In order to achieve the desired functionality you will need to make a custom Navigation template. In it you can use RadPanelBar control which implements this functionality out of the box. You can use your custom .ascx template by dropping the Navigation widget and clicking on the Edit button. Then expand the Design Settings drop down and in the Custom template path field type the relative path to your template.
I have attached a sample template which you can use in your project and build the navigation from there. For further styling and additional functionality if the control you can take a look at the RadPanelBar's Documentation.
I hope this helps.
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