This proxy statement (“Proxy Statement”) is being furnished to the stockholders of National Patent Development Corporation, a Delaware corporation, (the “Company”), in connection with the solicitation of proxies by the Board of Directors of the CompanyNational Patent (the “Board of Directors”) for use at the Company’s 2007National Patent’s 2009 Annual Meeting of Stockholders and any adjournments thereof (the “Annual Meeting”) to.  The Annual Meeting will be held on Thursday,Monday, December 20, 2007,28, 2009, at 10:9:00 a.m., inat the Odets Room on the fourth flooroffices of the New York Marriott MarquisDay Pitney LLP, 7 Times Square, located at 1535 Broadway,19th floor, New York, New York 10036,10036.

Under rules adopted by the Securities and at any adjournment thereof.

On or about November 16, 2007.

The presence in person or by proxy of the holders of a majority of the shares outstanding on the record dateRecord Date is necessary to constitute a quorum for the transaction of business at the Annual Meeting. Each stockholder is entitled to one vote in person or by proxy, for each share of common stock held as of the record dateRecord Date on each matter to be voted on at the Annual Meeting.

Abstentions and broker non-votes are included in determining the number of shares present or represented at the Annual Meeting for purposes of determining whether a quorum exists.  Broker non-votes occur when a broker returns a proxy but does not have discretionary authority to vote on a particular proposal or voting instructions from the beneficial owner.

At the Annual Meeting, stockholders will vote upon the following items:

1.

The election of six directors nominated to serve as National Patent’s Board of Directors.

2.

The ratification of the appointment of Eisner LLP as National Patent’s independent registered public accounting firm for the 2009 fiscal year.

3.

Such other business as may properly come before the Annual Meeting.

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Certain proposals, such as the election of directors and the ratification of the appointment of auditors, are considered “routine” matters and brokers generally may vote on behalf of beneficial owners who have not furnished voting instructions.  For “non-routine” proposals such as the approval of equity compensation plans and amendments, brokers may not vote on the proposals unless they have received voting instructions from the beneficial owner.

Directors will be elected by a plurality of the votes cast at the Annual Meeting.  The ratification of the appointment of Eisner LLP as National Patent’s independent registered public accounting firm for the fiscal year ending December 31, 2009 requires the favorable vote of a majority of the votes cast.  Thus, an abstention or a broker non-vote will have no effect on the outcome of the vote on the election of directors at the meeting.  Each of the approval of the amendments to the Company’s 2003 Incentive Stock Plan to increase the number of shares available for grant under the plan by 1,750,000 shares and the aggregate number of shares available for grant annually to an individual by 2,250,000 shares, the approval and adoption of the Company’s 2007 Incentive Stock Plan andor the ratification of the appointment of Eisner LLP as the Company’sNational Patent’s independent registered public accounting firm forat the fiscal year endingAnnual Meeting.

If you hold shares in your name as a holder of record, you are considered the “stockholder of record” with respect to those shares and you may vote by Internet at http://www.envisionreports.com/NPDV or by telephone (within the United States, United States territories and Canada) at 1-800-652-VOTE (8683), prior to 11:59 p.m., Eastern Time, on December 31, 2007 requires the favorable vote27, 2009 or by requesting delivery of a majorityfull set of proxy materials and completing and mailing the votes cast.

If you properly sign and return your proxy card or complete your proxy via the Annual Meetingtelephone or Internet, your shares will be voted as specified in the proxy.  Unless contrary instructions are given,you direct.  If you sign and return your proxy card but do not specify how you want your shares voted, the proxy will be voted (1) FOR the election ofALL the Board of Directors’ nominees for director, (2) FOR the approval of the amendments to the Company’s 2003 Incentive Stock Plan to increase the number of shares available for grant under the plan by 1,750,000 shares and the aggregate number of shares available for grant annually to an individual by 2,250,000 shares, (3) FOR the approval and adoption of the Company’s 2007 Incentive Stock Plan and (4) FOR the ratification of the appointment of Eisner LLP as the independent registered public accounting firm for the 20072009 fiscal year.

If any other matters are properly presented at the Annual Meeting for consideration, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place, the individuals named as proxies will have discretion to vote on those matters in their best judgment to the same extent as the person delivering the proxy would be entitled to vote.  If the Annual Meeting is adjourned, your proxy will remain valid and may be voted at the adjourned meeting.  You still will be able to revoke your proxy until it is voted.  As of the date of this proxy statement, the CompanyProxy Statement, National Patent is not aware of any matters that are to be presented at the Annual Meeting other than the election of directors,matters described and enumerated above.

 You may revoke your proxy and change your vote at any time before the approval of the amendmentsAnnual Meeting by submitting to the Company’s 2003 Incentive Stock Plan to increase the number of shares available for grant under the plan by 1,750,000 shares and the aggregate number of shares available for grant annually to an individual by 2,250,000 shares, the approval and adoption of the Company’s 2007 Incentive Stock Plan and the ratification of the appointment of Eisner LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2007.

This proxy solicitation is being made by the Board of Directors of the Company,National Patent, and the expense of preparing, printing, making available and mailing this proxy statement, Notice of Annual Meeting and proxymaterials is being paid by the Company.National Patent.  In addition to the use of the Internet or mails, proxies may be solicited personally, by electronic mail, by facsimile or by telephone by our directors, officers or regular employees of the CompanyNational Patent without additional compensation.  Arrangements may be made with brokerage houses and other custodians, nominees and fiduciaries to send a notice of internet availability and, if requested, proxies and proxy materials to the beneficial owners of stock. The CompanyNational Patent will reimburse banks, brokers and other custodians, nominees and fiduciaries for their costs in sending notices and proxy materials to the beneficial owners of our common stock.  In addition, the CompanyNational Patent has retained W.F.D.F. Doring & Co. to act as a proxy solicitor for the Annual Meeting. The CompanyNational Patent has agreed to pay W.F.D.F. Doring & Co. approximately $3,500, plus reasonable out-of-pocket expenses, for providing proxy solicitation services.

The Nominating and Corporate Governance Committee of our Board of Directors has recommended to our Board of Directors, and our Board of Directors proposes to National Patent’s stockholders six nominees for election at theour 2009 Annual Meeting as directors of National Patent.  Our Board of Directors determined the Company.number of nominees pursuant to our by-laws.  If elected, the directors will serve until theour next annual meeting and until their successors have been chosen and qualified.  The Board of Directors determined the number of nominees pursuantEach nominee has consented to the Company’s By-Laws and believes that thebeing named nominees are availablein this Proxy Statement and, if elected, will be ablehas committed to serve.serve as a director.  In the event that any of the nominees should become unable or unavailable to serve or for good reason will not serve, the persons named in the accompanying proxyas proxies intend to vote for such other person or persons, if any, as theour Board of Directors may designate as a substitute nominee, or theth e size of theour Board of Directors may be reduced.  All of thesix nominees are currently directors of the Company.

As discussed above under the heading “GENERAL,” the six candidates who receive the highest number of “FOR ALL”“FOR” votes will be elected.

Unless contrary instructions are given, the shares of common stock represented by the proxies being solicited will be voted “FOR ALL” the election of the nominees listed below.

The following tables set forth: (i) the names and ages of the nominees for election to director and the names and ages of the executive officersofficer of the CompanyNational Patent who dodoes not also serve as a director of the Company;National Patent; (ii) the other positions and offices presently held by such persons with the Company,National Patent, if any; (iii) the period during which such personsthe nominees for election to director have served on theour Board of Directors of the Company, if any;Directors; (iv) the expiration of each director’s term as director; and (v) the principal occupations and employment of thesuch persons.  Additional biographical information for each person follows the tables.  Each nominee has consented to being named in this proxy statement as a nominee for election as director and has agreed to serve if elected.  Certain of the nominees for director and the executive officer who is not a director currently all serve as directors and/or officers of Five Star Products, Inc., a paint and hardware distributor that is a majority-owned subsidiary of the Company (“Five Star Products”).

Set forth below is the name of, and certain biographical information regarding, an executive officer of the CompanyNational Patent who does not serve as a director of the Company.

A director will be elected by a plurality of the votes cast at the Annual Meeting, whether in person or by proxy.

 We are committed to establishing sound principles of corporate governance which promote honest, responsible and ethical business practices.  Our Board of Directors and Nominating and Corporate Governance Committee actively review and evaluate our corporate governance practices.  This review includes comparing our current governance policies and practices with those suggested by corporate governance authorities as well as the practices of other public companies.  Our Board of Directors has adopted those corporate governance policies and practices that its evaluation suggests are the most appropriate for National Patent.

Board Composition and Committee Memberships

Our Board of Directors is proposing for stockholder approval amendmentscurrently comprised of Messrs. Harvey P. Eisen, John C. Belknap, Talton R. Embry, Scott N. Greenberg, Lawrence G. Schafran and James Schreiber. Our Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee.  The table below indicates the current members of each of these committees.

Director Independence

Since the adoption of the Sarbanes-Oxley Act in July 2002, there has been growing public and regulatory focus on the independence of directors.  National Patent is not subject to the Company’slisting requirements of any securities exchange, includingThe Nasdaq Stock Market (“Nasdaq”), because the common stock of National Patent is traded on the over-the-counter bulletin board.  However, in July 2007, our Board of Directors adopted the standards for independence for Nasdaq-listed companies, and the independence determinations that follow are based upon the criteria established by Nasdaq for determining director independence and upon the criteria established by Nasdaq and the SEC for determining Audit Committee member independence.

OurBoard of Directorsdetermines the independence of its members through a broad consideration of all relevant facts and circumstances, including an assessment of the materiality of any relationship between National Patent and a director.  In making each of these independence determinations, ourBoard of Directorsconsidered and broadly assessed, from the standpoint of materiality and independence, all of the information provided by each director in response to detailed inquiries concerning his independence and any direct or indirect business, family, employment, transactional or other relationship or affiliation of such director with National Patent.

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Using the objective and subjective independence criteria enumerated in the Nasdaq marketplace rules listing requirements and the SEC rules, ourBoard of Directors has reviewed all relationships between each director and National Patent and, based on this review, our Board of Directors has affirmatively determined that Messrs. Schafran, Schreiber and Embry are each independent in accordance with Nasdaq independence criteria.  Messrs. Eisen, Belknap and Greenberg are not independent in accordance with Nasdaq independencecriteria; nor was National Patent’s former director, Mr. Flegel, independent.

Audit Committee

 Our Audit Committee is comprised of Messrs. Lawrence G. Schafran and Talton R. Embry.  Our Board of Directors has affirmatively determined that Messrs. Embry and Schafran are each independent in accordance with Nasdaq independence criteria and for purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Our Board of Directors has determined that both Audit Committee members are able to read and understand financial statements and that at least one member has accounting or related financial management expertise in accordance with the applicable rules of NASDAQ.  Our Board of Directors has also determined that Mr. Lawrence G. Schafran, who serves as the Audit Committee financial expert, has the accounting or related financial management expertise necessary for him to be considered a “financial expert ” under SEC rules.  

Our Audit Committee is responsible for maintaining free and open communications among itself, the independent auditors and Company management.  The Audit Committee assists our Board of Directors in fulfilling its oversight responsibility to the stockholders, potential stockholders, the investment community and others relating to the integrity of National Patent’s financial statements and the financial reporting process, National Patent’s compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence, National Patent’s systems of internal accounting and financial controls, the annual independent audit of National Patent’s financial statements, and the performance of National Patent’s internal audit function and the independent auditors.

The Audit Committee charter was included asAppendix C to the proxy statement for National Patent’s 2007 annual meeting.

Compensation Committee

Our Compensation Committee is comprised of Messrs. Talton R. Embry and Lawrence G. Schafran, each of whom has been determined by our Board of Directors to be independent in accordance with Nasdaq’s independence criteria, an “outside director” pursuant to criteria established by the Internal Revenue Service and is a “non-employee” director pursuant to criteria established by the SEC.  The Compensation Committee reviews and approves National Patent’s executive compensation programs, plans and awards.

The Compensation Committee charter was included asAppendix D to the proxy statement for National Patent’s 2007 annual meeting.

Role of the Compensation Committee

Our Compensation Committee reviews and approves the compensation arrangements for our Chief Executive Officer, officers and directors.  The Compensation Committee administers National Patent’s equity incentive plans and makes awards pursuant to those plans.  The Compensation Committee also establishes and administers any other incentive compensation plans for National Patent’s officers.  The Compensation Committee has the authority to engage compensation consultants to assist it in carrying out its duties.  When the Compensation Committee deems it to be appropriate, it may delegate its authority to a subcommittee of one or more of its members or, with respect to administrative changes to National Patent’s benefit plans, to one or more officers of National Patent.

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Role of Management

With respect to executive officer compensation, our Compensation Committee expects that it will receive recommendations and information from senior management.  We intend that, on a going-forward basis, our Chief Executive Officer will annually review with the Compensation Committee the performance of our executive officers and participate in Compensation Committee deliberations regarding the compensation of executive officers other than our Chief Executive Officer.  The Compensation Committee can exercise its discretion in modifying any recommended adjustments or awards to the named executive officers.  Upon request by the Compensation Committee, management may provide the Compensation Committee with recommendations, data and information regarding the compensation of National Patent’s outside directors.  

Director Compensation

Information with respect to director compensation is included in the “2008 Director Compensation” section below.

Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee is comprised of Messrs. Harvey P. Eisen, Talton R. Embry and Lawrence G. Schafran.  Our Board of Directors has determined that each of Messrs. Embry and Schafran is independent in accordance with Nasdaq independence criteria; however, Mr. Eisen is not independent because he serves as an officer of National Patent.  

The Nominating and Corporate Governance Committee is responsible for recommending, for consideration by our Board of Directors, candidates to serve as directors of National Patent.  The Nominating and Corporate Governance Committee also reviews recommendations from stockholders regarding corporate governance and director candidates.  The procedure for submitting recommendations of director candidates is set forth below under the caption “Selection of Director Candidates.”

See “Corporate Governance – General” for a discussion of the governance activities of the Nominating and Corporate Governance Committee.

The Nominating and Corporate Governance Committee charter was included asAppendix E to the proxy statement for National Patent’s 2007 annual meeting.

Selection of Director Candidates

The Nominating and Corporate Governance Committee bases its nomination recommendations on candidates’ business or professional backgrounds, talents and perspectives.  Candidates may be identified through any means believed by the Nominating and Corporate Governance Committee to be appropriate, including recommendations from members of the Nominating and Corporate Governance Committee, our Board of Directors, management or stockholders.  Any stockholder nominations for election as a director at the 2010 annual meeting must be in writing and sent to the Nominating and Corporate Governance Committee c/o National Patent Development Corporation, Attn. Corporate Secretary, 903 Murray Road, PO Box 1960, East Hanover, New Jersey 07936 no later than September 29, 2010.

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Each present nominee for election as a director is an incumbent director of National Patent selected for nomination by the recommendation of the Nominating and Corporate Governance Committee and action of our Board of Directors.

Attendance at Board Meetings, Committee Meetings, and Annual Meetings

In 2008, our Board of Directors held 11 meetings, our Audit Committee held 4 meetings, our Compensation Committee held 1 meeting and our Nominating and Corporate Governance Committee held 1 meeting. Each director (other than Mr. Schreiber who did not serve as a director in 2008) attended at least 75% of the aggregate meetings of our Board of Directors and of the committees of which such director was a member.  All directors who were serving as directors at the time of the 2008 annual meeting of stockholders were present at our 2008 annual meeting of stockholders.  

Our current director attendance policy is that unless there are mitigating circumstances, such as medical, family or business emergencies, the members of our Board of Directors are expected to participate in all meetings of our Board of Directors and all committee meetings of which the director is a member and to attend our annual meeting of stockholders.

Executive Sessions of Non-Management Directors

Our Corporate Governance Principles permit the non-management directors to meet regularly in executive session.  In 2008, the non-management directors did not meet in executive session, but during all directors meetings the opportunity to meet in executive session without management was available.

Stockholder Communications Process

Our Board of Directors provides a process for security holders to send communication to the Board of Directors.  Stockholders may send communications to the Board of Directors by mail in care of National Patent Development Corporation, Attn:  Corporate Secretary, 903 Murray Road, PO Box 1960, East Hanover, New Jersey, 07936.

Audit Committee Report

The Audit Committee of our Board of Directors has:

(a)

reviewed and discussed National Patent’s audited financial statements with management;

(b)

discussed with National Patent’s independent auditors the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended, “Communications with Audit Committees”; and

(c)

received the written disclosures and the letter from National Patent’s independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed the independent auditor’s independence with the independent auditors.

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Based on the review and discussions described above, the Audit Committee recommended to National Patent’s Board of Directors the approval for inclusion of National Patent’s audited financial statements in its Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

Code of Ethics

 We have adopted a Code of Ethics for our principal executive officer, senior financial officers, including our principal financial officer and our principal accounting officer, and persons performing similar functions for its subsidiaries.  If we make any substantive amendment to our Code of Ethics or grants any waiver from a provision of our Code of Ethics for said executive officers, we will disclose the nature of such amendment or waiver in a filing on Form 8-K.  Our Code of Ethics was filed as Exhibit 14.1 to our Form 10-K for the year ended December 31, 2004 filed with the SEC on April 15, 2005 and is incorporated by reference herein.  We will also provide a copy of our Code of Ethics to any person, without charge, upon written request made to the Secretary of National Patent at the following address: National Patent Development Corporation, Attn: Secret ary, 903 Murray Road, P.O. Box 1960, East Hanover, New Jersey 07936.

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SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS

Security Ownership of Principal Stockholders

The following table sets forth the number of shares of common stock beneficially owned as of November 2, 2009 by each person who is known by National Patent to own beneficially more than five percent of National Patent’s outstanding common stock other than executive officers or directors of National Patent, whose beneficial ownership is reflected in the Security Ownership of Directors and Executive Officers table below.  There were 17,561,240 shares of National Patent common stock outstanding on November 2, 2009.

Security Ownership of Principal Stockholders Table

______________

(1)

Based on a Schedule 13D/A filed jointly by Bedford Oak Advisors, LLC (“Bedford Oak”), Bedford Oak Capital, L.P. (“Capital”), Bedford Oak Acorn, L.P. (“Acorn”) and Mr. Eisen with the SEC on October 9, 2008.  Mr. Eisen is deemed to have beneficial ownership of such shares by virtue of his position as managing member of Bedford Oak, the investment manager of Capital and Acorn and certain other private investment partnerships.  Does not include options to purchase 1,666,666 shares of National Patent common stock exercisable by Mr. Eisen within 60 days of November 2, 2009.  See Security Ownership of Directors and Executive Officers table below.

(2)

Based on a Schedule 13D/A filed jointly by Gabelli Funds, LLC, GGCP, Inc., GAMCO Investors, Inc., GAMCO Asset Management, Inc., MJG Associates, Inc., Teton Advisors and Mario J. Gabelli with the SEC on March 17, 2009.

(3)

Based on a Schedule 13G filed by Frost Gamma Investments Trust with the SEC on February 12, 2009.

(4)

Based on a Schedule 13G filed jointly by Ilex Partners, L.L.C., Steinhardt Overseas Management, L.P. and Michael H. Steinhardt with the SEC on May 13, 2009.

(5)

Based on a Schedule 13G filed by Carl Warden with the SEC on May 21, 2007.  Includes 43,500 shares of National Patent common stock held by the Carl and Vicki Warden Family Foundation, of which Mr. Warden is the trustee.  Mr. Warden disclaims beneficial ownership of the 43,500 shares of National Patent common stock held by the Carl and Vicki Warden Family Foundation.

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Security Ownership of Directors and Executive Officers

The following table sets forth the beneficial ownership of National Patent’s outstanding common stock as of November 2, 2009 by each person who is a director or named executive officer of National Patent, naming each such person, and all persons who are currently directors and executive officers of National Patent, as a group.  

Security Ownership of Directors and Executive Officers Table

______________

* The number of shares owned is less than one percent of the outstanding shares.

(1)

Includes 3,658,400 shares of National Patent common stock beneficially owned by Bedford Oak, Capital and Acorn.  Mr. Eisen is deemed to have beneficial ownership of such shares by virtue of his position as managing member of Bedford Oak, the investment manager of Capital and Acorn.  See footnote 1 to Principal Stockholders table above.  Also includes 7,853 shares of National Patent common stock owned by Mr. Eisen individually and 1,666,666 shares of National Patent common stock issuable upon the exercise of options that are exercisable by Mr. Eisen within 60 days of November 2, 2009.

(2)

All shares of National Patent common stock are issuable upon the exercise of options exercisable within 60 days of November 2, 2009.

(3)

Includes 4,000 shares of National Patent common stock held by members of Mr. Greenberg’s family, and 5,867 shares of National Patent common stock allocated to Mr. Greenberg’s account pursuant to the provisions of the GP Strategies Retirement Savings Plan.  Mr. Greenberg disclaims beneficial ownership of the 4,000 shares of National Patent common stock held by members of his family.  Mr. Greenberg ceased serving as National Patent’s Chief Financial Officer effective July 31, 2007.

(4)

Includes 66,666 shares of National Patent common stock issuable to each of Messrs. Embry, Greenberg, Schafran and Sobotko upon the exercise of options, all of which are currently exercisable.

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(5)

Mr. Schreiber became a director of National Patent on November 11, 2009.

(6)

Includes Messrs. Eisen, Greenberg, Embry, Schafran and Schreiber, each of whom is a current director of National Patent, Mr. Belknap, who is currently a director and a named executive offer of National Patent, and Mr. Sobotko, who is currently a named executive officer of National Patent.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires National Patent’s executive officers and directors to file reports regarding ownership of National Patent’s common stock with the SEC, and to furnish National Patent with copies of all such reports.  Based on a review of these filings, National Patent believes that since January 1, 2008, all such reports were timely filed, except that one Form 4 relating to a January 31, 2008 purchase of 106,000 shares of common stock of National Patent by an affiliate of Mr. Eisen was not filed until February 6, 2008 due to a mechanical oversight.  

EXECUTIVE COMPENSATION

National Patent has elected to use the Smaller Reporting Company rules recently issued by the SEC regarding the disclosure of executive compensation.  Under these rules, National Patent provides a Summary Compensation Table covering 2008 and 2007 compensation for the individual who served as principal executive officer in 2008 and for two individuals who are the most highly-compensated executive officers other than the individual who served as principal executive officer, to whom we refer collectively as our “named executive officers”, an Outstanding Equity Awards at Year End Table and certain narrative disclosures.

The following tables and the narrative discussion include certain disclosures related to payments made by, and transactions with, Five Star Products for the period prior to August 28, 2008, which is the date upon which Five Star Products became a wholly-owned subsidiary of National Patent pursuant to National Patent’s acquisition of all of the outstanding shares of Five Star Products common stock (the “Five Star Products 100% Ownership Transaction”).

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SUMMARY COMPENSATION TABLE

The table below summarizes the total compensation paid to or earned by each of National Patent’s named executive officers for the fiscal years ended December 31, 2008 and 2007.

(1)

For services rendered from and after June 1, 2007, the date upon which Mr. Eisen began his service as Chairman of the Board, President and Chief Executive Officer of National Patent and thereupon became an employee of National Patent.

(2)

Includes $155,000 for 2007 and $110,000 for 2008 that was reimbursed to National Patent by Five Star Products prior to the date of the Five Star Products 100% Ownership Transaction.  See “CERTAIN TRANSACTIONS WITH MANAGEMENT – Services to Five Star Products.”

(3)

Includes (i) compensation for services rendered beginning on April 23, 2007, the date upon which Mr. Sobotko became an officer and employee of National Patent, and (ii) $103,000 for 2007 and $73,333 for 2008 that was reimbursed to National Patent by Five Star Products prior to the date of the Five Star Products 100% Ownership Transaction.  See “CERTAIN TRANSACTIONS WITH MANAGEMENT – Services to Five Star Products.”

(4)

The amounts in this column reflect the dollar amount recognized as expense for financial statement reporting purposes, calculated in accordance with FAS 123R.  A discussion of the assumptions used in calculating these values with respect to awards related to National Patent’s common stock may be found in Note 14 to our audited financial statements in the Form 10-K for the fiscal year ended December 31, 2008 and with respect to awards related to Five Star Products common stock may be found in Note 8 to Five Star Products’ audited financial statements in the Form 10-K for its fiscal year ended December 31, 2007.

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(5)

All amounts included for Mr. Belknap under “Stock Awards” relates to compensation expense incurred prior to the Five Star Products 100% Ownership Transaction in connection with Five Star Products restricted stock awards.  $8,576 of the amounts included for Mr. Sobotko for each of 2008 and 2007 under “Option Awards” relates to compensation expense incurred prior to the Five Star Products 100% Ownership Transaction in connection with Five Star Products stock option awards.

(6)

For Mr. Eisen, the amount reflected under “All Other Compensation” for 2007 is comprised of director fees received in 2007 for service prior to his service as Chief Executive Officer and President of National Patent, which was initiated on June 1, 2007.

o

For Mr. Belknap, the amount reflected under “All Other Compensation” is comprised of Group Term Life insurance premiums.

o

For Mr. Sobotko, the amount reflected under “All Other Compensation” is comprised of:

·

$41,917 paid to Mr. Sobotko for 2007 for consulting performed prior to the initiation of his service as an officer and employee of National Patent in April 2007;

·

$828 for each of 2008 and 2007, respectively, for Group Term Life insurance premiums; and

·

$3,289 in 2008 for 401(K) Company matching contributions.

(7)

Does not include amounts received from Five Star Products for the relinquishment of certain stock rights in connection with the Five Star Products 100% Ownership Transaction.  See “Overview of Material Agreements with Our Named Executive Officers”.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table provides information concerning the holdings of unexercised and unvested options to purchase shares of common stock of National Patent for each of the named executive officers at December 31, 2008.

(1)

These options vested or will vest in approximately one-third increments on each of March 1, 2008, March 1, 2009 and March 1, 2010.

(2)

These options vested or will vest in approximately one-third increments on each of December 1, 2007, December 1, 2008 and December 1, 2009.

(3)

These options vested or will vest in approximately one-third increments on each of July 30, 2008, July 30, 2009 and July 30, 2010.

Overview of Material Agreements with Our Named Executive Officers

The following is a summary of the material terms of employment agreements pursuant to which compensation was paid to our named executive officers for their service with National Patent or its subsidiaries.

Agreement with Harvey P. Eisen

On June 1, 2007, Mr. Eisen, who at such time served, and who continues to serve, as a director of National Patent, commenced his service as Chairman of the Board, President and Chief Executive Officer of National Patent.  Effective upon the commencement of his service as Chairman of the Board, President and Chief Executive Officer of National Patent, Mr. Eisen began receiving a salary from National Patent of $100,000 per annum.

On March 1, 2007, in connection with its decision to appoint Mr. Eisen to the executive positions described above, our Board of Directors granted to Mr. Eisen options to purchase an aggregate of 2,500,000 shares of National Patent common stock, pursuant to National Patent’s 2003 Incentive Stock Plan (the “2003 Stock Plan”) that would increase the number of shares available for grant under the plan by 1,750,000 shares and the aggregate number of shares available for grant annually to an individual by 2,250,000 shares.  The proposed amendments to the 2003 Stock Plan were adopted by the Board of Directors on March 1, 2007 and will become effective upon stockholder approval.

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Agreement with John C. Belknap

Mr. Belknap, who serves as a Vice President and director of National Patent and as the Chief Executive Officer and President and a director of Five Star Products, receives a salary of $300,000 from National Patent, $155,000 and $110,000 of which was reimbursed to National Patent by Five Star Products in 2007 and 2008, respectively, based on the amount of shares availabletime Mr. Belknap spends working for issuance under the 2003 Stock PlanFive Star Products.  In addition, Mr. Belknap was not sufficient to permit the exercise of all of these awards, thus necessitating the proposed amendments to the 2003 Stock Plan.  Therefore, the following portions of these awards ofgranted options to purchase an aggregate of 3,200,000 are subject to the approval400,000 shares of this Item 2 by the stockholders:

In addition, pursuant to a Restricted Stock Plan.

Agreement with Ira J. Sobotko

Pursuant to the terms and performance unitsconditions of the Stock Option Agreement, dated July 30, 2007, between National Patent and Mr. Sobotko (the “Sobotko NPDC Stock Option Agreement”), Mr. Sobotko, who serves as Vice President, Chief Financial Officer, Secretary and Treasurer of National Patent and as Senior Vice President, Finance, Secretary and Treasurer of Five Star Products, was granted options to purchase 100,000 shares of National Patent common stock under the 2003 Plan at an exercise price equal to $2.68 per share, the average of the closing bid and asked prices of National Patent common stock on July 30, 2007.  Contingent upon Mr. Sobotko’s continued employment with National Patent:

·

Options to purchase 66,666 shares of National Patent common stock are presently vested and exercisable; and

·

Options to purchase 33,334 shares of National Patent common stock will vest and become exercisable on July 30, 2010.

All unvested options would fully vest and become immediately exercisable upon an occurrence of a change in control of National Patent (as defined in the Sobotko NPDC Stock Option Agreement).  

In addition, pursuant to the terms and conditions of the Stock Option Agreement, dated July 17, 2007, between Five Star Products and Mr. Sobotko (the “Sobotko Five Star Stock Option Agreement”), Mr. Sobotko was granted options to purchase 125,000 shares of Five Star Products common stock under Five Star Products’ 2007 Incentive Stock Plan at an exercise price equal to $0.78 per share, the average of the closing bid and asked prices of Five Star Products common stock on July 17, 2007.  Options to purchase 41,625 shares of Five Star common stock vested on March 31, 2008 based upon the attainment by Five Star Products of adjusted EBITDA (as defined in the Sobotko Five Star Stock Option Agreement) of $5.0 million for the year ending December 31, 2007.  In connection with the Five Star Products 100% Ownership Transaction, Mr. Sobotko agreed to relinquish all of his rights to receive paymentscommon stock of cash onFive Star Products under the achievementSobotko Five Star Stock Option Agreement in consideration of certain performance goals over a specified performance period.

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Termination of Employment and Change in Control Arrangements

Potential Payments upon Termination or Change in Control

See the descriptions of the agreement with the named executive officers above for information with respect to the early vesting of stock option and restricted stock awards upon a change in control.

DIRECTOR COMPENSATION

The table below summarizes the total compensation paid to or earned by each director of National Patent (who is not also a named executive officer) for the fiscal year ended December 31, 2008.

2008 Director Compensation (1)

______________

(1)

Does not include compensation paid to Mr. S. Leslie Flegel, a former director of National Patent, for his service as Chairman of Five Star Products.  Mr. Flegel served as a director of National Patent and as Chairman of Five Star Products until his resignation from both positions in March 2008.  Although Mr. Flegel served as Chairman of Five Star Products until March 2008, he did not serve as an officer or employee of National Patent and did not receive any additional compensation for services provided as a director of National Patent.  See “CERTAIN TRANSACTIONS WITH MANAGEMENT -Agreement with Former Director S. Leslie Flegel”.

(2)

Mr. Embry elected to receive 3,845 shares of National Patent common stock appreciation rights,in lieu of $9,000 of his annual director’s fee and Mr. Schafran elected to receive 7,903 shares of National Patent common stock units, performance shares, performance units and other awards underin lieu of $18,500 of his annual director’s fee.

(3)

The amounts in this column reflect the 2003 Stock Plandollar amount recognized in fiscal 2008 for financial statement reporting purposes, calculated in accordance with FAS 123R.  A discussion of the assumptions used in calculating these values may be made subjectfound in Note 14 to the attainment of performance goals.  Performance goals may be expressedour audited financial statements in terms of business criteria including the following: profits, profit-related return ratios, return measures, cash flow, earnings, net sales growth, margins, productivity, share price, expense targets and customer satisfaction.

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Director Compensation

Directors who are not employees of National Patent or its subsidiaries are entitled to receive:

·

annual compensation of $5,000, paid in quarterly installments of $1,250;

·

$1,500 in cash for each meeting of the Board and for each Board committee meeting attended in person and $500 for each Board or Board committee meeting attended by means of conference telephone connection;

·

annual compensation of $5,000, paid in quarterly installments of $1,250, to each member of the Audit Committee (except the Chairman of the Audit Committee who is to receive annual compensation of $7,500), plus $1,500 for attending each meeting of the Audit Committee, whether attended in person or by telephone, except that the per meeting attendance fee is reduced to $750 for attendance at any Audit Committee meeting held on the same day as amended,a regular or special meeting of the Board; and

·

annual compensation of $3,000, paid in quarterly installments of $750, to each member of the Compensation Committee and each member of the Nominating and Corporate Governance Committee (except the Chairman of each such Committee, who is to receive annual compensation of $5,000), plus $1,000 for each meeting of either such Committee, whether attended in person or by telephone, except that the per attendance meeting fee is reduced to $500 for attendance at any such meeting held on the same day as wella regular or special meeting of the Board.

At the option of each director, the sums designated above as “annual compensation” may be paid in either cash or common stock of National Patent; provided that (1) the option to receive common stock is exercisable by notice to National Patent at anytime prior to the groups specifiedpayment of one or more quarterly payments of the annual compensation and (2) common stock issued in lieu of annual compensation is valued at the average between the closing bid and ask price on the day prior to the date upon which the annual compensation became payable and (3) all right, title and interest in and to common stock issued will vest in the table.  These awardsreceiving director upon issuance and (4) payment in common stock will only be available if such payment may be made without registration or other similar actions and in compliance with all relevant laws and regulations.

CERTAIN TRANSACTIONS WITH MANAGEMENT

Transactions with Related Persons, Promoters and Certain Control Persons

Warrants to Purchase National Patent Common Stock

On August 8, 2003, pursuant to a Note and Warrant Purchase Agreement, GP Strategies issued and sold to Gabelli Asset Management, Inc. (“Gabelli”) $7,500,000 aggregate principal amount of options6% Conditional Subordinated Notes due 2008 (the “Notes”) and 937,500 warrants, each entitling the holder thereof to purchase (subject to adjustment) one share of GP Strategies’ common stock.    Until GP Strategies paid the Notes in full in 2008, the Notes were secured by a mortgage on certain property of National Patent located in Pawling, New York which was, at the time the Note was issued, owned by GP Strategies.  While National Patent was at risk of foreclosure on this property (for which it had received an indemnification from GP Strategies), the full payment of the Notes during 2008 terminated any such risk.

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Pursuant to the Note and Warrant Purchase Agreement, on completion of a transaction pursuant to which GP Strategies distributed the stock of National Patent to its stockholders (the “Spin-Off”), National Patent issued warrants (“National Patent Development Warrants”) to Gabelli entitling them to purchase, in the aggregate, 1,423,887 shares of 2,567,170National Patent’s common stock for $3.57 per share.  On August 11, 2008, Gabelli and National Patent amended the National Patent Development Warrants to extend the expiration date from August 14, 2008 to August 15, 2008 and reduce the exercise price from $3.57 to $2.50 per share, upon which Gabelli exercised the National Patent Development Warrants in full.

Loan to Five Star Products

On September 30, 1998, Five Star Products’ wholly-owned subsidiary, Five Star Group, issued an unsecured note (the “JL Note”) payable to a wholly-owned subsidiary of National Patent following the Spin-Off.  The Note was extended on June 30, 2005, July 28, 2006 and March 2, 2007.  Pursuant to the last such extension, (i) the maturity date became June 30, 2009, (ii) a conversion feature was added such that the holder of the Extended Note, at its option, had the right to convert the principal of the Extended Note, and any accrued interest, into shares areof Five Star Products’ common stock at a fixed conversion price of $0.40 per share, and (iii) the right of  Five Star Products’ to prepay the Extended Note prior to maturity was extinguished. In July 2008, the JL Note was converted into shares of common stock of Five Star Products thereby extingu ishing any further rights to receive principal or interest under the JL Note.

Services to Five Star Products

Since 2004, National Patent has provided legal, tax, public and investor relations, insurance and employee benefit administration services to Five Star Products pursuant to a management services agreement. The management services agreement is automatically renewable for successive one-year terms unless one of the parties notifies the other in writing at least six months prior to the end of any renewal thereof.  National Patent and Five Star Products agree annually, in writing, to a management fee and adjust such figure during the year if necessary.  The management services agreement was renewed for 2008 and, prior to the date of the Five Star Products 100% Ownership Transaction, Five Star Products paid National Patent a general fee of $40,000 per month including $19,188 and $11,454 per month for the services of Messrs. Belknap and Sobotko, respectively.

Fees incurred under the management services agreement totaled $320,000 and $527,000 for the years ended December 31, 2008 (prior to the date of the Five Star Products 100% Ownership Transaction) and 2007, respectively.  The largest aggregate amount of principal outstanding and due during the above period in fiscal 2008 was $132,000, all of which has been paid by Five Star Products.  At the date of the Five Star Products 100% Ownership Transaction and December 31, 2007, the amounts due to National Patent under the management services agreement were $76,000 and $108,000, respectively.

In addition, National Patent incurred certain expenses on behalf of Five Star Products, primarily involving insurance, legal and other professional expenses.  Five Star Products reimbursed National Patent for such expenses, which amounted to approximately $228,000 for the portion of 2008 prior to the date of the Five Star Products 100% Ownership Transaction.

Management Agreement with GP Strategies

Concurrently with its spin-off from GP Strategies, National Patent and GP Strategies entered into a management agreement under which certain of National Patent’s executive officers who were also executive officers of GP Strategies were paid by GP Strategies subject to reimbursement by National Patent (the “GP Strategies Management Agreement”).  The GP Strategies Management Agreement terminated on November 24, 2007.

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Services under the approvalGP Strategies Management Agreement related to corporate federal and state income taxes, corporate legal services, corporate secretarial administrative support, and executive management consulting. For the year ended December 31, 2007, National Patent paid GP Strategies a fee under the GP Strategies Management Agreement of this Item 2$335,000, which included includes approximately 80% of the cost of the compensation and benefits required to be provided by GP Strategies to Jerome Feldman, who served as National Patent’s Chief Executive Officer until May 31, 2007.

Scott N. Greenberg, a director of National Patent, serves as the stockholders.

Loan From Bedford Oak

On November 12, 2004, National Patent entered into an agreement (the “2007 Stock Plan”“Bedford Agreement”) and directed that it be submitted to stockholders for approval at the Annual Meeting.  The 2007 Stock Plan will become effective only upon approvalborrow approximately $1,060,000 from Bedford Oak Partners, L.P., a greater than five percent stockholder, which is controlled by affirmative vote of a majority of the votes cast by the Company’s stockholders.

On January 20, 2005, all the principal and interest under the termsloans were repaid, including interest of $10,217 and $5,682 for Bedford Oak Partners and the former chairman, respectively.  Effective April 18, 2007, all of the 2007 Stock Plan incentiveoutstanding common stock options, nonqualifiedof Valera was acquired by Indevus Pharmaceuticals, Inc. (“Indevus” and the “Indevus Transaction”).  At the effective date of the Indevus Transaction each share of Valera common stock options, performanceoutstanding immediately prior to the effective time was exchanged for 1.1337 shares stock appreciation rights, restrictedof Indevus common stock and other incentives payablecertain contingent rights to receive additional Indevus common stock based upon the receipt by Indevus of FDA approval for three products under development by Valera at the time of the Indevus Transaction (the “Contingent Stock Rights”).

From June 25, 2007 through and including September 12, 2007, National Patent sold, in cash or ina series of brokers’ transactions, all of its 2,639,482 shares of Indevus common stock.  Such grants may be made to employees, officers and directorsstock received at the time of the Company or its subsidiariesIndevus Transaction and shares which National Patent received in 2007 as well as to consultants, agents, advisors and independent contractorsa result of Indevus receiving FDA approval of one of the Companyproducts subject to the Contract Stock Rights in open market transactions for an aggregate of approximately $17,598,000, net of commissions and brokerage fees.  Pursuant to the Bedford Agreement, Bedford Oak Partners and the former Chairman received an aggregate of approximately $922,000 of the proceeds of these sales.

On March 23, 2009, pursuant to a Merger and Reorganization Agreement, Indevus became a wholly-owned subsidiary of Endo Pharmaceutical Holdings, Inc. (“Endo”) and, in connection with that transaction the Contingent Stock Rights for the two remaining products awaiting FDA approval were converted into a right to receive cash to the extent Endo receives FDA approval for these products prior to specified dates in 2012.  If FDA approval is received, National Patent will receive between $2,685,000 and $2,347,000 (depending on the terms contained in the FDA approval) for one of the products and between $4,028,000 and $3,491,000 (depending on the terms contained in the FDA approval) for the second product.  Under the Bedford Agreement, Bedford Oak Partners and the former Chairman would receive between $262,000 and $227,000 of the amount received by National Patent with resp ect to the first product and between $393,000 and $341,000 of National Patent’s payment received for the second product.

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Agreement with Former Director S. Leslie Flegel

On March 2, 2007, in connection with his appointment as Chairman of Five Star Products, Mr. Flegel entered into a three-year agreement with Five Star Products ending on March 1, 2010 (the “Flegel Agreement”).  Under the Flegel Agreement, Mr. Flegel received a fee of an aggregate of $83,333 for the year ended December 31, 2007 and was reimbursed (i) $35,483 for 2007 and $3,570 for 2008 for travel expenses incurred in connection with his performance of services to Five Star Products and (ii) $20,833 for each of 2007 and 2008 for the cost of maintaining an office.  In addition, pursuant to the Flegel Agreement, Mr. Flegel was issued 2,000,000 shares of Five Star Products common stock, all of which were fully vested upon issuance and not subject to forfeiture.

Also on March 2, 2007, Mr. Flegel became a director of National Patent and entered into an agreement with National Patent pursuant to which he purchased from National Patent 200,000 shares of its common stock at a price of $2.40 per share, or its subsidiaries$480,000 in the aggregate.  This agreement provided Mr. Flegel with the right to exchange any or all of the 200,000 shares of National Patent common stock into Five Star Products common stock held by National Patent at the rate of six shares of Five Star Products common stock for certain bona fide services rendered.  The numbereach share of National Patent common stock.

On March 25, 2008, Mr. Flegel, National Patent and Five Star Products entered into an Agreement and Release under which (1) Mr. Flegel resigned as an officer and director of Five Star Products and as a director of National Patent and his right to all future payments under the Flegel Agreement was terminated; (2) National Patent purchased 1,698,336 shares of common stock of Five Star Products from Mr. Flegel and 301,664 shares of common stock of Five Star Products from his family for $0.60 per share; (3) National Patent repurchased the 200,000 shares of common stock of National Patent for $3.60 per share (which equates to be reserved and available for awards under the 2007 Stock Plan (subject to certain adjustments as provided therein) is 7,500,000.

The Audit Committee of theour Board of Directors has appointedselected Eisner LLP as the Company’sNational Patent’s independent registered public accounting firm for the 20072009 fiscal year.  Eisner LLP has served as the Company’sNational Patent’s independent registered public accounting firm since 2004.

In addition to appointing Eisner LLP as the Company’sNational Patent’s independent registered public accounting firm for the Company’s 2007National Patent’s 2009 fiscal year, the Audit Committee has directed that management submit the appointment of the independent registered public accounting firm for ratification by the Company’sNational Patent’s stockholders at the Annual Meeting.  One or more representatives of Eisner LLP are expected to be present at the Annual Meeting with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.

Stockholder ratification of the appointment of Eisner LLP as the Company’sNational Patent’s independent registered public accounting firm is not required by the Company’sNational Patent’s by-laws or otherwise.  However, the BoardNational Patent is submitting the appointment of Eisner LLP to stockholders for ratification as a matter of good corporate practice.  If stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain that firm.  Unless contrary instructions are given, the shares of common stock represented by the proxies being solicited will be voted for the ratification of the appointment of Eisner LLP as the Company’sNational Patent’s independent registered public accounting firm for the Company’s 2007National Patent’s 2009 fiscal year.

Pursuant to the requirements of the Sarbanes-Oxley Act of 2002, the terms of the engagement of Eisner LLP’s engagement by the Company isLLP are subject to specific pre-approval policies.

The affirmative vote of the majority of votes cast is required to ratify the Board’s appointment by our Board of the Company’sDirectors of National Patent’s independent registered public accounting firm.