EXHIBIT 4.2


                               SECURITY AGREEMENT


         THIS  SECURITY  AGREEMENT  (the  "Agreement")  is made and entered into
effective as of the 28th day of March, 2002, by and between Front Porch Digital,
Inc., a Nevada  corporation  (the "Pledgor") and Rice Opportunity Fund L.L.C., a
Delaware limited  liability company and Irl Nathan  (collectively,  the "Secured
Party").

         WHEREAS,  as of even date herewith,  Secured Party loaned  Pledgor,  as
Borrower,  an aggregate of $350,000  subject to and in accordance with the terms
and  conditions  set forth in those  certain  $250,000 and $100,000  Convertible
Secured Promissory Notes of even date herewith (collectively, the "Note");

         WHEREAS,  in  consideration  of Secured Party  accepting the Note,  the
parties hereto desire to enter into this  Agreement to further secure  Pledgor's
obligations to Secured Party;

         NOW, THEREFORE,  for and in consideration of the premises and covenants
set forth herein and other valuable  consideration,  the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:

         1.  INDEBTEDNESS. The security interest is herein created to secure all
obligations and  indebtedness to Secured Party,  direct or indirect now existing
or hereafter  arising of Pledgor or Borrower owed to Secured Party  (hereinafter
referred to as "Indebtedness") under the following:

             (a)  that  certain  Convertible  Secured  Promissory  Note,  by and
         between Pledgor,  as Maker, and Rice Opportunity Fund L.L.C., as Payee,
         in the original principal amount of $250,000.00,  dated effective as of
         even date herewith;

             (b)  that  certain  Convertible  Secured  Promissory  Note,  by and
         between Pledgor,  as Maker,  and Irl Nathan,  as Payee, in the original
         principal  amount  of  $100,000.00,  dated  effective  as of even  date
         herewith

             (c)  any  further  loans  which  may be made by  Secured  Party  to
         Pledgor, together with all other direct, indirect,  contingent, primary
         or secondary indebtedness of any character now or hereafter owing or to
         be owing by Pledgor to Secured  Party,  regardless  of how evidenced or
         incurred,  it  being  contemplated  that  Pledgor  may  become  further
         indebted to Secured Party in the future;

             (d) all other sums  recoverable  by the Secured Party and all other
         obligations  of Pledgor or Borrower  under the  provisions of the above
         Note, this Agreement,  and/or any other instrument securing or relating
         to the Indebtedness,  whether presently existing or hereinafter entered
         into (the "Loan Documents"); and

             (e) any and all of the covenants,  warranties,  representations and
         other  obligations  (other  than to  repay  the  Indebtedness)  made or
         undertaken by Pledgor under the Loan Documents (the "Obligations").

         2.  AGREEMENT  AND  COLLATERAL.  For value  received and  acknowledged,
Pledgor  hereby  grants  to  Secured  Party  a  security  interest  (hereinafter
"Security  Interest")  in  the  property  wherever  located  including,  without
limitation,  all  Collateral  located at (i) 20000  Horizon Way,  Suite 120, Mt.
Laurel, New Jersey 08054 and (ii) 5833 Westview Drive, Houston,  Texas 77055 and
(iii)  any  other  location   leased,   owned,   operated  or  used  by  Pledgor
(collectively,   the  "Premises")  (hereinafter   collectively  referred  to  as
"Collateral"), to-wit:


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<PAGE>

             (a) all fixtures,  furniture,  leasehold improvements,  appliances,
         furnishings,  materials, supplies, equipment, goods, machinery, general
         intangibles,  money, accounts,  inventory, rental and lease agreements,
         rental  and/or  lease  accounts  receivable,  and  all  other  personal
         property of any kind whatsoever (and the proceeds  therefrom) now owned
         or hereafter acquired by Pledgor or its successors or assigns, wherever
         located or  attached  to,  installed  in,  used in  connection  with or
         arising out of the Pledgor's business at the Premises (the "Business");
         (b) all plans,  specifications,  and drawings relating to the Business;
         (c) all contracts, contract rights, permits, licenses, deposits, bonds,
         franchises,   certificates,  rights  and  privileges  relating  to  the
         Business;  (d)  all  general  intangibles  relating  to  the  Business,
         including patents, patent rights, domain names,  trademarks,  trademark
         rights, trade names, trade name rights, service marks, copyrights,  and
         any  applications  for  any of the  foregoing,  maskworks,  net  lists,
         schematics, industrial models, inventions,  technology, know-how, trade
         secrets,  inventory,  ideas, algorithms,  processes,  computer software
         programs  or  applications  (in both source code and object code form),
         and tangible or intangible proprietary information or material; (e) all
         rentals,  deposits  and other sums as may become due  Pledgor as lessor
         under any and all leases,  rental  contracts,  written or verbal,  with
         respect to the Business; (f) deposits for taxes,  insurance,  licenses,
         permits or otherwise,  made under any  instrument  securing  payment of
         indebtedness of Pledgor to Secured Party;  (g) all claims and proceeds,
         including without  limitation,  all condemnation or insurance proceeds,
         arising  out of or with  respect  to the  Business  or the lease of the
         Premises; (h) all replacements, betterments, substitutions and renewals
         of, and  additions to, any of the  Collateral;  and (i) all proceeds of
         the Collateral.

             (b) Pledgor agrees that the security  interest granted herein shall
         continue  in all  Collateral  until any and all  indebtedness  owing to
         Secured  Party  by  Pledgor  hereunder  shall  be  satisfied  in  full,
         notwithstanding any payment in part or in full by Pledgor on account of
         any individual item of Collateral or inventory.

             (c) So long as  Pledgor is not in  default  under  this  Agreement,
         Pledgor may rent,  lease,  sell or exchange the  Collateral or any part
         thereof to others in the ordinary course of Pledgor's Business.

         3.  PLEDGOR'S  WARRANTIES,  COVENANTS AND FURTHER  AGREEMENTS.  Pledgor
hereby warrants, covenants and agrees that:

             (a) TITLE AND  AUTHORITY.  Pledgor  has  authority  to execute  and
         deliver  this  Agreement  and  Pledgor  will,  during  the term of this
         Agreement,  at  Pledgor's  cost,  keep the  Collateral  free from other
         liens,  security interests,  encumbrances or claims, and timely service
         any and all other  indebtedness in connection with the Collateral,  and
         defend any action which may affect the Security  Interest and Pledgor's
         title to the Collateral.  This Agreement and any account, instrument or
         document  which is, or shall be,  included  in the  Collateral  is, and
         shall be,  genuine  and legally  enforceable  and free from any setoff,
         counterclaim or defense.

             (b) FINANCING  STATEMENT.  Except as provided to Secured Party,  no
         financing  statement  covering the  Collateral  or any part or proceeds
         thereof is on file in any public office with the exception of financing
         statements  filed on behalf of or in favor of Secured  Party,  and,  at
         Secured Party's request,  Pledgor will join in executing all such other
         assignments, certificates,  supplemental writings and powers, financing
         statements and other  instruments  deemed necessary by Secured Party to
         evidence and perfect the Security Interest.

             (c) ASSIGNMENT.  Except as specifically  provided  herein,  Pledgor
         will not process, sell, pledge, encumber, hypothecate, assign, lease or
         otherwise  dispose  of all or any part of the


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<PAGE>

         Collateral  without  the  express  written  consent of  Secured  Party.
         Secured  Party may assign or transfer all or part of its rights in, and
         obligations,  if any, under the  Indebtedness,  the Collateral and this
         Agreement.

             (d) MAINTENANCE. Pledgor will preserve the Collateral (at Pledgor's
         own risk of loss), and will not waste,  destroy,  allow to deteriorate,
         or  materially  modify  the  Collateral,  or release  any party  liable
         thereon.  Pledgor  will not  exercise,  or cause to be  exercised,  any
         voting rights with regard to the Collateral,  without the prior written
         consent of Secured Party, if the direct or indirect effect of such vote
         results in a adverse  change to the Collateral or property in which the
         Collateral evidences a legal or beneficial  interest.  Pledgor will not
         allow  the  Collateral  to be  used  in  violation  of any  statute  or
         ordinance.  Secured  Party,  or its  agents,  will  have  the  right to
         examine,  audit,  inspect  and copy,  as the case may be,  any books or
         records  pertaining to the Collateral  (which Pledgor agrees to keep in
         an accurate and complete form,  reflecting the  assignment,  if any, of
         accounts  hereunder)  at any time.  Upon demand,  Pledgor shall furnish
         reports, data and financial  statements,  including audits by certified
         public accountants, in respect of the Collateral and Pledgor's business
         and  financial  condition,  as Secured  Party may  reasonably  require.
         Pledgor will pay  promptly  when due all taxes and  assessments  on the
         Collateral  or for its use and  operation  and all costs,  expenses and
         insurance premiums necessary to preserve, protect, maintain and collect
         the Collateral. Upon the failure or refusal of Pledgor to do any of the
         foregoing  after demand,  Secured  Party may, at its option,  discharge
         such  costs,  expenses,  and  premiums  for  the  preservation  of  the
         Collateral, and all sums so expended shall be part of the Indebtedness.

             (e)  ADDITIONAL  PROPERTY.  The  Collateral  includes all proceeds,
         upgrades,  improvements,  fixes,  increases,  substitutions,  products,
         fixtures,   accessories  and  attachments  thereof  including,  without
         limitation,  all securities,  subscription rights,  dividends, or other
         property or benefits which Pledgor is entitled to receive on account of
         Pledgor's right, title, and interest in the Collateral;  and equipment,
         tools,  parts and accessories used in connection  therewith;  and goods
         covered by chattel  paper,  accounts or other items of the  Collateral.
         The  Collateral  also  includes  all money or  property  of  Pledgor in
         Secured Party's possession, held for, or owed to Pledgor; Secured Party
         being  granted  herein  the right to set off such  money  and  property
         against  the  Indebtedness  after  default and the failure of any party
         obligated  thereon to cure such  default  within any  applicable  grace
         period. Upon demand,  Pledgor will immediately deliver to Secured Party
         all additional  property,  including any title and/or  certificates  of
         ownership,  if  appropriate,  upon  receipt  by  Pledgor,  with  proper
         instruments of transfer and assignment,  if possession by Secured Party
         is  necessary  to perfect  Secured  Party's  interest  or if  otherwise
         required pursuant to this Agreement.

             (f) NOTICE OF CHANGES.  Pledgor  will  immediately  notify  Secured
         Party of any change  occurring in or to the Collateral,  of a change in
         Pledgor's  residence,  or in any  fact or  circumstances  warranted  or
         represented  by Pledgor to  Secured  Party,  or if any event of default
         hereunder or under the Loan Documents occurs.

             (g)  REIMBURSEMENT.  Pledgor  shall  reimburse  Secured  Party  for
         Secured  Party's  reasonable  expenses and costs incurred in connection
         with  the  Collateral  inspections,   costs  incurred  with  audit  and
         verification  of rental  contracts,  rental leases,  or other rental or
         lease agreements,  and collection and  administration  costs (including
         reasonable attorneys' fees).

         4.  RIGHTS OF SECURED PARTY. Pledgor hereby  appoints  Secured Party as
Pledgor's  attorney-in-fact to do any act which rights, voting and otherwise, of
Pledgor in the Collateral (including,  but not limited to, the right to receive,
on behalf of Pledgor,  any and all  payments  due Pledgor by virtue of Pledgor's
ownership  interest  in and  to the  Collateral),  and to do all  things  deemed
reasonably  necessary  by


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<PAGE>

Secured Party to perfect the Security  Interest and preserve,  collect,  enforce
and  protect  the  Collateral  and  any  insurance  proceeds  hereunder,  all at
Pledgor's cost and without any obligation on Secured Party to so act, including,
but not limited to,  transferring  title into the name of Secured Party,  or its
nominee,   or  receipting  for,  settling,   or  otherwise  realizing  upon  the
Collateral.  Secured  Party  may,  in its  discretion,  require  Pledgor to give
possession or control of the Collateral to Secured  Party;  endorse as Pledgor's
agent any instruments, documents, or accounts in the Collateral, contact account
debtors directly to verify or collect  accounts;  take control of the Collateral
or  proceeds  thereof,  and  use  cash  proceeds  to  reduce  any  part  of  the
Indebtedness;  it being  understood  that Secured Party shall not be responsible
for any  depreciation  in value of the  Collateral  or for  preservation  of any
rights against prior parties.  The foregoing  rights and powers of Secured Party
shall be in addition  to, and not a  limitation  upon,  any rights and powers of
Secured Party given herein or by law, custom, or otherwise.

         The two Notes  described  in  SECTION 1 above and the rights of the two
Secured  Parties and Nathan shall be  equivalent  and treated PARI PASSU for all
purposes and in accordance  with an  intercreditor  agreement by and between the
two Secured Parties of even date herewith.

         5.  EVENTS OF DEFAULT. Pledgor shall be in default under this Agreement
upon the happening of any of the following events or conditions:

             (a) Default in the timely payment or performance of any obligation,
         covenant or  agreement  contained  within the  Indebtedness  and/or any
         agreement  securing the  Indebtedness,  and/or the Loan  Documents,  or
         otherwise made or owed to Secured Party;

             (b) If any warranty, representation, or statement knowingly made to
         Secured Party in the Loan Documents or made on behalf of Pledgor proves
         to have been false in any material respect when made;

             (c) Any event which results in the  acceleration of the maturity of
         any indebtedness of Pledgor to others under any indenture, agreement or
         undertaking;

             (d) Adverse material change in any fact warranted or represented in
         this Agreement;

             (e)  Constructive  or  actual  sale,  loss,   theft,   destruction,
         encumbrance, or uninsured damage to any of the Collateral;

             (f) Upon the  insolvency,  or  business  failure  of  Pledgor;  the
         appointment  of  a  receiver  for  any  part  of  the  Collateral;  the
         commission  of an act of  bankruptcy,  assignment  for the  benefit  of
         creditors or the commencement of any proceeding under any bankruptcy or
         insolvency law by or against Pledgor,  any entity of which Pledgor is a
         general partner or principal,  or any maker, guarantor, or other person
         liable upon or for any part of the Indebtedness or Collateral;

             (g)  Levy  on,  seizure,  or  attachment  of  all  or  part  of the
         Collateral;

             (h) Judgment in excess of $50,000.00  against Pledgor which remains
         unpaid for ten (10) days; or

             (i) Any time  Secured  Party  reasonably  believes  the prospect of
         payment of all or part of the  Indebtedness  or the performance of this
         Agreement or any of the Loan Documents are materially impaired.

         6.  REMEDIES OF SECURED PARTY. When an event of default occurs and such
default has not been cured within any applicable  grace period,  and at any time
thereafter,  Secured  Party  may  declare  all


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<PAGE>

or a part of the  Indebtedness  immediately  due and  payable and may proceed to
enforce  payment of same and to exercise  any and all of the rights and remedies
provided by the Uniform Commercial Code as codified under the laws of the States
of Texas or New  Jersey,  as the case  may be  (hereinafter  referred  to as the
"Code") as well as all other  rights and  remedies  possessed  by Secured  Party
under this Agreement or otherwise at law or in equity,  Pledgor understands that
sales of  Collateral  hereunder  may be  restricted  by the  requirement  of the
obtaining of certain consents to such transactions and that private sales of the
Collateral or sales in other transactions may be necessary,  which sales Pledgor
recognizes as  commercially  reasonable.  Secured  Party may require  Pledgor to
assemble the  Collateral  and make it  available  to Secured  Party at any place
designated by Secured Party that is reasonably  convenient to both parties.  For
purposes of the notice requirements of the Code, Secured Party and Pledgor agree
that notice given at least five (5) days prior to the related  action  hereunder
is  reasonable.  Secured Party shall be entitled to immediate  possession of the
Collateral and all books and records evidencing same and shall have authority to
enter upon any  premises  upon which said items may be situated  and remove same
therefrom.  Expenses of retaking,  holding,  preparing for sale, selling, or the
like, shall include without  limitation,  Secured Party's reasonable  attorneys'
fees and all such expenses  shall be recovered by Secured Party before  applying
the proceeds from the disposition of the Collateral toward the Indebtedness.  To
the extent allowed by the Code, Secured Party may use its discretion in applying
the proceeds of any disposition of the  Collateral.  Secured Party shall account
to Pledgor for any surplus  remaining  after the  disposition of the Collateral.
All rights and remedies of Secured  Party  hereunder are  cumulative  and may be
exercised  singularly or concurrently.  The exercise of any right or remedy will
not be a waiver of any other.

         Without declaring the Note terminated, Secured Party may enter upon the
Pledgor's property located at the Premises and take possession of such property,
by picking or changing locks if necessary,  and lockout, expel or remove Pledgor
and any other  person  whom may be  occupying  all or any part of such  premises
without  being  liable for any claim for  damages,  and do  whatever  Pledgor is
obligated to do under any and all  agreements,  including  without  limiting the
generality of the foregoing,  the lease  agreement  covering such premises,  and
Pledgor  agrees to  reimburse  Secured  Party on demand for any  expenses  which
Secured Party may incur in effecting compliance with Pledgor's obligations under
such lease;  further,  Pledgor agrees that Secured Party shall not be liable for
any damages  resulting  to Pledgor  from  effecting  compliance  with  Pledgor's
obligations  under  such lease  caused by the  negligence  of  Secured  Party or
otherwise;  further,  Pledgor agrees that Secured Party may hold, lease, manage,
operate  or  otherwise  use  or  permit  the  use of the  leased  premises,  the
Collateral,  and Pledgor's business, either by itself or by other persons, firms
or entities,  in such manner, for such time and upon such other terms as Secured
Party  may  deem  prudent   under  the   circumstances   (making  such  repairs,
alterations,  additions  and  improvements  thereto and taking such other action
from time to time as Secured Party shall deem necessary or desirable), and apply
all  monies  collected  from  such  acts to the  obligations  arising  under the
Indebtedness,  after  first  deducting  Secured  Party's  costs and  expenses in
connection with such acts,  including  without  limitation,  reasonable fees and
operating  charges in  connection  with the  operation  and  maintenance  of the
Pledgor's business.

         7.  GENERAL.

             (a)  RIGHTS AS TO CHATTEL  PAPER OF  INSTRUMENTS.  With  respect to
         chattel  paper  or  instruments  which  are a part  of the  Collateral,
         Secured  Party without  notice to Pledgor,  shall have the right at any
         time and from time to time to notify and direct the  account  debtor or
         obligor  thereon to  thereafter  make all  payments on such  Collateral
         directly to Secured Party, regardless of whether Pledgor was previously
         making collections  thereon, and with respect to such instruments which
         are stock certificates, bonds, or other securities, Secured Party shall
         have the  authority,  without  notice to  Pledgor,  either to have them
         registered  in  Secured  Party's  name,  or in the  name of a  nominee;
         provided, however,  notwithstanding the foregoing,  Secured Party shall
         not have the right,  prior to default,  to have transferred into itself
         or its nominee any equity  security (as defined
<PAGE>

         in Rule  13D-1(d)  of the  General  Rules  and  Regulations  under  the
         Securities  Exchange Act of 1934 or any successor  thereto)  comprising
         the Collateral or any part thereof.  With or without such registration,
         Secured  Party  shall  have the  authority  to demand of the  corporate
         obligor  issuing the same,  and receipt for, any and all  dividends and
         other  distributions  payable in  respect  thereof,  regardless  of the
         medium in which paid and whether  they are  ordinary or  extraordinary.
         Each  account  debtor and  obligor  making  payment  to  Secured  Party
         hereunder shall be fully protected in relying on the written  statement
         of Secured Party that it then holds a secured  interest  which entitles
         it to receive  such  payment and the receipt of Secured  Party for such
         payment  shall be full  acquittance  therefor  to the one  making  such
         payment.

             (b) DILIGENCE BY SECURED PARTY. Secured Party shall never be liable
         for  its  failure  to  use  due  diligence  in  the  collection  of the
         Indebtedness, or any part thereof, or for its failure to give notice to
         Pledgor  of default in the  payment  of the  Indebtedness,  or any part
         thereof,  or in the payment of, or upon any security,  whether  pledged
         hereunder  or  otherwise.  Secured  Party  shall have no duty to fix or
         preserve  rights  against  prior parties to the  Collateral,  and shall
         never be liable to use diligence in collecting  any amount payable with
         respect  to the  Collateral,  but shall be liable  only to  account  to
         Pledgor for what it may actually  collect or receive  thereon.  Without
         limiting the generality of the immediately  preceding  sentence,  it is
         specifically  understood  and agreed that  Secured  Party shall have no
         responsibility  for  ascertaining any maturities,  calls,  conversions,
         exchanges,  offers,  tenders, or similar matters relating to any of the
         Collateral or for informing Pledgor with respect to any of such matters
         (irrespective  of whether  Secured Party actually has, or may be deemed
         to have,  knowledge  thereof).  Secured  Party shall not be required to
         take any  steps or  actions  with  regard to the  Collateral  as may be
         requested  or  authorized  by Pledgor  unless (i)  Secured  Party shall
         determine,  in its sole and  absolute  discretion,  that such  steps or
         actions  will not  adversely  affect  the  value as  Collateral  of the
         Collateral,  and (ii) such request or  authorization by Pledgor is made
         in writing and is actually  received by Secured  Party.  The  foregoing
         provisions  of this  paragraph  shall be fully  applicable to all stock
         certificates,  bonds,  or other  securities  held in pledge  hereunder,
         irrespective of whether Secured Party may or may not have exercised any
         right under SECTION 7(a) above, to have such stock certificates, bonds,
         or other securities registered in its name or in the name of a nominee.

             (c)  MODIFICATION OF LOANS.  Concerning the  Indebtedness,  Secured
         Party,  in its discretion,  without in any manner  impairing its rights
         and powers hereunder,  may, at any time and from time to time,  without
         further consent of or notice to Pledgor,  and with or without  valuable
         consideration,  (i) renew or extend the  maturity of or accept  partial
         payments upon the  Indebtedness  or any part thereof;  (ii) release any
         person primarily or secondarily liable in respect thereof;  (iii) alter
         in any manner that Secured Party may elect the terms of any  instrument
         evidencing  the  Indebtedness  or any  part  thereof  either  as to the
         maturity thereof, rate of interest,  method of payment, parties thereto
         or  otherwise;  (iv) renew,  extend or accept  partial  payments  upon,
         release or permit  substitutions  for or  withdrawals  of, any security
         (other  than  the  Collateral)  at  anytime   directly  or  indirectly,
         immediately or remotely,  securing the payment of the  Indebtedness  or
         any part  thereof;  and (v)  release or pay to any person  entitled  to
         receive any amount paid or payable in respect of any direct or indirect
         security for the Indebtedness, or any part thereof.

             (d) EFFECT OF SECURITIES  LAWS.  Because of the  Securities  Act of
         1933, as amended, or any other laws or regulations,  there may be legal
         restrictions or limitations  affecting Secured Party in any attempts to
         dispose of certain portions of the Collateral in the enforcement of its
         rights and  remedies  hereunder.  For these  reasons  Secured  Party is
         hereby  authorized  by Pledgor but not  obligated,  in the event of any
         default  hereunder  giving  rise to Secured  Party's  rights to sell or
         otherwise  dispose  of the  Collateral,  to sell all or any part of the
         Collateral  at private  sale,  subject to  investment  letter or in any
         other  manner  which  will  not  require  the  Collateral,  or any


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<PAGE>

         part thereof, to be registered in accordance with the Securities Act of
         1933, as amended, or the Rules and Regulations  promulgated thereunder,
         or any other law, regulation,  at the best price reasonably  obtainable
         by Secured Party at any such private sale or other  disposition  in the
         manner  mentioned  above.  Secured Party is also authorized by Pledgor,
         but not obligated, to take such actions, give such notices, obtain such
         consents,  and do such other things as Secured  Party may deem required
         or  appropriate  in the event of the sale or  disposition of any of the
         Collateral.  Pledgor clearly  understands that Secured Party may in its
         discretion  approach a restricted  number of potential  purchasers  and
         that a sale under such  circumstances  may yield a lower  price for the
         Collateral,  or any part or parts  thereof,  than  would  otherwise  be
         obtainable if same were registered and sold in the open market. Pledgor
         agrees (i) that in the event  Secured  Party  shall,  upon any  default
         hereunder  sell the  Collateral,  or any part thereof,  at such private
         sale or  sales,  Secured  Party  shall  have the right to rely upon the
         advice and opinion of any member firm of a national securities exchange
         as to the best  price  reasonably  obtainable  upon such  private  sale
         thereof,  and (ii) that such reliance shall be conclusive evidence that
         Secured Party handled such matter in a commercially  reasonable  manner
         under the Code.

             (e) WAIVER BY  SECURED  PARTY.  No waiver by  Secured  Party of any
         right  hereunder  or of any  default by Pledgor  shall be binding  upon
         Secured  Party unless in writing.  Failure or delay by Secured Party to
         exercise any right  hereunder or waiver of any default of Pledgor shall
         not operate as a waiver of any other right, or further exercise of such
         right, or of any further default.

             (f) PARTIES BOUND.  This Agreement  shall be binding upon and inure
         to the  benefit  of the  parties  hereto  and their  respective  heirs,
         executors,   administrators,    legal   representatives,    successors,
         receivers, trustees and assigns. All representations and warranties and
         agreements  of Pledgor  are joint and  several.  This  Agreement  shall
         constitute  a continuing  agreement,  applying to all future as well as
         existing  transactions,  such future transactions being contemplated by
         Pledgor and Secured Party.

             (g) LAW TO APPLY.  THIS AGREEMENT  SHALL BE CONSTRUED IN ACCORDANCE
         WITH  THE CODE  (THE  DEFINITIONS  OF WHICH  APPLY  HEREIN)  AND  OTHER
         APPLICABLE   LAWS  OF  THE  UNITED  STATES  OF  AMERICA  AND  IS  FULLY
         PERFORMABLE IN COOK COUNTY, ILLINOIS.

             (h) NOTICE.  Any notice,  tender,  report,  or delivery to be given
         under  this  Agreement  shall be  conclusively  deemed  received  if in
         writing and either (i)  personally  delivered,  or in the  alternative,
         (ii) upon deposit in the United States Mail, postage prepaid, certified
         or  registered,  return  receipt  requested,  to the  addresses  of the
         parties  hereto as set forth on the signature  page hereof,  or at such
         other  addresses  as the parties  hereto  may,  in  writing,  direct in
         accordance herewith.

             (i)  MODIFICATIONS.  This Agreement shall not be amended in any way
         except by a written agreement signed by the parties hereto.

             (j)  SEVERABILITY.  The  unenforceability  of any provision of this
         Agreement shall not affect the  enforceability or validity of any other
         provision hereof.

             (k)  CONSTRUCTION.  If there is any conflict between the provisions
         hereof  and  the  provisions  of the  Indebtedness,  the  latter  shall
         control.  The captions herein are for convenience of reference only and
         not  for  definition  or  interpretations  of any  substantive  matters
         herein.

             (l) AMBIGUITIES.  In the event it shall be determined that there is
         any ambiguity  contained herein,  said ambiguity shall not be construed
         against either party hereto as a result of


                                       7
<PAGE>

         such party's preparation of or amendments to this Agreement,  but shall
         be entered in favor or against either of the parties hereto in light of
         all the facts,  circumstances and intentions of the parties at the time
         this Agreement comes into effect.

             (m)  WAIVER  OF  PLEDGOR.  Except  as  expressly  set  forth in the
         Indebtedness  or herein,  Pledgor  hereby waives  presentment,  demand,
         notice  of  dishonor,  grace,  protest,  notice of  protest,  notice of
         intention  to  accelerate,  and notice of  acceleration,  and all other
         notices with respect to collection, or acceleration of maturity, of the
         Collateral and Indebtedness.

             (n) FILING AS  FINANCING  STATEMENT.  Secured  Party shall have the
         right,  at any time, to execute and file this  Agreement as a financing
         statement,  but the failure of Secured  Party to do so shall not impair
         the validity or enforceability of this Agreement.

             (o) ADDITIONAL TERMS. All annexes and schedules attached hereto, if
         any, are hereby made a part hereof by reference.

             (p)  REMEDIES.  If any action at law or in equity is  necessary  to
         enforce or interpret the terms of this Agreement,  the prevailing party
         shall be entitled to reasonable  attorneys' fees,  costs, and necessary
         disbursements  in addition to any other  relief to which such party may
         be entitled.

             (q) USURY.  It is the intention of the Secured  Party,  the Pledgor
         and any holder of this Agreement to conform  strictly to the usury laws
         of the state  whose laws have  application  to this  Agreement  and the
         transactions  contemplated  herein.  All agreements between the Pledgor
         and Secured party whether now existing or hereafter arising and whether
         written  or  oral,  are  hereby  expressly   limited  so  that,  in  no
         contingency or event whatsoever, shall the amount paid, or agreed to be
         paid,  to the Secured Party for the use,  forbearance,  or detention of
         the money to be loaned  hereunder  or  otherwise  or for the payment or
         performance  of any covenant or obligation  contained  herein or in any
         other document evidenced hereby,  exceed the maximum amount permissible
         under applicable law. If from any circumstances whatsoever, fulfillment
         of  any  provision  hereof  or  of  any  other  document  at  the  time
         performance of such provision shall be due, shall involve  transcending
         the  limit  of  validity  prescribed  by  law,  then  IPSO  FACTO,  the
         obligation  shall  be  reduced  to the  limit of such  validity  in the
         following  sequence:  First,  all sums paid or agreed to be paid by the
         Pledgor for the use,  forbearance or detention of the  indebtedness  of
         the Pledgor to the Secured  Party  shall,  to the extent  permitted  by
         applicable  law,  be  amortized,   prorated,   allocated,   and  spread
         throughout  the full state term of such  indebtedness  until payment in
         full so that the actual  effective  rate of  interest  contracted  for,
         collected  or charged on account of such  indebtedness  is not  greater
         than the maximum  lawful  rate of interest  during the full term of the
         indebtedness;  and Second, to the extent that, after application of the
         preceding  "First"  step,  there  shall ever be an amount  deemed to be
         interest by applicable  law which shall exceed the highest lawful rate,
         such amount which would be excessive  interest  shall be applied to the
         reduction of the principal  indebtedness  of the Pledgor to the Secured
         Party, and not to the payment of interest.  If such excessive  interest
         exceeds  the  unpaid  balance  of  principal   hereof  and  such  other
         indebtedness (if any), the excess shall be refunded to the Pledgor. The
         terms and provision of this paragraph shall control and supersede every
         other  provision of all agreements  between the Pledgor and the Secured
         Party  applicable to the  contracting  for,  collecting and charging of
         interest.

         IN WITNESS  WHEREOF,  the parties  hereto have executed this  Agreement
effective as of the day and year first above written.


                                       8
<PAGE>

                                       SECURED PARTY:


                                       RICE OPPORTUNITY FUND, L.L.C.
                                       a Delaware limited liability company


                                       By: Minamax LLC, Managing Member



                                       By:        /S/ MARK A. RICE
                                          --------------------------------------
                                          Mark A. Rice, Managing Member

                                       Address: 666 Dundee Road, Suite 1901
                                                Northbrook, Illinois 60062


                                                    /S/ IRL NATHAN
                                       -----------------------------------------
                                       IRL NATHAN

                                       Address:  Irl Nathan
                                       c/o Ronald L. Sussman
                                       8235 Douglas Avenue, Suite 1100
                                       Dallas, Texas 75225
                                       Telecopy: (214) 378-8290


                                       PLEDGOR:


                                       FRONT PORCH DIGITAL, INC.,
                                       a Nevada corporation


                                       By:        /S/ DONALD MAGGI
                                          --------------------------------------

                                       Name:              DONALD MAGGI
                                            ------------------------------------

                                       Title:       CHIEF EXECUTIVE OFFICER
                                              ----------------------------------

                                       Address:  20000 Horizon Way, Suite 120
                                                 Mt. Laurel, New Jersey 08054


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