FRONT PORCH DIGITAL, INC. AND CERTAIN OF ITS SUBSIDIARIES
                            MASTER SECURITY AGREEMENT

To:      Laurus Master Fund, Ltd.
         c/o Ironshore Corporate Services, Ltd.
         P.O. Box 1234 G.T
         Queensgate House
         South Church Street
         Grand Cayman, Cayman Islands

Date:    May 13, 2004


To Whom It May Concern:

         1.       To  secure  the  payment  of  all  Obligations  (as  hereafter
defined),  Front Porch Digital, Inc., a Nevada corporation (the "Company"),  and
each other entity that is required to enter into this Master Security  Agreement
(each an "Assignor"  and,  collectively,  the  "Assignors")  hereby  assigns and
grants to Laurus a continuing security interest in all of the following property
now owned or at any time  hereafter  acquired by any  Assignor,  or in which any
Assignor  now has or at any time in the future may acquire  any right,  title or
interest (the  "Collateral"):  all cash,  cash  equivalents,  accounts,  deposit
accounts deposit accounts (including, without limitation, the Restricted Account
(the  "Restricted  Account")  maintained at North Fork Bank (Account Name: Front
Porch Digital, Account Number: 2704051610) referred to in the Restricted Account
Agreement),  inventory,  equipment,  goods,  documents,  instruments (including,
without  limitation,  promissory notes),  contract rights,  general  intangibles
(including,  without  limitation,  payment  intangibles and an absolute right to
license  on terms no less  favorable  than  those  current  in effect  among our
affiliates,  but not  own  intellectual  property),  chattel  paper,  supporting
obligations,  investment property  (including,  without  limitation,  all equity
interests  owned  by any  Assignor),  letter-of-credit  rights,  trademarks  and
tradestyles  in which any Assignor now have or hereafter  may acquire any right,
title or  interest,  all  proceeds  and  products  thereof  (including,  without
limitation,   proceeds  of  insurance)   and  all   additions,   accessions  and
substitutions thereto or therefore.  In the event any Assignor wishes to finance
the  acquisition  in the ordinary  course of business of any hereafter  acquired
equipment and has obtained a commitment from a financing  source to finance such
equipment from an unrelated  third party,  Laurus agrees to release its security
interest on such  hereafter  acquired  equipment so financed by such third party
financing source. Except as otherwise defined herein, all capitalized terms used
herein shall have the meaning  provided  such terms in the  Securities  Purchase
Agreement (defined below).

         2.       The term  "Obligations"  as used herein shall mean and include
all debts,  liabilities and obligations owing by each Assignor to Laurus arising
under,  out of, or in  connection  with:  (i) that certain  Securities  Purchase
Agreement dated as of the date hereof by and between the Company and Laurus (the
"Securities  Purchase Agreement") and (ii) the Related Agreements referred to in
the Securities  Purchase  Agreement (the Securities  Purchase Agreement and each
Related Agreement,  as each may be amended,  modified,  restated or supplemented
from time to time, are collectively referred to

<PAGE>

herein as the "Documents"), and in connection with any documents, instruments or
agreements  relating to or  executed in  connection  with the  Documents  or any
documents,  instruments or agreements  referred to therein or otherwise,  and in
connection  with any  other  indebtedness,  obligations  or  liabilities  of any
Assignor  to Laurus,  whether  now  existing  or  hereafter  arising,  direct or
indirect, liquidated or unliquidated, absolute or contingent, due or not due and
whether  under,  pursuant  to  or  evidenced  by a  note,  agreement,  guaranty,
instrument  or  otherwise,  in  each  case,  irrespective  of  the  genuineness,
validity, regularity or enforceability of such Obligations, or of any instrument
evidencing  any  of the  Obligations  or of any  collateral  therefor  or of the
existence or extent of such collateral,  and  irrespective of the  allowability,
allowance or disallowance of any or all of the Obligations in any case commenced
by or against  any  Assignor  under Title 11,  United  States  Code,  including,
without   limitation,   obligations  or   indebtedness   of  each  Assignor  for
post-petition interest,  fees, costs and charges that would have accrued or been
added to the Obligations but for the commencement of such case.

         3.       Each  Assignor  hereby  represents,  warrants and covenants to
Laurus that:

         (a)      it is a corporation, partnership or limited liability company,
                  as the case may be,  validly  existing,  in good  standing and
                  organized  under the respective  laws of its  jurisdiction  of
                  organization  set forth on Schedule A, and each  Assignor will
                  provide  Laurus thirty (30) days' prior written  notice of any
                  change in its jurisdiction of organization;

         (b)      its  legal  name  is  as  set  forth  in  its  Certificate  of
                  Incorporation or other organizational document (as applicable)
                  as  amended  through  the  date  hereof  and as set  forth  on
                  Schedule A, and it will provide Laurus thirty (30) days' prior
                  written notice of any change in its legal name;

         (c)      its organizational identification number (if applicable) is as
                  set forth on  Schedule A hereto,  and it will  provide  Laurus
                  thirty  (30) days' prior  written  notice of any change in its
                  organizational identification number;

         (d)      it is the lawful owner of its respective Collateral and it has
                  the sole right to grant a security  interest  therein and will
                  defend such  Collateral  against all claims and demands of all
                  persons and entities;

         (e)      it will keep its respective  Collateral  free and clear of all
                  attachments,  levies,  taxes,  liens,  security  interests and
                  encumbrances of every kind and nature ("Encumbrances"), except
                  (i)  Encumbrances  securing  the  Obligations  and (ii) to the
                  extent said Encumbrance does not secure indebtedness in excess
                  of  $100,000  and such  Encumbrance  is removed  or  otherwise
                  released within ten (10) days of the creation thereof;

         (f)      it will, at its and the other Assignors joint and several cost
                  and  expense  keep the  Collateral  in good  state  of  repair
                  (ordinary  wear and  tear  excepted)  and  will  not  waste or
                  destroy  the  same or

<PAGE>

                  any part thereof  other than  ordinary  course  discarding  of
                  items no longer used or useful in its or such other Assignors'
                  business;

         (g)      it will not  without  Laurus'  prior  written  consent,  sell,
                  exchange,  lease  or  otherwise  dispose  of  the  Collateral,
                  whether by sale,  lease or  otherwise,  except in the ordinary
                  course of business and except for the  disposition or transfer
                  in the ordinary  course of business  during any fiscal year of
                  obsolete  and  worn-out   equipment  or  equipment  no  longer
                  necessary  for its ongoing  needs,  having an  aggregate  fair
                  market value of not more than $100,000.

         (h)      it will insure or cause the  Collateral to be insured  against
                  loss or damage by fire, theft,  burglary,  pilferage,  loss in
                  transit and such other hazards consistent with past practices.
                  If any such  Assignor  fails to do so, Laurus may procure such
                  insurance and the cost thereof shall be promptly reimbursed by
                  the  Assignors,  jointly and severally,  and shall  constitute
                  Obligations;

         (i)      it will at all  reasonable  times and upon  reasonable  notice
                  allow Laurus or Laurus' representatives free access to and the
                  right of inspection of the Collateral;

         (j)      such Assignor (jointly and severally with each other Assignor,
                  if any) hereby  indemnifies and saves Laurus harmless from all
                  loss,  costs,  damage,  liability  and/or  expense,  including
                  reasonable  attorneys'  fees, that Laurus may sustain or incur
                  to enforce  payment,  performance or fulfillment of any of the
                  Obligations  and/or in the enforcement of this Master Security
                  Agreement  or in the  prosecution  or defense of any action or
                  proceeding  either against  Laurus or any Assignor  concerning
                  any matter  growing out of or in  connection  with this Master
                  Security  Agreement,  and/or any of the Obligations and/or any
                  of the  Collateral  except to the extent caused by Laurus' own
                  negligence or willful  misconduct (as determined by a court of
                  competent jurisdiction in a final and nonappealable decision).

         4.       The  occurrence of any of the  following  events or conditions
shall constitute an "Event of Default" under this Master Security Agreement:

         (a)      Breach of any material covenant,  warranty,  representation or
                  statement  made or  furnished  to Laurus by any Assignor or on
                  any Assignor's benefit was false or misleading in any material
                  respect when made or furnished,  and if subject to cure, shall
                  not be cured for a period of fifteen (15) days; or

         (b)      the  occurrence  of an "Event of  Default"  as  defined in the
                  Securities Purchase Agreement.

         5.       Upon the  occurrence  of any Event of Default  and at any time
thereafter,  Laurus may declare all Obligations  immediately due and payable and
Laurus  shall have the  remedies  of a secured  party  provided  in the  Uniform
Commercial  Code as in effect in the State of New York, this Agreement and

<PAGE>

other  applicable  law.  Upon the  occurrence of any Event of Default and at any
time thereafter, Laurus will have the right to take possession of the Collateral
and to maintain such  possession on its premises or to remove the  Collateral or
any part  thereof to such other  premises  as Laurus may  desire.  Upon  Laurus'
request,  each of the  Assignors  shall  assemble or cause the  Collateral to be
assembled  and make it available to Laurus at a place  reasonably  designated by
Laurus.  If any  notification  of  intended  disposition  of any  Collateral  is
required by law,  such  notification,  if mailed,  shall be deemed  properly and
reasonably  given  if  mailed  at least  ten  (10)  business  days  before  such
disposition,   postage  prepaid,  addressed  to  any  Assignor  either  at  such
Assignor's  address shown herein or in the Securities  Purchase  Agreement or at
any  subsequent  address  appearing on Laurus'  records for such  Assignor.  Any
proceeds of any disposition of any of the Collateral  shall be applied by Laurus
to the payment of all expenses in  connection  with the sale of the  Collateral,
including reasonable  attorneys' fees and other legal expenses and disbursements
and the reasonable expense of retaking,  holding,  preparing for sale,  selling,
and the like,  and any balance of such  proceeds may be applied by Laurus toward
the payment of the Obligations in such order of application as Laurus may elect,
and each Assignor shall be liable for any  deficiency.  Following the occurrence
and  during  the  continuance  of an Event of  Default,  Laurus  shall  have the
immediate  right to  withdraw  any and all monies  contained  in the  Restricted
Account and apply same pursuant to Section 2.4 of the Note.

         6.       If any Assignor  defaults in the performance or fulfillment of
any of the terms, conditions,  promises, covenants,  provisions or warranties on
such  Assignor's  part to be performed  or  fulfilled  under or pursuant to this
Master Security  Agreement,  Laurus may, at its option without waiving its right
to enforce this Master Security Agreement according to its terms, immediately or
at any time  thereafter and without  notice to any Assignor,  perform or fulfill
the same or cause the performance or fulfillment of the same for each Assignor's
joint and several  account  and at each  Assignor's  joint and several  cost and
expense,  and the  reasonable  cost and expense  thereof  (including  reasonable
attorneys'  fees)  shall be added to the  Obligations  and shall be  payable  on
demand with interest thereon at the highest rate permitted by law, or, following
an Event of Default,  at Laurus'  option,  debited by Laurus from the Restricted
Account referred to in the Restricted Account Agreement.

         7.       Each  Assignor  appoints  Laurus,  any  of  Laurus'  officers,
employees  or any other  person or  entity  whom  Laurus  may  designate  as its
attorney,  with power to execute such  documents in its behalf and to supply any
omitted  information and correct patent errors in any documents  executed by any
Assignor or on any Assignor's  behalf; to file financing  statements against the
Assignors  covering the Collateral;  to sign the name of each Assignor on public
records;  and to do all other  things  Laurus deem  necessary  to carry out this
Master Security  Agreement.  Each Assignor hereby ratifies and approves all acts
of the attorney and neither  Laurus nor the attorney will be liable for any acts
of commission  or omission,  nor for any error of judgment or mistake of fact or
law other than gross negligence or willful  misconduct (as determined by a court
of competent  jurisdiction in a final and non-appealable  decision).  This power
being  coupled  with an  interest,  is  irrevocable  so long as any  Obligations
remains unpaid.

<PAGE>

         8.       No delay or failure on Laurus' part in  exercising  any right,
privilege or option  hereunder shall operate as a waiver of such or of any other
right, privilege, remedy or option, and no waiver whatever shall be valid unless
in writing,  signed by Laurus and then only to the extent therein set forth, and
no  waiver  by  Laurus of any  default  shall  operate  as a waiver of any other
default or of the same default on a future  occasion.  Laurus' books and records
containing  entries  with  respect to the  Obligations  shall be  admissible  in
evidence in any action or  proceeding,  shall be binding upon each  Assignor for
the purpose of establishing  the items therein set forth (absent manifest error)
and shall constitute  prima facie proof thereof.  Laurus shall have the right to
enforce  any one or more of the  remedies  available  to  Laurus,  successively,
alternately  or  concurrently.  Each  Assignor  agrees  to join  with  Laurus in
executing  financing  statements or other  instruments to the extent required by
the Uniform Commercial Code in form satisfactory to Laurus and in executing such
other documents or instruments as may be required or reasonably deemed necessary
by Laurus for purposes of affecting or continuing  Laurus' security  interest in
the Collateral.

         9.       This  Master  Security  Agreement  shall  be  governed  by and
construed  in  accordance  with the laws of the State of New York and  cannot be
terminated  orally.  All  of  the  rights,  remedies,  options,  privileges  and
elections  given to Laurus  hereunder  shall  inure to the  benefit  of  Laurus'
successors and assigns.  The term "Laurus" as herein used shall include  Laurus,
any parent of Laurus',  any of Laurus'  subsidiaries and any  co-subsidiaries of
Laurus' parent,  whether now existing or hereafter created or acquired,  and all
of the terms, conditions, promises, covenants, provisions and warranties of this
Agreement  shall  inure to the  benefit of and shall  bind the  representatives,
successors  and assigns of each Assignor and each of the  foregoing.  Laurus and
each Assignor  hereby (a) waive any and all right to trial by jury in litigation
relating to this  Agreement and the  transactions  contemplated  hereby and each
Assignor agrees not to assert any counterclaim in such litigation, (b) submit to
the nonexclusive jurisdiction of any New York State court sitting in the borough
of Manhattan,  the City of New York and (c) waive any  objection  Laurus or each
Assignor may have as to the bringing or maintaining of such action with any such
court.

         10.      All notices from Laurus to any Assignor shall be  sufficiently
given if mailed or delivered to such Assignor's address set forth below.

                                  Very truly yours,

                                  FRONT PORCH DIGITAL, INC.

                                  By: /s/ Thomas P. Sweeney III
                                     --------------------------------
                                  Name: Thomas P. Sweeney III
                                  Title: Chairman


                                  ACKNOWLEDGED:

                                  LAURUS MASTER FUND, LTD.

                                  By:/s/ David Grin
                                     --------------------------------
                                  Name: David Grin
                                  Title: Director