocation

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -30-
<PAGE>

     cancellation, suspension or modification of any such Permit except as would
     not have a Material Adverse Effect.

          (m)  Consents, Preferential Rights, etc.  Except as would not have a
               ----------------------------------
     Material Adverse Effect, and other than the Required Consents set forth on
     Appendix 3(a)(v) hereto, neither the Contribution nor the execution or
     delivery of this Agreement and the Related Agreements, or the consummation
     of the agreements and transactions contemplated by this Agreement and the
     Related Agreements requires any consent, approval or waiver from any Person
     for the assignment to the Company of the Contributed Assets including,
     without limitation, with respect to any Contract, oil and gas lease, area
     of mutual interest or seismic data that have not already been obtained (and
     such consents or waivers that have been obtained do not contain any
     requirements on the part of the Company or any Investor and are not
     conditional upon any future event occurring except conditions satisfied on
     or prior to Closing) and all preferential rights to purchase, rights of
     first refusal and any similar rights affecting the Contributed Assets have
     been waived.

          (n)  No Other Activities. Except as contemplated by this Agreement,
               -------------------
     the Company has not engaged in any material business activity.

Section 9.  Termination.
            -----------

          (a)  Termination. This Agreement may be terminated prior to the
               -----------
     Initial Closing:

               (i)   by the unanimous consent of CHEX and WPEP;

               (ii)  by CHEX in the event of a breach by WPEP of any
          representation, warranty, covenant or agreement contained in this
          Agreement which would give rise to the failure of a condition set
          forth in Section 3(a) or 3(c) which cannot be cured or, if curable,
          has not been cured within 15 days following receipt by the breaching
          party of written notice of such breach;

               (iii) by WPEP in the event of a breach by CHEX or the Company
          of any representation, warranty, covenant or agreement contained in
          this Agreement which would give rise to the failure of a condition set
          forth in Section 3(a) or 3(b) which cannot be cured or, if curable,
          has not been cured within 15 days following receipt by the breaching
          party of written notice of such breach;

               (iv)  by CHEX or WPEP if a court of competent jurisdiction or
          other Governmental Entity shall have issued an order, decree or ruling
          or taken any other action (which order, decree or ruling the Company
          and the Investors shall use all commercially reasonable efforts to
          lift), in each case permanently restraining, enjoining, or otherwise
          prohibiting the transactions contemplated by this Agreement, and such
          order, decree, ruling or other action shall have become final and
          nonappealable; provided, however, that the right to terminate this
          Agreement under

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -31-
<PAGE>

          this clause (iv) shall not be available to any party whose breach of
          this Agreement has been the cause of, or resulted in, such order,
          decree, ruling or other action;

               (v)   by CHEX or WPEP if the Initial Closing shall not have
          occurred within 45 days of the date hereof, provided, however, that
          the right to terminate this Agreement under this clause (v) shall not
          be available to any party whose breach of this Agreement has been the
          cause of, or resulted in, the failure of the Initial Closing Date to
          occur within such period.

          (b)  Effect of Termination. In the event of the termination of this
               ---------------------
     Agreement, written notice thereof shall be given to all other parties
     hereto by the terminating party specifying the provision pursuant to which
     the termination is made, and this Agreement shall forthwith become null and
     void, except for liability of a party arising out of willful breach of, or
     misrepresentation under, this Agreement prior to such termination.

Section 10.  Miscellaneous.
             -------------

          (a)  Indemnification.
               ---------------

               (i)  Subject to the limitations set forth herein, CHEX hereby
          agrees to indemnify and hold the Company harmless from and against any
          liabilities, claims, losses, damages, costs and expenses of any kind
          (including, without limitation, the reasonable fees and disbursements
          of the Company's counsel in connection with any investigative,
          administrative or judicial proceeding, whether or not the Company is
          designated as a party thereto) that may be incurred by the Company,
          relating to or arising out of (A) any breach of the representations
          and warranties made by CHEX in Section 7 and Section 8 hereof, (B) any
          operation of the assets of CHEX not contributed to the Company under
          this Agreement, (C) any Excluded Liabilities, (D) ownership or
          operation of the Contributed Assets prior to the Effective Date
          including any liabilities arising with respect to such period (other
          than payment defaults under the Fairfield Agreement), (E) the
          arbitration award relating to the Zydeco Agreement, or (F) the failure
          of CHEX to perform any covenant contained herein required to be
          performed by CHEX.

               (ii) THE PARTIES HERETO INTEND THAT THE INDEMNITIES SET FORTH IN
          THIS SECTION 10(a) BE CONSTRUED AND APPLIED AS WRITTEN ABOVE
          NOTWITHSTANDING ANY RULE OF CONSTRUCTION TO THE CONTRARY.  WITHOUT
          LIMITING THE FOREGOING, THE INDEMNITIES SHALL APPLY NOTWITHSTANDING
          ANY STATE'S "EXPRESS NEGLIGENCE RULE" OR SIMILAR RULE THAT WOULD DENY
          COVERAGE BASED ON AN INDEMNITEE'S SOLE, CONCURRENT OR CONTRIBUTORY
          ACTIVE OR PASSIVE NEGLIGENCE OR GROSS NEGLIGENCE OR STRICT LIABILITY.
          IT IS THE INTENT OF THE PARTIES THAT, TO THE EXTENT PROVIDED IN THIS
          SECTION 10(a), THE INDEMNITIES SET FORTH HEREIN SHALL APPLY TO AN
          INDEMNITEE'S SOLE, CONCURRENT OR CONTRIBUTORY ACTIVE OR PASSIVE
          NEGLIGENCE, GROSS NEGLIGENCE OR STRICT LIABILITY. THE

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -32-
<PAGE>

          PARTIES AGREE THAT THIS PROVISION IS "CONSPICUOUS" FOR PURPOSES OF ALL
          STATE LAWS.

               The indemnification provided for in this Section 10(a) shall be
     made by periodic payments of the amount thereof during the course of the
     investigation or defense, as and when bills are received or expenses,
     losses, damages or liabilities are incurred.

          (b)  Consent to Amendments. This Agreement may be amended and the
               ---------------------
     observance of any term of this Agreement may be waived with (and only with)
     the written consent of the Required Holders; provided, however, that in no
     event shall any amendment impose any additional material obligation on any
     party hereto without such party's written consent.

          (c)  Restrictive Legend. Each Share and any security issued in
               ------------------
     exchange therefor shall bear the legend set forth in Section 7.4 of the
     Stockholders Agreement.

          (d)  Survival of Representations and Warranties. All representations
               ------------------------------------------
     and warranties contained herein or made in writing by or on behalf of any
     party to this Agreement in connection herewith shall survive the execution
     and delivery of this Agreement without limits, regardless of any
     investigation made by or on behalf of any party; provided, however, that
     the representations made in Sections 8(f) through (n) shall only survive
     for eighteen months after the Effective Date.

          (e)  Successors and Assigns; No Third Party. All covenants and
               --------------------------------------
     agreements in this Agreement contained by or on behalf of the parties
     hereto shall bind and inure to the benefit of the respective successors and
     assigns of the parties hereto and, to the extent provided in this
     Agreement, to the benefit of any future holders of Shares issued pursuant
     to this Agreement.  Subject to the foregoing and except as provided in
     Section 10(a) and (b), nothing in this Agreement shall confer upon any
     person or entity not a party to this Agreement, or the legal
     representatives of such person or entity, any rights or remedies of any
     nature or kind whatsoever under or by reason of this Agreement. No transfer
     of Shares shall relieve any party of its obligations hereunder, if the
     transferee of such Shares does not perform any assumed obligation.
     Notwithstanding anything to the contrary contained herein, but subject to
     Section 2(c)(ii) hereof, the right to participate in Subsequent Financings
     pursuant to this Agreement is not transferable or assignable without the
     prior written consent of the Company and each Eligible Investor.

          (f)  Notices. All communications provided for hereunder shall be
               -------
     personally delivered, sent via overnight delivery service, sent by
     facsimile or sent by registered or certified mail and, if to the Investors,
     addressed to each Investor at its address or facsimile number specified on
     the signature page hereof or such other address or facsimile number as such
     Investor may designate in writing from time to time and, if to the Company,
     addressed to Gryphon Exploration Company, Attention: Michael Harvey, Two
     Allen Center, 1200 Smith Street, Suite 1740, Houston, Texas  77002,  or
     such other address as the Company may designate in writing from time to
     time.  Communications personally delivered or sent

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -33-
<PAGE>

     via overnight delivery service or facsimile shall be deemed received when
     delivered, and communication sent by registered or certified mail shall be
     deemed to have been received on the fifth Business Day after the date of
     such mailing.

          (g)  Descriptive Headings. The descriptive headings of the several
               --------------------
     Sections of this Agreement are inserted for convenience only and do not
     constitute a part of this Agreement.

          (h)  Satisfaction Requirement. If any agreement, certificate or
               ------------------------
     other writing, or any action taken or to be taken, is by the terms of this
     Agreement required to be satisfactory to the Investors, the determination
     of such satisfaction shall be made collectively by the Investors in their
     reasonable judgment exercised in good faith.

          (i)  Governing Law. This Agreement shall be construed and enforced
               -------------
     in accordance with, and the rights of the parties shall be governed by, the
     law of the State of Texas, without giving effect to the choice of law or
     conflicts principles thereof.

          (j)  Entire Agreement. This Agreement and the other writings
               ----------------
     referred to herein or delivered pursuant hereto contain the entire
     agreement among the parties with respect to the subject matter hereof and
     supersede all prior and contemporaneous arrangements or understandings with
     respect thereto.

          (k)  Severability. Any provision of this Agreement that is
               ------------
     prohibited or unenforceable in any jurisdiction shall, as to such
     jurisdiction, be ineffective to the extent of such prohibition or
     unenforceability without invalidating the remaining provisions hereof, and
     any such prohibition or unenforceability in any jurisdiction shall not
     invalidate or render unenforceable such provision in any other
     jurisdiction.

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -34-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have each executed this Agreement as
of the date first set forth above.

                              GRYPHON EXPLORATION COMPANY

                              By: _______________________________________
                                  Name:
                                  Title:

                              CHENIERE ENERGY, INC.
                                  1200 Smith Street, Suite 1740
                                  Houston, TX

                              By: _______________________________________
                                  Name:
                                  Title:

                              CHENIERE-GRYPHON MANAGEMENT, INC.
                                  1200 Smith Street, Suite 1740
                                  Houston, TX

                              By: _______________________________________
                                  Name:
                                  Title:

                              WARBURG, PINCUS EQUITY PARTNERS, L.P.
                                  466 Lexington Avenue, 10th Floor
                                  New York, New York 10017

                              By: Warburg Pincus & Co., its general partner

                              By: _______________________________________
                                  Name:
                                  Title: Partner

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -35-
<PAGE>

                              WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I,
                              C.V.
                                  466 Lexington Avenue, 10th Floor
                                  New York, New York 10017

                              By: Warburg Pincus & Co., its general partner

                              By: _______________________________________
                                  Name:
                                  Title: Partner

                              WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II,
                              C.V.
                                  466 Lexington Avenue, 10th Floor
                                  New York, New York 10017

                              By: Warburg Pincus & Co., its general partner

                              By: _______________________________________
                                  Name:
                                  Title: Partner

                              WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III,
                              C.V.
                                  466 Lexington Avenue, 10th Floor
                                  New York, New York 10017

                              By: Warburg Pincus & Co., its general partner

                              By: _______________________________________
                                  Name:
                                  Title: Partner

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -36-
<PAGE>

                              _______________________________________
                              MICHAEL HARVEY

                              _______________________________________
                              RON KRENZKE

                          GRYPHON EXPLORATION COMPANY
                    Contribution and Subscription Agreement

                                      -37-

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