<PAGE>
                                                                   EXHIBIT 10.16

NOTE: PORTIONS OF THIS EXHIBIT INDICATED BY "[***]" ARE SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST, AND HAVE BEEN OMITTED FROM THIS EXHIBIT.
COMPLETE, UNREDACTED COPIES OF THIS EXHIBIT HAVE BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION AS PART OF THIS COMPANY'S CONFIDENTIAL TREATMENT
REQUEST.

                                VENDOR AGREEMENT

              Between:

              BEST BUY CO., INC.                DIRECTED ELECTRONICS, INC.
                                                --------------------------
              7075 Flying Cloud Drive    and    One Viper Way
                                                --------------------------
              Eden Prairie, MN 55344            Vista, CA 92085
                                                --------------------------

1.    LICENSE TO SELL PRODUCTS

Vendor grants Best Buy Co., Inc., and its affiliates and subsidiaries ("Best
Buy"), a non-exclusive license to distribute all products Vendor makes available
to Best Buy (the "Products"), to end users and commercial buyers in the United
States, and other territories as agreed from time to time, through its sales
channels including but not limited to its present and future stores, Internet
Website, (www.BestBuy.com), distribution centers and mail order distribution
centers.

2.    PRICING AND TAXES

-     PRICES: Vendor will sell the Products to Best Buy at the prices then in
      effect on its current price list, as may be changed from time to time, or
      as otherwise agreed between the parties. Prices exclude freight and
      insurance. Vendor guarantees competitive pricing.

-     TAXES: Vendor's prices do not include sales, use, excise, or similar
      taxes. The amount of any valid present or future sales, use, excise, or
      other similar tax which is attributable to Best Buy shall be paid by Best
      Buy; or in lieu thereof, Best Buy shall provide Vendor with a tax
      exemption certificate acceptable to the taxing authorities.

3.    PAYMENT

Vendor shall electronically submit an invoice to Best Buy on the same day
Product is shipped. Invoice credit terms will be set forth in the Vendor Program
Agreement as further described in Section 11. The designated credit term shall
commence on the date Best Buy verifies receipt of Product at the FOB point (e.g.
distribution center or store in the case of FOB destination shipping terms; or
by the Best Buy-assigned center in the case of FOB origin shipping terms). Best
Buy's policy is to cut and mail checks on the due date or first workday
thereafter. Thus, if the credit terms are net 60 days, Best Buy will send
payments 60 days after Best Buy verifies receipt of Product at the FOB
destination point. No additional charges of any type beyond the price of the
Products shall be added to an invoice without Best Buy's express written
consent. Vendor may not charge interest on any past due amounts as a result of
audits, claims or disputed deductions. All transactions must be valued and paid
in U.S. currency. Best Buy may offset against amounts payable to the Vendor all
present and future indebtedness of the Vendor to Best Buy arising from any
transaction.

Vendor will send invoices to Best Buy electronically as provided in Section 10
(Electronic Data Interchange; Web-Based Electronic Commerce). All invoices not
sent electronically should be sent to Best Buy Purchasing LLC, Attn: Accounts
Payable, P.O. Box 9331, Minneapolis, MN 55440-9331. Best Buy Purchasing LLC is a
controlled subsidiary of Best Buy Co., Inc. Best Buy Purchasing LLC will pay
Vendor invoices in accordance with this Section 3 and shall initially assume
title to all Products. Best Buy Purchasing LLC will resell and transfer title to
such Products to Best Buy Co., Inc.'s other affiliates and subsidiaries to
distribute the Products through the sales channels provided in Section 1. Best
Buy Co., Inc. guarantees the performance required of Best Buy Purchasing LLC
under this Agreement.

4.    SHIPPING

-     SELECT SHIPPING TERMS: One of the following ground shipment terms shall be
      agreed upon at the time this Agreement is executed by checking the
      applicable box. No other ground shipment terms other than the two options
      described below may be used.

[ ]   Best Buy's preferred method of shipping for domestic shipments is F.O.B.
      Origin, Freight Collect and Allowed. Best Buy shall be responsible for
      carrier selection routing instructions and pick-up appointments at
      Vendor's domestic origin facility. In addition, Best Buy is responsible
      for carrier freight payments except as otherwise specified in this
      Agreement, submitting freight claims for loss and damage, scheduling
      appointments at destination, and tracking and tracing freight in transit.
      Title and risk of loss passes to Best Buy Purchasing LLC upon delivery to
      Best Buy at Vendor's domestic origin shipping dock. Vendor agrees to have
      Products in "ship-ready" condition by the ship date as specified in the PO
      and further, provide 48-hour notice to Best Buy for truckload shipments
      and 24-hour notice to Best Buy for less-than-truckload shipments. Vendor
      will pay a freight allowance to Best Buy pursuant to the attached
      Collaborative Transportation Agreement, as amended from time to time by
      the parties.

[X]   Alternatively, Vendor shall ship Product to Best Buy FOB Destination,
      Freight Prepaid by Vendor to the location specified by Best Buy, including
      but not limited to its stores, distribution centers, and third-party
      fulfillment providers. Vendors are encouraged to utilize Best Buy's
      Preferred Carriers, as listed in the attached Routing and Shipping Guide.
      Because such Preferred Carriers are electronically linked with Best Buy's
      systems, Vendor's adherence to this request will improve tracking
      capability and on-time performance while producing shorter transit times
      and minimizing the need for Expedited Shipments, as defined below, to Best
      Buy's distribution centers and stores.

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REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

-     EXISTING VENDOR CONVERSION TO FOB ORIGIN, FREIGHT COLLECT AND ALLOWED
      TERMS: In the event Vendor currently ships Product to Best Buy FOB
      Destination, Freight Prepaid by Vendor, Vendor may be converted to the
      preferred FOB Origin, Freight Collect and Allowed terms as described
      above, via its Collaborative Transportation Management Program ("CTM").
      Under CTM, Best Buy will receive a negotiated freight allowance from the
      vendor in exchange for assuming the expenses associated with inbound
      carrier freight previously borne by Vendor. Freight allowance to be paid
      to Best Buy with respect to FOB Origin, Freight Collect and Allowed terms
      will be agreed between the parties in a writing and attached hereto as the
      Collaborative Transportation Agreement. For example, the negotiated
      freight allowance can reflect a flat percentage of invoice value, (ad
      valorem), or dollars and/or cents per pound, or dollars and/or cents per
      box or as actual freight expense incurred. Freight allowances and/or
      expenses will be reconciled after each Best Buy fiscal month.

-     EXPEDITED SHIPMENTS: Terms for expedited shipments will be FOB Origin,
      Freight Collect. Vendor will pay any additional freight expenses incurred
      in connection with an expedited shipment arising from a shipment delay
      caused by Vendor. The parties will determine responsibility for expedited
      shipment expenses in other situations on a case by case basis. In the
      event current shipping terms are FOB Origin, Freight Collect and Allowed,
      and the parties determine that the need for an expedited shipment was not
      the fault of Vendor, Vendor shall still be responsible for reimbursing
      Best Buy for the agreed Freight Allowance expense.

-     SHIPPING AND ROUTING GUIDE: Vendor shall follow the terms and conditions
      stated in Best Buy's Shipping and Routing Guide, which may be accessed at
      WWW.EXTENDINGTHEREACH.COM.

-     OTHER CHARGES: Any and all charges related to special requests of Vendor
      to carrier, including loading assistance, detention, or any other
      instructions, prior to title passage, are the responsibility of the
      Vendor.

-     DIRECT IMPORT AGREEMENT: Terms for directly Imported Products will be set
      forth in a Direct Import Agreement, which may be attached hereto.

-     BILL OF LADING: Vendor shall use Best Buy's standard Bill of Lading form,
      which may be accessed at WWW.EXTENDINGTHEREACH.COM.

5.    SHIPPING PERFORMANCE MANAGEMENT

-     RIGHT TIME: Vendor agrees to deliver Product on a timely basis to Best Buy
      at the FOB point in accordance with the prearranged delivery and/or
      pick-up dates the parties agree upon from time to time. For FOB Origin,
      Freight Collect terms, Product must be ready for delivery to Best Buy on
      the pick-up date committed to by Vendor. For FOB Destination, Freight
      Prepaid terms, Product must be delivered to Best Buy within two days of
      the delivery date committed to by Vendor. In the event Vendor is in breach
      of this "Right Time" shipping commitment, Vendor shall pay to Best Buy, or
      Best Buy may offset against Vendor invoice, in each instance of breach,
      [***] subject to the breach, as identified on the corresponding PO for
      each day early or late, as the case may be, [***]. Such amount shall be
      considered liquidated damages, as it is reasonable in light of Best Buy's
      anticipated loss for Vendor's non-conformance.

-     RIGHT QUANTITY: Vendor agrees to deliver the right quantity of Product to
      Best Buy in accordance with an accepted PO. However, Best Buy shall
      consider a PO-SKU quantity [***] a conforming delivery. If Vendor delivers
      a non-conforming quantity, Vendor shall pay to Best Buy, or Best Buy may
      offset against Vendor Invoice, an amount equal to the quantity
      non-conformance percentage multiplied by the total cost of the particular
      SKU subject to the non-conformity, as identified on the corresponding PO
      [***]. Such amount shall be considered liquidated damages, as it is
      reasonable in light of Best Buy's anticipated loss for Vendor's
      non-conformance.

-     PROGRAM IMPLEMENTATION: Vendor agrees to comply with Best Buy's
      implementation schedule for the Shipping Performance Management Program,
      as described above (Right Time; Right Quantity). Upon notice to Vendor of
      the commencement of the Program, Best Buy will provide information
      concerning Vendor's shipping performance to Vendor for [***]
      ("Implementation Period"). Vendor will not be subject to charges for
      shipping non-conformance during the Implementation Period. Following the
      Implementation Period, Vendor will be subject to the charges for shipping
      non-conformance as specified in this Section 5. Best Buy will identify and
      report incidents of Vendor's non-conforming shipments and make available
      information concerning each incident for 4 weeks prior to the date that
      any charge hereunder will be assessed so that Vendor may investigate and
      determine the validity of each incident of shipping non-conformance
      reported by Best Buy.

-     ACHIEVING SHIPPING PERFORMANCE STANDARDS: If Vendor maintains shipping
      conformance for Right Time and Right Quantity at a rate of [***] based
      upon the aggregate of all PO-SKU orders in such period Best Buy will
      suppress future charges for non-conformance, provided that Vendor
      continues to maintain weekly shipping performance at or above [***]
      conformance. In the event unforeseen circumstances prevent Vendor from
      maintaining this [***] threshold, in Best Buy's sole discretion, Vendor
      will be permitted to perform below [***] for [***] of a rolling 6-week
      period without reinstatement of charges for non-conformance. If Vendor
      first qualifies for suppression of charges but then later fails to
      maintain the [***] threshold performance standard or its limited exception
      for unforeseen circumstances, Vendor must reestablish shipping standards
      of [***] or greater for 13 consecutive weeks before non-conformance
      charges will again be suppressed.

6.    [***] Notice of Price Increases

      [***] Best Buy will receive [***] as per the current Vendor Program
      Agreement upon the effective date of a [***] to the Products with respect
      to Best Buy's [***] which shall include [***]. Best Buy will determine its
      [***] as of the effective date of [***] and will submit [***] to
      in-transit Product shall be reflected on the purchase orders prior to them
      being received into Best Buy distribution centers. Subject to Best Buy's
      audit rights herein, Best Buy will make commercially reasonable efforts to
      submit documentation to Vendor [***] after the effective date of the
      [***].

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REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

-     NOTICE OF PRICE INCREASES: [***] of the effective date of any increases to
      the cost of Product to Best Buy. Price increases are based on the purchase
      order date, not the shipment date.

7.    RETURNS

Best Buy shall have the right to return at Vendor's expense, [***] (which is
Best Buy's last purchase price) any Products (i) against which an allegation is
made that the use of such Products infringes on any patent, trademark, trade
secret, copyright, right of privacy or publicity, or any other tangible or
intangible proprietary or intellectual property right; (ii) are not
manufactured, packaged, or labeled in accordance with industry standards and/or
all applicable laws, ordinances, rules, and regulations; and (iii) that are
damaged or defective, or where use of such Products has caused injury to person
or property.

For the purposes of this Agreement, the term "defective," when referring to the
Products, shall include the following:

-     Product that is visually or operationally defective;

-     Product that has been returned by a customer in accordance with Best Buy's
      return policy after the customer has opened the Product (i.e. the
      wrapping, seal, or box has been opened), regardless of whether the Product
      is otherwise defective; and

Additional return rights that supplement the foregoing may be specified in the
Vendor Program Agreement.

Vendor agrees to provide a return authorization ("RA") within 48 hours of
request. Vendor also agrees to allow delivery of return product as of the day
the RA is issued to Best Buy. If an appointment is required for Best Buy's
return delivery, Vendor agrees to provide an appointment within 3 days of the
carrier's expected time of arrival. Any and all changes to Vendor contact
personnel must be communicated immediately to the following address:

            Best Buy Co., Inc.
            Returns Department
            7275 Flying Cloud Drive
            Eden Prairie, MN  55344

Vendor agrees to issue and send to Best Buy a credit memo within 60 days from
the date of the check upon which Best Buy deducted the amount specified in its
Return goods Memo ("RGM") to Vendor. Such credit memo shall reference either
Best Buy's RGM number or the RA number.

If Vendor receives Product from Best Buy that Vendor believes is non-returnable,
Vendor will return such Product to Best Buy's originating Product returns
location within 90 days of Vendor's determination. In this case, the shipment
cartons must reference the original return shipment's RA or RTV number.

8.    DEBIT BALANCES

If Vendor has a "Debit Balance" (defined as any balance due and owing from
Vendor to Best Buy, whether or not related to the performance of this Agreement)
with Best Buy, the amount owed will be deducted by Best Buy from the next
payment to Vendor. If there is no outstanding balance due Vendor, then Vendor
shall pay the debit balance to Best Buy in full, [***]. If the amount owed is
disputed, Vendor agrees to reconcile the account and remit payment to Best Buy
[***]. Payment shall be made in the form of check or wire; payment via a credit
memo is not acceptable. Best Buy may charge the Vendor interest [***], whichever
is greater, commencing as of the date of notification by Best Buy, for any debit
balances not reconciled and paid [***] from Best Buy.

9.    DISCONTINUED PRODUCT

A "Discontinued Product" means any Product that Vendor has stopped manufacturing
or any Product that undergoes a change in appearance or packaging. Vendor agrees
to provide Best Buy with at least 90 days advance written notice of the
occurrence of a Discontinued Product, or as soon as possible in the event that
the discontinuance is caused by actions taken by a component part supplier of
Vendor. Upon notice of such Discontinued Product, Best Buy may, without penalty
or liability, cancel any outstanding purchase orders pertaining to the
Discontinued Product. With respect to Best Buy's [***], Vendor and Best Buy
shall negotiate in good faith [***] so that Best Buy may still [***].

10.   ELECTRONIC DATA INTERCHANGE; WEB-BASED ELECTRONIC COMMERCE

As a condition to entering into this Agreement, the parties agree to exchange
certain documents electronically via (i) traditional Electronic Data Interchange
("EDI"); or (ii) Web-Based Electronic Commerce ("EC"). In particular, the
parties shall exchange the following documents via either EDI or EC:

Required:

-     Purchase Order ("PO"): EDI850. Vendor must be compliant with EDI or EC
      [***] of its receipt of the first PO from Best Buy (Vendor will not accept
      verbal purchase orders unless confirmed by an EDI850).

-     Electronic Invoices: EDI810. Vendor must be compliant on EDI or EC [***]
      of its receipt of the first PO from Best Buy.

-     Purchase Order Changes: EDI860. Vendor must be compliant on EDI or EC
      [***] of its receipt of the first PO from Best Buy.

-     Advance Ship Notice ("ASN"): EDI856, including UCC128 barcode direct to
      store orders. Vendor must be ready to test for ASN compliance on EDI or

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      EC [***] of its receipt of the first PO from Best Buy, or upon Best Buy's
      request thereafter based upon Best Buy's priority schedule.

-     Functional Acknowledgement: EDI997. Vendor shall send EDI997 so that it is
      received [***] days of Best Buy's PO.

Optional:

Along with the required documents identified above, Vendor must use reasonable
efforts to explore the possibilities of implementing the following documents:

-     Product Activity: EDI852 (sales and inventory information, delivered
      weekly to Vendor by Best Buy).

-     Store Text Message: EDI864 (store addresses).

-     Other EDI documents as they become available.

Additional Requirements:

-     Prior to its acceptance of a Best Buy PO, Vendor must ensure all Products
      will be marked with a valid UPC number, as well as ensuring that such
      Products are set up in the Best Buy system.

-     Best Buy reserves the right to charge a reasonable fee for drop shipments
      when Best Buy stores are required to detail-receive Vendor shipments due
      to an invalid ASN/UCC128.

-     At Best Buy's request, Vendor must re-send all electronic documents using
      a new EDI ISA control number. Vendor must ensure duplicate transmissions
      are not fed into Vendor's database. Best Buy will not accept duplicate
      shipments and will return such shipments at Vendor's expense (including
      any carrying and handling costs).

-     Traditional EDI must be set up directly with the Vendor, not through a
      third-party service or sales representative.

11.   VENDOR PROGRAM AGREEMENT

Best Buy and Vendor may agree upon additional business terms from time to time
concerning matters such as Products, pricing, Market Development Funds ("MDF"),
invoice credit term, stock rotation, volume rebates, new store allowances, etc.
Such additional terms shall be contained in one or more Vendor Program
Agreements, as amended from time to time by the parties.

12.   COLLABORATIVE PLANNING, FORECASTING AND REPLENISHMENT

Vendor may be requested to participate in Best Buy's Collaborative Planning,
Forecasting and Replenishment ("CPFR") program. If requested and if Vendor
accepts, the parties will enter into a separate, written CPFR agreement that
will be incorporated in this Agreement. Such CPFR agreement will obligate the
parties to share information concerning supply chain processes using the CPFR
standards as developed by the Voluntary Inter-industry Commerce Standards
Association ("VICS").

13.   SERVICE

Best Buy is committed to meeting our customer's high expectations concerning
post-sale service and warranty repairs. A comprehensive Product Service
Agreement between the parties is necessary to ensure customer satisfaction.
Unless otherwise determined by Best Buy, the attached Product Service Agreement
controls the servicing and warranty repairs of the Products and must be signed
simultaneous with or prior to the signing of this Agreement.

14.   PROPRIETARY RIGHTS

Vendor grants Best Buy a license to use, exhibit, excerpt, reproduce, publish,
publicly perform and transmit via the Internet and otherwise use all trade
names, trademarks, service marks and other proprietary information associated
with the Products to promote and sell the Products. Vendor will provide Best Buy
with Product specifications for use by Best Buy in preparing advertising and
promotional materials, and hereby grants Best Buy a license to use, exhibit,
excerpt, reproduce, publish, publicly perform and transmit via the Internet and
otherwise for the purpose of advertising and promotion any and all such Product
specifications and other content provided by Vendor. Upon termination of this
Agreement, Best Buy may continue to advertise and promote the Products, using
the Vendor's trade names, trademarks and service marks, and other proprietary
information until inventory depletion. This Agreement does not grant Vendor any
right or license to use Best Buy's trade names, trademarks or service marks,
promotional material, copy, graphics, themes, strategies, inventions, program,
and files without first obtaining Best Buy's express written approval.

15.   CONFIDENTIALITY

This Agreement and any information marked as confidential or, regardless of form
(written/electronic/oral) or marking, is of the nature that a reasonable person
would understand its owner would not want It disclosed to the public will be
considered to be Confidential Information. Further, Confidential Information
shall also include (i) any document or data transaction between the parties;
(ii) matters of a technical nature such as trade secret processes or devices,
know-how, data, formulas, inventions (whether or not patentable or copyrighted),
specifications and characteristics of products or services planned or being
developed, and research subjects, methods and results, (iii) matters of a
business nature such as information about costs, profits, pricing, policies,
markets, sales, suppliers, customers, product plans, and marketing concepts,
plans or strategies, (iv) matters relating to project initiatives and designs,
(v) matters of a human resources nature such as employment policies and
practices, personnel, including individual names, addresses, and telephone
numbers; compensation and employee benefits, (vi) other information of a similar
nature not generally disclosed to the public. Each party agrees not to disclose
Confidential Information except to employees, or a third party subject to a
similar confidentiality agreement, which have a need to know to perform their
responsibilities. Each party agrees to take at least the same precautions to
protect Confidential Information as such party would utilize to ensure the
protection, confidentiality and security of its own confidential information.
Each Party, at its own expense, will properly use security

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procedures which are reasonably sufficient to ensure that all transmissions of
documents are authorized and to protect its business records and data from
improper access.

Upon the expiration or earlier termination of this Agreement, a party may, in
writing, request either the prompt return or destruction, and a written
certification of such destruction, of any Confidential Information provided to
the other party.

Each party further acknowledges that monetary damages may not alone be a
sufficient remedy for unauthorized disclosure of Confidential Information and
that the non-disclosing party shall be entitled to seek all remedies and damages
available in law and equity, including but not limited to such injunctive relief
as may be deemed proper by a court of competent jurisdiction.

16.   REPRESENTATIONS AND WARRANTIES

Vendor represents and warrants to Best Buy that:

-     Vendor has the authority to enter into this Agreement and to sell the
      Products to Best Buy, free and clear of all liens, charges, encumbrances,
      or other restrictions, and that the persons signing this Agreement on
      behalf of Vendor are authorized to sign.

-     The Products shall be free from defects in material and workmanship, and
      shall be fit and safe for the use(s) normally and reasonably intended.

-     The Products are of merchantable quality and shall perform in conformance
      with specifications.

-     Vendor shall provide to Best Buy, at no charge, adequate copies of any
      necessary training and product information brochures, and will assist with
      the training of Best Buy personnel on Best Buy's premises, at no charge,
      as reasonably necessary so that Best Buy's sales and service personnel
      will be adequately knowledgeable with respect to the Products.

-     Vendor will warrant to the end user the Products in accordance with
      Vendor's applicable standard Product warranty.

-     Vendor will comply with all applicable laws and regulations in performing
      its obligations under this Agreement, including but not limited to laws
      and regulations pertaining to product design, manufacture, packaging and
      labeling; and, if applicable, importation, the Foreign Corrupt Practices
      Act, and laws and treaties designed to protect human rights.

-     If Vendor receives notice from a governmental authority of any material
      non-compliance with applicable laws, or receives notice of claim(s) from
      consumer(s) (which, individually or in the aggregate, may reasonably be
      expected to result in material liability to Vendor and/or Best Buy) that a
      Product is defective or does not comply with all applicable laws, it shall
      notify Best Buy within 10 days regarding the existence and nature of such
      claim(s).

-     Vendor shall provide detailed, accurate product specification information
      and manufacturer's warranty information for all Products. Vendor must
      provide this information to its buyer representative 6 weeks before the
      first Product ship date or promptly upon Best Buy's request. Failure to
      provide such information in a timely manner may, in Best Buy's sole
      discretion, result in a delay in Product placement.

-     Vendor shall deliver samples of Product on a timely basis and upon the
      reasonable request of Best Buy.

-     Vendor shall comply with Best Buy's security source tagging requirement,
      which is subject to change from time to time upon reasonable notice to
      Vendor.

Best Buy represents and warrants to Vendor that:

-     Best Buy has the authority to enter into this Agreement, and that the
      persons signing this Agreement on behalf of Best Buy are authorized to
      sign.

-     Best Buy agrees to exert commercially reasonable efforts to promote and
      sell the Products consistent with Best Buy's sales, marketing and
      merchandising plans, as may be amended from time to time in Best Buy's
      sole and absolute discretion.

17.   TERM AND TERMINATION

TERM: This Agreement will commence upon the effective date, which shall be the
date when it has been fully executed by authorized representatives of both
parties, and shall continue until it is terminated according to its terms.

TERMINATION: Either party may terminate this Agreement at any time without cause
upon 90 days written notice to the other party. In the event of a material
breach of this Agreement, this Agreement may be terminated immediately by the
non-breaching party, provided that notice describing the breach has been
provided to the breaching party and the breaching party has failed to cure such
breach within 30 days of receipt of notice.

EVENTS ON TERMINATION: Upon expiration or the termination of this Agreement
without cause, the parties shall agree to either (i) completion by Best Buy of
sell-through of the remaining Product inventory or (ii) return of the remaining
Product inventory to Vendor, for which Best Buy [***] (freight shall be arranged
by Best Buy). Unless Best Buy elects to sell through the remaining Product
inventory with the permission of Vendor, the breaching party shall be
responsible for all return freight charges and the return shipment of all
remaining Product inventory to Vendor. Best Buy shall receive a refund, at cost,
for all returned Product inventory.

18.   INDEMNIFICATION

Vendor will indemnify, defend, and hold Best Buy harmless from and against any
and all claims, actions, liabilities, losses, costs and expenses ("Claims")
arising from or in connection with Vendor's (i) breach of this Agreement,
including but limited to its representations and warranties; (ii) acts or
omissions of Vendor relating to the Products which includes, but is not limited
to Claims relating to alleged infringement of third party intellectual property
or proprietary rights; Claims that the Products, or use thereof, caused personal
injury, death, or real or personal property damage; (iii) false or misleading
Product specifications or other content provided to Best Buy to promote and sell
the Products; and (iv) failure to promptly perform its obligations in connection
with a manufacturer's rebate offer.

Further, Vendor agrees to fully indemnify, defend and hold harmless against any
Claims resulting from a product recall, whether such recall is initiated by
Vendor prior to or after consumer complaints, or regardless of the existence of
consumer complaints.

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Best Buy agrees to give Vendor prompt written notice of any claims, to tender
the defense to Vendor, and to grant Vendor the right to control settlement and
resolution. Vendor agrees to pay all costs of liability, settlement and defense,
including attorney fees and costs.

19.   INSURANCE

Within 10 business days of the effective date of this Agreement, Vendor agrees
to procure and maintain a minimum amount of $5,000,000 of appropriate insurance
against the types of claims for which Vendor has agreed to indemnify Best Buy,
to name Best Buy as an Additional Insured, and to supply Best Buy with a
Certificate of Insurance that names Best Buy as an Additional Insured, and which
also provides that such insurance will not be canceled or changed unless at
least thirty (30) days prior written notice has been given to Best Buy of such
changes. Best Buy does not represent or warrant that the coverage of insurance
specified herein is sufficient or adequate to protect Vendor's interests or
liabilities. If Vendor fails to procure or at any time fails to maintain
insurance as required by this section, Best Buy may terminate this Agreement
immediately and without notice.

20.   ASSIGNMENT

This Agreement may not be assigned by either party without first obtaining the
other party's express written consent, which consent shall not be unreasonably
withheld; provided, however, that Best Buy may assign this Agreement, without
obtaining Vendor's express written consent, to (i) a successor corporation
resulting from a merger, consolidation, or non-bankruptcy consolidation or to a
purchaser of all or substantially all of Best Buy's assets or a majority, or
controlling interest in Best Buy's voting stock, provided that the purchaser's
net worth at the time of purchase is equal to or greater than that of Best Buy,
and further provided that the purchaser is not a competitor of Vendor; and (ii)
a present or future subsidiary or affiliate. Any attempted assignment in
violation of this Agreement shall be null and void.

If Vendor assigns payments to an assignee/factor, Vendor understands and agrees
that Vendor and the assignee/factor will be required to sign Best Buy's standard
acknowledgment form to assure Best Buy that assignee/factor understands the
rights being assigned (e.g., that deductions from invoice payments may be made
in accordance with this Agreement between Best Buy and Vendor.

21.   AUDIT RIGHTS; CLAIMS AND CHARGE-BACKS

-     AUDIT RIGHTS: Each party shall have the right to, upon reasonable prior
      written notice and at reasonable times during regular business hours,
      audit the other party to assure compliance with the terms and conditions
      of this Agreement. If the audit reveals that a party is not performing in
      material compliance with the terms of this Agreement, then, in addition to
      any other legal and equitable rights and remedies available, the party not
      in compliance shall reimburse the other for the reasonable costs of the
      audit.

-     CLAIMS: Neither party hereto may raise a claim of any nature relative to
      this Agreement [***] after the date of any such cause of action accrued.

-     CHARGE-BACKS: Vendor has [***] from date of deduction (check date) to
      provide written denial of charge-backs, including all supporting
      documentation. If no denial is received by Best Buy [***], Best Buy will
      assume the deductions were accepted by the Vendor, and Vendor hereby
      agrees not to contest such deductions. Rejected charge-backs must be
      returned using the Dispute Control Document, which may be accessed at
      www.extendingthereach.com.

22.   AVOIDANCE OF CONFLICT OF INTEREST; CODE OF CONDUCT STANDARDS

Vendor agrees to respect and abide by Best Buy's conflict of interest and code
of conduct policies, which may be amended from time to time and which will be
made available to Vendor upon request. Vendor agrees to contact Best Buy's Open
Line (1-800-520-1132) for information concerning Best Buy's policies and to
discuss any ethical or conduct concerns that they may have as a result of their
contact with Best Buy personnel. Vendor understands and acknowledges that Best
Buy's conflict of interest and code of conduct policies address Vendor-paid
travel, gifts and gratuities, offering and accepting bribes, family members and
close personal relationships involving employees of both parties, personal
investments in the other party, Vendor-sponsored charitable and other events,
Vendor product samples, Vendor promotional copies, direct personal purchases
from Vendors by Best Buy employees, and awards, incentives and other spiffs from
vendors. Vendor agrees to avoid conflict of interest situations with Best Buy,
to deal in arms length negotiations with Best Buy, and to contact Best Buy's
Open Line to address Vendor's concerns. Best Buy similarly agrees to abide by
Vendor's policies concerning this subject matter.

23.   FORCE MAJEURE

Neither party shall be in breach of this Agreement solely due to causes beyond
the control and without the fault or negligence of such party. Such causes may
include, but are not restricted to, acts of God or of a public enemy, acts of
the government in either its sovereign or contractual capacity, fires, floods,
epidemics, quarantine restrictions, strikes, freight embargoes, power failure,
or failure of the U.S. postal system, but in every case the failure to perform
must be beyond the control and without fault or negligence of the party failing
to perform. The Vendor also agrees to inform Best Buy of any Force Majeure event
within 48 hours of its occurrence. Failure to notify Best Buy of such an event
within 48 hours will result in forfeiture, by Vendor, to claim that such an
event had occurred.

24.   NOTICES

                                  Page 6 of 8
<PAGE>

All notices, requests, demands and other communications which are required or
may be given under this Agreement shall be in writing and shall be deemed to
have been duly given if hand-delivered or mailed by either registered or
certified mail, return receipt requested, or by nationally recognized overnight
courier service, receipt confirmed. In the case of notices via first-class mail
or courier service, notices shall be deemed effective upon the date of receipt
or upon the date returned for non-delivery. Notices shall be addressed to the
parties as set forth below, unless either party notifies the other of a change
of address, in which case the latest noticed address shall be used:

<TABLE>
<CAPTION>
Notices to Vendor:                 Notices To Best Buy:
-----------------                  -------------------
<S>                                <C>
Directed Electronics, Inc.         Best Buy Co., Inc.
One Viper Way                      Attn:
Vista, California  92085           Copy To: General Counsel, Legal Department
                                   7075 Flying Cloud Drive
                                   Eden Prairie, Minnesota  55344
</TABLE>

25.   GENERAL

RELATIONSHIP OF THE PARTIES: The relationship between the parties shall be that
of independent contractor. Nothing herein shall be construed as creating or
constituting the relationship of employer/employee, franchisor/franchisee,
principal/agent, partnership, or joint venture between the parties.

GOVERNING LAW; JURISDICTION: This Agreement shall be governed by and interpreted
under the laws of the State of Minnesota. Vendor and Best Buy expressly consent
and submit to the exclusive jurisdiction of the state and federal district
courts located In Minneapolis, Minnesota.

ENFORCEABILITY: If any provision of this Agreement is held to be unenforceable
by a court of competent jurisdiction, such provision shall be more narrowly and
equitably construed so that it becomes legal and enforceable, and the entire
Agreement shall not fail on account thereof and the balance of the Agreement
shall continue in full force and effect.

NO WAIVER: Any of the provisions of this Agreement may be waived by the party
entitled to the benefit thereof. Neither party will be deemed, by any act or
omission, to have waived any of its rights or remedies hereunder unless such
waiver is in writing and signed by the waiving party, and then only to the
extent specifically set forth in such writing. A waiver with reference to one
event will not be construed as continuing or as a bar to or waiver of any other
right or remedy, or as to a subsequent event.

COUNTERPARTS AND ELECTRONICS SIGNATURE: This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. This Agreement may be
executed by facsimile or other "electronic signature" (as defined in the
Electronic Signatures in Global and National Commerce Act of 2000) in a manner
agreed upon by the parties hereto.

ENTIRE AGREEMENT; AMENDMENT: This Agreement, including the exhibits attached
hereto, contains the entire Agreement between the parties with respect to the
subject matter hereof, supersedes all prior agreements, negotiations and oral
understandings, if any, and may not be amended, supplemented, or modified in any
way, except by an amendment in writing and signed by authorized officers of the
parties hereto. No amendment shall be affected by the acknowledgement or
acceptance of a purchase order, invoice, or other forms stipulating different
terms. This Agreement shall inure to the benefit of and be binding upon each of
the parties and their respective successors, assigns, heirs, executors,
administrators, trustees and legal representatives.

RESERVATION OF RIGHTS: Duties and obligations imposed by this Agreement and
rights and remedies available hereunder shall be in addition to and not a
limitation of duties, obligations, rights and remedies otherwise imposed or
available by law.

HEADINGS: Headings used in this Agreement are for the purposes of convenience
only and shall not affect the legal interpretation of this Agreement.

DRAFTSMANSHIP: Each of the parties hereto has been represented by its own
counsel. In the event of a dispute, no provision of this Agreement shall be
construed in favor of one party and against the other by reason of the
draftsmanship of this Agreement.

SURVIVAL: The expiration or termination of this Agreement shall not terminate
vested rights of either party from any liabilities or obligations incurred under
this Agreement prior to and which by their nature are intended to survive
expiration or termination, including but not limited to provisions relating to
confidentiality, indemnification, returns, and proprietary rights.


                                  Page 7 of 8
<PAGE>

ADDENDA (CHECK IF APPLICABLE)

Each checked Addendum is hereby incorporated into and made a part of this
Agreement:

[X]   Vendor Program Agreement

[X]   Product Service Agreement

[ ]   Collaborative Transportation Agreement

[ ]   Solution Plus Rebate Agreement

[ ]   Direct Import Agreement

[ ]   Configure to Order Agreement

[ ]   Consignment Agreement

THIS AGREEMENT SHALL BE EFFECTIVE WHEN (i) FULLY EXECUTED BY THE PARTIES; AND
(ii) EACH NECESSARY ADDENDUM IS ATTACHED HERETO:

BEST BUY CO., INC.

Authorized Officer:        /s/ Michael London
                    ------------------------------------
                              (Signature)

Name: Michael London
      --------------------------------------
                   (Please Print)

Title: EVP, General Merch. Mgr

Date: April 11, 2001

BEST BUY PURCHASING LLC

Authorized Officer:        /s/ Michael London
                    -----------------------------------
                             (Signature)

Name: Michael London
      --------------------------------------
                   (Please Print)

Title: EVP, General Merch. Mgr

Date: April 11, 2001

VENDOR: DIRECTED ELECTRONICS, INC.

Authorized Officer:       /s/ James E. Minarik
                    --------------------------------
                               (Signature)

Name: James E. Minarik
      --------------------------------------
                   (Please Print)

Title: President & CEO

Date: March 30, 2001