EXHIBIT 10.1

                      BRILLIANT DIGITAL ENTERTAINMENT, INC.
                    6355 Topanga Canyon Boulevard, Suite 120
                            Woodland Hills, CA 91367

                                 March 30, 2004

To the Holders of Secured Convertible Promissory Notes
of Brilliant Digital Entertainment, Inc. Set
Forth on the Schedule 1 Attached Hereto

         Re:      Amendments to Notes, Loan Documents and Warrants

Gentlemen:

         Reference is made to those certain (i) Secured  Convertible  Promissory
Notes, dated May 23, 2001, issued by the Brilliant Digital Entertainment,  Inc.,
a  Delaware  corporation  (the  "COMPANY"),  in favor of each of  Harris  Toibb,
Europlay 1, LLC and  Preston  Ford,  Inc.,  each as  previously  amended by that
certain  Amendment No. One to Secured  Convertible  Promissory Note, dated as of
December 19, 2001, and those certain Amendments No. Two and No. Three to Secured
Convertible Promissory Note, dated as of October 4, 2002, and December 31, 2003,
respectively (as amended,  each a "MAY CONVERTIBLE NOTE" and  collectively,  the
"MAY CONVERTIBLE  NOTES");  (ii) Secured  Convertible  Promissory  Notes,  dated
December  19,  2001,  issued by the Company in favor of each of Harris Toibb and
Chapel Capital, Ltd., each as previously amended by those certain Amendments No.
One and Two to Secured Convertible Promissory Note, dated as of October 4, 2002,
and December  31, 2003,  respectively  (each a "DECEMBER  CONVERTIBLE  NOTE" and
collectively,  the "DECEMBER  CONVERTIBLE  NOTES");  (iii)  Warrants to Purchase
Common Stock of Brilliant Digital Entertainment, Inc. in favor of each of Harris
Toibb,  Europlay 1, LLC and Preston Ford,  Inc., dated May 23, 2001 which expire
May 23, 2004 (each a "MAY WARRANT" and  collectively,  the "MAY WARRANTS"),  and
(iv) Warrants to Purchase Common Stock of Brilliant Digital Entertainment,  Inc.
in favor of Harris Toibb and Chapel Capital, Ltd., dated December 19, 2001 which
expire May 23, 2004 (each a "DECEMBER  WARRANT" and collectively,  the "DECEMBER
WARRANTS") (the May Warrants and the December  Warrants together are referred to
as the "WARRANTS").

         The  May  Convertible   Notes  and  the  December   Convertible   Notes
(collectively, the "NOTES") had a stated maturity date of December 31, 2003 (the
"MATURITY  DATE") and the Company  notified each of you that it will not be able
to pay the amounts  outstanding under the May Convertible Notes and the December
Convertible  Notes on the Maturity  Date.  As of December 31, 2003,  each of you
agreed in writing to an  extension  of the  Maturity  Date to March 1, 2004 (the
"MARCH 2004 MATURITY DATE").  The Company notified each of you that it would not
be able to pay the amounts  outstanding  under the May Convertible Notes and the
December  Convertible  Notes on the March  Maturity Date and has requested  that
each of you agree to an extension of the March  Maturity  Date to September  26,
2004. At March 1, 2004 the Notes were in default.


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         This letter agreement (this "LETTER AGREEMENT") constitutes the binding
agreement of the Company and each of you (each,  a "HOLDER"),  pursuant to which
each  Holder and the  Company  shall amend the May  Convertible  Notes,  the May
Warrants,  the December Convertible Notes and the December Warrants on the terms
and conditions set forth herein.

         For good  and  valuable  consideration,  receipt  of  which  is  hereby
acknowledged, the Company and each Holder agree as follows:

         1.       AMENDMENTS  TO  CONVERTIBLE   NOTES.   Concurrently  with  the
execution  and delivery of this  Agreement  by each Holder and the Company,  the
Company and such Holder shall execute and deliver,  to the extent  applicable to
such  Holder,  (i)  that  certain  Amendment  No.  Four to  Secured  Convertible
Promissory  Note,  dated as of  December  31,  2003,  substantially  in the form
attached  hereto  as  EXHIBIT  A (the  "MAY  NOTE  AMENDMENT"),  which  May Note
Amendment shall amend the Holder's respective May Convertible Note to change the
Maturity Date (as defined  therein) from March 1, 2004 to September 26, 2004 and
to add as a default or an event of default thereunder, the failure to pay by the
Company or any of its  subsidiaries  (taken as a whole) (which failure to pay in
the case of  indebtedness  due  Sharman  Networks  Limited or  Europlay  Capital
Advisors, LLC (an amendment to which indebtedness requires consent of the Agent)
shall occur  following  written demand for payment),  any  principal,  interest,
premium,  or other  amount  payable  with  respect  to any item of  indebtedness
aggregating One Hundred Thousand Dollars ($100,000) or which would allow for the
acceleration  or the right to  accelerate  indebtedness,  which would permit the
holder of such  indebtedness to cause maturity to occur or which would allow for
the  commencement or the right to commence  remedies with respect  thereto,  and
(ii) that certain  Amendment No. Three to Secured  Convertible  Promissory Note,
dated as of December  31, 2003,  substantially  in the form  attached  hereto as
EXHIBIT B (the "DECEMBER  NOTE  AMENDMENT"  and  collectively  with the May Note
Amendment, the "NOTE AMENDMENTS"), which December Note Amendment shall amend the
Holder's  respective  December  Convertible Note to change the Maturity Date (as
defined  therein)  from  March 1,  2004 to  September  26,  2004 and to add as a
default or an event of default thereunder,  the failure to pay by the Company or
any of its subsidiaries  (taken as a whole) (which failure to pay in the case of
indebtedness due Sharman Networks Limited or Europlay Capital Advisors,  LLC (an
amendment  to which  indebtedness  requires  consent of the Agent)  shall  occur
following  written demand for payment),  any principal,  interest,  premium,  or
other  amount  payable  with  respect  to any  item  or  items  of  indebtedness
aggregating One Hundred Thousand Dollars ($100,000) or which would allow for the
acceleration  or the right to  accelerate  indebtedness,  which would permit the
holder of such indebtedness to cause maturity to occur, or which would allow for
the commencement or the right to commence remedies with respect thereto.

         2.       AMENDMENTS  TO WARRANTS.  Concurrently  with the execution and
delivery of this Agreement by each Holder and the Company,  the Company and such
Holder shall execute and deliver,  to the extent applicable to such Holder, that
certain (i) Amendment No. Two to the May Warrant to Purchase  Common Stock dated
as of March 30, 2004,  substantially  in the form  attached  hereto as Exhibit C
(the "MAY  WARRANT  AMENDMENT")  which May  Warrant  Amendment  shall  amend the
Holder's  respective May Warrant to extend the term of the May Warrant and thus,
the period of time during  which the May Warrant is  exercisable,  to October 4,
2005 and  (ii)Amendment  No. 1 to the December  Warrant to Purchase Common Stock
dated as of March 30, 2004, substantially in the form attached hereto as Exhibit
D (the "DECEMBER  WARRANT


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AMENDMENT") which December Warrant Amendment shall amend the Holder's respective
December Warrant to extend the term of the December Warrant and thus, the period
of time during  which the  December  Warrant is  exercisable  to October 4, 2005
(collectively, the "WARRANT AMENDMENTS").

         3.       PROHIBITION ON ISSUANCE OF SECURITIES AND BORROWINGS.

                  3.1      During the term of the Note  Amendments,  without the
prior written  consent of the Agent,  the Company shall not and shall cause each
and all of its  direct  or  indirect  subsidiaries  to not,  issue  any  form of
security  or incur  any  indebtedness  for  money  borrowed,  unless  all of the
proceeds  therefrom,  which in no event shall be in an aggregate  amount of less
than Two Million Five Hundred Thousand Dollars ($2,500,000),  are used solely to
pay to the Holders, the accrued interest on and the outstanding principal of the
Secured  Promissory  Notes,  in the order and  manner  set forth in the  Secured
Promissory Notes.  Notwithstanding the foregoing, this Section 3 shall not apply
in  respect  of the  issuance  of (a)  shares  of  Common  Stock or  options  to
employees,  key  consultant,  vendors,  officers  or  directors  of the  Company
pursuant  to any  stock  or  option  plan  duly  adopted  by a  majority  of the
non-employee  members of the Board of  Directors of the Company or a majority of
the  members of a  committee  of  non-employee  directors  established  for such
purpose,  (b) securities  upon the exercise of or conversion of any  convertible
securities,  options  or  warrants  issued and  outstanding  on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement to increase the number of such securities  (unless such amendment
results from the application of any anti dilution provisions  applicable to such
securities),  (c)  securities  in  connection  with  the  acquisition,   merger,
consolidation,  or other business  combination by or of the Company with, by, or
of all or any  portion  of the  equity or assets of any  person or  entity,  the
primary purpose of which is not to raise capital and the consideration for which
does not result in the  receipt by the  Company or its  subsidiaries  of cash or
cash equivalents,  including  securities issued by the Company upon its exercise
of rights to do any of the  foregoing;  (d)  securities  issued  to  parties  to
commercial  contracts as consideration  thereunder  primarily for purposes other
than to raise  capital,  and (d) securities to third parties in payment of trade
payables which have accrued as of the date of this Agreement.

                  3.2      During the term of the Note  Amendments,  without the
prior written  consent of the Agent,  the Company shall not and shall cause each
and  all of  its  direct  or  indirect  subsidiaries  to  not,  enter  into  any
transaction,  directly  or  indirectly,  for the sale,  lease,  license or other
disposition  of  material  assets of the  Company  which is not in the  ordinary
course of business,  unless all of the proceeds therefrom are used solely to pay
to the Holders,  the accrued  interest on and the  outstanding  principal of the
Secured  Promissory  Notes,  in the order and  manner  set forth in the  Secured
Promissory Notes.

         4.       CONSIDERATION   FOR  AMENDMENTS.   In  consideration  of  each
Holder's amendment of the May Convertible Note and/or December Convertible Note,
as soon as  practicable  following  receipt by the Company of this Agreement and
the  May  Note  Amendment   and/or  December  Note  Amendment,   as  applicable,
countersigned  by the Holder,  the Company  shall issue to such Holder a warrant
expiring October 4, 2005 (each, a "WARRANT") initially  exercisable for a number
of shares of Common Stock equal to (i) twenty  percent (20%) of the  outstanding
principal amount (which, for purposes of clarity,  shall not include accrued but
unpaid  interest,  costs and


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fees) of the May Convertible Note and/or December Convertible Note being amended
by the Holder pursuant to this Agreement, DIVIDED BY (ii) a price (the "EXERCISE
PRICE") of fifteen cents ($0.15).  Each Warrant shall have an exercise price per
share equal to the Exercise Price, and shall otherwise be on the terms set forth
in the form of Warrant attached as EXHIBIT E to this Agreement.

         5.       PURCHASER REPRESENTATIONS. Each Holder represents and warrants
to the Company with respect to itself as follows:

                  5.1      INVESTMENT REPRESENTATIONS.

                           5.1.1.   The Holder has such knowledge and experience
in financial and business matters, including investments of the type represented
by this Agreement and the Warrants, as to be capable of evaluating the merits of
an  investment in the Company and can bear the economic risk of an investment in
the  Warrant  and the shares of Common  Stock that may be acquired by the Holder
upon  exercise of the Warrant  (the  "WARRANT  SHARES"  and,  together  with the
Warrant, the "SECURITIES");

                           5.1.2.   The Holder is an  "accredited  investor"  as
such term is defined in Rule 501 of  Regulation  D under the  Securities  Act of
1933 (the "SECURITIES ACT"); and

                           5.1.3.   The Holder is acquiring  the Warrant and, to
the extent  exercised,  will be acquiring  the Warrant  Shares,  for  investment
purposes  only,  for its own  account  and not with a view to, or for  resale in
connection with, the distribution or other disposition  thereof in contravention
of the Securities Act or any state securities law.

                  5.2.     TRANSFER  RESTRICTIONS.  The Holder  acknowledges and
agrees that the Securities are subject to the following transfer restrictions:

                           5.2.1.   The  Securities  have  not  been  registered
under  the  Securities  Act,  and  the P  Holder  agrees  not to  sell,  pledge,
distribute,  offer for sale, transfer or otherwise dispose of the Securities, as
applicable,  in the absence of (i) an effective registration statement under the
Securities  Act  as  to  Securities,   as  applicable,   and   registration   or
qualification  of  the  Securities  under  any  applicable  Blue  Sky  or  state
securities  laws then in  effect,  or (ii) an  opinion  of  counsel,  reasonably
satisfactory to the Company,  that such  registration and  qualification are not
required. Upon exercise of the Warrants, each of the certificates evidencing the
Warrant Shares shall bear a legend in substantially the following form:

         THE SECURITIES  EVIDENCED BY THIS  CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE U.S.  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
         ACT"), OR ANY OTHER APPLICABLE  SECURITIES LAWS AND HAVE BEEN ISSUED IN
         RELIANCE UPON AN EXEMPTION FROM THE  REGISTRATION  REQUIREMENTS  OF THE
         SECURITIES ACT AND SUCH OTHER  SECURITIES  LAWS.  NEITHER THIS SECURITY
         NOR ANY  INTEREST  OR  PARTICIPATION  HEREIN  MAY BE  REOFFERED,  SOLD,
         ASSIGNED, TRANSFERRED,  PLEDGED, ENCUMBERED,  HYPOTHECATED OR OTHERWISE
         DISPOSED OF,  EXCEPT  PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT


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         UNDER THE  SECURITIES  ACT OR PURSUANT TO A TRANSACTION  THAT IS EXEMPT
         FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

                           5.2.2.   In the reasonable discretion of the Company,
the Company may condition  any transfer of all or any portion of the  Securities
(other than a disposition  satisfying  the conditions set forth in clause (i) of
SECTION  5.2.1(i)  above)  upon the  transferee's  delivery  to the Company of a
written agreement, in form and substance reasonably satisfactory to the Company,
whereby the transferee (i) makes such  representations and warranties to and for
the  benefit  of the  Company  as are  comparable  to  the  representations  and
warranties of the Holder hereto, as and to the extent applicable to the proposed
disposition,  and (ii) agrees to be bound by the transfer restrictions set forth
in this SECTION 5.2.

                  5.3.     MANNER OF SALE.  At no time was the Holder  presented
with or  solicited  by or  through  any  leaflet,  public  promotional  meeting,
television   advertisement  or  any  other  form  of  general   solicitation  or
advertising.

         6.       REGISTRATION RIGHTS. The Company agrees that each Holder shall
be  entitled to have the  Warrant  Shares  registered  with the  Securities  and
Exchange  Commission  for resale under the Securities Act upon the same terms as
the registration rights granted by the Company to the Holder with respect to the
shares of Common  Stock  underlying  the Holder's  May  Convertible  Note and/or
December Convertible Note.

         7.       EXCESS CASH. Excess Cash payments shall be made to the Holders
in accordance with the following:

                  7.1      EXCESS CASH PAYMENTS.  Until the Notes and all of the
obligations  thereunder  and under this  Agreement are paid in full, the Company
shall pay in cash, in immediately  available funds, pro rata to the Holders, not
later than thirty  (30)  Business  Days after the end of each month,  commencing
April 1, 2004,  an amount  equal to fifty  percent  (50%) of Excess Cash for the
prior month then ended.  For purposes of this Agreement,  "Excess Cash" means at
any time of  determination,  the  amount  which  is  equal  to the  consolidated
Revenues  of  the  Company  and  its  subsidiaries,  minus  costs  and  expenses
consisting  only of (i)  costs of  revenues,  (ii)  sales and  marketing  costs,
(iii)general and administrative  costs, and (iv) research and development costs,
all of which are  determined  monthly in the same  manner as is  reported in the
Company's  consolidated  statements of operations  most recently  filed with the
Securities and Exchange  Commission  which statements of operations are prepared
in accordance with generally accepted  accounting  principles and with the rules
and  regulations  (including  Regulation S-X)  promulgated  under the Securities
Exchange Act of 1934, as amended.  For purposes of determining  "Excess Cash" as
set forth above,  there shall not be deducted from Revenues any amounts for cash
or non-cash  interest  (accrued or paid),  depreciation and  amortization  costs
(accrued or paid) or taxes  (accrued  or paid) or for any item not  specifically
identified above.

                  7.2      NO INCREASED EXPENSES. Until the Notes and all of the
obligations  thereunder and under this Agreement are paid in full there shall be
no material increase in the monthly general and  administrative  expenses of the
Company or any of its  subsidiaries,  including  but not limited to salaries and
associated employee and consulting costs and expenses.


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         8.       ACKNOWLEDGEMENT  AND  AFFIRMATION  OF THE NOTES,  THE PURCHASE
AGREEMENTS AND THE WARRANTS.  The Company,  and each of Brilliant Studios,  Inc.
and B3D, Inc (each a "SPECIAL  SUBSIDIARY"),  acknowledge and agree that (i) the
Company is indebted to each Holder in the principal amount set forth on Schedule
1 hereto,  plus accrued and unpaid interest and other fees and costs,  including
an aggregate agreed upon amount of legal fees and costs through March 1, 2004 of
$300,000,  (ii) the Notes, the Purchase Agreements (as such terms are defined in
the Notes) and the Warrants delivered in connection with the Notes, the Purchase
Agreements and the amendments thereof are legal,  valid and binding  obligations
of the  Company  and are and shall  continue,  after the  amendments  to the May
Convertible  Notes,  the May Warrants,  the December  Convertible  Notes and the
December Warrants  contemplated  herein, in full force and effect and are hereby
confirmed  in all  respects  and the  Company  hereby  reaffirms  each and every
obligation  thereunder  and each of the waivers and consents made  therein,  and
(iii)  the  amounts  set forth in clause  (i)  above and the  obligation  of the
Company to repay the Notes and perform  under the  Purchase  Agreements  and the
Warrants are absolute and unconditional and not subject to any offset, defenses,
claims,  counterclaims  or  disputes.  The Company and each  Special  Subsidiary
represents and warrants that it has reread the Notes,  the Purchase  Agreements,
the Warrants,  the Note  Amendments  and the Warrant  Amendments and each of the
obligations,  waivers and consents set forth  therein and that its  execution of
this Letter Agreement and the agreements, acknowledgements and affirmations made
herein  have been done  after  consultation  with  legal  counsel  and with full
knowledge of its  significance  and  consequences and in recognition of the fact
that on March 1, 2004 the Company and each Special Subsidiary was, and presently
continues to be, in default thereunder..

         9.       ACKNOWLEDGEMENT AND REAFFIRMATION OF SECURITY AGREEMENTS.  The
Company, and each subsidiary, hereby acknowledge and agree that (a) the Security
and Pledge  Agreement,  dated as of May 23,  2001,  as amended,  executed by the
Company and each Special  Subsidiary (the "MAY SECURITY  AGREEMENT") and (b) the
Security  and Pledge  Agreement,  dated as of  December  19,  2001,  as amended,
executed by the Company and each  Special  Subsidiary  (the  "DECEMBER  SECURITY
AGREEMENT") (i) are legal, valid and binding obligations of the Company and each
Special  Subsidiary and that no defenses to or claims against the enforcement of
the May Security Agreement or the December Security Agreement or the exercise by
the Agent of its rights  thereunder exist, (ii) grant to the Agent (as such term
is defined therein) a valid,  enforceable and perfected security interest in and
lien against all of the assets of the Company and of each Special  Subsidiary as
of such  dates and as of the date of this  Letter  Agreement,  and (iii) are and
shall continue,  after the amendments to the May Convertible  Notes and December
Convertible Notes  contemplated  herein, in full force and effect and are hereby
confirmed in all respects  and the Company and each  Special  Subsidiary  hereby
reaffirms  each and every  obligation  thereunder  and each of the  waivers  and
consents made therein.  The Company and each Special  Subsidiary  agree that all
references in the May Security Agreement to the Convertible Notes shall mean and
be a reference to the  Convertible  Notes as amended by the May Note  Amendments
and the Company and each Special  Subsidiary  agree that all  references  in the
December  Security  Agreement  to the  Convertible  Notes  shall  mean  and be a
reference to the Convertible  Notes as amended by the December Note  Amendments.
The Company and each Special  Subsidiary  represents  and  warrants  that it has
reread the May Security  Agreement and the December Security  Agreement and each
of the  obligations,  waivers  and  consents  set  forth  therein  and  that its
execution of this Letter  Agreement  and the  agreements,  acknowledgements  and
affirmations  made herein have been done after  consultation  with legal counsel
and with full


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knowledge of its  significance  and  consequences and in recognition of the fact
that on March  1,  2004,  the  Company  and each  Special  Subsidiary  was,  and
presently contuinues to be, in default thereunder.

         10.      ACKNOWLEDGEMENT AND REAFFIRMATION OF GUARANTEES.

                  (a)      Each  Special  Subsidiary  hereby   acknowledges  and
agrees that (i) the Guaranty, dated as of May 23, 2001, executed by each Special
Subsidiary (the "MAY GUARANTY") and (ii) the Guaranty,  dated as of December 19,
2001,  executed by each Special  Subsidiary (the "DECEMBER  GUARANTY"),  (X) are
legal,  valid and binding  obligations  of each Special  Subsidiary  and that no
defenses  to or  claims  against  the  enforcement  of the May  Guaranty  or the
December  Guaranty or the exercise by the Agent of its rights  thereunder exist,
and (Y) are and shall  continue,  after the  amendments  to the May  Convertible
Notes and December  Convertible  Notes  contemplated  herein,  in full force and
effect and are hereby  confirmed  in all  respects  and each  Subsidiary  hereby
reaffirms  each and every  obligation  thereunder  and each of the  waivers  and
consents made therein. Each Special Subsidiary agrees that all references in the
May Guaranty to the Convertible  Notes,  or words of similar import,  shall mean
and be a  reference  to the  Convertible  Notes  as  amended  by  the  May  Note
Amendments  and  each  Special  Subsidiary  agrees  that all  references  in the
December  Guaranty to the Convertible  Notes, or words of similar import,  shall
mean and be a reference to the Convertible Notes as amended by the December Note
Amendments.  Any  reference  in the  May  Guaranty  to  Secured  Obligations  or
Convertible Note Loans shall include, to the extent applicable,  the Convertible
Notes as amended by the May Note  Amendments  and any  reference in the December
Guaranty to Secured  Obligations or Convertible Note Loans shall include, to the
extent  applicable,  the  Convertible  Notes as  amended  by the  December  Note
Amendments.

                  (b)      Each Special Subsidiary  represents and warrants that
it has  reread  the May  Guaranty  and the  December  Guaranty  and  each of the
obligations,  waivers and consents set forth therein and that its affirmation of
such obligations,  waivers and consents herein have been made after consultation
with  legal  counsel  and  with  full  knowledge  of  their   significance   and
consequences,  with the understanding  that events giving rise to any defense or
right waived or released may diminish,  destroy,  or otherwise  adversely affect
rights that each Subsidiary otherwise may have against the Company, the Holders,
the Agent or against any collateral pledged to the Holders,  and that, under the
circumstances,  the waivers,  releases and consents  herein given are reasonable
and not contrary to public policy or law.

                  (c)      Each Subsidiary  acknowledges  that the amendments to
the May Convertible Notes and the December Convertible Notes contemplated herein
directly  benefit  each  Subsidiary  and that  such  amendments  provide  for an
extension of the  maturity  date of the May  Convertible  Notes and the December
Convertible  Notes to  September  26,  2004 and the  addition as a default or an
event of default  thereunder,  the  failure to pay by the  Company or any of its
subsidiaries  (taken  as  a  whole)  (hich  failure  to  pay  in  the  case  of
indebtedness due Sharman Networks Limited or Europlay Capital Advisors,  LLC (an
amendment  to which  indebtedness  requires  consent of the Agent)  shall  occur
following written demand for payment), any principal, interest, premium or other
amount payable with respect to any item of indebtedness  aggregating One Hundred
Thousand  Dollars  ($100,000) or which would allow for the  acceleration  or the
right  to  accelerate  indebtedness,  which  would  permit  the  holder  of such


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indebtedness  to  cause  maturity  to  occur,  or  which  would  allow  for  the
commencement or the right to commence remedies with respect thereto.

         11.      AUTHORIZATION.  The Company and each  subsidiary  has the full
legal right,  power and  authority  to conduct its  business  and  affairs.  The
Company has the full legal right,  power and authority to enter into and perform
its  obligations  under  this  Letter  Agreement  and the Note  Amendments.  The
execution and delivery of this Letter Agreement and the Note Amendments, and the
performance  by the Company of its  obligations  hereunder and  thereunder,  are
within the corporate powers of the Company, and have been duly authorized by all
necessary corporate action properly taken. The officer(s)  executing this Letter
Agreement and the Note  Amendments  are duly  authorized to act on behalf of the
Company.  Each subsidiary has the full legal right, power and authority to enter
into and perform its obligations under this Letter Agreement.  The execution and
delivery of this Letter Agreement, and the performance by each subsidiary of its
obligations hereunder,  are within the corporate powers of each subsidiary,  and
have been duly authorized by all necessary  corporate action properly taken. The
officer(s)  executing this Letter Agreement are duly authorized to act on behalf
of each subsidiary.

         12.      PAYMENT OF  EXPENSES.  The  Company  hereby  agrees to pay all
out-of-pocket  costs and expenses,  including attorney fees, paid or incurred by
Harris Toibb in connection  with the  negotiation,  preparation and execution of
this  Letter  Agreement,  which the  Company  agrees is  $20,000  (the  "Expense
Payment").  The  Expense  Payment  shall  be  paid  to  Harris  Toibb  upon  the
effectiveness of this Letter Agreement.

         13.      EFFECTIVENESS. This effectiveness of this Letter Agreement and
the obligations of the parties hereunder shall be conditioned upon the execution
and  delivery of this Letter  Agreement by each and all of the parties set forth
below.

         14.      RELEASE.   The  Company  and  each  of  its  subsidiaries  and
affiliates  on  behalf  of  themselves   and  their   respective   predecessors,
successors,  principals,  employers,  employees,  attorneys,  heirs,  executors,
representatives,  agents,  administrators,  insurers and assigns (the "RELEASING
PARTIES") do hereby  release and discharge  each of the Holders in any capacity,
whether   individual  or   representative,   their   predecessors  in  interest,
subsidiaries,   affiliates,  agents,  representatives,   attorneys,  principals,
associates,  employees, employers, heirs, executors,  administrators,  partners,
insurers,  successors  and assigns and each of them and all persons,  firms,  or
corporations with whom any of the former may have been now, or may hereafter be,
affiliated  jointly or  severally  (the  "RELEASEES")  from any and all  rights,
claims,  demands,  liabilities,  actions,  and causes of action,  suits,  debts,
demands, acts, agreements,  damages, obligations,  costs, fees, expenses, of any
nature whatsoever,  whether known or unknown,  suspected or claimed,  matured or
unmatured, fixed or contingent, that the Company, its subsidiaries or affiliates
or any of them may now have or hereafter  may have or claim to have arising from
any matter,  event,  cause or thing  occurring from the beginning of time to the
date of this Letter  Agreement  against  the  Releasees  directly or  indirectly
arising  out of or  related to any  claims,  debts,  obligations,  duties of any
nature directly or indirectly  concerning or related to the Notes,  the Purchase
Agreements,   the  Warrants,  the  Security  Agreements,   the  Guarantees,  the
amendments to any and all of the foregoing agreements, including those contained
in this Letter  Agreement,  any other agreements in writing or oral which may be
directly or indirectly  related to the foregoing,  including matters relating to
the  issuance  of  securities  underlying  the  Notes and


                                       8
<PAGE>


the  Warrants  and the  negotiations  and  actions  and  inactions  directly  or
indirectly  arising from or related to any of the  foregoing.  By executing this
Release, the Releasing Parties expressly waive and relinquish any and all rights
they may have under  California  Civil Code  Section  1542,  which  provides  as
follows:

                  A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
                  DOES NOT KNOW OR  SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
                  EXECUTING  THE  RELEASE,  WHICH  IF KNOWN  BY HIM,  MUST  HAVE
                  MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

         15.      MISCELLANEOUS.  This Letter  Agreement  and the  exhibits  and
schedules  attached hereto  represent the entire  agreement  between the parties
concerning  the  subject  matter  hereof,  and all oral  discussions  and  prior
agreements  are merged  herein;  PROVIDED,  if there is a conflict  between this
Letter Agreement and any other document executed contemporaneously herewith with
respect to the  obligations  described  herein,  the  provision  of this  Letter
Agreement  shall control.  The parties agree that any disputes of  controversies
with respect to this Letter Agreement shall be governed by the choice of law and
other  provisions  contained  in  the  Notes.  This  Letter  Agreement  and  the
Amendments  may be  executed  in any  number of  counterparts  and by  different
parties to this Letter  Agreement or the  Amendments  in separate  counterparts,
each of which  when so  executed  shall be deemed to be an  original  and all of
which taken  together  shall  constitute  one and the same Letter  Agreement and
Amendment.

                         (Signatures on Following Pages)


                                       9
<PAGE>


                         Very truly yours,


                         BRILLIANT DIGITAL ENTERTAINMENT, INC.,
                         a Delaware corporation


                         By:      /S/ TYLER TARR
                                -------------------------------------------
                                  Tyler Tarr
                         Its:     Chief Financial Officer


ACCEPTED:

HARRIS TOIBB, as holder and as Agent

  /S/ HARRIS TOIBB
------------------------------------

EUROPLAY 1, LLC

By:    /S/ MARK DYNE
       ------------------------------------------
       Name: MARK DYNE
             ------------------------------------
Its:   MANAGER
       ------------------------------------------

PRESTON FORD INC.

By:    /S/ DAVID WILSON
       ------------------------------------------
       Name: DAVID WILSON
             ------------------------------------
Its:
       ------------------------------------------

CAPEL CAPITAL LTD.

By:    /S/ NICHOLAS HANNAH
       ------------------------------------------
       Name: NICHOLAS HANNAH
             ------------------------------------
Its:   Director Marlborough Nominees Limited
       ------------------------------------------


                                       10
<PAGE>


AGREED:

BRILLIANT DIGITAL ENTERTAINMENT, INC.,
a Delaware corporation

By:    /S/ TYLER TARR
       -------------------------------------
       Tyler Tarr
Its:   Chief Financial Officer


BRILLIANT STUDIOS, INC.


By:    /S/ TYLER TARR
       -------------------------------------
       Tyler Tarr
Its:   Chief Financial Officer


B3D, INC.


By:    /S/ TYLER TARR
       -------------------------------------
       Tyler Tarr
Its:   Chief Financial Officer


                                       11
<PAGE>


                                   SCHEDULE 1
                                  NOTE HOLDERS

                                        PRINCIPAL AMOUNT        PRINCIPAL AMOUNT
                                             OF MAY                OF DECEMBER
   NAME OF NOTE HOLDER                  CONVERTIBLE NOTE        CONVERTIBLE NOTE
   -------------------                  ----------------        ----------------
Harris Toibb                                 $2,000,000               $350,000
     6355 Topanga Canyon Blvd.
     Suite 411
     Woodland Hills, CA 91367

Europlay 1, LLC                                 214,150                     --
     15821 Ventura Blvd.,
     Suite 525
     Encino, California 91436

Preston Ford, Inc.                               50,000                     --
     P.O. Box 98
     Preston, MD 21655

Capel Capital, Ltd.                                 --                 400,000
     P.O. Box 212
     Hadsley House
     St. Peter Port
     Guernsey, Channel Islands
                                             -----------              --------

Total                                        $2,264,150               $750,000
                                             ==========               ========


                                       12
<PAGE>


                                    EXHIBIT A

                            AMENDMENT NUMBER FOUR TO
                       SECURED CONVERTIBLE PROMISSORY NOTE



                                       13
<PAGE>


                                    EXHIBIT B

                            AMENDMENT NUMBER THREE TO
                       SECURED CONVERTIBLE PROMISSORY NOTE



                                       14
<PAGE>


                                    EXHIBIT C

                             AMENDMENT NO. 2 TO THE
                        WARRANT TO PURCHASE COMMON STOCK
                                       OF
                      BRILLIANT DIGITAL ENTERTAINMENT, INC.



                                       15
<PAGE>


                                    EXHIBIT D

                             AMENDMENT NO. 1 TO THE
                        WARRANT TO PURCHASE COMMON STOCK
                                       OF
                      BRILLIANT DIGITAL ENTERTAINMENT, INC.



                                       16
<PAGE>


                                    EXHIBIT E

                                     WARRANT


                                       17