Executive Severance Agreement – Navarre Corp.

EXECUTIVE SEVERANCE AGREEMENT

THIS EXECUTIVE SEVERANCE AGREEMENT (the
“Agreement“), dated as of the 31st day of March, 2008 (the
“Effective Date“), is entered into by and between
NAVARRE CORPORATION, a Minnesota corporation, (the
“Company“), and DIANE LAPP, an individual
residing in the State of Minnesota (the “Executive“).

WHEREAS, Executive holds the key position of Vice President
Finance and is considered an integral part of Company153s management;

WHEREAS, the Company desires to promote the stability of the
Company by providing the Executive with appropriate assurances with respect to
certain events that result in the Executive153s involuntary termination as
described more fully herein; and

WHEREAS, the Board of Directors of the Company (the
“Board“) has determined that this Agreement is in the best
interests of the Company and its shareholders in order to secure Executive153s
continued services.

NOW, THEREFORE, in consideration of the above recitals and
the mutual promises contained in the Agreement, it hereby agreed by and between
the parties as follows:

1.	DEFINITIONS. For purposes of this Agreement the following definitions apply:

a. “Base Salary“ means the Executive153s
annualized base salary as adjusted from time to time.

b. “Cause” means a termination of Executive153s
employment by the Company or its successor due to any of the following:

(i) Executive153s conviction of, or the entering by Executive of a plea of
nolo contendere to, any felony charge or to any non-felony crime
involving misrepresentation, fraud or moral turpitude;

(ii) Executive153s gross neglect, willful malfeasance or willful misconduct in
connection with her employment hereunder which has had or could have a material
adverse effect on the business or reputation of the Company and its
subsidiaries, unless Executive reasonably believed in good faith that such act
or non-act was in the best interests of the Company;

(iii) A substantial and continual refusal by Executive to perform Executive153s
assigned duties, responsibilities or obligations (provided that such duties,
responsibilities or obligations are lawful and further provided that the failure
to perform is not due to incapacity caused by a disability) that continues for
thirty (30) days after receipt by Executive of written notice from the Company
identifying the duties, responsibilities or obligations not being performed;

(iv) A violation by Executive of any policy of the Company or its successor
that is generally applicable to all employees or all officers of the Company or
its successor including, but not limited to, policies concerning insider trading
or sexual harassment, or the Company153s code of conduct, that Executive knows or
reasonably should know could reasonably be expected to result in a material
adverse effect on the Company or its successor, unless such violation is capable
of being cured and is not cured within thirty (30) days after receipt of notice
thereof from the Company;

(v) Any fraudulent or dishonest action, or failure to act, with respect to
the business or affairs of the Company or its successor or breach of the duty of
loyalty toward the Company or its successor, including, without limitation,
providing false or misleading information to the Company or its successor;

(vi) Executive153s failure to cooperate, if requested by the Board, with any
investigation or inquiry into her or the Company153s (or its successor153s) business
practices, whether internal or external, including, but not limited to
Executive153s refusal to be deposed or to provide testimony at any trial or
inquiry; or

(vii) Any material breach by Executive of the provisions of Paragraphs 4, 5,
or 6 of this Agreement, unless such violation is capable of being cured and is
not cured within thirty (30) days after receipt of notice thereof from the
Company.

c. “Code” means the Internal Revenue Code of 1986,
as amended.

d. “Good Reason” means a termination of Executive153s
employment by the Executive for any of the following events, provided that
Executive shall have delivered a written notice to the Company or its successor
within thirty (30) days of her having actual knowledge of the occurrence of one
of such events, stating that she intends to terminate her employment for Good
Reason and specifying the factual basis for such termination, and such event
shall not have been cured by the Company or its successor within thirty (30)
days of the receipt of such notice, and further provided that the termination of
Executive153s employment occurs no later than six months (6) months following the
initial existence of one of such events:

(i) A material diminution in Executive153s Base Salary from that in effect as
of the Effective Date;

(ii) A material diminution in Executive153s duties, responsibilities or
authority from that in effect as of the Effective Date; or

(iii) A material change in the geographic location of Executive153s principal
place of employment from that in effect as of the Effective Date.

e. “Severance Event” means either: (i) the
effective date of the termination of Executive153s employment by the Company for
any reason other than for Cause, or (ii) the effective date of the termination
of Executive153s employment for Good Reason. A Severance Event shall not include a
termination of Executive153s employment as a result of Executive153s death. The term
“termination of employment” and other similar terms used in this Agreement shall
be construed to have the same meaning as is given to the term “separation from
service” in Section 409A of the Code.

TERM OF AGREEMENT. This Agreement shall be effective as of
the Effective Date and shall continue through December 31, 2010. As of December
31, 2010, and on each December 31 thereafter, the Agreement shall automatically
be extended for one additional year unless, not later than the preceding June
30, either party shall have given notice that such party does not wish to extend
the Agreement term.

3.	SEVERANCE PAYMENTS.

a. Upon the occurrence of a Severance Event, and in consideration of and
contingent upon the execution and delivery by Executive of a mutually agreeable
general release of all claims and expiration of any applicable revocation period
in connection therewith, Executive shall be entitled to a severance payment as
follows:

(i) Subject to Paragraph 3c below, an amount equal to Executive153s then
current Base Salary; and

(ii) In full substitution for Executive153s rights under the Company153s annual
incentive bonus plan, a substitute incentive award equal to the average amount
of the annual incentive award earned and paid to the Executive with respect to
the preceding three (3) fiscal years.

b. The severance payment shall be made in a lump sum within thirty (30) days
after the effective date of the termination of employment.

c. If applicable, the severance amount provided for in Paragraph 3a(i) above
will be offset by any income protection benefits payable to Executive during the
first twelve months of a qualifying disability under the Company153s group
short-term and long-term disability insurance plans.

d. Notwithstanding the foregoing to the contrary, in no event shall the
amount due and payable hereunder constitute a “Parachute Payment” within the
meaning of the Section 280G(b)(2) of the Code. In the event that any portion of
the severance payment would be deemed a Parachute Payment, the amount of the
severance payment shall be reduced only to the extent necessary to eliminate any
such treatment or characterization.

e. It is the intent of the parties that payments under this Agreement comply
with Section 409A of the Code, and, accordingly, to interpret, to the maximum
extent permitted, this Agreement to be in compliance therewith. If the Executive
notifies the Company in writing (with specificity as to the reason therefore)
that the Executive believes that any provision of this Agreement (or of any
payment of compensation under this Agreement) would cause the Executive to incur
any additional tax or interest under Section 409A of the Code, and the Company
concurs with such belief or the Company (without any obligation whatsoever to do
so) independently makes such determination, the parties shall, in good faith,
reform such provision to try to comply with Section 409A through good faith
modifications to the minimum extent reasonably appropriate to conform with
Section 409A. To the extent that any provision hereof is modified by the parties
to try to comply with Section 409Aof the Code, such modification shall be made
in good faith and shall, to the maximum extent reasonably possible, maintain the
original intent of the applicable provision without violating the provisions of
Section 409A. Notwithstanding the foregoing, the Company shall not be required
to assume any economic burden in connection with compliance or noncompliance
with Section 409A of the Code.

4.	CONFIDENTIALITY.

a. Executive acknowledges that her position with Company will bring Executive
in close contact with many confidential affairs of the Company and its
subsidiaries, including, but not limited to, information about costs, profits,
financial data, markets, trade secrets, sales, products, key personnel, pricing
policies, customer lists, development projects, operational methods, technical
processes, plans

for future development, business affairs and methods and other information
not readily available to the public. In recognition of the foregoing, Executive
covenants and agrees that:

(i) Executive will keep secret all material confidential matters of the
Company which are not otherwise in the public domain and will not disclose them
to anyone outside of the Company, either during or after the termination of her
Employment, except with the Company153s written consent and except for such
disclosure as is necessary in the performance of Executive153s duties or to the
extent required by an order of a court having competent jurisdiction or under
subpoena from an appropriate government agency; and

(ii) Executive will deliver promptly to the Company on termination of her
employment with the Company, or at any other time the Company may so request,
all memoranda, notes, records, reports and other documents (and all copies
thereof) containing confidential material relating to the Company, which
Executive may then possess or have under her control.

5.	INTELLECTUAL PROPERTY.

a. All right, title, and interest in and to all inventions, patent
applications, patents thereon, know-how and trade secret information, and all
copyrightable material, copyrights, and copyright applications (collectively,
“Intellectual Property”) that Executive conceives or originates, either
individually or jointly with others, and which relate to the business of the
Company, will be the sole and exclusive property of the Company, and Executive
hereby irrevocably assigns and conveys the sole and exclusive right, title and
interest therein, free and clear of any liens or other encumbrances. Such
Intellectual Property shall include, but not be limited to, Intellectual
Property that:

(i) Is based on any confidential or proprietary information of the Company or
of any vendor, supplier or customer of the Company;

(ii) Is related to the actual business of or research and development of the
Company;

(iii) Was developed with use of materials, employees, supplies or facilities
of the Company; or

(iv) Was funded by the Company.

b. Executive agrees to execute promptly any papers and perform promptly any
other reasonable acts necessary to assist the Company to perfect all rights,
including all Intellectual Property rights, reserved or conveyed thereto
hereunder. Executive agrees to render promptly aid and assistance to the Company
in any interference or litigation pertaining to such Intellectual Property, and
all reasonable expenses therefor incurred by Executive at the request of the
Company will be borne by the Company.

c. Executive will promptly disclose to the Company all Intellectual Property
conceived or originated pursuant to her employment.

d. Executive warrants that in the event that Executive creates any original
materials or uses any proprietary information in rendering services, none of
such material shall infringe any copyrights, trade secrets, rights of privacy,
or any other rights of others.

NONSOLICITATION. Executive covenants and agrees that during
her employment with the Company and for a period of two (2) years thereafter she
will not, directly or indirectly, as a principal, officer, director,
shareholder, partner, member, employee, consultant, independent contractor,
agent or executive or in any other capacity whatsoever, without the prior
written consent of the Company, solicit or attempt to solicit or encourage any
person, who is then, or was within the then most recent 12-month period, to the
knowledge of Executive, an employee, agent, consultant or representative of the
Company, to become an employee, agent, representative or consultant of or to
Executive or any other individual or entity.

7.	ASSIGNMENT. This Agreement and all of the provisions hereof will be binding upon and inure to the benefit of the Company153s successors and assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by Executive.

SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or unenforceable or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. In furtherance and not in limitation of the foregoing, should the
duration or geographical extent of, or business activities covered by, any
provision of this Agreement be in excess of that which is valid and enforceable
under applicable law, then such provision shall be construed to cover only that
duration, extent or activities which may validly and enforceably be covered.
Executive acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Agreement be given the construction which renders its
provisions valid and enforceable to the maximum extent (not exceeding its
express terms) possible under applicable law.

COMPLETE AGREEMENT. This Agreement contains the complete
agreement between the parties with respect to the subject matter hereof and
supersedes any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way. No person, whether or not an officer, agent, employee or
representative of any party, has made or has any authority to make for or on
behalf of that party any agreement, representation, warranty, statement,
promise, arrangement or understanding not expressly set forth in this Agreement
(“Parole Agreements”). The parties acknowledge that in entering into this
Agreement, they have not relied and will not in any way rely upon any Parole
Agreements.

10.	COUNTERPARTS. This Agreement may be executed in one or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together, when delivered, will constitute one and the same instrument.

11.

GOVERNING LAW; CHOICE OF FORUM; ENFORCEMENT. The internal
law, without regard to conflicts of laws principles, of the State of Minnesota
will govern all questions concerning the construction, validity and
interpretation of this Agreement and the performance of the obligations imposed
by this Agreement. Any and every legal proceeding arising out of or in
connection with this Agreement shall be brought in the appropriate courts of the
State of Minnesota, and each of the parties hereto consents to the exclusive
jurisdiction of such courts.

12.

INJUNCTIVE RELIEF. Executive agrees that it would be
difficult to compensate the Company fully for damages for any violation of the
provisions of Paragraphs 3, 4 and 5 of this Agreement. Accordingly, Executive
specifically agrees that the Company shall be entitled to injunctive relief to
enforce the provisions of such Paragraphs.

13.

NO WAIVER. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there by any estoppel to enforce any
provisions of this Agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any written
waiver shall not be deemed a continuing waiver unless specifically stated, shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.

14.	MODIFICATION. This Agreement may not be altered, modified or amended except by an instrument in writing signed by Executive and the Company.

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.


NAVARRE CORPORATION		EXECUTIVE

By:	/s/ Cary L. Deacon	/s/ Diane Lapp
	Cary L. Deacon	Diane Lapp
Its:	President and CEO

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