CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
           THE SECURITIES AND EXCHANGE COMMISSION / BRILLIANT DIGITAL
                        ENTERTAINMENT, INC. CONFIDENTIAL

This agreement  ("Agreement")  is entered into as of July 14, 1998,  ("Effective
Date") by and between CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE  SECURITIES  AND  EXCHANGE  COMMISSION,   having  a  place  of  business  at
CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION ("CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE  COMMISSION ") and Brilliant  Digital  Entertainment
Corporation,  having a place of business at 6355 Topanga Canyon Boulevard, Suite
120, Woodland Hills, California, 91367 ("Publisher") on behalf of themselves and
their respective worldwide subsidiaries.

                                   BACKGROUND

A.       CONFIDENTIAL   INFORMATION   OMITTED  AND  FILED  SEPARATELY  WITH  THE
         SECURITIES AND EXCHANGE  COMMISSION plans to release a processor having
         CONFIDENTIAL   INFORMATION   OMITTED  AND  FILED  SEPARATELY  WITH  THE
         SECURITIES AND EXCHANGE COMMISSION technology.  Publisher is developing
         software which is able to use these enhanced capabilities.

B.       CONFIDENTIAL   INFORMATION   OMITTED  AND  FILED  SEPARATELY  WITH  THE
         SECURITIES AND EXCHANGE COMMISSION is willing to provide Publisher with
         assistance  and  funds,  and  to  receive  distribution  rights  to the
         software.  Publisher is willing to undertake the development activities
         and grant the rights set out in this Agreement.

                                    AGREEMENT

CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION and Publisher agree as follows:
1.   PUBLISHER'S EFFORTS
1.1. THE TITLES. The "Titles" to be developed and delivered under this Agreement
     are the initial CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY WITH
     THE SECURITIES AND EXCHANGE COMMISSION scaleable episodes of the Titles and
     each of the first three  subsequent  additional  episodes  (if any) of each
     Title,  made  during  the  term  of  this  Agreement,   named  CONFIDENTIAL
     INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE

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           CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
           THE SECURITIES AND EXCHANGE COMMISSION / BRILLIANT DIGITAL
                        ENTERTAINMENT, INC. CONFIDENTIAL

     COMMISSION,  CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
     SECURITIES AND EXCHANGE  COMMISSION,  CONFIDENTIAL  INFORMATION OMITTED AND
     FILED  SEPARATELY WITH THE SECURITIES AND EXCHANGE  COMMISSION and a fourth
     Title to be  determined  and  agreed  upon by the  parties  no  later  than
     November 1, 1998 (the TBD Title). The features the first episode of each of
     the four Titles must posses are more particularly  described in the Product
     Requirements Document ("PRD") set forth in Attachment A. The Titles include
     all versions for all PC platforms, and include all updates and enhancements
     thereof made during the term of this Agreement and the collateral  material
     specified in Attachment B.

1.2. COMMITMENT TO DEVELOP.  Publisher shall use commercially reasonable efforts
     to  develop  and  deliver to  CONFIDENTIAL  INFORMATION  OMITTED  AND FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION the Titles according
     to the milestones set forth in Section 3 and the  Development  Schedule and
     specifications  contained in the PRD. The CONFIDENTIAL  INFORMATION OMITTED
     AND FILED  SEPARATELY  WITH THE  SECURITIES  AND  EXCHANGE  COMMISSION  and
     CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES
     AND EXCHANGE COMMISSION Titles, must, at a minimum,  noticeably demonstrate
     to an end user the  advantages  of running  the  Titles on an  CONFIDENTIAL
     INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE SECURITIES AND EXCHANGE
     COMMISSION processor containing CONFIDENTIAL  INFORMATION OMITTED AND FILED
     SEPARATELY  WITH THE  SECURITIES  AND  EXCHANGE  COMMISSION  technology,  a
     CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES
     AND EXCHANGE  COMMISSION,  and CONFIDENTIAL  INFORMATION  OMITTED AND FILED
     SEPARATELY  WITH THE  SECURITIES  AND EXCHANGE  COMMISSION  and  associated
     graphics cards vs. an CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
     WITH  THE  SECURITIES  AND  EXCHANGE   COMMISSION   Processor   running  at
     CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES
     AND EXCHANGE  COMMISSION with a CONFIDENTIAL  INFORMATION OMITTED AND FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE  COMMISSION and an CONFIDENTIAL
     INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE SECURITIES AND EXCHANGE
     COMMISSION and  associated  graphics  card.  The  CONFIDENTIAL  INFORMATION
     OMITTED AND FILED  SEPARATELY  WITH THE SECURITIES AND EXCHANGE  COMMISSION
     and the TBD Title must at a minimum,  noticeably demonstrate the advantages
     of it on an CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY WITH THE
     SECURITIES  AND  EXCHANGE  COMMISSION  Processor  containing   CONFIDENTIAL
     INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE SECURITIES AND EXCHANGE
     COMMISSION running at

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           CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
           THE SECURITIES AND EXCHANGE COMMISSION / BRILLIANT DIGITAL
                        ENTERTAINMENT, INC. CONFIDENTIAL

     CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES
     AND EXCHANGE COMMISSION,  with a CONFIDENTIAL INFORMATION OMITTED AND FILED
     SEPARATELY  WITH THE  SECURITIES AND EXCHANGE  COMMISSION and  CONFIDENTIAL
     INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE SECURITIES AND EXCHANGE
     COMMISSION and  associated  graphics card VS. an  CONFIDENTIAL  INFORMATION
     OMITTED AND FILED  SEPARATELY  WITH THE SECURITIES AND EXCHANGE  COMMISSION
     Processor containing CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY
     WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  running  at  CONFIDENTIAL
     INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE SECURITIES AND EXCHANGE
     COMMISSION,  with a CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY
     WITH THE SECURITIES AND EXCHANGE COMMISSION and an CONFIDENTIAL INFORMATION
     OMITTED AND FILED  SEPARATELY  WITH THE SECURITIES AND EXCHANGE  COMMISSION
     and associated graphics card.


1.3. LANGUAGES.  CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY WITH THE
     SECURITIES AND EXCHANGE COMMISSION and CONFIDENTIAL INFORMATION OMITTED AND
     FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE  COMMISSION will be ready
     and available for purchase by retailers  CONFIDENTIAL  INFORMATION  OMITTED
     AND FILED  SEPARATELY  WITH THE SECURITIES  AND EXCHANGE  COMMISSION in the
     following languages:

1.4. DIALOGUE AND TEXT: U.S. English, CONFIDENTIAL INFORMATION OMITTED AND FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

1.5. SUBTITLES AND TEXT:  CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY
     WITH THE SECURITIES AND EXCHANGE COMMISSION.

1.6. CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES
     AND EXCHANGE  COMMISSION  and the TBD Title will be ready and available for
     purchase by retailers in U.S. English on or before CONFIDENTIAL INFORMATION
     OMITTED AND FILED  SEPARATELY WITH THE SECURITIES AND EXCHANGE  COMMISSION,
     and on or before CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
     THE SECURITIES AND EXCHANGE COMMISSION in the following languages:

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           THE SECURITIES AND EXCHANGE COMMISSION / BRILLIANT DIGITAL
                        ENTERTAINMENT, INC. CONFIDENTIAL

1.7. DIALOGUE AND TEXT:  CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY
     WITH THE SECURITIES AND EXCHANGE COMMISSION.

1.8. SUBTITLES AND TEXT:  CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY
     WITH THE SECURITIES AND EXCHANGE COMMISSION.

1.9. PROGRAM REVIEW.  CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
     THE  SECURITIES AND EXCHANGE  COMMISSION,  Publisher and any third party(s)
     working  on the  Titles for  Publisher  shall  meet at least  twice a month
     (either in person or by telephone conference) to review the progress of the
     Titles'  development,  including the milestones set out in the  Development
     Schedule and the compliance of the Titles with the PRD.

2.   TECHNICAL  ASSISTANCE  FROM  CONFIDENTIAL  INFORMATION  OMITTED  AND  FILED
     SEPARATELY  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION.  CONFIDENTIAL
     INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE SECURITIES AND EXCHANGE
     COMMISSION  is currently  helping  Publisher  optimize and port some of its
     products to the CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY WITH
     THE SECURITIES AND EXCHANGE COMMISSION microprocessor  architecture under a
     separate  Source Code License  Agreement  ("SLA")  effective April 27, 1998
     between the  parties.  Any  technical  contributions  to the Titles made by
     CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES
     AND EXCHANGE COMMISSION  hereunder shall be considered  Modifications under
     that SLA and subject solely to its terms.

          CONFIDENTIAL   INFORMATION  OMITTED  AND  FILED  SEPARATELY  WITH  THE
     SECURITIES AND EXCHANGE COMMISSION agrees that an Application Engineer will
     coordinate the technical  resources  needed from  CONFIDENTIAL  INFORMATION
     OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION to
     assist with code  optimizations  and will be made  reasonably  available to
     Publisher as needed.

3.   ADVANCES OF FUNDS

3.1. AMOUNT AND TIMING.  CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY
     WITH THE SECURITIES  AND EXCHANGE  COMMISSION  will advance  certain funds,
     totaling  CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE

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           THE SECURITIES AND EXCHANGE COMMISSION / BRILLIANT DIGITAL
                        ENTERTAINMENT, INC. CONFIDENTIAL

     SECURITIES AND EXCHANGE COMMISSION  ($CONFIDENTIAL  INFORMATION OMITTED AND
     FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE  COMMISSION) to Publisher
     for  delivery  of 3  Titles,  CONFIDENTIAL  INFORMATION  OMITTED  AND FILED
     SEPARATELY  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION,  CONFIDENTIAL
     INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE SECURITIES AND EXCHANGE
     COMMISSION,  and CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
     THE SECURITIES AND EXCHANGE COMMISSION. If CONFIDENTIAL INFORMATION OMITTED
     AND FILED  SEPARATELY  WITH THE  SECURITIES  AND  EXCHANGE  COMMISSION  and
     Publisher mutually agree upon the specific details of a fourth Title (which
     is  currently  referred  to as  "Title  to be  determined")  no later  than
     November  1,  1998,  then  CONFIDENTIAL   INFORMATION   OMITTED  AND  FILED
     SEPARATELY  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  will  advance
     additional  funds  totaling  CONFIDENTIAL  INFORMATION  OMITTED  AND  FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE  COMMISSION  upon  CONFIDENTIAL
     INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE SECURITIES AND EXCHANGE
     COMMISSION acceptance of the milestones identified below (collectively, the
     "Funds").  CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY WITH THE
     SECURITIES AND EXCHANGE  COMMISSION  will advance the Funds to Publisher in
     the amounts  specified  below  CONFIDENTIAL  INFORMATION  OMITTED AND FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE  COMMISSION  after  Publisher's
     accomplishing and delivering,  subject to CONFIDENTIAL  INFORMATION OMITTED
     AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION reasonable
     satisfaction  and acceptance not to be unreasonably  withheld,  each of the
     following milestones:

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                        ENTERTAINMENT, INC. CONFIDENTIAL

     CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
     WITH THE SECURITIES AND EXCHANGE COMMISSION



3.2. USE OF FUNDS.  The Funds  shall only be used for  development  of the Title
     until  the  final   deliverable   hereunder  is  accepted  by  CONFIDENTIAL
     INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE SECURITIES AND EXCHANGE
     COMMISSION.

     4.   CONFIDENTIAL   INFORMATION  OMITTED  AND  FILED  SEPARATELY  WITH  THE
          SECURITIES AND EXCHANGE COMMISSION PARTICIPATION IN MARKETING

     4.1. MARKETING. If accepted and timely delivered,  CONFIDENTIAL INFORMATION
          OMITTED  AND  FILED   SEPARATELY  WITH  THE  SECURITIES  AND  EXCHANGE
          COMMISSION   will  include  the  Title   prominently  in  CONFIDENTIAL
          INFORMATION  OMITTED  AND FILED  SEPARATELY  WITH THE  SECURITIES  AND
          EXCHANGE  COMMISSION   CONFIDENTIAL   INFORMATION  OMITTED  AND  FILED
          SEPARATELY  WITH THE  SECURITIES  AND  EXCHANGE  COMMISSION  marketing
          efforts and, at CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY
          WITH THE  SECURITIES  AND EXCHANGE  COMMISSION  sole  discretion,  may
          include Publisher in other appropriate marketing activities.

     4.2. LICENSE.  To the  extent  it  actually  possesses  the right to do so,
          Publisher  grants  to  CONFIDENTIAL   INFORMATION  OMITTED  AND  FILED
          SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION a royalty-free,
          world-wide   license,   with  the  right  to   sublicense,   to  copy,
          demonstrate,  prepare  derivative  works of, and  display  and perform
          publicly the Title and its  collateral  artwork and  documentation  in
          connection with CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY
          WITH THE SECURITIES AND EXCHANGE COMMISSION  marketing  activities for
          the Title as well as any other  CONFIDENTIAL  INFORMATION  OMITTED AND
          FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION marketing
          activities.  This license,  however,  is contingent upon  CONFIDENTIAL
          INFORMATION  OMITTED  AND FILED  SEPARATELY  WITH THE  SECURITIES  AND
          EXCHANGE  COMMISSION  receiving  written  approval from Publisher each
          time  CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY WITH THE
          SECURITIES  AND  EXCHANGE  COMMISSION  wishes to  exercise  its rights
          hereunder.  Publisher  will grant such requests if it has the right to
          do so.

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           THE SECURITIES AND EXCHANGE COMMISSION / BRILLIANT DIGITAL
                        ENTERTAINMENT, INC. CONFIDENTIAL

     4.3. Other Titles.  CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY
          WITH THE SECURITIES AND EXCHANGE  COMMISSION and Publisher may develop
          or market products which are directly competitive with the Title.

     5.   CONFIDENTIAL   INFORMATION  OMITTED  AND  FILED  SEPARATELY  WITH  THE
          SECURITIES AND EXCHANGE COMMISSION RECOUPMENT OF THE FUNDS

          5.1. "Revenue Copy" means a sale,  license,  or other  distribution of
               one copy of a Title for which Publisher receives revenue.

          5.2. ROYALTY ON REVENUE COPIES.  CONFIDENTIAL  INFORMATION OMITTED AND
               FILED  SEPARATELY  WITH THE  SECURITIES  AND EXCHANGE  COMMISSION
               shall  earn a royalty  on each  Revenue  Copy  distributed  by or
               through  Publisher  according to the rate schedule below, but not
               to exceed $CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY
               WITH THE  SECURITIES AND EXCHANGE  COMMISSION  (or  $CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE  COMMISSION  if  additional  funds for which the  second
               sentence  of  section   3.1   provides,   are  not   advanced  by
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES  AND  EXCHANGE  COMMISSION)  for Revenue  Copies sold,
               licensed,  or otherwise  distributed in the United States and not
               to exceed $CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY
               WITH THE  SECURITIES AND EXCHANGE  COMMISSION  (or  $CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE  COMMISSION  if  additional  funds for which the  second
               sentence  of  section   3.1   provides,   are  not   advanced  by
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES  AND  EXCHANGE  COMMISSION)  for Revenue  Copies sold,
               licensed, or otherwise distributed elsewhere.


          CONFIDENTIAL   INFORMATION  OMITTED  AND  FILED  SEPARATELY  WITH  THE
          SECURITIES AND EXCHANGE COMMISSION


          5.3. RESERVES.  Publisher  shall be  entitled  to retain a  reasonable
               reserve  for  product  returns  and  discounts,   not  to  exceed
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE

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           THE SECURITIES AND EXCHANGE COMMISSION / BRILLIANT DIGITAL
                        ENTERTAINMENT, INC. CONFIDENTIAL

               SECURITIES  AND  EXCHANGE  COMMISSION%  of the  amount  otherwise
               payable  under  section 5.1.  Such reserve shall be liquidated no
               later than CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY
               WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION   following  the
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES  AND  EXCHANGE  COMMISSION  in which the  reserve  was
               retained.

          5.4. ADVERTISING.  Until the funds  have been  recouped,  CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE COMMISSION will also receive from Publisher CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE  COMMISSION%  of  Publisher's  CONFIDENTIAL  INFORMATION
               OMITTED AND FILED  SEPARATELY  WITH THE  SECURITIES  AND EXCHANGE
               COMMISSION  revenues from  advertising  on CD ROM versions of the
               Titles and on web pages devoted to the Titles, minus CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE COMMISSION  (CONFIDENTIAL  INFORMATION OMITTED AND FILED
               SEPARATELY  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION%  of
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES  AND EXCHANGE  COMMISSION  revenues).  These  revenues
               apply  towards   CONFIDENTIAL   INFORMATION   OMITTED  AND  FILED
               SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION recoupment
               of the Funds.  If  Publisher  derives  revenue  from web pages on
               which  the   Titles   and  other   properties   are   advertised,
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES  AND EXCHANGE  COMMISSION  will  receive  CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE  COMMISSION%  of  CONFIDENTIAL  INFORMATION  OMITTED AND
               FILED  SEPARATELY  WITH THE  SECURITIES  AND EXCHANGE  COMMISSION
               revenues for the percentage of advertising  revenue  derived from
               the Titles specifically.

          5.5. WEB LINKING.  Publisher  will provide a link and generate  visits
               from its World Wide Web page to another  World Wide Web page that
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES  AND  EXCHANGE  COMMISSION  will,  from  time  to time
               specify ("click throughs").

               5.5.1.CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY WITH
                    THE SECURITIES AND EXCHANGE

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           THE SECURITIES AND EXCHANGE COMMISSION / BRILLIANT DIGITAL
                        ENTERTAINMENT, INC. CONFIDENTIAL

                    COMMISSION and Publisher will agree on the specific terms of
                    this web linking plan no later than CONFIDENTIAL INFORMATION
                    OMITTED  AND  FILED   SEPARATELY  WITH  THE  SECURITIES  AND
                    EXCHANGE   COMMISSION   for  BTS  titles  and   CONFIDENTIAL
                    INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
                    AND EXCHANGE COMMISSION for Holiday titles.

          5.6. DISCOUNTED  TITLE   PURCHASES.   For  a  period  of  CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE COMMISSION years after the Effective Date,  CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE   COMMISSION   shall  have  the  option,   at  its  sole
               discretion,  to purchase  copies of the Titles at a  CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE  COMMISSION%  discount off the best distributor discount
               (minimum of CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
               WITH THE  SECURITIES  AND EXCHANGE  COMMISSION% ), for re-sale by
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES  AND  EXCHANGE  COMMISSION.  CONFIDENTIAL  INFORMATION
               OMITTED AND FILED  SEPARATELY  WITH THE  SECURITIES  AND EXCHANGE
               COMMISSION will apply the  CONFIDENTIAL  INFORMATION  OMITTED AND
               FILED  SEPARATELY  WITH THE SECURITIES  AND EXCHANGE  COMMISSION%
               discount  towards  the  recoupment  of the  Funds  for each  unit
               subsequently sold by CONFIDENTIAL  INFORMATION  OMITTED AND FILED
               SEPARATELY  WITH  THE  SECURITIES  AND  EXCHANGE   COMMISSION  or
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES AND EXCHANGE COMMISSION designated agent.

          5.7. USE OF AN CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY
               WITH THE SECURITIES AND EXCHANGE COMMISSION LOGO. Publisher will,
               at CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
               SECURITIES AND EXCHANGE COMMISSION  request,  use an CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE  COMMISSION  logo on the Titles'  packaging  in a manner
               specified   by   CONFIDENTIAL   INFORMATION   OMITTED  AND  FILED
               SEPARATELY  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  and
               according to standard CONFIDENTIAL  INFORMATION OMITTED AND FILED
               SEPARATELY  WITH THE  SECURITIES  AND  EXCHANGE  COMMISSION  logo
               licensing terms.

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           THE SECURITIES AND EXCHANGE COMMISSION / BRILLIANT DIGITAL
                        ENTERTAINMENT, INC. CONFIDENTIAL

               Publisher will not use an  CONFIDENTIAL  INFORMATION  OMITTED AND
               FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION logo
               unless so requested to do so by CONFIDENTIAL  INFORMATION OMITTED
               AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

          5.8. FUNDS  RECOUPMENT  CAP. The maximum  aggregate  amount payable to
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES AND EXCHANGE  COMMISSION under section 5 as royalties,
               as advertising  revenues,  and as discounts  shall not exceed the
               actual  amount  of  funds  paid  to  publisher  by   CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE COMMISSION under section 3.1. The discounts may continue
               to be provided  subject to Section 5.5 following full  recoupment
               of funds.

          6.   MONEY

          6.1. MANNER OF PAYMENT.  All payments shall be made in US dollars, and
               shall  be  sent  to the  address  specified  in  this  Agreement.
               Payments  shall be made by wire  transfer or, if no wire transfer
               instructions  are given,  by check drawn on a U.S.  bank. A party
               may specify revised instructions and address by written notice to
               the other.

          6.2. PAYMENTS TO CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
               WITH  THE  SECURITIES  AND  EXCHANGE   COMMISSION.   Payments  to
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES AND EXCHANGE  COMMISSION  shall be by wire transfer to
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES   AND   EXCHANGE   COMMISSION   for  the   account  of
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES AND EXCHANGE COMMISSION,  General Account CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE COMMISSION.

          6.3. PAYMENTS TO  PUBLISHER.  Payments to  Publisher  shall be made by
               wire  transfer  to:  CONFIDENTIAL  INFORMATION  OMITTED AND FILED
               SEPARATELY  WITH THE  SECURITIES AND EXCHANGE  COMMISSION,  ABA#:
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES   AND   EXCHANGE   COMMISSION,    Attn:   CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE COMMISSION,  CONFIDENTIAL  INFORMATION OMITTED AND FILED
               SEPARATELY WITH THE SECURITIES AND EXCHANGE

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               COMMISSION,   Account  Name:  Brilliant  Digital   Entertainment,
               Account #: CONFIDENTIAL  INFORMATION OMITTED AND FILED SEPARATELY
               WITH THE SECURITIES AND EXCHANGE COMMISSION.

          6.4. STATEMENTS.  Within  CONFIDENTIAL  INFORMATION  OMITTED AND FILED
               SEPARATELY WITH THE SECURITIES AND EXCHANGE  COMMISSION after the
               end of each calendar  quarter  during the term of this  Agreement
               Publisher  shall  pay  any  amounts  due  and  shall  deliver  to
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES  AND EXCHANGE  COMMISSION  at the addresses set out in
               this Agreement a report which sets out:
               6.4.1. The period covered;
               6.4.2. The number of copies of each Title distributed  hereunder;
               6.4.3.  The number of Revenue Copies,  6.4.4.  The balance of the
               Funds;  and 6.4.5.  The  balance of  accounts  receivable  on the
               Titles.

          6.5. RECORDS AND  AUDITING.  Each party shall  maintain  complete  and
               accurate records of the activities performed under this Agreement
               (including  records  of sales and  distribution)  for a period of
               three (3) years after the completion thereof. Records relating to
               the  performance  of this  Agreement  shall be made  available in
               confidence  to  other  party's   independent   certified   public
               accountants  (or  equivalent  for  non-U.S.  jurisdictions)  upon
               reasonable notice, which records may be used for the sole purpose
               of auditing a party's compliance with the Agreement. In the event
               that a shortfall greater than 10% is discovered in royalties paid
               by a party,  such audit shall be at the audited party's  expense,
               and such party shall promptly make up the difference.

          6.6. TAXES. Each party shall be solely  responsible for its own taxes,
               including any applicable  sales taxes and customs duties on items
               acquired under this  Agreement.  To the extent,  if any, that the
               applicable taxing authority  requires  withholding of taxes based
               on payments made hereunder,  the paying party shall withhold such
               taxes and  provide  the payee with the  documentation  reasonably
               necessary to claim a credit therefor.

          7.   TERM,  TERMINATION,  WHAT IF  SOMETHING  GOES WRONG

          7.1. TERM OF  AGREEMENT.  This  Agreement's  term  commences as of the
               Effective  Date and  terminates on the later of March 31, 2003 or
               the  last  day  of  the  calendar  year  in  which   CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE  COMMISSION  fully  recoups  the Funds,  unless  earlier
               terminated or unless extended by agreement of the parties.

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          7.2. BREACH.  Either  party may  terminate  this  Agreement by written
               notice if the  other  party is in  material  breach of any of its
               terms and fails to cure such breach within thirty days of written
               notice of such breach.

          7.3. DELAY.  Publisher shall promptly notify CONFIDENTIAL  INFORMATION
               OMITTED AND FILED  SEPARATELY  WITH THE  SECURITIES  AND EXCHANGE
               COMMISSION of any  anticipated  delay in meeting the  Development
               Schedule.  If it appears that there will be a delay in having one
               or  more  Titles  delivered  and  accepted  as set  out  in  this
               Agreement,   then  CONFIDENTIAL  INFORMATION  OMITTED  AND  FILED
               SEPARATELY  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  and
               Publisher  shall meet to discuss an appropriate  course of action
               in good  faith  before  exercising  any of the  remedies  set out
               below. Both parties shall use reasonable  judgment and efforts to
               rearrange  development and ingredient  delivery schedules to deal
               with  setbacks,  such as  unavailability  of specific  technology
               ingredients  or difficulty in developing  the Titles.  7.3.1.  If
               Publisher's delay is due to causes beyond its
                    reasonable  control then the remaining dates for Publisher's
                    deliverables,  and all other  dates  calculated  from  those
                    date(s),  shall be extended by a reasonable  amount of time,
                    not in any case to exceed three  months in the  aggregate or
                    the period of any delay in CONFIDENTIAL  INFORMATION OMITTED
                    AND  FILED  SEPARATELY  WITH  THE  SECURITIES  AND  EXCHANGE
                    COMMISSION providing technology labeled "Critical."
          If the Delay will be over ninety days, then  CONFIDENTIAL  INFORMATION
          OMITTED  AND  FILED   SEPARATELY  WITH  THE  SECURITIES  AND  EXCHANGE
          COMMISSION may terminate the Agreement by written notice to Publisher.

          7.4. CONVENIENCE.  In addition to the provisions  above,  CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE  COMMISSION may, at its sole discretion,  terminate this
               Agreement  without  cause by  written  notice  to  Publisher.  If
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES  AND EXCHANGE  COMMISSION  chooses to  terminate  this
               Agreement  without cause,  Publisher  shall be entitled to retain
               all Funds provided by CONFIDENTIAL  INFORMATION OMITTED AND FILED
               SEPARATELY  WITH  THE  SECURITIES  AND  EXCHANGE   COMMISSION  to
               Publisher   before  the  effective  date  of   termination,   and
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES  AND  EXCHANGE  COMMISSION  shall  have no  rights  in
               Publisher's Titles.

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          7.5. EFFECT OF TERMINATION. Upon any termination of this Agreement for
               any reason:  7.5.1.  Publisher shall on CONFIDENTIAL  INFORMATION
               OMITTED AND FILED  SEPARATELY  WITH THE  SECURITIES  AND EXCHANGE
               COMMISSION   written   request,   return   all   materials   that
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES AND EXCHANGE COMMISSION had provided hereunder. 7.5.2.
               The provisions of Section 8 shall survive termination. 7.5.3. Any
               third-party  licenses  directly or indirectly  granted by a party
               under this Agreement  shall survive such  termination,  provided,
               that the party granting such license shall be responsible for any
               royalties  earned on the  license  under this  Agreement.  7.5.4.
               Publisher  may  retain  that  portion  of the Funds paid prior to
               termination,  but if termination is other than for Convenience or
               for  breach  by  CONFIDENTIAL   INFORMATION   OMITTED  AND  FILED
               SEPARATELY  WITH THE  SECURITIES  AND  EXCHANGE  COMMISSION,  and
               Publisher  releases,  licenses or  otherwise  commercializes  the
               Titles in any  format  or  medium,  Publisher  shall  return  the
               previously advanced Funds to CONFIDENTIAL INFORMATION OMITTED AND
               FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION at a
               rate of  $CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY
               WITH THE  SECURITIES  AND EXCHANGE  COMMISSION per retail Revenue
               Copy or  $CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY
               WITH THE SECURITIES AND EXCHANGE  COMMISSION per OEM Revenue Copy
               until the entire amount of previously advanced Funds is repaid to
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES AND EXCHANGE COMMISSION.

          7.6. RIGHTS.  Subject to the  limitations  in Section  4.2,  Publisher
               warrants  and  represents  that it has or shall obtain all rights
               necessary to undertake the activities described in this Agreement
               and to grant  the  licenses  described  herein.  Publisher  shall
               promptly  notify  CONFIDENTIAL   INFORMATION  OMITTED  AND  FILED
               SEPARATELY  WITH THE  SECURITIES  AND EXCHANGE  COMMISSION of any
               charge  or claim  of  infringement  of any  third  party's  right
               relating to development or distribution of the Titles.

          7.7. NOT A  MUNITION.  Publisher  warrants  and  represents  that  the
               Titles,  including any updates or  revisions,  contains and shall
               contain  no  encryption  or other  capabilities  that  renders it
               subject to the US's

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                        ENTERTAINMENT, INC. CONFIDENTIAL

               International  Traffic and Arms Regulation (ITAR) set forth at 22
               C.F.R.,   Section  120  et  seq.  or  any  successor  or  foreign
               counterpart regulations.

          7.8. SUITS BASED ON TITLES.  Publisher  shall defend,  indemnify,  and
               hold CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY WITH
               THE SECURITIES AND EXCHANGE COMMISSION and its customers harmless
               from  and  against  any  suit  or  proceeding   brought   against
               CONFIDENTIAL  INFORMATION  OMITTED AND FILED  SEPARATELY WITH THE
               SECURITIES  AND  EXCHANGE   COMMISSION,   its   subsidiaries   or
               customers,  based upon the development or distribution of Titles,
               including  any claim that the Titles  infringes  any  third-party
               intellectual  property right (a "Claim").  Publisher's  indemnity
               will include all damages and costs awarded,  including attorneys'
               fees,   and   settlement   costs,   provided  that   CONFIDENTIAL
               INFORMATION  OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
               EXCHANGE   COMMISSION   shall  not  settle   any  claim   without
               Publisher's consent.  7.8.1. The indemnified party shall promptly
               notify Publisher of
                    any  Claim and will  provide  information,  assistance,  and
                    cooperation   in  defending   against  it  (at   Publisher's
                    expense).
               7.8.2. The  indemnified  party will have the right to participate
                    in the defense of any Claim, at its own expense.
               7.8.3. If there appears, in CONFIDENTIAL  INFORMATION OMITTED AND
                    FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
                    opinion, to be a reasonable  likelihood that distribution of
                    any  portion  of the  Titles  may be found to  infringe  the
                    rights of any third  party,  then  CONFIDENTIAL  INFORMATION
                    OMITTED  AND  FILED   SEPARATELY  WITH  THE  SECURITIES  AND
                    EXCHANGE   COMMISSION   may   terminate   the  Agreement  or
                    Publisher,  at its  expense,  will  either  (i)  obtain  for
                    CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY WITH
                    THE SECURITIES AND EXCHANGE  COMMISSION or its customers the
                    right to continue to use such Titles as contemplated herein,
                    (ii) modify  such Titles so that it becomes  non-infringing,
                    but without materially altering its functionality,  or (iii)
                    replace   such   Titles  with  a   functionally   equivalent
                    non-infringing  Titles,  all  at  CONFIDENTIAL   INFORMATION
                    OMITTED  AND  FILED   SEPARATELY  WITH  THE  SECURITIES  AND
                    EXCHANGE COMMISSION option.
               7.8.4. This  indemnity  shall not apply to portions of the Titles
                    prepared or provided by the indemnified party.
               7.8.5. Publisher's  total  liability under this section shall not
                    exceed  the  amount  of  Funds   provided  by   CONFIDENTIAL
                    INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
                    AND EXCHANGE COMMISSION under this agreement.

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          8.   WARRANTS. As partial  consideration for CONFIDENTIAL  INFORMATION
               OMITTED AND FILED  SEPARATELY  WITH THE  SECURITIES  AND EXCHANGE
               COMMISSION  obligations under Section 2 of this Agreement and the
               requirements under "Next Step" in clause 6 ("Application  Feature
               Specifications")  of the  "CONFIDENTIAL  INFORMATION  OMITTED AND
               FILED  SEPARATELY  WITH THE  SECURITIES  AND EXCHANGE  COMMISSION
               Brilliant Digital Entertainment Technical Production Requirements
               Document"  attached hereto as Attachment A, Publisher has granted
               to CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
               SECURITIES AND EXCHANGE COMMISSION a Warrant,  attached hereto as
               Attachment  D.

          9.   GENERAL PROVISIONS

               9.1. CONFIDENTIAL  TERMS.  Except as otherwise  provided  herein,
                    each  party  shall  maintain   other  party's   confidential
                    disclosures in confidence  pursuant to CNDA #89580.  Neither
                    party may disclose the existence or terms of this  Agreement
                    without the prior written  consent of the other party except
                    as  required  by  law  or as  required  by  section  401(a),
                    "Immediate  Public  Disclosure of Material  Information," of
                    the American Stock Exchange Company Guide. Any such required
                    disclosure(s) will be to the most limited extent allowable.

               9.2. TITLE.  Except for the licenses  expressly provided here, or
                    in a "shrink wrap" or other written license, no licenses are
                    granted by either party, either expressly or by implication,
                    to any intellectual  property of the other.  Notwithstanding
                    CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY WITH
                    THE  SECURITIES  AND  EXCHANGE  COMMISSION  ownership in the
                    copyrights in the CONFIDENTIAL INFORMATION OMITTED AND FILED
                    SEPARATELY  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION
                    Technology,  Publisher  shall own all  copyrights in its own
                    original work, including its own Titles.

               9.3. RELATIONSHIP  OF PARTIES.  The  parties are not  partners or
                    joint  venturers,  or liable for the  obligations,  acts, or
                    activities of the other.

               9.4. AMENDMENTS  AND  ASSIGNMENTS.  Any change,  modification  or
                    waiver to this Agreement must be in writing and signed by an
                    authorized  representative of each party.  Neither party may
                    assign this  Agreement  or any portion of this  Agreement to
                    any other party without the other's prior written consent.

               9.5. MERGER AND WAIVER.  This  Agreement is the entire  agreement
                    between  the parties  with  respect to the  development  and
                    distribution  of the Titles,  and it supersedes any prior or
                    contemporaneous   agreements   and   negotiations

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                    relating  thereto.  No waiver of any breach or default shall
                    constitute  a waiver of any  subsequent  breach or  default.

               9.6. LIMITED  LIABILITY.  Neither  party  shall be  liable to the
                    other for lost profits, expected revenues, or development or
                    support   costs  arising  from  any   termination   of  this
                    Agreement.  IN NO EVENT SHALL  EITHER PARTY BE LIABLE TO THE
                    OTHER  FOR LOSS OF  PROFITS,  DATA,  OR USE OR ANY  SPECIAL,
                    CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVER CAUSED, EVEN IF
                    ADVISED  OF THE  POSSIBILITY  OF SUCH  DAMAGE.  THE  PARTIES
                    ACKNOWLEDGE THAT THESE LIMITATIONS ON POTENTIAL  LIABILITIES
                    WERE AN  ESSENTIAL  ELEMENT IN SETTING  CONSIDERATION  UNDER
                    THIS AGREEMENT.

               9.7. EXPORT.  Neither  party  shall  export  the  Titles  or  the
                    CONFIDENTIAL  INFORMATION  OMITTED AND FILED SEPARATELY WITH
                    THE SECURITIES AND EXCHANGE COMMISSION in violation of US or
                    other applicable law.

               9.8. NOTICES AND REQUESTS.  All notices and requests  required or
                    made under this  Agreement  must be in writing  and shall be
                    personally delivered or if mailed postage prepaid, certified
                    or registered  mail,  or overnight  courier to the addresses
                    listed  below:  CONFIDENTIAL  INFORMATION  OMITTED AND FILED
                    SEPARATELY WITH THE SECURITIES AND EXCHANGE  COMMISSION

               9.9. CHOICE OF LAW.  Any claim based on this  Agreement  shall be
                    governed  by the laws of  Delaware,  and shall be subject to
                    the exclusive  jurisdiction  of the state and federal courts
                    located there.

               9.10.ATTACHMENTS.  The following  Attachments are incorporated by
                    reference  into  this  Agreement:
                    9.10.5 Attachment D-- Warrants

               IN  WITNESS  OF THEIR  AGREEMENT,  the  parties  have  caused the
               Agreement   to   be   executed   below   by   their    authorized
               representatives.

CONFIDENTIAL  INFORMATION  OMITTED      BRILLIANT DIGITAL ENTERTAINMENT, INC.
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION      BY: /S/ MICHAEL OZEN
                                            ----------------
                                        MICHAEL OZEN
                                        CHIEF FINANCIAL OFFICER
By:   /S/
   ------------------------------
   CONFIDENTIAL INFORMATION
   OMITTED AND FILED SEPARATELY
   WITH THE SECURITIES AND
   EXCHANGE COMMISSION
     VICE-PRESIDENT