We do not own any real property. We currently lease approximately 50,000 square feet of office space in Deerfield Beach, Florida under a lease agreement with 2200 Deerfield Florida LLC. The lease expires on March 31, 2016 and we have the option to extend the term for two additional 36-month periods, as well as the right to terminate the lease within the first five years. The monthly rent increases every 12 months, starting at $62,500 and ending at approximately $81,550.
In March 2008, we closed our New York sales office, which accounted for approximately 20% of our sales activity for 2007. We also reduced sales and sales support staff in our Florida office. As a result of the closure, we terminated 34 licensed sales agents and eliminated eight open licensed sales positions, which were vacated subsequent to December 31, 2007. In October 2008, we further reduced our Telesales sales and sales support staff in our Florida office and terminated 51 employees, including 22 agents. Management believes these reductions will result in the reduced expenses in excess of reduced revenue.
Severance and other compensation expense was $505,610 in 2008 as compared to $365,651 in 2007. The increase was the result of severance expense as a result of the termination of Ivan Spinner.
During the first quarter of 2008, we determined that the portion of the license fee paid by Telesales for a commission system, together with capitalized costs incurred to implement the commission system, was impaired as a result of the absence of definitive plans to implement this system for internal use in Telesales. We recorded a $295,633 expense in the first quarter of 2008 to write-off the value of this asset.
In 2008, we had an increase of $350,349 in other expense as compared to 2007, primarily due to estimated cost of settling certain litigation.
The Company’s advance agreement with Golden Rule Insurance Company (“Golden Rule”) is contractually limited to a maximum of $9,000,000, can be terminated by either party at any time, and in the event of termination the Company’s outstanding advance balance (including interest, if any) can be called by Golden Rule with seven days written notice. The Company’s advance agreement with Golden Rule expired on December 31, 2008 and thereafter Golden Rule will no longer advance first year premium commissions to the Company. As of December 31, 2008 the Company’s outstanding advance balance with Golden Rule was $2,317,003. Subsequent to December 31, 2008 in connection with the Company’s execution of a client transition agreement with eHealthInsurance Services, Inc. (“eHealth”), eHealth paid Golden Rule $966,097, which represented a partial repayment of the Company’s outstanding advance balance owed to Golden Rule, from amounts that otherwise would have been due the Company from eHealth. In addition eHealth assumed approximately $794,000 of the Company’s outstanding advance balance with Golden Rule as of the date of the eHealth transaction.
On February 15, 2008, Mr. Eissa and Mr. Spinner returned to the Company in aggregate 20,749 shares of the 100,000 shares of the Company’s Common Stock that vested to them on this date as consideration for the Company paying their estimated tax liabilities pursuant to the terms of their February 15, 2007 restricted stock grants. The shares were valued at $1.32 per share based on closing price of our Common Stock on the OTCBB on February 15, 2008.
On September 10, 2007, the Company and Mr. Brauser entered into a Separation and Transitional Services Agreement, which, among other things, extended the exercisable period of Mr. Brauser’s exercisable options for an additional year. The Company recorded $106,925 of compensation expense as a result of the modification of the Brauser Option, which was valued as of September 10, 2007 using the Black-Scholes option-pricing model based on the following assumptions: expected volatility of 50%, risk free interest rate of 4.77%, expected life of 2 years and 0% assumed dividend yield.
Pursuant to a written employment agreement, which we amended on March 31, 2008, Mr. Charles Eissa serves as our President. Pursuant to his amended employment agreement, his annual base salary is $250,000 per year. He is entitled to receive such bonus compensation as a majority of the members of our board of directors may determine from time to time. Mr. Eissa’ s amended employment agreement is effective beginning on March 31, 2008 and expires on March 31, 2009, subject to automatic annual renewals.
On March 31, 2009, Charles Eissa, the Company’s President, and the Company agreed to a Separation of Employment and General Release Agreement whereby Mr. Eissa and the Company mutually agreed that Mr. Eissa’s employment terminated effective March 31, 2009 (“Separation Date”). Under the terms of the agreement the Company will continue to pay Mr. Eissa his current base salary for a period of fourteen (14) months after the Separation Date, less applicable tax withholding, which will be paid in equal installments in accordance with the Company’s normal payroll practices. The Company will provide Mr. Eissa with continued medical, dental and vision coverage at the level in effect as of the Separation Date until the end of the twelve (12)-month period following the Separation Date. In addition the Company agreed to vest effective with the Separation Date all remaining restricted common stock granted to Mr. Eissa on February 15, 2007 subject to the payment in cash of any withholding taxes to the Company, which would have vested between March 15, 2009 and February 15, 2010. Any stock option grants held by Mr. Eissa that are not vested as of the Separation Date shall be forfeited as of the Separation Date.