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UNDERWATER ENGINEERING SERVICES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 AND 2016 Note 7 - Retirement Plans (cont'd.) The obligation of the Company to provide benefits to the Rabbi Plan shall be the sole unsecured promise of the Company with respect to this plan. The Company has a Trust agreement for the purpose of setting aside funds to provide for the payment of benefits under the Rabbi Plan. The assets of the Trust shall at all times remain subject to the claims of the general creditors of the Company and no participant or beneficiary shall have any claim or right with respect to the assets held in the Trust, except to the extent that the participant is a general creditor of the related party. The Company is part of an Employee Stock Ownership Plan ("ESOP") for all eligible employees who are at least 21 years old and have a minimum of one (1) year of service (generally, 1,000 or more hours of service per year). The ESOP's records are maintained on a twelve-month period of time ("Plan Year"), January 1 to December 31. Contributions may be made in the form of either cash or employer stock at the sole discretion of the Company. Cash and/or stock contributed to the ESOP will be put into a Trust run by a duly appointed trustee. If the employer's stock is contributed, it will be valued at its current fair market value. The employer's contribution will be "allocated" to, or divided among, participants eligible to share in the contribution for the Plan Year. Half of the contribution will be allocated among the participants based upon an employee's total compensation of $270,000, as indexed, during the Plan Year as a percentage of the total compensation of eligible participants. The other half of the contribution will be allocated among the participants based upon an employee's credited years of service as a percentage of the total number of credited years of service of all eligible participants. A credited year equals a year in which an employee was credited with 1,000 hours or more of service, including service prior to the effective date of the ESOP with the Company or its acquired companies. The law limits the amount allowed to be allocated to an employee to the lesser of $54,000, as indexed, or 100 percent of an employee's compensation. This limit is increased by a $6,000 catch-up for employees 50 and older in 401(k), 403(b), and 457 plans. Note 8 - Commitments and Contingencies Leases The Company leases office space, equipment and automobiles under noncancellable operating leases requiring future minimal rental payments as follows: Years Ending December 31: 2018 $ 9,336 2019 7,898 2020 7,898 2021 7,898 $ 33,030 Rent expense charged to operations for the years ended December 31, 2017 and 2016 was approximately $135,000 and $140,000, respectively, of which, approximately $118,000 and $118,000, respectively, was paid to the related parties under a month-to-month lease arrangement. 13