Exhibit 10.26
 
 Annual Incentive Plan
Fiscal Year  2009
 Effective April 1, 2008  March 31, 2009
 
 (NAVARRE LOGO)
    
    (NAVARRE LOGO)
 (ENCORE LOGO)
    
    (BCI LOGO)
    
    (FUNIMATION LOGO)




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Contents
 I.
    
    Purpose of the PlanII.
    
    EligibilityIII.
    
    Administration of PlanIV.
    
    Plan DesignV.
    
    Financial ObjectivesVI.
    
    Individual ObjectivesVII.
    
    Incentive PaymentsVIII.
    
    Amendment, Suspension and TerminationIX.
    
    Unfunded PlanX.
    
    Other Benefit and Compensation ProgramsXI.
    
    Governing Law
 Exhibit I:
    
    FY2009 Incentive Plan ComponentsExhibit II:
    
    FY2009 Incentive Plan Payout ScheduleExhibit III:
    
    FY2009 Incentive Payout Calculation Examples
  2




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I. Purpose of the Plan
  II. Eligibility
  III. Administration
  IV. Plan Design
  
    
    Financial Objectives
    
    Individual Objectives
  V. Financial Objectives
   3




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For FY2009, the Compensation Committee has determined that the Financial Objectives are:
 
    
    Consolidated Operating Income of $20 million (for all participants)
    
    Consolidated Net Sales of $664 million (for corporate participants)
    
    Subsidiary Budgeted Operating Income (for subsidiary participants)
    
    Subsidiary Budgeted Net Sales (for subsidiary participants)
 Threshold
  For FY2009, the Compensation Committee has determined that the Financial Objective threshold is
Consolidated Operating Income of $16 million.
 Growth Multiplier
 For FY2009, subject to the maximum payment provision in Paragraph VII, the Compensation
Committee has determined that if Consolidated Operating Income exceeds the target, a participants
incentive payment will be increased by the same percentage that Consolidated Operating Income
exceeds the stated target (the Growth Multiplier).
 Discretionary Pool
  The Compensation Committee has determined that the maximum discretionary pool for FY2009 is
$500,000, which may be awarded in whole or in part.
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VI. Individual Objectives
 Goal Setting
 specific and measurable
 Goal Monitoring
  Goal Modification
  Goal Measurement
  VI. Incentive Payments
 Results and Adjustments
  Payments
   5




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Maximum Payment
  For FY2009, the Compensation Committee has determined that the total payment to any participant
under this Plan shall not exceed 150% of the participants base salary.
 Communication
  VII. Amendment, Suspension and Termination
  VIII. Unfunded Plan
  IX. Other Benefit and Compensation Programs
  X. Governing Law
   6




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EXHIBIT I
 Annual Incentive Plan Components
 Consolidated
    
    SubsidiaryOperating
    
    Operating
    
    Consolidated
    
    Subsidiary
    
    IndividualJob Level
    
    Income
    
    Income
    
    Net Sales
    
    Net Sales
    
    ObjectivesCEO, CFO and COO
    
    
    60
    %
    
    
    
    
    
    
    20
    %
    
    
    
    
    
    
    20
    %Subsidiary Presidents
    
    
    20
    %
    
    
    40
    %
    
    
    
    
    
    
    20
    %
    
    
    20
    %Corporate VPs
    
    
    60
    %
    
    
    
    
    
    
    20
    %
    
    
    
    
    
    
    20
    %Subsidiary VPs
    
    
    20
    %
    
    
    40
    %
    
    
    
    
    
    
    20
    %
    
    
    20
    %Corporate Directors
    
    
    40
    %
    
    
    
    
    
    
    20
    %
    
    
    
    
    
    
    40
    %Subsidiary Directors
    
    
    20
    %
    
    
    20
    %
    
    
    
    
    
    
    20
    %
    
    
    40
    %Corporate Managers
    
    
    40
    %
    
    
    
    
    
    
    20
    %
    
    
    
    
    
    
    40
    %Subsidiary Managers
    
    
    20
    %
    
    
    20
    %
    
    
    
    
    
    
    20
    %
    
    
    40
    %
  7




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EXHIBIT II
 Annual Incentive Plan  Payout Schedule for Financial Objectives
 Percent of
    
    PayoutTarget / Budget
    
    %Target
    
    
    100
    %
    
    
    100
    %99
    %
    
    
    97.5
    %98
    %
    
    
    95.0
    %97
    %
    
    
    92.5
    %96
    %
    
    
    90.0
    %95
    %
    
    
    87.5
    %94
    %
    
    
    85.0
    %93
    %
    
    
    82.5
    %92
    %
    
    
    80.0
    %91
    %
    
    
    77.5
    %90
    %
    
    
    75.0
    %89
    %
    
    
    72.5
    %88
    %
    
    
    70.0
    %87
    %
    
    
    67.5
    %86
    %
    
    
    65.0
    %85
    %
    
    
    62.5
    %84
    %
    
    
    60.0
    %83
    %
    
    
    57.5
    %82
    %
    
    
    55.0
    %81
    %
    
    
    52.5
    %Minimum
    
    
    80
    %
    
    
    50
    %Below 80%
    
    0% Payout
 Incentive Plan Upside Potential:
  8




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EXHIBIT III
 Incentive Payout Calculation Examples
 Example #1:
  Consolidated
    
    Subsidiary
    
    Consolidated NetOperating Income
    
    Operating Income
    
    Sales
    
    Subsidiary Net Sales
    
    Individual Objectives10% of base salary
- 
(40% of total)
    
    
    
    5% of base salary -

(20% of total)
    
    
    
    10% of base salary -

(40% of total)
 Incentive Component
    
    % Attained
    
    
    Payout %
    
    
    Calculation
    
    
    PayoutConsolidated Op Income
    
    
    80
    %
    
    
    50
    %
    
    
    $80,000 x 10% x 50%
    
    
    $
    4,000Subsidiary Op Income
    
    
    
    %
    
    
    
    %
    
    
    
    
    
    $
    0Consolidated Net Sales
    
    
    100
    %
    
    
    100
    %
    
    $
    80,000 x 5% x 100
    %
    
    $
    4,000Subsidiary Net Sales
    
    
    
    %
    
    
    
    %
    
    
    
    
    
    $
    0Individual Objectives
    
    
    80
    %
    
    
    80
    %
    
    $
    80,000 x 10% x 80
    %
    
    $
    6,400$
    14,400
 Example #2:
  Consolidated
    
    Subsidiary
    
    Consolidated NetOperating Income
    
    Operating Income
    
    Sales
    
    Subsidiary Net Sales
    
    Individual Objectives8% of base salary
- (20% of total)
    
    16% of base salary -

(40% of total)
    
    
    
    8% of base salary -

(20% of total)
    
    8% of base salary -
(20% of total)
 Incentive Component
    
    % Attained
    
    
    Payout %
    
    
    Calculation
    
    
    PayoutConsolidated Op Income
    
    
    90
    %
    
    
    75
    %
    
    
    $100,000 x 8% x 75%
    
    
    $
    6,000Subsidayr Op Income
    
    
    100
    %
    
    
    100
    %
    
    $
    100,000 x 16% x 100
    %
    
    $
    16,000Consolidated Net Sales
    
    
    
    %
    
    
    
    %
    
    
    
    
    
    $
    0Subsidiary Net Sales
    
    
    80
    %
    
    
    50
    %
    
    $
    100,000 x 8% x 50
    %
    
    $
    4,000Individual Objectives
    
    
    95
    %
    
    
    95
    %
    
    $
    100,000 x 8% x 95
    %
    
    $
    7,600$
    33,600
  9




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Example #3  Growth Multiplier:
  Consolidated
    
    Subsidiary
    
    Consolidated NetOperating Income
    
    Operating Income
    
    Sales
    
    Subsidiary Net Sales
    
    Individual Objectives8% of base salary -
(20% of total)
    
    16% of base salary -

(40% of total)
    
    
    
    8% base salary -

(20% of total)
    
    8% of base salary -

(20% of total)
 Incentive Component
    
    % Attained
    
    
    Payout %
    
    
    Calculation
    
    
    PayoutConsolidated Op Income
    
    
    110
    %
    
    
    100
    %
    
    
    $100,000 x 8% x 100%
    
    
    $
    8,000Subsidiary Op Income
    
    
    100
    %
    
    
    100
    %
    
    $
    100,000 x 16% x 100
    %
    
    $
    16,000Consolidated Net Sales
    
    
    
    %
    
    
    
    %
    
    
    
    
    
    $
    0Subsidiary Net Sales
    
    
    90
    %
    
    
    75
    %
    
    $
    100,000 x 8% x 75
    %
    
    $
    6,000Individual Objectives
    
    
    100
    %
    
    
    100
    %
    
    $
    100,000 x 8% x 100
    %
    
    $
    8,000$
    38,000110% Achievement = 10% Multiplier
    
    $
    3,800$
    41,800
  10