AMENDED AND RESTATED EMPLOYMENT AGREEMENT

Exhibit 99.1

AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

     This Amended and Restated Employment Agreement (the “Agreement”), dated December 28, 2006 (the “Execution Date”), is entered into by and between Cary L. Deacon, an individual residing in Minnesota (the “Executive”) and Navarre Corporation, a Minnesota corporation (the “Company”).

R E C I T A L S

     A. The Company recognizes that the business environment makes it difficult to attract and retain highly-qualified executives. The Company further recognizes that the Executive has provided valued service as an officer to the Company and is an important resource the Company desires to retain.

     B. In recognition of the Executive’s promotion to Chief Executive Officer of the Company, the Company and Executive now desire to amend and restate that certain original Employment Agreement (the “Original Agreement”) between the parties dated June 21, 2006.

     C. The Board of Directors of the Company (the “Board”) has determined that both the Original Agreement and this Agreement are in the best interests of the Company and its shareholders in order to secure Executive’s continued services and encourage his continued full attention and dedication to the business of the Company, and Executive is willing to continue his service to Company on the terms and conditions hereinafter set forth.

     NOW, THEREFORE, the parties hereby agree as follows:

ARTICLE I
EMPLOYMENT

   1.01 Executive’s Service. Beginning August 11, 2005, Executive has been employed by the Company as President and Chief Operating Officer. He shall continue to have such authority and responsibility, and shall serve in such capacities consistent with that status, as may from time to time be assigned to him by the Company’s Chief Executive Officer through December 31, 2006. Beginning January 1, 2007, (the “Promotion Date”), Executive will be promoted and employed by the Company as President and Chief Executive Officer. He shall have such authority and responsibility, and shall serve in such capacities consistent with that status, as may from time to time be assigned to him by the Company’s Board of Directors. The services of Executive are exclusive to the Company, and Executive will provide his full-time services to the Company. Executive is not precluded from serving on the boards of directors of other business entities, with the prior written approval of the Board, so long as such service does not interfere with his responsibilities to the Company. Executive agrees to perform his duties under this Agreement faithfully and to the best of his ability and to comply with the Company’s operating policies, procedures and practices in effect from time to time. Executive hereby confirms that he is under no contractual commitments inconsistent with his obligations set forth in this Agreement.

ARTICLE II
COMPENSATION AND BENEFITS

   2.01 Base Salary. During the Original Term of this Agreement (as defined in Section 3.01 below) and beginning on the Promotion Date and through the Amended Term of this Agreement (as defined in Section 3.01 below) the Company will pay to Executive a minimum base salary of $350,000 per annum and $450,000 per annum, respectively (the “Base Salary”), payable in equal installments on the Company’s regular payroll dates during the term of this Agreement. Executive’s performance will be reviewed by the Board annually to determine merit increases to the Base Salary as the Board deems appropriate and in accordance with its customary procedures and practices applicable to other executives. Such increases, once granted, are not subject to revocation except pursuant to a program of salary reductions applicable to

the Company’s executive officers generally. It is acknowledged that the Company will withhold and deduct from all compensation paid to Executive such amounts as are required under federal, state and local law to be withheld for income tax, Social Security and other withholding purposes.

   2.02 Performance Bonus. As additional compensation for Executive, Executive is eligible to receive an annual bonus during the Original Term of this Agreement with a target of 60% of Executive’s Base Salary and beginning on the Promotion Date and through the Amended Term of this Agreement with a target of 80% of Executive’s Base Salary for each fiscal year of the Company (the “Bonus”), in accordance with the annual bonus plan available to Company’s executives as a group as approved and determined by the Board. Executive’s Bonus for the Company’s 2007 fiscal year shall be prorated based on the bonus opportunity targets in effect before and after the Promotion Date. Executive’s Bonus, if approved by the Board, shall be paid annually not later than the June 15^th following the completion of the fiscal year.

   2.03 Stock Grants. Executive is eligible for grants under the Company’s 2004 Stock Plan, (the “Plan”) and any successor plans, as determined and approved by the Compensation Committee of the Board in its sole discretion. Executive acknowledges that on November 2, 2006 he received each of the following awards in connection with his appointment as Chief Executive Officer of the Company pursuant to this Agreement:

          (a) A non-qualified stock option grant under the terms and conditions of the Plan covering 300,000 shares of the Company’s common stock. The exercise price shall be fair market value on the date of grant as defined in the Plan. This stock option grant shall vest in three equal installments on the first, second and third anniversaries of the date of grant, subject to acceleration of vesting upon (i) the occurrence of a Change of Control Transaction (as defined in the Plan) or (ii) termination by the Company Without Cause or by Executive for Good Reason (both as defined in Section 3.02 below) prior to the end of the then current term of this Agreement. In the event of the occurrence of a triggering event described in the foregoing clause (ii), Executive will have until the end of the Amended Term (as defined in Section 3.01 below) of this Agreement in which to exercise this grant.

          (b) A restricted stock grant under the terms and conditions of the Plan covering 70,000 shares of the Company’s common stock. This restricted stock grant shall vest in three equal installments on the first, second and third anniversaries of the date of grant, subject to acceleration of vesting upon (i) the occurrence of a Change of Control Transaction or (ii) termination by the Company Without Cause or by Executive for Good Reason prior to the end of the then current term of this Agreement.

   2.04 Benefits. Executive is entitled to participate in all benefit plans, retirement plans and fringe benefits, including incentive arrangements, available to Company’s executives as a group and for which his status and level of employment qualify him in accordance with the Company’s policies. Any additional fringe benefits to Executive must be determined and approved by the Board in amounts that are commensurate with the services rendered.

   2.05 Expenses. All reasonable travel and incidental expenses incurred by Executive in the performance of his duties under this Agreement will be reimbursed by the Company provided that Executive complies with the Company’s expense reimbursement policies and provides the Company with documentation for such expenses in a form sufficient to sustain the Company’s deduction for such expenses under Section 162 of the Internal Revenue Code of 1986, as amended (the “Code”).

   2.06 Life Insurance. During the Original Term and subject to Executive’s provision to the Company of reasonable evidence of having paid such amounts, the Company shall provide Executive with reimbursement not to exceed $5,000 on an annual basis for premiums paid by

executive in connection with a life insurance policy insuring Executive’s life with a benefit not to exceed $700,000. Beginning on the Promotion Date and through the Amended Term, and subject to Executive passing any physical examination required by the insurance company, the Company shall pay to the insurance company premiums, not to exceed $15,000 on an annual basis, for a term life insurance policy covering the Executive with a benefit not to exceed $2,000,000. The Executive shall own such policy and the policy shall be payable to such beneficiary or beneficiaries as Executive shall determine in his sole discretion. Further, Executive agrees that he shall submit to reasonable physical examination at the Company’s request in the event that the Company should determine that it will pursue the acquisition of one or more “key man” life insurance policies with a benefit payable to the Company or such other person or entity that the Company shall designate upon the death of Executive.

   2.07 Compensation Upon Termination.

          (a) In the event this Agreement is terminated for any reason by either party, Executive (or his heirs or legal representatives) will be entitled to receive: (i) payment of Base Salary earned to the date of termination; (ii) payment for accrued vacation to the date of termination; (iii) payment owing to Executive pursuant to Section 2.02 for the fiscal year prior to the year of termination (to the extent any such payments were earned but unpaid on the date of termination); (iv) reimbursement pursuant to Section 2.05 of expenses incurred through the date of termination; and (v) vested benefits under the Company’s qualified benefit plans.

          (b) In addition to those amounts payable pursuant to Section 2.07(a), if Executive’s employment under this Agreement is terminated by the Company pursuant to Section 3.02(e) (Without Cause) or by Executive pursuant to Section 3.02(d) (for Good Reason), then Executive will also be entitled to the following, as severance.

          (i) An amount equal to Executive’s Base Salary for a period of the greater of the remaining current term of this Agreement (as provided in Section 3.01) or two (2) years following the date of termination of the Executive’s employment. Such amount shall be paid to Executive in two (2) equal installments as follows: (a) the first installment shall be paid not later than sixty (60) days following the termination of Executive’s employment; and (b) the second installment shall be paid on the first anniversary of the termination of Executive’s employment.

          (ii) In full substitution for Executive’s rights under the Company’s annual incentive bonus plan, the Executive will be paid a substitute incentive award equal to the average amount of the Bonus earned and paid to the Executive with respect to the preceding three (3) fiscal years, and multiplied by a factor of two (2). This substitute incentive award shall be paid in two (2) equal installments as follows: (a) the first installment shall be paid not later than sixty (60) days following the termination of Executive’s employment; and (b) the second installment shall be paid on the first anniversary of the termination of Executive’s employment.

          (iii) The Company shall provide Executive with reimbursement for the costs of continuing coverage of medical, dental and life benefits pursuant to applicable COBRA laws, rules or regulation for a period not to exceed eighteen (18) months from the time of termination. The Company will discontinue such benefits coverage before such date, if, and at such time as, Executive (a) is covered under the health, dental, or life insurance policy of a new employer, or (b) chooses to discontinue his insurance coverage with the Company, for whatever reason. By Executive’s entering into this Agreement, he acknowledges and agrees that the Company may modify his insurance plans or terminate his insurance plans at any time, but only in a manner consistent with those provided to the Company’s other senior executives. Executive further agrees to promptly provide the Company with written notice should he become covered under the health, dental, or life insurance policy of a future employer.

          (iv) Notwithstanding anything to the contrary contained in Sections 2.07(b)(i) and (ii) above, upon the occurrence of any Change of Control Transaction (as defined in the Plan) that occurs following the termination of Executive’s employment under this Agreement by the Company pursuant to Section 3.02(e) (Without Cause) or by Executive pursuant to Section 3.02(d) (for Good Reason), all amounts payable to Executive pursuant to Sections 2.07(b)(i) and (ii) above, that have not previously been paid to Executive at the time of such Change of Control Transaction, shall immediately be paid to Executive.

          (c) In addition to those amounts payable pursuant to Section 2.07(a), if Executive’s employment under this Agreement is terminated due to his death pursuant to Section 3.02(a), Executive will be entitled to payment of his annual bonus pursuant to Section 2.02 to which Executive would have been entitled for the fiscal year in which such death occurred, pro-rated to the date of his death.

          (d) In addition to those amounts payable pursuant to Section 2.07(a), if Executive’s employment under this Agreement is terminated due to Disability, as defined in Section 3.02(b), Executive will be entitled to payment of his Base Salary up until the date Executive begins receiving benefits under the Company’s disability benefits plan and payment of the annual bonus pursuant to Section 2.02 to which Executive would have been entitled for the fiscal year in which such Disability occurred, pro-rated to the date of Disability.

          (e) If Executive’s employment under this Agreement is terminated other than pursuant to Sections 3.02(a) (Death), (b) (Disability), (d) (for Good Reason) or (e) (Without Cause), Executive shall not thereafter be entitled to receive any salary or other payments or benefits under this Agreement, other than those earned through the date of termination.

          (f) As a condition precedent to receiving any payment or benefit pursuant to 2.07(b) or (d) above, the Executive and the Company shall first execute, and deliver to one another, and not timely revoke, a mutual release of all claims in a form reasonably acceptable to Executive and the Company.

ARTICLE III
TERM; TERMINATION

   3.01 Term. The term of the Original Agreement began on June 21, 2006 and ends on December 31, 2006 (the “Original Term”). The initial term of this Agreement begins on the Promotion Date and expires on December 31, 2009 (the “Initial Amended Term”), unless terminated earlier in accordance with Section 3.02 hereof. Upon the expiration of the Initial Amended Term, this Agreement shall be automatically renewed for successive additional one (1) year terms unless this Agreement is terminated in writing by either party hereto at least six (6) months prior to the expiration of the Initial Amended Term or any subsequent renewal term (the Initial Amended Term and any subsequent renewal terms shall be referred to collectively herein as the “Amended Term”). If Executive’s employment with the Company continues after the expiration of the Amended Term of this Agreement, then such employment will be on an “at will” basis and, except for continuing intellectual property, non-compete and confidentiality obligations pursuant to Articles IV, V and VI herein, not subject to the terms and conditions of this Agreement.

   3.02 Termination.

          (a) Death. Executive’s employment under this Agreement terminates without further notice upon his death.

          (b) Disability. The Company may, by notice to Executive or his legal representative, terminate Executive’s employment under this Agreement if the Board determines in good faith that (i) Executive has a mental or physical condition which renders Executive, with reasonable accommodation, unable or incompetent to carry out the material job responsibilities which Executive held or the material duties to which Executive was assigned at the time the condition arose, (ii) the condition has existed for at least six (6) months, and (iii) the condition is reasonably expected to be permanent or to last for either an indefinite duration or a duration in excess of six months (a “Disability”). In order to assist the Board in making a determination of Disability, Executive will, as reasonably requested by the Board: (x) make himself available for medical examinations by a physician chosen by the Board; (y) grant the Board and such physician access to all relevant medical information concerning him and arrange to furnish copies of medical records to the Board and such physician; and (z) use his best efforts to cause his own physicians to be available to discuss his medical condition. If Executive disagrees with the findings of the Board-appointed physician, he may appoint his own physician to make the relevant determinations as to Disability. In the event that the physician appointed by Executive disagrees with the findings of the Board-appointed physician, the two physicians shall select a third physician whose determination shall be binding.

          (c) Termination by the Company for Cause. The Company may terminate Executive’s employment under this Agreement for Cause (as defined below). For these purposes “Cause” means:

          (i) Executive’s conviction of, or the entering by Executive of a guilty plea or a plea of nolo contendere to, any felony charge;

          (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