ex10_1.htm


  
    Exhibit
10.1

    


    FIVE
STAR PRODUCTS, INC.

    10
East 40th Street,
Suite 3110

    New
York, New York 10016

    
    

     

    
      	 	June 26,
    2008


    

     

    Bruce
Sherman

    c/o Five
Star Products, Inc.

    10 East
40th Street, Suite 3110

    New York,
NY 10016

    


    Re:  Five Star Products, Inc. –
Agreement Regarding Options

    


    Reference is made to (i) Five Star
Products, Inc., a Delaware corporation, with an address at 10 East 40th Street,
Suite 3110, New York, NY (the “Company”), (ii) National Patent Development
Corporation, a Delaware corporation, with an address at 10 East 40th Street,
Suite 3110, New York, NY (“National Patent”), (iii) that certain Stock Option
Agreement (the “Stock Option Agreement”), dated as of March 1, 2007 between the
Company and Bruce Sherman (the “Grantee”), annexed hereto as Exhibit A, and (iv)
that certain Tender Offer and Merger Agreement (the “Tender Offer Agreement”)
dated as of June 26, 2008, among National Patent, NPDV Acquisition Corp. (the
“Purchaser”) and the Company.

    


    Pursuant to the Stock Option
Agreement and the terms of the Company’s 2007 Incentive Stock Plan (the “2007
Plan”), Grantee was granted options (the “Options”) to purchase from the
Company, all or any part of 400,000 shares (the “Option Shares”) of the
Company’s common stock, par value $0.01 per share (the “Common Stock”), at an
initial purchase price of $0.38 per share (subject to adjustment as provided in
the 2007 Plan)(the “Exercise Price”), which Options become vested and
exercisable subject to the terms and conditions set forth in the Stock Option
Agreement and the 2007 Plan (such vested options are referred to herein as the
“Vested Options”).  As of the date hereof, Grantee holds an aggregated
of 400,000 Options consisting of 133,200 Vested Options and 266,800 Options that
have not yet vested and are not exercisable (the “Unvested
Options”).

     

    This agreement (this “Agreement”) is to
confirm and memorialize the understanding by and among National Patent, the
Company and Grantee pursuant to which the Company shall deliver to Grantee the
Purchase Price (as defined herein) as consideration for Grantee’s agreement not
to exercise Grantee’s Options after the date hereof and the cancellation of
Grantee’s Options and the termination of the Stock Option Agreement upon payment
of the Purchase Price.

    


    Pursuant to the Tender Offer Agreement,
(i) the Purchaser shall acquire all of the outstanding shares of Common Stock by
commencing a tender offer (the “Tender Offer”) to purchase up to 100% of the
shares of Common Stock at the Offer Price (as defined in the Tender Offer
Agreement) and (ii) following the consummation of the Tender Offer, the
Purchaser shall merge with and into the Company, with the Company being the
surviving corporation (the “Merger”).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    In connection with the Tender Offer and
Merger, National Patent, the Company and Grantee hereby agree that as
consideration for Grantee’s agreement to not exercise Grantee’s Options and
the cancellation of Grantee’s Options and termination of the Stock Option
Agreement, and in consideration for past services rendered by Grantee to the
Company and future services to be rendered by Grantee to the Company, the
Company shall pay to Grantee, promptly following the completion of the Merger
(or such earlier date as selected by the Company), a purchase price (the
“Purchase Price”) equal to $32,000 (subject to reduction for withholding
taxes).

    


    This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and shall be interpreted
and construed in accordance with the laws of the State of New
York.  This Agreement sets forth the entire agreement between the
parties hereto and shall not be modified except by written agreement signed by
the parties hereto.  This Agreement shall terminate and be of no force
and effect if the Merger is not consummated by December 31, 2008.

    


    By countersigning this Agreement where
indicated below and returning it to the Company, Grantee agrees to, and accepts,
the terms of this Agreement.

     

    

      
        	 	Sincerely,	 
	 	 	 
	 	FIVE
      STAR PRODUCTS, INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Ira J. Sobotko	 
	 	 	Name:
      Ira J. Sobotko	 
	 	 	Title:
      Senior Vice President, Finance	 
	 	 	 	 


      

    

     

     

    
      
        	 	
                NATIONAL
      PATENT DEVELOPMENT

                CORPORATION

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ John C. Belknap	 
	 	 	Name:
      John C. Belknap	 
	 	 	Title:
      Vice President	 
	 	 	 	 


      

    

    


    


    AGREED
UPON AND ACCEPTED BY:

    


    


     

    
      
        	/s/ Bruce
      Sherman	 
	BRUCE SHERMAN,
      Individually	 


      

       

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    .

    ANNEX
A