Document:

Exhibit 10.1

 

EXHIBIT 10.1

SPANISH BROADCASTING SYSTEM, INC.

2006 OMNIBUS EQUITY COMPENSATION PLAN

STOCK OPTION GRANT AGREEMENT FOR NON-EMPLOYEE DIRECTORS

This STOCK OPTION GRANT AGREEMENT, dated as of the date set forth on Schedule A (the
“Date of Grant”), is delivered by Spanish Broadcasting System, Inc. (the “Company” or “SBS”), to
you (the “Grantee”). Capitalized terms used herein but not defined herein have the meanings given
to them in the Spanish Broadcasting System, Inc. 2006 Omnibus Equity Compensation Plan.

RECITALS

A. The Spanish Broadcasting System, Inc. 2006 Omnibus Equity Compensation Plan (the “Plan”)
attached hereto as Exhibit A provides for the grant of stock options to purchase shares of
Class A common stock, $0.0001 par value per share, of the Company (the “Common Stock”).

B. The Board of Directors of the Company (the “Committee” for purposes of grants to
Non-Employee Directors) has decided to make a stock option grant, subject to the terms and
conditions set forth in this Stock Option Grant Agreement (the “Agreement”) and the Plan, as an
inducement for the Participant to promote the best interests of the Company and its shareholders.

NOW, THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as
follows:

1. Grant of Option. Subject to the terms and conditions set forth in this Agreement and in
the Plan, the Company hereby grants to the Grantee a Non-Qualified Stock Option (the “Option”) to
purchase the shares of common stock of the Company (“Shares”) at a specified exercise price per
Share set forth on Schedule A. The Option shall become exercisable according to Section 2
below.

2. Exercisability of Options. Options shall become exercisable (vest) in such installments
(which need not be equal) and at such times as set forth on Schedule A, if the Grantee is
employed by, or providing service to, the Employer on the applicable date. To the extent not
exercised, installments shall accumulate and may be exercised, in whole or in part, at any time
after becoming exercisable, but not later than the date the Option expires. The Committee may
accelerate the exercisability of any or all-outstanding Options at any time for any reason.
Notwithstanding the foregoing, any Options that are not exercisable prior to a Change in Control
shall become exercisable on the date of such Change in Control and shall remain exercisable for the
remainder of their term.

3. Term of Options. Options shall be for such term as the Committee shall determine as set
forth on Schedule A, provided that no Option shall be exercisable after the expiration of
ten years from the Date of Grant, unless it is terminated at an earlier date pursuant to the provisions
of this Agreement or the Plan.

 

 

 

4. Exercise of Option After Termination of Service as Non-Employee Director. To the extent
exercisable the Option granted under this Agreement may be exercised by the Grantee only while he
is providing service to the Company as a Non-Employee Director, except as provided below:

(i) If the Grantee’s dies while a Non-Employee Director, or if his service as a
Non-Employee Director is terminated due to his Disability, the Grantee (or his Designated
Beneficiary or personal representative, as applicable) may exercise the Option no later than
twelve (12) months after such death or determination of Disability;

(ii) If the Grantee’s service as Non-Employee Director terminates for any reason other
than those set forth in (i) above and is not for Cause, the Grantee may exercise the Option
within three (3) months after such termination; or

(iii) If the Grantee dies during an extended exercise period described in (i) or (ii)
above, his Designated Beneficiary may exercise such Option no later than the expiration of
such extended period.

Notwithstanding (i) through (iii) above or anything in this Agreement or the Plan to the contrary,
at any time after the grant of the Option, the Committee, in its sole and absolute discretion and
subject to whatever terms and conditions it selects, may provide that the Option may be exercised
after the relevant extended period set forth above, but in no event later than the date that it
would have expired under this Agreement.

5. Exercise Procedures.

(a) Subject to the provisions of Sections 2 and 3 above, the Grantee may exercise part or all
of the exercisable Option by giving the Company written notice (in person or by first class mail to
the Secretary of the Company at the Company’s principal executive office) of the Grantee’s intent
to exercise the Option in the manner provided in this Agreement, specifying the number of Shares as
to which the Option is to be exercised and is accompanied by full payment therefor. The purchase
price for any Shares purchased pursuant to the exercise of an Option shall be paid in full upon
such exercise in cash, by check or, at the discretion of the Committee and upon such terms and
conditions as the Committee shall approve, by transferring previously owned Shares to the Company,
having Shares withheld or exercising pursuant to a “cashless exercise” procedure, or any
combination thereof. Any Shares transferred to the Company as payment of the purchase price under
an Option shall be valued at their Fair Market Value on the date of exercise of such Option. If
requested by the Committee, the Grantee shall deliver the Option Agreement evidencing the Option to
the Secretary of the Company who shall endorse thereon a notation of such exercise and return such
Option Agreement to the Grantee. Not less than one hundred (100) Shares may be purchased at any
time upon the exercise of an Option unless the number of Shares so purchased constitutes the total
number of Shares then purchasable under the Option or the Committee determines otherwise, in its
sole discretion. The Committee may impose from time to time such limitations as it deems
appropriate on the use of Shares of the Company to exercise the Option.

 

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(b) The obligation of the Company to deliver Shares upon exercise of the Option shall be
subject to all applicable laws, rules, and regulations and such approvals by governmental agencies
as may be deemed appropriate by the Committee, including such actions as Company counsel shall deem
necessary or appropriate to comply with relevant securities laws and regulations.

(c) All obligations of the Company under this Agreement shall be subject to the rights of the
Company as set forth in the Plan to withhold amounts required to be withheld for any taxes, if
applicable.

6. Change of Control. The provisions of the Plan applicable to a Change in Control shall
apply to the Option, and, in the event of a Change in Control, the Option shall automatically
become fully exercisable.

7. Restrictions on Exercise. Except as the Committee may otherwise permit pursuant to the
Plan, only the Grantee may exercise the vested portion of the Option during the Grantee’s lifetime
and, after the Grantee’s death, the Option shall be exercisable (subject to the limitations
specified in the Plan) solely by the legal representatives of the Grantee, or by the person who
acquires the right to exercise the Option by will or by the laws of descent and distribution, to
the extent that the Option is exercisable pursuant to this Agreement.

8. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, the terms of
which are incorporated herein by reference, and in all respects shall be interpreted in accordance
with the Plan. The grant and exercise of the Option are subject to interpretations, regulations
and determinations concerning the Plan established from time to time by the Committee in accordance
with the provisions of the Plan, including, but not limited to, provisions pertaining to (i) rights
and obligations with respect to withholding taxes, (ii) the registration, qualification or listing
of the Shares, (iii) changes in capitalization of the Company and (iv) other requirements of
applicable law. The Committee shall have the authority to interpret and construe the Option
pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions
arising hereunder.

9. No Other Rights. The grant of the Option shall not confer upon the Grantee any right to
be retained by or in the service of the Company.

10. No Shareholder Rights. Neither the Grantee, nor any person entitled to exercise the
Grantee’s rights in the event of the Grantee’s death, shall have any of the rights and privileges
of a shareholder with respect to the Shares subject to the Option, until certificates for Shares
have been issued upon the exercise of the Option.

11. Assignment and Transfers. Except as the Committee may otherwise permit pursuant to the
Plan, the rights and interests of the Grantee under this Agreement may not be pledged, sold,
assigned, encumbered, hypothecated to or otherwise transferred in favor of any party other than the
Company or a Subsidiary except, in the event of the death of the Grantee, by will or by the laws of
descent and distribution. In the event of any attempt by the Grantee to alienate, assign, pledge,
hypothecate, or otherwise dispose of the Option or any right hereunder, except as provided for in
this Agreement, or in the event of the levy or any attachment, execution or similar process upon
the rights or interests hereby conferred, the Company may terminate the Option by notice to the Grantee, and the Option and all rights hereunder shall thereupon become
null and void. The rights and protections of the Company hereunder shall extend to any successors
or assigns of the Company and to the Company’s parents, subsidiaries, and affiliates. This
Agreement may be assigned by the Company without the Grantee’s consent.

 

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12. Tax Consequences and Withholding. The exercise of the Option will result in taxable
income to the Grantee, and the Grantee (or the Grantee’s legal representative in the event of
death) shall be solely responsible for all tax consequences that result from the exercise of the
Option, as well as any subsequent sale of the Shares received upon exercise of the Option. The
Grantee (or the Grantee’s legal representatives in the event of death) shall pay to the Company, or
make other arrangements satisfactory to the Company to provide for the payment of, any federal,
state, local or other taxes that the Company is required to withhold with respect to the exercise
of the Option.

13. Applicable Law. The validity, construction, interpretation and effect of this
instrument shall be governed by and construed by and determined in accordance with the laws of the
State of New York, without giving effect to the conflicts of laws provisions thereof.

14. Notice. Any notice to the Company provided for in this instrument shall be addressed
to the Company in care of the Chief Financial Officer (or his designee), at 2601 S. Bayshore Drive,
PH II, Coconut Grove, Florida 33133 and any notice to the Grantee shall be addressed to such
Grantee at the current address shown on the payroll of the Employer, or to such other address as
the Grantee may designate to the Employer in writing. Any notice shall be delivered by hand, sent
by telecopy or enclosed in a properly sealed envelope addressed as stated above, registered and
deposited, postage prepaid, in a post office regularly maintained by the United States Postal
Service.

15. Definitions.

Whenever used in this Agreement, the following terms and phrases have the following respective
meanings:

“Cause” shall mean the Grantee’s willful failure to perform his duties with the Company or a
Subsidiary or the willful engaging in conduct which is injurious to the Company or a Subsidiary,
monetarily or otherwise, as determined by the Committee in its sole discretion.

“Designated Beneficiary” shall mean any individual designated by the Grantee, in a manner
determined by the Committee, to receive amounts due the Grantee in the event of the Grantee’s
death. In the absence of an effective designation by the Grantee, Designated Beneficiary shall mean
the Grantee’s estate.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute and
attest this Agreement, and the Grantee has executed this Agreement, effective as of the
Date of Grant.

	 	 	 	 	 
	 	SPANISH BROADCASTING SYSTEM, INC.

 	 
	 	By:  	/s/ Raul Alarcon, Jr.
 	 
	 	 	Name:  	Raul Alarcon, Jr. 	 
	 	 	Title:  	President 	 
	 

I hereby accept the Option described in this Agreement, and I agree to be bound by the
terms of the Plan and this Agreement. I hereby further agree that all the decisions and
determinations of the Compensation Committee shall be final and binding.

	 	 	 
	 
	 	Grantee:   	/s/ Manuel E. Machado
	 
	 	Address:	 
	 	 	 
	 	Date: 	July 19, 2010

 

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SCHEDULE A

SPANISH BROADCASTING SYSTEM, INC.

2006 EQUITY COMPENSATION PLAN

NONQUALIFIED STOCK OPTION GRANT FOR NON-EMPLOYEE DIRECTOR

The Board of Directors of Spanish Broadcasting System, Inc. (the “Company”) has determined to
grant to you (the “Grantee”) a nonqualified stock option to purchase shares of common stock of the
Company under the Spanish Broadcasting System, Inc. 2006 Omnibus Equity Compensation Plan (the
“Plan”). The terms of the grant are set forth in the Nonqualified Stock Option Grant Agreement (the
“Grant”) provided to you. The following provides a summary of the key terms of the Grant; however,
you should read the entire Grant, along with the terms of the Plan, to understand the Grant fully.

	 	 	 
	Grantee:
	 	Manuel E. Machado
	Date of Grant:
	 	June 3, 2010
	Options Granted:
	 	50,000
	Option Price per share:
	 	$1.79
	Total Cost to Exercise:
	 	$89,500
	Exercisability Schedule*:
	 	20% immediately, 20% each year after
	 
	 	10,000 on 6/3/2010
	 
	 	10,000 on 6/3/2011
	 
	 	10,000 on 6/3/2012
	 
	 	10,000 on 6/3/2013
	 
	 	10,000 on 6/3/2014
	Term/Expiration Date:
	 	June 3, 2020 unless terminated earlier.
	Transferability:
	 	Not transferable except in accordance with the Plan.

*- The Grantee must be providing services to the Company as a Non-Employee Director (as
defined in the Plan) on the applicable date for the option to become exercisable.

 

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Exhibit 10.1

EXECUTIVE SEVERANCE AGREEMENT

     THIS EXECUTIVE SEVERANCE AGREEMENT (the “Agreement”), dated as of the 12th day
of August, 2010 (the “Effective Date”), is entered into by and between NAVARRE CORPORATION, a
Minnesota corporation, (the “Company”), and Ward Thomas, an individual residing in the State of
Minnesota (the “Executive”).

     WHEREAS, Executive is being hired to hold a key position as a Divisional President of the
Company and will be considered an integral part of the Company’s 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 Executive’s
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
Executive’s 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 Executive’s then current base salary as adjusted from time to
time.

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

(i) Executive’s 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) Executive’s gross neglect, willful malfeasance or willful misconduct in
connection with his 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 Executive’s
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 Company’s code of conduct, that Executive knows or
reasonably should know could

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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) Executive’s failure to cooperate, if requested by the Board, with any
investigation or inquiry into his or the Company’s (or its successor’s) business
practices, whether internal or external, including, but not limited to Executive’s
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. “Change in Control” shall mean a transaction involving any of the following:

(i) the occurrence of (a) any sale, lease, exchange or other transfer of all or
substantially all of the assets of the Company (in one transaction or in a series of
related transactions) to a corporation that is not controlled by the Company, or (b)
any consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Company stock
would be converted into cash, securities or other property, other than a merger of
the Company in which shareholders immediately prior to the merger have the same
proportionate ownership of stock of the surviving corporation immediately after the
merger;

(ii) the occurrence of a change in control of the Company of a nature that would be
required to be reported (assuming such event has not been “previously reported”) in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act, whether or not the Company is then subject to such reporting
requirement;

(iii) the public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) by the Company or any Person that such Person has become the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more of the combined
voting power of the Company’s then outstanding securities;

(iv) the occurrence of any transaction whereby individuals who constitute the board
of directors of the Company prior to the transaction cease for any reason to
constitute at least a majority thereof following the transaction; or

(v) individuals who constitute the board of directors of the Company prior to the
transaction cease for any reason to constitute at least a majority thereof
immediately thereafter.

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

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e. “Good Reason” means a termination of Executive’s 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 his having actual knowledge of the
occurrence of one of such events, stating that he intends to terminate his 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 Executive’s employment occurs no
later than six months (6) months following the initial existence of one of such events:

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

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

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

f. “Severance Event” means either: (i) the effective date of the termination of Executive’s
employment by the Company for any reason other than for Cause, or (ii) the effective date of
the termination of Executive’s employment for Good Reason. A Severance Event shall not
include a termination of Executive’s employment as a result of Executive’s 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.

	2.	 	TERM OF AGREEMENT. This Agreement shall be effective as of the Effective Date and
shall continue through December 31, 2011. As of December 31, 2011, 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. Executive shall be entitled to the following severance payments in consideration of and
contingent following the later to occur of (i) the execution and delivery by Executive of a
general release of all claims substantially in the form attached hereto as Exhibit A, and
(ii) the expiration of any applicable revocation period in connection therewith.

b. Upon the occurrence of a Severance Event within the first twelve (12) months of
Executive’s employment:

(i) Subject to Paragraph 3f below, an amount equal to one-half of Executive’s then
current Base Salary.

c. Upon the occurrence of a Severance Event after Executive’s first anniversary of
employment:

(i) Subject to Paragraph 3f below, an amount equal to Executive’s then current Base
Salary; and

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(ii) In full substitution for Executive’s rights under the Company’s 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. To the extent that Executive has not been
employed by the Company for at least three (3) years, such substitute incentive
award will be equal to the average amount of the annual incentive award earned and
paid to the Executive for the fiscal years that have been completed during the term
of his employment.

d. Upon the occurrence of a Severance Event within one (1) year following a Change in
Control, and Executive is not offered reasonably comparable employment, defined as same or
greater compensation, same or greater job responsibility and same geographical region
(within 30 miles) of employment, with a successor entity:

(i) Subject to Paragraph 3f below, an amount equal to Executive’s then current Base
Salary; and

(ii) In full substitution for Executive’s rights under the Company’s 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. To the extent that Executive has not been
employed by the Company for at least three (3) years, such substitute incentive
award will be equal to the average amount of the annual incentive award earned and
paid to the Executive for the fiscal years that have been completed during the term
of his employment.

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

f. If applicable, the severance amount provided for above will be offset
by any income protection benefits payable to Executive during the
first twelve months of a qualifying disability under the Company’s
group short-term and long-term disability insurance plans.

g. 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.

h. 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 409A of 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.

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	 	 	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 his 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 and
its subsidiaries which are not otherwise in the public domain and will not disclose
them to anyone outside of the Company and its subsidiaries, either during or after
the termination of his Employment, except with the Company’s written consent and
except for such disclosure as is necessary in the performance of Executive’s
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 his 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 and its subsidiaries, which Executive
may then possess or have under his 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

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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 his 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.

	6.	 	COVENANT NOT TO COMPETE.

a. Executive acknowledges that the businesses of the Company is highly competitive and
international in scope, that its products are sourced and marketed throughout North America,
that the Company competes in nearly all of its business activities with other organizations
which are or could be located throughout North America and that the nature of Executive’s
services, position and expertise are such that he is capable of competing with the Company
from nearly any location in North America. Executive further acknowledges that all services
of Executive are exclusive to the Company, and that Executive’s performances and services
hereunder are of a special, unique, unusual, extraordinary and intellectual character which
gives them peculiar value, the loss of which cannot reasonably or adequately be compensated
in an action at law for damages and that a breach by Executive of the terms of this Section
6 of this Agreement will cause the Company irreparable injury.

b. In recognition of the foregoing, Executive covenants and agrees that he will not, 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, do any of the following during his employment with the
Company, plus (i) an additional six (6) months following a Severance Event that occurs
during the first twelve months of Executive’s employment; or (ii) an additional twelve (12)
months following a Severance Event that occurs after the first twelve (12) months of
Executive’s employment:

(i) Engage in a business that competes with a material portion of the Company’s, or
any of its subsidiaries, business activities;

(ii) Acquire any ownership of any kind in, or become associated with or provide
services to any other person, corporation, partnership, limited liability company,
business trust, association or other business entity engaged in a business that
competes with a material portion of the Company’s, or any of its subsidiaries,
business activities;

(iii) Intentionally and knowingly solicit or attempt to solicit or participate in
the solicitation of a vendor or a customer of the Company, or any of its
subsidiaries, to terminate his, her or its relationship therewith; or

(iv) Solicit or attempt to solicit or encourage any person, who is then, or was
within the then most recent twelve (12) month period, to the knowledge of Executive,
an employee, agent, consultant or representative of the Company or any of its
subsidiaries, to become an employee, agent, representative or consultant of or to
Executive or any other individual or entity.

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    c.
    Nothing in this Section 6 of this Agreement shall prevent Executive from making or
holding an investment in securities traded on any national securities exchange or traded in
the over-the-counter market, provided said investments do not exceed one percent (1%) of the
issued and outstanding securities of any one such issuer or, if the total investment in the
issuer is $500,000 or less, up to five percent (5%) of such issued and outstanding
securities.

	7.	 	NO CONFLICTS. Executive represents and warrants that he is not a party to any agreement
with any other person or business entity, including former employers, that in any way affects
Executive’s employment by Company or relates to the same subject matter of this Agreement or
conflicts with his obligations under this Agreement, or restricts Executive’s services to
Company.
	 
	8.	 	ASSIGNMENT. This Agreement and all of the provisions hereof will be binding upon and
inure to the benefit of the Company’s successors and assigns. Neither this Agreement nor any
of the rights, interests or obligations hereunder may be assigned by Executive.
	 
	9.	 	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.
	 
	10.	 	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.
	 
	11.	 	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.
	 
	12.	 	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.

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	13.	 	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.
	 
	14.	 	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.
	 
	15.	 	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:
	 	 	 	 	 	 	 	 
	 

	 	 

Cary L. Deacon,
	 	 
	 	 

Ward Thomas
	 	 
	 

	 	Its: President and CEO	 	 	 	 	 	 

8

 

Exhibit A

FORM OF GENERAL RELEASE

Navarre Corporation, a Minnesota corporation, and Ward Thomas (“Executive”), a resident of the
State of Minnesota, agree that:

     1. Definitions. All words used in this Release are intended to have their
plain meanings in ordinary English. Specific terms in this Release have the following meanings:

	 	a.	 	“Navarre” means Navarre Corporation and any of its successors, assigns
and/or its affiliated and predecessor companies, and the present and former
officers, administrators, partners, insurers and agents of it, whether in its
individual or official capacities.
	 
	 	b.	 	“Executive’s Claims” means all claims listed in Paragraph 4,
General Release of All Claims.
	 
	 	c.	 	“Release” or “Agreement” means this General Release Agreement.
	 
	 	d.	 	“Executive Severance Agreement” means the agreement attached as Exhibit
A, dated March 20, 2008, which terms and conditions are incorporated herein.

     2. Last Day of Employment. Executive’s last day of employment with Navarre
was                            , 20____.

     3. Consideration. In consideration of the signing of this Release, the agreements set
forth herein, and those terms set forth in the Executive Severance Agreement, Navarre agrees to
make the severance payment as outlined in the Executive Severance Agreement, Paragraph 4.

     4. General Release of All Claims. Executive knowingly and voluntarily releases and
forever discharges, to the full extent permitted by law, Navarre of and from any and all claims,
known and unknown, asserted and unasserted, Executive has or may have against Navarre as of the
date of execution of this Release including, but not limited to, the following claims and any
alleged violation of:

	 	a.	 	All claims arising out of or relating to Executive’s employment
with Navarre and Executive’s termination; and
	 
	 	b.	 	All claims arising out of or relating to statements, actions,
or omissions of Navarre; and
	 
	 	c.	 	All claims for any alleged unlawful discrimination, harassment,
retaliation or reprisal or any other alleged unlawful practices arising under
any federal, state, or local statute, ordinance, or regulation, including
without limitation claims under the Age Discrimination in Employment Act of
1967, as amended; Title VII of the Civil Rights Act of 1964, as amended; the
Americans with Disabilities Act of 1990, as amended; Section 1981 of the Civil
Rights Act of 1866; the Sarbanes-Oxley Act of 2002, as amended; the Employee
Retirement Income Security Act of 1974, as amended; the Equal Pay Act of 1963,
as amended; the Immigration

9

 

	 	 	 	Reform and Control Act of 1986, as amended; the Worker Adjustment and
Retraining Notification Act; the Minnesota Human Rights Act, as amended; the
Fair Credit Reporting Act, as amended; and workers’ compensation
non-interference or non-retaliation statutes; and
	 
	 	d.	 	All claims for alleged wrongful discharge; breach of contract;
breach of implied contract; breach of a covenant of good faith and fair
dealing; breach of fiduciary duty; estoppel; Executive’s activities, if any, as
a “whistleblower;” defamation; infliction of emotional distress; fraud;
misrepresentation; negligence; harassment; retaliation or reprisal;
constructive discharge; assault; battery; rape; false imprisonment; invasions
of privacy; interference with contractual or business relationships; any other
wrongful employment practices or violation of any common law; and
	 
	 	e.	 	All claims for compensation of any kind, including without
limitation, bonuses, commissions, vacation pay, and expense reimbursements
beyond that which Executive has received or will receive as a result of this
agreement; and
	 
	 	f.	 	All claims for back pay, front pay, reinstatement, other
equitable relief, compensatory damages, damages for alleged personal injury,
liquidated damages, and punitive damages; and
	 
	 	g.	 	All claims for attorneys’ fees, costs and interest.

However, Executive’s Claims do not include any claims that the law does not allow to be waived or
any claims that may arise after the date on which Executive signs this Release.

     5. Taxability. Executive agrees that the consideration referenced herein is intended
as wage loss and Executive understands that the severance will be paid through the regular payroll
system with applicable withholdings. However, Navarre shall have no responsibility or liability as
a result of Executive’s characterization of any amounts paid by Navarre as taxable or non-taxable
damages and Executive agrees to indemnify Navarre and hold it harmless for all such liability or
obligations, if any.

     6. No Unlawful Limitation. Executive understands and agrees that, notwithstanding
anything to the contrary in this Release, nothing is intended to and/or nothing shall: (a)
constitute an unlawful release or waiver of any of his rights under any laws; or (b) prevent,
impede, or interfere with his ability or right to: (i) provide truthful testimony pursuant to
subpoena, (ii) file any charge with, or participate in an investigation or proceeding conducted by
any governmental entity, (iii) enforce this Agreement, and/or (iv) seek defense and indemnification
for any claims asserted by third parties arising out of the performance of Executive’s duties as an
officer of Navarre for which Navarre is obligated by state or federal law to defend and indemnify
Executive. Notwithstanding anything to the contrary, nothing in this Release is intended to be nor
shall be construed to be a violation of any law.

     7. Confidentiality. To the fullest extent permitted by law, Executive agrees to keep
this Release and its terms and conditions of the settlement confidential. Notwithstanding the
confidentiality covenants, Executive may make disclosure to his attorneys, wife and tax advisor(s),
provided that before any such disclosure is made, all such persons to whom disclosure is to be made
agree to keep this Release and its terms and conditions confidential, and Executive may make
disclosure as required by law.

     8. Affirmations. Executive affirms that he has not filed, caused to be filed, or
presently is not a party to any claim, complaint, or action against Navarre in any forum or form.
Executive further

10

 

affirms that he has been paid and/or has received all leave (paid or unpaid), compensation,
wages, vacation payment and/or buyout, bonuses, commissions, and/or benefits to which he may be
entitled and that no other leave (paid or unpaid), compensation, wages, bonuses, commissions and/or
benefits are due to him, except as provided in this Agreement. Executive further affirms that he
has no known workplace injuries or occupational diseases and has been provided with and/or has not
been denied any leave requested under the Family and Medical Leave Act. Executive affirms and
warrants that he has, and will continue to, comply fully with the covenants contained in Paragraphs
5, 6 and 7 of the Executive Severance Agreement.

     9. Nondisparagement. Executive agrees not to disparage the reputation or character of
Navarre, its subsidiaries, or any of its or their directors, officers or employees.

     10. Governing Law and Interpretation. This Release shall be governed and conformed in
accordance with the laws of the State of Minnesota. In the event that Executive or Navarre
breaches any provision of this Release, Executive and Navarre affirm that either may institute an
action to be decided by a judge without a jury to specifically enforce any term or terms of this
Release. Should any provision of this Release be declared illegal or unenforceable by any court of
competent jurisdiction and cannot be modified to be enforceable, excluding the general release
language, such provision shall immediately become null and void, leaving the remainder of this
Release in full force and effect.

     11. Prevailing Parties Recovery in the Event of Breach. If either party violates
this Agreement, the non-breaching party has a right to sue for such breach and the prevailing party
shall pay to the other party any reasonable attorneys’ fees, costs and expenses associated with
such litigation.

     12. Amendment. This Release may not be modified, altered or changed except upon
express written consent of both parties wherein specific reference is made to this Release.

     13. Entire Agreement. This Release and the Executive Severance Agreement, which is
attached and incorporated herein by reference, set forth the entire agreement between Executive and
Navarre. Executive acknowledges that he has not relied on any representations, promises, or
agreements of any kind made to him in connection with his decision to accept this Release, except
for those set forth in this Release.

     14. Benefit Plans. The expiration or forfeiture of awards granted to Executive under
the 1992 Stock Option Plan and 2004 Stock Plan are governed by the terms of each individual award
agreement. Generally, vested stock options under the 2004 Stock Plan, must be exercised within 90
days of the last day of employment and no later than 4:00 p.m. Minneapolis time on said date. This
Agreement does not affect vested benefits under the Navarre 401(k) Plan and benefit continuation
rights under COBRA.

     15. Return of Company Property. Executive agrees that he will immediately return to
Navarre all property, equipment, documents, reports, or any other documentation related to Navarre
including, but not limited to, records, keys and pass cards, software and other physical or
personal property which he has received or prepared or helped to prepare in connection with his
employment, which is in his possession or control, and Executive further agrees not to retain any
copies, duplications, reproductions or excerpts thereof (whether tangible or electronic).

     16. No Admission of Liability. It is expressly understood that this Agreement does
not constitute, nor shall it be construed as, an admission by Navarre of Executive of any liability
or unlawful conduct whatsoever. Navarre and Executive specifically deny any liability or unlawful
conduct.

11

 

     EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN ADVISED TO CONSULT HIS OWN ATTORNEY CONCERNING THIS
RELEASE. HAVING ELECTED TO EXECUTE THIS RELEASE, TO FULFILL THE PROMISES HEREIN AND TO RECEIVE THE
SUMS IN PARAGRAPH 3 ABOVE AND PARAGRAPH 4 OF THE EXECUTIVE SEVERANCE AGREEMENT, EXECUTIVE FREELY
AND KNOWINGLY, AND AFTER DUE CONSIDERATION AND ADVICE FROM HIS LEGAL COUNSEL, ENTERS INTO THIS
RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ANY AND ALL CLAIMS HE MIGHT HAVE AGAINST NAVARRE.

     Executive further acknowledges that he has the right to rescind this Release within fifteen
(15) calendar days after it has been signed. To be effective, the rescission must be in writing
and be delivered to Navarre either by hand delivery or by mail, properly addressed to Navarre and
sent by certified mail, return receipt requested, within the fifteen (15) day period.

     IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Release as of
the date set forth below:

	 	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	Navarre Corporation,	 	 
	 	 	 	 	 	 	a Minnesota corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	 	 	Name:	 	 	 	 
	Dated:

	 	 	 	 	 	 	 	Its:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Dated:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

12

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