Document:

Exhibit 10.31

Exhibit 8 to Form of Security Agreement                            Document 20

                          SUBORDINATED LOAN COMMITMENT

         This Subordinated Loan Commitment dated October 31, 2001 by and between
Chiles Offshore Inc., a Delaware corporation (the "Subordinated Lender") and
Chiles Galileo LLC, a Delaware limited liability company (the "Shipowner").

                                    RECITALS

         A.       The United States of America, represented by the Secretary of
                  Transportation, acting by and through the Maritime
                  Administrator (the "Secretary") has on the date hereof entered
                  into a Commitment to Guarantee Obligations under Title XI of
                  the Merchant Marine Act, 1936, as amended, (the "Commitment")
                  pursuant to which the Secretary has agreed, subject to
                  conditions set forth in the Commitment, to guarantee
                  Obligations issued by the Shipowner in a principal amount not
                  to exceed $81,000,000;

         B.       In order to provide security to the Secretary for his
                  Guarantees, the Shipowner has entered into a Security
                  Agreement, Contract No. MA-13674, dated the date hereof, with
                  the Secretary (the "Security Agreement") and a Title XI
                  Reserve Fund and Financial Agreement, Contract No. MA-13676,
                  dated the date hereof, with the Secretary (the "Financial
                  Agreement");

         C.       The Subordinated Lender is the sole member of the Shipowner;

         D.       The  Secretary has required, as a condition to the Commitment,
                  that the Subordinated  Lender
                  provide financial assistance to the Shipowner;

         E.       The Subordinated Lender is willing to provide such assistance
                  on the terms agreed and set forth herein.

         NOW THEREFORE, in consideration of the premises, and of other good and
valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Shipowner and the Subordinated Lender agree, and confirm that
their agreement is for the benefit of and enforceable by the Secretary, as
follows:

         1.       Capitalized terms used herein which are not defined herein and
                  are defined in Schedule X to the Security Agreement shall have
                  the meanings ascribed to them in Schedule X.

         2.       The  Subordinated Lender shall lend the Shipowner amounts, as
                  required, to pay for the difference between the capitalizable
                  cost of the Vessel and the proceeds of the Obligations.

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Exhibit 8 to Form of Security Agreement                            Document 20

         3. The Subordinated Lender shall lend the Shipowner at delivery of the
            Vessel an amount which will cause: (1) the Shipowners to have
            positive Working Capital including Cash or Cash Equivalents at least
            equal to the next year's mandatory principal payments due on the
            Obligations; and (2) the Shipowner's Long-Term Debt not to exceed
            two times its Net Worth.

         4. The Shipowner may at its election (and, if the provisions of Section
            5 or 6 hereof are in effect, shall) borrow from the Subordinated
            Lender at any time when the Guarantees on any Obligations are in
            effect an amount not to exceed in the aggregate (a) the sum of (i)
            the amount of mandatory principal payments due on the Obligations in
            the next one-year period and (ii) the amount of interest on the
            Obligations to be paid during the next two-year period after giving
            effect to all mandatory payments of principal scheduled to occur
            during said two-year period, less (b) the sum of all amounts
            previously borrowed under Sections 4, 5 and 6 of this Subordinated
            Loan Commitment.

         5. In the event that the Shipowner does not timely deposit with the
            Indenture Trustee in accordance with Section 3.09 of the General
            Provisions to the Indenture funds sufficient to make any mandatory
            principal payments of Obligations and to pay interest on the
            Obligations due on that Interest Payment Date, the Shipowner shall,
            subject to the aggregate limitation on the obligation of the
            Subordinated Lender in Section 4, borrow from the Subordinated
            Lender funds which, together with funds on deposit with the
            Indenture Trustee, are sufficient to redeem said Obligations and pay
            said interest on said Interest Payment Date. These funds will be
            paid directly by the Subordinated Lender to the Indenture Trustee.
            If at any time the Shipowner does not immediately borrow said funds,
            the Secretary shall, subject to the aggregate limitation on the
            obligation of the Subordinated Lender in Section 4, have the right
            to compel the Subordinated Lender to lend said funds to the
            Shipowner as aforesaid. There is no limit to the number of times
            this right can be exercised by the Secretary. This right shall be
            exercised by giving notice to the Subordinated Lender in the form
            attached as Exhibit A hereto.

         6. In the event that, as established by a financial statement filed in
            accordance with Section 7 below, the Subordinated Lender's (a)
            Long-Term Debt exceeds two times its Net Worth; (b) Working Capital
            is not equal to at least one dollar; or (c) Net Worth is not at
            least equal to $193,673,000, then the Secretary shall have the right
            to compel the Subordinated Lender to lend to the Shipowner an amount
            equal to (i) the maximum amount remaining available under the
            provisions of Section 4 hereof, less (ii) the amount, if any, as
            established by the Shipowner's most recent financial statement filed
            in accordance with the Financial Agreement, by which the Shipowner's
            Working Capital (adjusted to exclude receivables outstanding for
            more than 90, rather than 60, days) exceeds one dollar.

         7. The Subordinated Lender shall file with the Secretary audited and
            unaudited

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Exhibit 8 to Form of Security Agreement                            Document 20

            financial statements at the times provided in 46 C.F.R. 298.42, as
            now in effect. All financial statements shall be in accordance with
            generally accepted accounting principles.

         8. All obligations of the Subordinated Lender under this Subordinated
            Loan Commitment shall cease upon the earlier of: (a) the Secretary's
            exercise of his rights under Section 6 hereof and the Subordinated
            Lender's compliance with its obligations under Section 6; (b) the
            filing with the Secretary by the Shipowner of a quarterly financial
            statement certified by an independent certified public accountant
            showing that the Shipowner's Long-Term Debt does not exceed its Net
            Worth and that it has Working Capital of at least one dollar; or (c)
            the Guarantees on each of the Obligations of the Shipowner terminate
            pursuant to the provisions of Section 3.02(a), (b) or (d) of the
            Security Agreement.

         9. All obligations of the Shipowner to repay any amounts borrowed by
            the Shipowner under this Subordinated Loan Commitment shall be
            subordinate to the rights of the Secretary as set forth in the
            Subordination Agreement attached hereto and made a part hereof by
            this reference among the Subordinated Lender, the Shipowner, and the
            Secretary dated the date hereof and no moneys borrowed shall be
            repaid except in accordance with the terms of said Subordination
            Agreement.

        10. The Shipowner and the Subordinated Lender confirm that this
            Subordinated Loan Commitment is for the benefit of the Secretary and
            shall be enforceable against each of them by the Secretary.

                            [Signature page follows]

                                       3

<PAGE>

          IN WITNESS WHEREOF, the Subordinated Lender and the Shipowner has
executed this Subordinated Loan Commitment this 31st day of October, 2001.

                                        CHILES OFFSHORE INC.

                                        BY: /s/ DICK FAGERSTAL
                                            ----------------------------------
                                            Senior Vice President

SHIPOWNER:                              CHILES GALILEO LLC

                                        BY: /s/ DICK FAGERSTAL
                                            ----------------------------------
                                            Senior Vice President

<PAGE>

                                    EXHIBIT A

         Reference is made to Section 5 of the Subordinated Loan Commitment by
Chiles Offshore Inc. to Chiles Galileo LLC dated _______________, 2001. Terms
defined in said Commitment shall have the same meaning when used herein.

         Notice is hereby given under Section 5 of said Commitment that Chiles
Offshore Inc. shall lend $ to the Indenture Trustee in immediately available
funds.

(SEAL)

                                        UNITED STATES OF AMERICA,
                                        SECRETARY OF TRANSPORTATION,
Attest:                                 MARITIME ADMINISTRATOR

                                        BY:
---------------------------------           ----------------------------------
Assistant Secretary
Maritime AdministrationExhibit 10.32

                                                                EXECUTION COPY
                                                                --------------
Exhibit 9 to Security Agreement                                    Document 21
                                                       Contract No. MA - 13678
                                                                         -----

                             SUBORDINATION AGREEMENT

         THIS SUBORDINATION AGREEMENT, dated as of October 31, 2001 (the
"Subordination Agreement"), is made by and among Chiles Galileo LLC, a Delaware
limited liability company (the "Debtor"), Chiles Offshore, Inc., a Delaware
corporation, its successors and assigns (the "Subordinated Creditor"), and the
United States of America, represented by the Secretary of Transportation, acting
by and through the Maritime Administrator (the "Secretary" or the "Senior
Creditor", and together with the Debtor and the Subordinated Creditors, the
"Parties").

                              W I T N E S S E T H:

         WHEREAS, the Debtor has issued Obligations guaranteed by the Secretary
pursuant to Title XI of the Merchant Marine Act, 1936 (the "Guarantee");

         WHEREAS, in connection with the Guarantee, the Debtor executed that
certain promissory note in favor of the Secretary, as Obligee, in the amount of
the Obligations (the "Secretary's Note");

         WHEREAS, the Debtor has entered into that certain Security Agreement,
Contract No. MA-13674 (the "Security Agreement"), dated the date hereof, with
the Secretary in connection with the Guarantee;

         WHEREAS the Subordinated Lender is the sole member of the Debtor;

         WHEREAS, the Debtor and the Subordinated Creditor have entered into a
Subordinated Loan Commitment dated the date hereof (the "Subordinated Loan
Commitment") whereby the Subordinated Lender has agreed to advance funds to the
Debtor as therein provided;

         WHEREAS, the Debtor has agreed in the Security Agreement to make no
distributions to its members except in accordance with the Subordinated Loan
Commitment;

         NOW THEREFORE, in consideration of the premises and the mutual
agreements contained herein, and of other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged and in order to induce the
Secretary to issue the Guarantees, the parties hereto, intending to be legally
bound, do hereby agree as follows:

         1. DEFINITIONS. For purposes of this Subordination Agreement,
capitalized terms used but undefined herein shall have the meanings
ascribed to them in Schedule X to the Security Agreement, and the following
terms shall have the following meanings:

         "Senior Debt" means all amounts and other obligations (including,
without limitation, all principal, interest, fees, expenses and indemnities) now
or hereafter owing from the Debtor, its successors and assigns, including,
without limitation, all amounts due to the Senior Creditor, its successors and
assigns, under the Secretary's Note, or any promissory notes, security
agreements, guaranties or other documents or instruments related thereto
whenever executed.

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                                                                EXECUTION COPY
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Exhibit 9 to Security Agreement                                    Document 21
                                                       Contract No. MA - 13678
                                                                         -----

                  "Senior Liens" means all liens, mortgages, security interests
and/or other encumbrances of any nature or type, now or hereafter securing, in
whole or in part, any of the Senior Debt.

                  "Senior Loan Documents" means any agreements, documents, or
instruments now or hereafter evidencing or securing all or any portion of the
Senior Debt, including, without limitation, the Secretary's Note.

                  "Subordinated Debt" means all amounts and other obligations
(including, without limitation, all principal, interest, fees, expenses and
indemnities) now or hereafter owing from the Debtor, its successors and assigns,
to the Subordinated Creditor, its successors or assigns, under the Subordinated
Loan Commitment.

                  "Subordinated Loan Documents" means any agreements, documents,
or instruments now or hereafter evidencing or securing all or any portion of the
Subordinated Debt, including without limitation, the Subordinated Loan
Commitment.

                  2. CONSENT OF SUBORDINATED CREDITOR. Notwithstanding any of
the terms of the Subordinated Loan Documents, the Subordinated Creditor does
hereby subordinate the Debtor's payment of any distribution to which it is
entitled under the Subordinated Loan Documents to the Debtor's payment of all
amounts due under the Senior Loan Documents; provided, however, that the Debtor
may pay a distribution as set forth herein.

                  3. SUBORDINATION OF SUBORDINATED DEBT. So long as no default,
or event which with notice or the passage of time or both would constitute a
default, has occurred or is continuing under or with respect to the Senior Loan
Documents or the Subordinated Loan Documents, the Debtor may repay the
Subordinated Debt to the extent the Debtor is permitted to make distributions
under the terms of the Financial Agreement.

                  4. THE SUBORDINATED CREDITOR AND LIENS. The Subordinated
Creditor hereby agrees that so long as the Senior Debt remains outstanding, the
Subordinated Debt shall not be secured by any liens, security interests,
mortgages, hypothecations, or any other type of encumbrance whatsoever.

                  5. DISTRIBUTIONS UPON DEBTOR INSOLVENCY. (a) Upon (i) any
distribution of assets of Debtor in connection with any dissolution, winding up
or liquidation of the Debtor (whether in bankruptcy, insolvency, or receivership
proceedings, upon an assignment for the benefit of creditors or otherwise), (ii)
any other marshaling of the assets and liabilities of the Debtor, or (iii) the
reorganization of the Debtor (the events in clauses (i), (ii) and (iii) above
hereinafter collectively referred to as "Debtor Insolvency"), Senior Creditor
will first be entitled to receive payment in full, in accordance with the terms
of the Senior Loan Documents, of all sums owing under or in respect of the
Senior Debt before the Subordinated Creditor shall be entitled to receive from
the Debtor any payment owing under the Subordinated Loan Documents or in respect
of the Subordinated Debt.

                  (b) Upon default by the Debtor under any of the Senior Debt or
Senior Loan Documents, or Debtor Insolvency, Senior Creditor is hereby
irrevocably authorized and empowered (in its own name or in the name of the
Subordinated Creditor or otherwise), but shall have no obligation, to demand,
sue for, collect and receive every payment or distribution referred to herein,
and give acquittance for and to

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                                                                EXECUTION COPY
                                                                --------------
Exhibit 9 to Security Agreement                                    Document 21
                                                       Contract No. MA - 13678
                                                                         -----

file claims and proofs of claim and to take such other action with respect to
the Subordinated Debt as Senior Creditor may deem necessary or advisable for
the exercise or enforcement of any of its rights or interests hereunder.

         (c) To the extent there are any sums owing in respect of the Senior
Debt, the Subordinated Creditor shall duly and promptly take such action as
Senior Creditor may reasonably request (i) to collect the Subordinated Debt for
the account of the Senior Creditor and to file appropriate claims or proofs of
claim in respect of the Subordinated Debt; (ii) to execute and deliver to Senior
Creditor such powers of attorney, assignments or other instruments as Senior
Creditor may request in order to enable Senior Creditor to enforce any and all
of the Subordinated Creditors' claims with respect to the Subordinated Debt, and
(iii) to collect and receive any and all payments or distributions which may be
payable or deliverable upon or with respect to the Subordinated Debt.

         6. PAYMENTS RECEIVED CONTRARY TO THIS AGREEMENT. All payments or
distributions upon or with respect to the Subordinated Debt which are received
by the Subordinated Creditor contrary to the provisions of this Agreement, shall
be received in trust for the benefit of Senior Creditor, shall be segregated
from other funds and property held by the Subordinated Creditor and shall be
forthwith paid to Senior Creditor in the same form as so received (with any
necessary endorsement) to be applied to the payment or prepayment of the Senior
Debt in accordance with the terms of the Senior Loan Documents.

         7. DEFAULT AND ENFORCEMENT OF SUBORDINATED DEBT. In the event of a
default with respect to the Senior Debt or the Subordinated Debt, or event which
with notice or the passage of time or both would constitute a default, has
occurred or is continuing under or with respect to the Senior Debt or the
Subordinated Debt, the Debtor shall not repay the Subordinated Debt unless and
until the Senior Debt has been paid in full; provided, however, that in the
event of a default under the Subordinated Debt, the Subordinated Creditor may
seek recourse against the Debtor, but only with the prior written consent of the
Secretary, which shall be granted or withheld in his sole discretion.

         8. DEFAULT AND NET WORTH OF DEBTOR. In the event and during the
continuance of any default by the Debtor or the Subordinated Creditor in the
observance or performance of any of the provisions of this Subordination
Agreement, the Subordinated Debt shall forthwith cease to be included in Net
Worth, as defined in the Financial Agreement, without any requirement for
notice, demand, or other action by the Secretary.

         9. DEBTOR'S REPRESENTATIONS AND WARRANTIES. The Debtor hereby
represents and warrants to the Secretary (a) that the factual statements set
forth in the recitals herein are true and accurate; and (b) that it has made all
Senior Loan Documents available to the Subordinated Creditor.

         10. SUBORDINATED CREDITOR'S REPRESENTATIONS AND WARRANTIES. The
Subordinated Creditor hereby represents and warrants to the Secretary (a) that
the factual statements set forth in the recitals herein are true and accurate;
and (b) that it has either reviewed all the Senior Loan Documents or hereby
waives review thereof.

         11. SPECIFIC PERFORMANCE. The Subordinated Creditor hereby agrees that
Senior Creditor is hereby authorized to demand specific performance of this
Agreement at any time the Subordinated Creditor shall have failed to comply with
any of the provisions of this Agreement applicable

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                                                                EXECUTION COPY
                                                                --------------
Exhibit 9 to Security Agreement                                    Document 21
                                                       Contract No. MA - 13678
                                                                         -----

to it. The Subordinated Creditor hereby irrevocably waives any defense based
on the adequacy of a remedy at law, which might be asserted as a bar to such
remedy of specific performance.

         12. ASSIGNMENTS AND OTHER INSTRUMENTS. The Subordinated Creditor agrees
to execute and deliver to Senior Creditor such assignments or other instruments
as may be reasonably requested by Senior Creditor to enable it to enforce its
rights hereunder.

         13. REFERENCES TO SUBORDINATION. Upon the request of the Secretary, the
Subordinated Creditor (a) shall cause the Subordinated Loan Documents, and any
amendment, renewal or extension thereof, to refer, in form and substance
satisfactory to the Secretary, to the fact that the indebtedness evidenced by
each such instrument is subordinated to the Senior Debt under this Subordination
Agreement; (b) shall further mark its books of accounts in such a manner as
shall be effective to give proper notice of the effect of this Agreement; and
(c) shall, at any time and from time to time, promptly execute and deliver all
additional instruments and documents, and take all further action, as may be
necessary or desirable, in the discretion of Senior Creditor, to protect any
right or interest granted or purported to be granted by this Agreement and to
enable Senior Creditor to exercise and enforce its rights and remedies
hereunder.

         14. NO LIABILITY FOR ACTIONS BY SENIOR CREDITOR. The parties hereto
agree that Senior Creditor shall not be liable for any action or failure to act
under or in connection with any of the documents or instruments creating the
Senior Liens or the Senior Debt, it being understood that the decision of
whether and when to act and the manner of proceeding under such instruments and
documents are within the sole discretion of Senior Creditor and shall not be
affected in any manner by the existence of the Subordinated Debt and the
Subordinated Liens. The Parties hereto further agree that such obligations as
may be imposed under the documents and instruments creating the Senior Liens or
under the Uniform Commercial Code or other applicable laws shall run exclusively
to the benefit of the Senior Creditor and may be enforced or waived by the
Senior Creditor and not by the Subordinated Creditor.

         15. NO DUTY TO INFORM SUBORDINATED CREDITORS. Nothing in this Agreement
shall be construed as imposing on Senior Creditor an obligation to inform the
Subordinated Creditor of any defaults arising under the Senior Loan Documents or
to provide the Subordinated Creditor with any financial or other information of
which Senior Creditor is or becomes aware with respect to the Debtor. Without
limiting the generality of the foregoing, Senior Creditor shall not be obligated
to provide the Subordinated Creditor with a notice that an event of default has
occurred under the Senior Loan Documents

         16. RIGHTS OF SUBROGATION. The Subordinated Creditor agrees that no
payment or distribution to Senior Creditor pursuant to the provisions of this
Agreement shall entitle the Subordinated Creditor to exercise any rights of
subrogation in respect thereof until the Senior Debt has been paid in full.

         17. NO ASSIGNMENT OF SUBORDINATED DEBT. The Subordinated Creditor shall
not, without Senior Creditor's prior written consent, sell, assign, pledge,
encumber or otherwise dispose of any of the Subordinated Debt, and any attempt
to do so shall be null and void ab initio.

                                       4

<PAGE>

                                                                EXECUTION COPY
                                                                --------------
Exhibit 9 to Security Agreement                                    Document 21
                                                       Contract No. MA - 13678
                                                                         -----

         18. OBLIGATIONS HEREUNDER NOT AFFECTED. All rights and interests of
Senior Creditor hereunder, and all agreements and obligations of the
Subordinated Creditor hereunder, shall remain in full force and effect
irrespective of: (a) any lack of validity or enforceability of the Senior Loan
Documents or any other agreement or instrument relating thereto; (b) any change
in the time, manner or place of payment of, or in any other term of, all or any
of the Senior Debt, or any other amendment or waiver of or any consent to the
departure from the Senior Loan Documents; (c) any exchange, release or
nonperfection of any Senior Lien, or any release or amendment or waiver of or
consent to departure from any guaranty supporting all or any portion of the
Senior Debt; or (d) any other circumstances which might otherwise constitute a
defense available to, or a discharge of the Debtor in respect of the Senior Debt
or the Subordinated Creditor in respect of this Agreement. This agreement shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Senior Debt is rescinded or must be otherwise returned
by Senior Creditor upon Debtor Insolvency, all as though such payment had not
been made.

         19. WAIVER. The Subordinated Creditor and the Debtor hereby waive
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Senior Debt and this Agreement and any requirement that Senior
Creditor protect, secure or insure any security interest or lien or property
subject thereto or exhaust any right or take any action against the Debtor or
any other person or entity or any collateral.

         20. MISCELLANEOUS

         (a) GOVERNING LAW. This Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their respective successors and assigns,
and shall be construed and enforced in accordance with the laws of the District
of Columbia.

         (b) SEVERABILITY. If any of the provisions or terms of this Agreement
shall for any reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other of the terms hereof, and this
agreement shall be construed as if such unenforceable term had never been
contained herein.

         (c) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original Agreement but all of
which together shall constitute one and the same instrument.

         (d) HEADINGS. The descriptive headings herein are for convenience only
and shall not affect the meaning or construction of any of the
provisions hereof.

         (e) NOTICES. All notices and other communications provided for in this
Agreement shall be in writing (unless otherwise specified) and shall be
transmitted by facsimile transmission and shall be mailed (with first class
postage prepaid, return receipt requested) or sent or delivered to each party at
the address set forth under its name on the signature page hereof, or at such
other address as shall be designated by such party in a written notice to each
other party. Except as otherwise specified, all such notices and communications
if duly given or made shall be effective upon receipt.

                                       5

<PAGE>

                                                                EXECUTION COPY
                                                                --------------
Exhibit 9 to Security Agreement                                    Document 21
                                                       Contract No. MA - 13678
                                                                         -----

         (f) CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES. The Subordinated
Creditor hereby irrevocably submits to the jurisdiction of the federal District
Court for the District of Columbia, in any action or proceeding brought to
enforce or otherwise arising out of or relating to this Agreement, and
irrevocably waives to the fullest extent permitted by law any objection which it
may now or hereafter have to the laying of venue in any such action or
proceeding in such forum and hereby further irrevocably waives any claim that
such forum is an inconvenient forum. The Subordinated Creditor agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in any other jurisdiction by suit on the judgment or in any manner
provided by law. Nothing herein shall impair the right of Senior Creditor to
bring any action or proceeding against the Subordinated Creditor or its
respective properties in the courts of any other jurisdiction, and the
Subordinated Creditor irrevocably submits to the nonexclusive jurisdiction of
the appropriate courts of the jurisdiction or jurisdictions in which the
Subordinated Creditor is incorporated, or in any place or places where property
or an office of the Subordinated Creditor is located.

         (g) ENTIRE AGREEMENT; AMENDMENT. This Agreement represents the entire
Agreement between the parties hereto and, except as expressly provided herein,
shall not be affected by reference to any other documents. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but such may be accomplished only by an instrument in writing
signed by the parties hereto.

         (h) COSTS OF ENFORCEMENT. The Subordinated Creditor agrees to pay to
Senior Creditor any and all costs and expenses, including attorney's fees,
incurred by Senior Creditor as a result of the Subordinated Creditor's default
hereunder and/or in protecting and/or enforcing the rights of Senior Creditor
under this Agreement whether or not a lawsuit is commenced. Attorneys' fees, in
either case, shall include services rendered at both the trial and appellate
levels, as well as services rendered subsequent to judgment and obtaining
execution thereon. Costs and expenses, including attorneys' fees, shall be
considered as part of the Senior Debt, as that term is used herein.

         (i) CONTINUING AGREEMENT. This Agreement is solely for the benefit of,
and shall be enforceable by Senior Creditor, and its successors, transferees and
assigns, and no other person or persons shall have any right, benefit, priority,
or interest under, or because of the existence of, this Agreement. This
Agreement is a continuing agreement and shall (a) remain in full force and
effect until the Senior Debt shall have been paid in full, and (b) be binding on
the Subordinated Creditor, its respective successors or assigns. Without
limiting the generality of the foregoing, Senior Creditor may assign or
otherwise transfer any other promissory note held by it evidencing the Senior
Debt to any other person or entity, and such other person or entity shall
thereupon become vested with all the rights in respect thereof granted to Senior
Creditor herein.

                                       6

<PAGE>

         IN WITNESS WHEREOF, the parties have duly executed or have caused this
Agreement to be duly executed by their respective signatories hereunto duly
authorized, and have duly caused their seals to be affixed hereto as of the date
and year first above written.

                                       THE SUBORDINATED CREDITOR

                                       CHILES OFFSHORE INC.

                                       BY:  /s/ DICK FAGERSTAL
                                           ---------------------------------
                                       Name:    Dick Fagerstal
                                       Title:   Senior Vice President
                                       Address: 1370 Avenue of the Americas,
                                                New York, NY 10019
                                                Facsimile No.: (212) 582-8522

                                       THE SENIOR CREDITOR

                                       UNITED STATES OF AMERICA
                                       SECRETARY OF TRANSPORTATION
                                       MARITIME ADMINISTRATOR

                                       By:       /s/ JOEL C. RICHARD
                                           ---------------------------------
                                       Name:         Joel C. Richard
                                       Title:        Secretary
                                       Address:      400 7th St. S.W.
                                                     Washington, D.C. 20590
                                       Facsimile No. (202) 366-7901

                                       THE DEBTOR

                                       CHILES GALILEO LLC

                                       BY:  /s/ DICK FAGERSTAL
                                           ----------------------------------
                                       Name:    Dick Fagerstal
                                       Title:   Senior Vice President
                                       Address: 1370 Avenue of the Americas,
                                                New York, NY 10019
                                                Facsimile No.: (212) 582-8522

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