Conditional Unsecured Promissory Note

by Funimation
August 14th, 2002

                                                                    EXHIBIT 10.3


$650,000.00                                              July 31, 2002
                                                         Los Angeles, California

         INDEBTEDNESS. FOR VALUE RECEIVED, but expressly subject to the
condition indicated under the section titled "Conditional Obligation" below,
Navarre Corporation, a Minnesota corporation (hereinafter referred to as
"Maker"), promises to pay to the bankruptcy estate of Encore Software, Inc.
(hereinafter referred to as "Holder" or "Encore"), or order, at 2029 Century
Park East, Suite 300, Los Angeles, CA 90067 or at such other place as may be
designated in writing by the holder of this Promissory Note (hereinafter
referred to as this the principal sum of Six Hundred Fifty Thousand and 00/100
Dollars ($650,000.00), together with interest accrued thereon if not paid when
due. This Note evidences a portion of the purchase price payable by Maker to
Encore for the property purchased under that certain Asset Purchase Agreement
dated June 7, 2002, as amended and modified by that certain Amended and Restated
Asset Purchase Agreement dated July 10, 2002, and by that certain First
Amendment dated July 31, 2002 to the Amended and Restated Asset Purchase
Agreement (collectively referred to hereinafter as the "Asset Purchase
Agreement"), between Maker and Encore.

         INTEREST. Except as provided in the immediately following sentence, no
interest shall accrue under this Note. In the event that (i) any payment due
under this Note is not paid when due, (ii) Holder provides written notice
thereof to Maker and (iii) Maker fails to make such payment within ten (10) days
from receipt of such written notice, and without affecting any of Holder's
rights and remedies provided herein, the amount due under this Note shall
include interest accrued from the date hereof to the date of payment on the
unpaid principal balance of this Note at a fixed rate of interest equal to eight
percent (8%) per annum.

         PAYMENT. The entire principal amount of this Note shall be due and
payable in full on April 1, 2003.

         PREPAYMENT. Maker may prepay all or part of the principal balance due
under this Note, without premium or penalty.

         WAIVERS. Maker, for itself, its legal representatives, successors and
assigns, except as provided herein, expressly waives presentment, protest,
demand, notice of dishonor, notice of nonpayment, notice of maturity, notice of
protest, presentment for the purpose of accelerating maturity and diligence in
collection, and consents that Holder may extend the time for payment or
otherwise modify the terms of payment of any part or the whole of the debt
evidenced hereby.

         CHOICE OF LAW. This Note and all transactions hereunder and/or
evidenced hereby shall be governed by, construed under and enforced in
accordance with the laws of the State of California.

         ASSIGNMENT, ETC. Holder reserves the right to sell, assign, transfer,
negotiate or grant participation interests in all or any part of or any interest
in Holder's rights and benefits hereunder.

         MODIFICATION. This Note may not be changed, modified, amended or
terminated orally, but only by a written document executed by Maker.

CONDITIONAL OBLIGATION. Notwithstanding anything to the contrary contained
herein, any and all obligations of Maker to make any payments under this Note
are expressly conditioned upon Maker receiving Sony's written approval to
manufacture the PS2 version of Dragon's Lair ("PS2-DL") by no later than October
17, 2002. If such approval is received on or after October 18, 2002, Holder
acknowledges that Maker shall not have the necessary time to properly distribute
PS2-DL to all of the retailers for the 2002 Thanksgiving and Christmas holiday
seasons, and Maker shall be irreparably harmed and damaged and, therefore, the
Holder hereby irrevocably agrees that the Maker shall have no obligation to make
any payment under this Note and this Note shall be deemed satisfied and paid in

         UNSECURED OBLIGATION.  This Note is an unsecured obligation of Maker.

a Minnesota Corporation

By:     /s/ James G. Gilbertson
Its:     Chief Financial Officer