Document:

EXHIBIT 4.1

                            FRONT PORCH DIGITAL, INC.

                           7% CONVERTIBLE SECURED NOTE

$                                                                         , 2002
 ----------                                                       --------

         FRONT PORCH  DIGITAL INC., a Nevada  corporation  (the  "Company")  for
value received, hereby promises to pay to the order of __________________ or its
assigns       (the       "Holder"),       the       principal       sum       of
_____________________________________________  ($____________)  or  such  lesser
amount as shall have been  advanced  hereunder,  together  with  interest on the
unpaid  principal  amount  hereof  outstanding  from time to time after the date
hereof at the per annum rate of seven percent (7%). Principal and interest shall
be payable in lawful money of the United States at the  principal  office of the
Holder or at such other address as the Holder may from time to time designate to
the Company in writing.

         Commencing on July 1, 2002 and  continuing on the first calendar day of
each calendar  quarter  (October 1, January 1) during the term hereof,  interest
only  payments in the form of U.S.  dollars  shall be due and payable to Holder.
The entire balance of unpaid  principal and accrued and unpaid interest  thereon
at the  rate set  forth  above  shall  be due and  payable  on  March  27,  2003
("Maturity Date").  Interest hereon shall be computed on the basis of the actual
number of days elapsed over a 365 or, if applicable,  a 366 day year. Any amount
of  principal  or  interest  on this Note  which is not paid when due shall bear
interest  at the  lesser  of (i)  eighteen  percent  (18%) per annum or (ii) the
maximum  amount of interest  permitted by applicable  law, from the date thereof
until the same is paid ("Default Interest") and the Holder, at the Holder's sole
discretion,  may  include  any  accrued  but  unpaid  Default  Interest  in  the
Conversion Amount.

         Notwithstanding  the  foregoing,  if the Company  shall (i) complete an
underwritten  public offering  covering the offering and sale of Common Stock of
the  Company,  $______  par  value  per  share  ("Common  Stock"),  in which the
aggregate net proceeds to the Company equals or exceed $2,000,000;  or (ii) sell
all or  substantially  all of its assets;  the entire  unpaid  principal  amount
hereof  together with all accrued and unpaid interest  thereon,  at the Holder's
option,  shall become  immediately due and payable without any further action on
the part of the Holder.

         1.  ADDITIONAL  LOANS;  LIQUIDATION  PREFERENCE.  This  Loan  is  being
entered into  simultaneously  with a $_____________  loan from __________ to the
Company as of even date herewith and the rights of Holder and ________  shall be
equivalent  and treated PARI PASSU for all purposes  and in  accordance  with an
intercreditor  agreement  by and  between  Holder  and  ________  of  even  date
herewith.  Until the  earlier of (i) the entire  Note is  converted  into Common
Stock of the  Company  in  accordance  with the terms and  conditions  set forth
herein or (ii) the entire outstanding  balance of principal and accrued interest
hereunder is satisfied in full,  the Company shall not be permitted to incur any
other  indebtedness,  other  than  trade  payables  in the  ordinary  course  of
business, without the express written consent of Holder, which consent shall not
be unreasonably withheld or delayed. Further, the Company represents,  warrants,
covenants  and agrees that  indebtedness  held by Holder and ______ is superior,
with respect to rights,  claims and  security  interests  against all  presently
existing  and  hereafter  arising  assets,  including  license  fees and revenue
streams,  of the Company,  to any other  indebtedness  of the Company and,  upon
liquidation  or sale of all or  substantially  all of the assets or greater than
50% of the issued and  outstanding  shares of Common Stock of the  Company,  all
obligations  of the Company to Holder and  _______,  including  the  Liquidation
Preference (hereinafter defined), shall be satisfied prior to any other

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creditor of the Company receiving any asset of the Company or any right or claim
thereto.  Further,  Holder shall be entitled to the Liquidation  Preference upon
any sale or liquidation of all or substantially all of the assets or business of
the Company, whether in bankruptcy or otherwise,  including, but not limited to,
a merger, business combination or any other transaction in connection with which
a majority of the then issued and outstanding  Common Stock of the Company shall
be exchanged for, converted into, acquired for or constitute solely the right to
receive  (whether  by means of an exchange  offer,  liquidation,  tender  offer,
consolidation,  merger,  combination,   reclassification,   recapitalization  or
otherwise)  cash,  securities  property  or  a  combination  thereof.  Upon  the
occurrence of any event described above, Holder shall be entitled to (i) payment
of all  outstanding  principal and accrued  interest under this Note, and (ii) a
liquidation  preference in the amount of three (3) times the outstanding  amount
of principal and accrued  interest  under this Note before any other creditor or
claimant of the  Company is entitled to receive any asset or proceeds  therefrom
or any right or claim thereto (the "Liquidation Preference").

         2.  FIRST AND PRIOR SECURITY INTEREST. In the event of a liquidation of
the  Company,  the Company  covenants  and agrees to cause the Holder  hereof to
receive payment of all outstanding principal and interest due hereunder plus the
Liquidation Preference prior to the payment of any other creditor or claimant of
the Company.  The Company  further  covenants  and agrees to cause all presently
existing and hereafter  arising  creditors of the Company,  who are owed greater
than $100,000, to execute and deliver  subordination  agreements for the benefit
of Holder in form and content  satisfactory  to Holder.  The Company and, by its
acceptance hereof, the Holder of this Note agree that the indebtedness evidenced
by this Note,  including the principal of and interest  thereon shall be secured
by a first and prior  lien  against  all of the assets of the  Company,  whether
presently  existing or hereafter  arising,  subject to and in accordance  with a
security  agreement  (the  "Security  Agreement")  of even date  herewith by and
between the  Company,  as  Pledgor,  and Holder and  ______,  as Secured  Party,
covering all assets, including proceeds thereof, of the Company. In this regard,
the  Company  covenants  and agrees to execute  and  deliver  such  further  and
additional  documents and  instruments  to effectuate  the intent of the parties
hereto upon receipt of written request therefore by Holder.

                (a)   In the event of any insolvency, bankruptcy,  receivership,
         liquidation or any other  marshalling of the assets and  liabilities of
         the Company,  the Holder shall be entitled to receive  payment in full,
         or provision shall be made for such payment, of all principal, interest
         and other sums due on account of the Holder of this Note, including the
         Liquidation  Preference,  before any other  creditor or claimant of the
         Company shall be entitled to receive payment of principal,  interest or
         any other sums due on their respective accounts.

                (b)    Subject to the payment in full of all  obligations  under
         this Note,  the holders of all other  subordinate  indebtedness  of the
         Company shall be  subordinated to the rights of the Holder of this Note
         to  receive   payments  or   distributions  on  the  first  and  senior
         indebtedness  represented by this Note,  until all principal,  interest
         and other sums due under this Notes shall have been paid.

                (c)   No payment on account of principal, interest or other sums
         due to other  subordinate  creditors of the  Company,  other than trade
         creditors  approved by Holder in writing,  shall be made by the Company
         unless full payment of all sums then due with respect to all  principal
         and accrued  interest  hereunder  has been made or duly provided for to
         the  satisfaction  of Holder,  which consent shall not be  unreasonably
         withheld or delayed; provided,  however, that the Company may pay trade
         payables  in the  ordinary  course of  business  without the consent of
         Holder  as long as such  payments  to any one  vendor  (including  such
         vendor's  affiliates)  in any  six  (6)  month  period  do  not  exceed
         $50,000.00.(d) Notwithstanding any provision herein to the contrary, as
         long as there is any amount  outstanding  under this Note,  the Company
         shall not incur any  indebtedness  other  than trade  creditors  in the
         ordinary course of the Company's  business  without the express written
         consent  of  Holder,  which  consent shall not be unreasonably withheld

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         or delayed.

         3.  DEFAULT.  Upon the  occurrence of any of the  following  "Events of
Default":

                (a)    failure to pay all unpaid  principal  or any accrued and
         unpaid interest on this Note;

                (b)     the Company shall default in any material respect in the
         performance  or  observance  of any  covenant  or  agreement  contained
         herein,  the  Security  Agreement  or in any of  the  other  agreements
         required to be entered  into  pursuant to the terms and  conditions  of
         this Note;

                (c)     any  representation  or  warranty  of the  Company  made
         herein or in the Security  Agreement  shall have been  incorrect in any
         material respect;

                (d)     the   acceleration   of  the   maturity   date   of  any
         indebtedness  for which the Company or any subsidiary or parent thereof
         is directly or contingently liable;

                (e)     the Company  shall  commence  any  voluntary  proceeding
         under  any   bankruptcy,   reorganization,   arrangement,   insolvency,
         readjustment of debt,  receivership,  dissolution or liquidation law or
         statute of any  jurisdiction,  whether  now or  hereafter  in effect or
         shall be  adjudicated  insolvent  or bankrupt by a decree of a court of
         competent  jurisdiction;  or shall petition or apply for, acquiesce in,
         or consent to, the  appointment  of any receiver or trustee of all or a
         substantial  part of its property;  or shall make an assignment for the
         benefit of  creditors;  or shall admit in writing its  inability to pay
         its debts as they come due;

                (f)     there  shall be  commenced  against  the  Company or any
         subsidiary  or parent  thereof  any  proceeding  under any  bankruptcy,
         reorganization,   arrangement,   insolvency,   readjustment   of  debt,
         receivership,   dissolution  or  liquidation  law  or  statute  of  any
         jurisdiction,  whether  now  or  hereafter  in  effect,  and  any  such
         proceeding  shall  remain  undismissed  for a period  of 30 days;  or a
         receiver or trustee shall be appointed for all or a substantial part of
         its or his  property and any such  receivership  or  trusteeship  shall
         remain  undischarged  for  a  period  of  30  days;  or  a  warrant  of
         attachment,  execution or similar  process shall be issued  against any
         substantial  part of its or his  property  and the  same  shall  not be
         dismissed or bonded within 30 days after levy;

                (g)      a material  adverse  change shall have  occurred in the
         Company's  financial  condition,   results  of  operation  or  business
         prospects  or the  Company  is unable to pay its bills in the  ordinary
         course of business; or

                (h)      a judgment not covered by insurance  for the payment of
         money which in the  aggregate at any one time exceeds  $50,000 shall be
         rendered  against the Company or any of its subsidiaries or parent by a
         court of competent jurisdiction;

then,  and in any such event,  the Holder of this Note may by written  notice to
the Company declare the entire unpaid  principal  amount of this Note,  together
with all accrued  interest and other sums thereon due and payable,  and the same
shall, unless such Event of Default shall be cured within ten (10) business days
after the date such notice is given, immediately become due and payable upon the
expiration  of such period,  without  presentment,  demand,  protest,  notice of
intention to accelerate  maturity or notice of acceleration of maturity or other
notice of any kind, all of which are expressly waived.

         4.  CONVERSION  PRIVILEGE.  The Holder of this Note may, at its option,
convert  all or any  portion of the then  outstanding  principal  amount and, at
Holder's election, all or any portion of the

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accrued interest of this Note, or a portion thereof if the portion is $10,000 or
an  integral  multiple  of  $10,000,  into  Common  Stock at any  time  prior or
subsequent to the Maturity  Date.  The number of shares of Common Stock issuable
upon  conversion  of the  entire  $_______  principal  amount of this Note shall
initially  be  _________   shares  (the   "Conversion   Number"),   such  amount
representing  a conversion  price of $0.119 per share,  subject to adjustment as
provided  below.  If less than  $_______  is  converted  to Common  Stock of the
Company  under  this  Note,  the  number  of  shares  into  which  this  Note is
convertible shall be  proportionately  reduced.  The initial conversion price of
this Note is $0.119 per share (the "Conversion Price"), subject to adjustment as
provided below. The Conversion Price and Conversion  Number represent the intent
of the  Company  and the  Holder,  that  for a period  of one (1) year  from the
effective dated hereof,  to ensure that the Conversion Number be guarantied as a
fixed  percentage  of the issued and  outstanding  shares of Common Stock of the
Company as of the  effective  date  hereof  (the  "Conversion  Percentage").  No
fractional  shares shall be issued upon conversion of a portion of the principal
amount of this Note. In the event the portion of such principal  amount being so
converted would result in the issuance of fractional  shares,  the Company shall
round down the number of shares upon conversion of such principal  amount to the
nearest whole share,  with cash being paid in lieu of any fractional share in an
amount  equal to the then  fair  market  value  (as  determined  by the Board of
Directors of the Company) of a share of Common Stock, with the remainder of such
principal amount remaining subject to the terms and conditions of this Note.

         5.  CONVERSION  PROCEDURE.  In order to convert all or a portion of the
principal  amount or accrued  interest  then  outstanding  under this Note,  the
Holder shall send written  notification  (the  "Notice") to the Company,  at the
address  herein,  of the  principal  amount the Holder wishes to convert and the
name or names in which the Holder  wishes the  certificate  or  certificates  of
shares of Common Stock to be issued.  The date on which the Holder  delivers the
Notice to the Company shall be the conversion date (the "Conversion  Date").  As
soon as practicable,  but in any event within five (5) business days,  after the
Conversion  Date,  the  Company  shall  deliver or cause its  transfer  agent to
deliver to the Holder a certificate  or  certificates  evidencing  the shares of
Common Stock  issuable upon the  conversion in accordance  with the terms of the
Notice.  The person in whose name the certificate is registered shall be treated
as a  stockholder  of  the  Company  on  and  after  the  Conversion  Date.  The
outstanding  principal  amount of the Note  shall be  reduced  by the  principal
amount  converted in  accordance  with this SECTION 5. Interest on the principal
amount of this Note  accepted  for  conversion  pursuant  to the  provisions  of
SECTION 5 hereof shall cease to accrue as of the Conversion Date.

         If for any reason  Holder has not  received all of the shares of Common
Stock prior to the fifth (5th) business day after  delivery of the Notice,  then
the Holder,  upon written notice to the Company's transfer agent, with a copy to
the Company,  may void its conversion Notice with respect to, and retain or have
returned,  as the case may be,  any  principal  amount of this Note that has not
been converted pursuant to such Holder's  conversion  Notice;  provided that the
voiding of Holder's conversion Notice shall not effect the Company's obligations
to make any  payments  which have  accrued  prior to the date of such  Notice or
otherwise. Thereafter, the Conversion Price of the principal amount of this Note
returned  or  retained  by the Holder for  failure  to timely  convert  shall be
adjusted to the lesser of (i) the  Conversion  Price as in effect on the date on
which the Holder voided the conversion Notice, (ii) the lowest closing bid price
during the period  beginning on the Conversion  Date and ending on the date such
Holder voided the conversion  Notice,  and (iii) the Conversion  Price as of the
Conversion Date as set forth in the conversion Notice.

         6.  TAXES ON CONVERSION.  If the Holder converts this Note, the Company
shall pay any  documentary,  stamp or similar  issue or transfer  tax due on the
issue of Common Stock upon the  conversion.  Nothing  herein shall  preclude any
income tax withholding required by law or regulation.

         7.  COMPANY  TO PROVIDE  SHARES.  The  Company  shall at all times keep
reserved a sufficient

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number of shares of Common  Stock to permit the  conversion  of this  Note.  The
Company  covenants  and  agrees to  reserve  no less than 200% of the  number of
shares of Common Stock required to be issued upon  conversion of the outstanding
Note. All shares of Common Stock delivered upon conversion of this Note shall be
fully paid and  nonassessable  and shall be free from preemptive rights and free
of any lien or adverse  claim.  The  Company  will  endeavor  to comply with all
federal and state  securities  laws  regulating the offer and delivery of Common
Stock  upon  conversion  of this  Note,  if any,  and will list or cause to have
quoted  such  Common  Stock  on  a  national   securities  exchange  or  in  the
over-the-counter  market or such other  market on which the Common Stock is then
listed or quoted.

         8.  ADJUSTMENT FOR CHANGE IN SHARES;  ANTIDILUTION.  (a) If, within one
(1) year from the effective date of this Note, even if all or any portion of the
Note is or has been converted into Common Stock or the Company has tendered full
payment  thereof to the Escrow Agent  (hereinafter  defined) in accordance  with
SECTION 12 , the Company:

             i.    pays a dividend or makes a  distribution  on its Common Stock
                   in Common Stock;

             ii.   subdivides its outstanding Common Stock into a greater number
                   of shares;

             iii.  combines  its  outstanding  shares  of  Common  Stock  into a
                   smaller number of shares;

             iv.   makes a distribution on its Common Stock in shares other than
                   Common Stock;

             v.    issues by  reclassification of its Common Stock any shares of
                   the Company; or

             vi.   issues or agrees to issue any shares of Common Stock, rights,
                   warrants or any instrument that is convertible or exercisable
                   into  Common  Stock of the Company or has rights or a similar
                   economic effect of Common Stock of the Company;

then the Conversion  Number in effect  immediately prior to such action shall be
increased so that the Holder will  maintain  its  Conversion  Percentage  and be
entitled to receive upon  conversion of this Note the number of shares of Common
Stock  and/or  other  securities  of the  Company  which the  Holder  would have
acquired  immediately  following such action if such Holder had fully  converted
this Note immediately  prior to such action,  together with additional shares of
Common Stock so as to preserve Holder's  Conversion  Percentage at no additional
cost to  Holder.  The  intent of the  Company  and the Holder is to ensure for a
period of one (1) year  that  Holder  will be able to  maintain  its  Conversion
Percentage based upon the Conversion Number set forth above in SECTION 4 and the
number of issued and  outstanding  shares as of the effective  date hereof.  All
adjustments  pursuant to this SECTION 8(a) shall  become  effective  immediately
after the record date in the case of a dividend or distribution  and immediately
after  the  effective   date  in  the  case  of  a   subdivision,   combination,
reclassification  or issuance  of shares by the  Company.  Any such  adjustments
shall be made successively whenever any event listed above occurs.

              (b) In the event of any  consolidation  of the  Company  with,  or
merger of the Company into, another person (other than a consolidation or merger
in which the  Company is the  continuing  entity),  or in the event of any sale,
assignment,  lease,  transfer or other  disposition  to another person of all or
substantially  all of the  properties  and assets of the Company as an entirety,
the Holder shall  thereafter  have the right to either (i) accelerate the entire
indebtedness  represented  by this Note or (ii)  convert this Note into the kind
and  amount of  shares  and  other  securities  and  property  (including  cash)
receivable upon such  consolidation,  merger,  sale or conveyance by a holder of
the  number of shares of Common  Stock  into  which  this Note  might  have been
converted  immediately prior to such consolidation,  merger, sale or conveyance,
which amount shall include the  Liquidation  Preference.  The provisions of this

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SUBSECTION  (b) shall  similarly  apply to successive  consolidations,  mergers,
sales or other dispositions.

              (c) The  Conversion  Price  in  effect  immediately  prior  to any
adjustment  of the  number of shares of Common  Stock  into  which  this Note is
convertible  shall be  simultaneously  adjusted  (but not below par value of the
Common Stock) by multiplying the Conversion Price in effect immediately prior to
such  adjustment  by a fraction,  the  numerator of which shall be the number of
shares of Common Stock into which this Note is exercisable  immediately prior to
such  adjustment,  and the denominator of which shall be the number of shares of
Common Stock into which this Note is exercisable after such adjustment.

              (d) The  provisions  of THIS  SECTION  8 shall  not  apply  to the
issuance of shares upon exercise of previously  issued options granted  pursuant
to any employee stock  incentive plan  identified on the Company's most recently
filed annual or quarterly report or otherwise approved by Holder in writing.

         9.  NOTICE OF ADJUSTMENT. Whenever an adjustment is to be made pursuant
to SECTION 8, the Company  shall use best  commercial  efforts to deliver to the
Holder of this Note at least five (5) business days prior written  notice of the
adjustment  to the  Conversion  Number and, in any event,  such notice  shall be
delivered  within  three (3)  business  days  following  the  adjustment  to the
Conversion Number.

         10.  PIGGY-BACK  REGISTRATIONS.  If at any time the Company proposes to
file with the  Securities  and Exchange  Commission  (the "SEC") a  registration
statement  relating to an offering  for its own account or the account of others
under the  Securities  Act of 1933 Act (the "1933 Act") of any of its securities
(other than on Form S-4 or Form S-8 or their  equivalents  at such time relating
to  securities to be issued solely in  connection  with any  acquisition  of any
entity or business or equity securities issuable in connection with stock option
or other  employee  benefit  plans),  the Company shall  promptly send to Holder
written notice of the Company's  intention to file a registration  statement and
of Holder's  rights  under this SECTION 10 and, if within  twenty (20)  business
days after  receipt of such  notice,  Holder  shall so request in  writing,  the
Company  shall  include in such  registration  statement  all or any part of the
Common Stock held by Holder or to be held by Holder  after  delivery of Holder's
conversion  Notice in accordance  with the terms an conditions  set forth herein
that Holder  requests to be registered.  If an offering in connection with which
Holder is  entitled to  registration  under this  SECTION 10 is an  underwritten
offering,  then Holder shall offer and sell such  registrable  securities  in an
underwritten offering using the same underwriter or underwriters and on the same
terms  and  conditions  as  other  shares  of  Common  Stock  included  in  such
underwritten offering by the Company. If a registration pursuant to this SECTION
10 is to be an  underwritten  public  offering and the  managing  underwriter(s)
advise the  Company in writing,  that in their  reasonable  good faith  opinion,
marketing or other factors  dictate that a limitation on the number of shares of
Common Stock which may be included in the registration statement is necessary to
facilitate  and not  adversely  affect the proposed  offering,  then the Company
shall cause such  registration to include a minimum of the greater of: (1) fifty
percent  (50%) of the shares  requested to be  registered by Holder or (2) fifty
percent (50%) of the shares of Common Stock offered by the Company. All costs of
the registration of the Holder's shares,  including legal fees shall be borne by
the Company.

         11.  MANDATORY  REGISTRATION.  Except as provided in SECTION 12 hereof,
upon the later of (i)  conversion  of all or a portion of this Note into  Common
Stock or (ii) April 15, 2003,  the Company shall,  at its sole expense,  prepare
and file with the SEC a registration statement or registration statements (as is
necessary) on Form S-3 covering the resale of all of Holder's  Common Stock.  In
the event that Form S-3 is  unavailable  for such a  registration,  the  Company
shall use such other form as is available for such a  registration.  The Company
shall us its best efforts to have the registration  statement declared effective
by the SEC as soon as  practicable.  In the event that Form S-3 is not available
for any registration of Holder's Common Stock  hereunder,  the Company shall (i)
register the sale of the Holder's Common

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Stock on another  appropriate  form and (ii)  undertake to register the Holder's
Common Stock on Form S-3 as soon as such form is  available,  provided  that the
Company shall maintain the  effectiveness of the registration  statement then in
effect  until such time as a  registration  statement  on Form S-3  covering the
Holder's Common Stock has been declared  effective by the SEC. The Company shall
us its best efforts to have the registration statement declared effective by the
SEC as soon as practicable.

             (a)  The  Company  and  the  Holder  each   acknowledge  that  each
registration   statement  prepared  in  accordance  herewith  shall  include  an
indeterminate  number of shares of Common  Stock  pursuant to Rule 416 under the
1933 Act so as to cover any and all Common  Stock which may become  issuable (1)
to prevent  dilution  resulting  from stock splits,  stock  dividends or similar
transactions  and (ii) if  permitted  by law, by reason of certain  antidilution
provisions or reductions in the Conversion  Price or increases in the Conversion
Number in accordance  with the terms and  conditions  set forth herein.  In this
regard, the Company agrees to use best efforts to ensure that the maximum number
of shares of Common Stock which may be registered pursuant to Rule 416 under the
1933 Act are covered by each  registration  statement and,  absent guidance from
the SEC or other  definitive  authority to the  contrary,  the Company shall use
best efforts to  affirmatively  support and to not take any position  adverse to
the  position  that each  registration  statement  filed  hereunder  covers  all
eligible  shares of Common Stock of Holder.  If the Company  determines that the
registration  statement  filed  hereunder does not cover all of Holder's  Common
Stock,  the Company shall  immediately  (1) provide to Holder  written  evidence
setting forth the basis for the Company's position and the authority  therefore,
and (ii) prepare and file an amendment to such  registration  statement or a new
registration statement within 45 days thereafter.

             (b) Whenever Holder has requested that any of Holder's Common Stock
be  registered  pursuant  to this  SECTION 11 or at such time as the  Company is
obligated to file a registration  statement with the SEC pursuant to SECTION 10,
the Company will use its best efforts to effect the registration of the Holder's
Common Stock in accordance with the intended method of disposition  thereof and,
pursuant thereto, the Company shall have the following obligations:

                   i. The  Company  shall and keep such  registration  statement
             effective  pursuant to Rule 415  promulgated  under the 1933 Act at
             all times until the earlier of (1) the date as of which  Holder may
             sell all of Holder's Common Stock without  restriction  pursuant to
             Rule 144 promulgated  under the 1933 Act (or successor  thereto) or
             (2) the  date on  which  (A) the  Holder  shall  have  sold  all of
             Holder's   Common  Stock  and  (B)  no  portion  of  this  Note  is
             outstanding  (the   "Registration   Period"),   which  Registration
             Statement  (including  any  amendments or  supplements  thereto and
             prospectuses  contained  therein)  shall  not  contain  any  untrue
             statement  of a  material  fact or omit to  state a  material  fact
             required to be stated therein,  or necessary to make the statements
             therein, in light of the circumstances in which they were made, not
             misleading.

                   ii.  The  Company  shall  prepare  and file with the SEC such
             amendments (including post-effective amendments) and supplements to
             the  registration  statement and the prospectus  used in connection
             with such registration  statement,  which prospectus is to be filed
             pursuant  to Rule 424  promulgated  under the 1933  Act,  as may be
             necessary  to keep such  registration  statement  effective  at all
             times  during the  registration  period,  and,  during such period,
             comply  with the  provisions  of the 1933 Act with  respect  to the
             disposition of all registrable securities of the Company covered by
             such registration statement, including Holder's Common Stock, until
             such time as all of Holder's  Common Stock shall have been disposed
             of in accordance  with the intended  methods of  disposition as set
             forth in such registration statement.

                   iii.  The Company  shall use its best efforts to (A) register
             and qualify the  Holder's  Common Stock  covered by a  Registration
             Statement  under such other  securities  or "blue sky" laws of such
             jurisdictions in the United States as Holder  reasonably  requests,
             (B)  prepare  and  file in  those  jurisdictions,  such  amendments
             (including  post-effective  amendments)  and  supplements

                                       7
<PAGE>

             to such  registrations  and  qualifications  as may be necessary to
             maintain the effectiveness  thereof during the Registration Period,
             (iii) take such other  actions as may be necessary to maintain such
             registrations and  qualifications in effect at all times during the
             Registration  Period,  and (iv) take all other  actions  reasonably
             necessary or  advisable  to qualify the  Holder's  Common Stock for
             sale in such  jurisdictions.  The  Company  shall  promptly  notify
             Holder of the  receipt  by the  Company  of any  notification  with
             respect to the suspension of the  registration or  qualification of
             any of the Holder's  Common Stock for sale under the  securities or
             "blue sky" laws of any  jurisdiction  in the  United  States or its
             receipt of actual notice of the  initiation or  threatening  of any
             proceeding for such purpose.

                   iv. The  Company  shall hold in  confidence  and not make any
             disclosure of information concerning Holder provided to the Company
             unless (i)  disclosure of such  information  is necessary to comply
             with federal or state  securities laws, (ii) the disclosure of such
             information  is  necessary  to avoid or correct a  misstatement  or
             omission in any registration  statement,  (iii) the release of such
             information  is  ordered  pursuant  to a subpoena  or other  final,
             non-appealable order from a court or governmental body of competent
             jurisdiction,  or (iv) such  information  has been  made  generally
             available  to the public other than by  disclosure  in violation of
             this Note or any other agreement. The Company agrees that it shall,
             upon learning that disclosure of such information concerning Holder
             is  sought  in or by a court  or  governmental  body  of  competent
             jurisdiction or through other means,  give prompt written notice to
             Holder and allow such  Holder to  undertake  appropriate  action to
             prevent  disclosure  of, or to obtain a protective  order for, such
             information.

                   v. The  Company  shall  take  all  other  reasonable  actions
             necessary  to  expedite  and  facilitate  disposition  by Holder of
             Holder's common Stock pursuant to a registration statement.

                   vi. To the fullest extent permitted by law, the Company will,
             and hereby does, indemnify, hold harmless and defend Holder against
             any  losses,  claims,  damages,   liabilities,   judgments,  fines,
             penalties,   charges,  costs,  attorneys'  fees,  amounts  paid  in
             settlement or expenses, joint or several, (collectively,  "Claims")
             incurred  in  investigating,  preparing  or  defending  any action,
             claim,  suit,  inquiry,  proceeding,  investigation or appeal taken
             from  the  foregoing  by  or  before  any  court  or  governmental,
             administrative or other regulatory agency, body or the SEC, whether
             pending or threatened,  whether or not an  indemnified  party is or
             may be a party thereto ("Indemnified Damages"), to which Holder may
             become subject  insofar as such Claims (or actions or  proceedings,
             whether  commenced or threatened,  in respect thereof) arise out of
             or are based  upon:  (A) any untrue  statement  or  alleged  untrue
             statement  of a material  fact in a  registration  statement or any
             post-effective   amendment   thereto  or  in  any  filing  made  in
             connection  with  the  qualification  of  the  offering  under  the
             securities  or other "blue sky" laws of any  jurisdiction  in which
             Holder's  Common  Stock  is  offered  ("Blue  Sky  Fi1ing")  or the
             omission or alleged  omission to state a material  fact required to
             be stated therein or necessary to make the  statements  therein not
             misleading,   or  (Bi)  any  untrue  statement  or  alleged  untrue
             statement  of  a  material  fact   contained  in  any   preliminary
             prospectus if used prior to the effective date of such registration
             statement,  or  contained  in the final  prospectus  (as amended or
             supplemented,  if  the  Company  files  any  amendment  thereof  or
             supplement  thereto  with  the  SEC)  or the  omission  or  alleged
             omission to state therein any material  fact  necessary to make the
             statements made therein,  in light of the circumstances under which
             the statements therein were made, not misleading.

      12.  PREPAYMENTS.  This Note may not be prepaid by the Company without the
express written consent of the Holder, which consent may be withheld in its sole
discretion  after  receipt  of ten (10)  business  days  prior  written  notice.
Notwithstanding the foregoing,  in the event the Company raises $2,500,000.00 of
equity capital in a single private offering of its equity  securities,  then the
Company,  may

                                       8
<PAGE>

upon thirty (30) days prior written  notice to Holder,  elect to prepay the Note
in whole,  but not in part and the Holder shall have ten (10)  business  days to
elect  one  of  the  following  options:  (a)  accept  prepayment  of all of the
outstanding  principal and accrued interest under this Note; or (ii) convert the
balance of  outstanding  principal  and  accrued  interest  under this Note into
Common Stock in accordance  with the terms and conditions  set forth herein;  or
(iii) cause the Company to pay the outstanding  principal and accrue interest to
a mutually agreeable escrow agent (the "Escrow Agent"),  which Escrow Agent will
hold such  amount  until the  earlier of (A)  Holder's  election  to convert the
outstanding  balance of  outstanding  principal and accrued  interest under this
Note into Common Stock in  accordance  with the terms and  conditions  set forth
herein or (B)  Holder's  election  to  accept  such sum in  satisfaction  of the
Company's  obligations  hereunder,  whereupon  Escrow  Agent  shall  deliver the
escrowed sum to the Company or the Holder, as the case may be. The Company shall
bear the cost of the Escrow Agent.

         Notwithstanding   any  provision  herein  to  the  contrary,   Holder's
antidilution  rights described in SECTION 8 hereof shall survive any of Holder's
elections set forth above in this SECTION 12.

         In the event  this Note is  satisfied  in full or the amount to satisfy
the Note is delivered to Escrow Agent, Holder's first and prior lien against the
Company's assets and the Security  Agreement shall be released by Holder and the
Company  shall no longer be restricted by this Note from paying any creditors or
issuing any debt instruments.

         13.  ASSIGNMENT.  This Note is not assignable by the Company. This Note
and the Common Stock into which it is  convertible  are  assignable by Holder to
its affiliates  (as defined in Rule 405  promulgated  under the Securities  Act)
that are Accredited  Investors.

         14. NOTICES. Any notice necessary under this Agreement shall be in
writing and shall be considered delivered three days after the mailing is sent
by certified mail, return receipt requested, or when received, if sent by
telecopy, prepaid courier, express mail or personal delivery to the following
addresses:

If to the Company:        Front Porch Digital Inc.
                          20000 Horizon Way, Suite 120
                          Mt. Laurel, New Jersey 08054
                          Attention: Chief Executive Officer
                          Telecopy: (   )
                                     ---  --------------

With a copy to:           Pryor Cashman Sherman & Flynn LLP
                          410 Park Avenue
                          New York, N.Y. 10022
                          Attention: Eric M. Hellige
                          Telecopy: (212) 326-0846

If to Holder:
                          -------------------------------

                          -------------------------------

                          -------------------------------

                          -------------------------------

                          -------------------------------

                                       9
<PAGE>

With a copy to:           Creel, Sussman & Moore, LLP
                          8235 Douglas Avenue, Suite 1100
                          Dallas, Texas 75225
                          Attention: Ronald L .Sussman
                          Telecopy: (214) 378-8290

         15.  SEVERABILITY. If any provision of this Note is held to be illegal,
invalid or  unenforceable  under any current or future law, and if the rights or
obligations of the parties under this Note would not be materially and adversely
affected thereby,  such provision shall be fully separable,  and this Note shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part thereof,  the remaining provisions of this Note shall
remain in full  force and  effect  and shall  not be  affected  by the  illegal,
invalid or  unenforceable  provision or by its severance  therefrom.  In lieu of
such  illegal,  invalid  or  unenforceable  provision,   there  shall  be  added
automatically as a part of this Note, a legal,  valid and enforceable  provision
as similar in terms to such illegal,  invalid or unenforceable  provision as may
be possible,  and the parties hereto request the court or any arbitrator to whom
disputes  relating to this Note are submitted to reform the  otherwise  illegal,
invalid or unenforceable provision in accordance with this SECTION 15.

         16.  MISCELLANEOUS.  Past due principal and interest on this Note shall
bear  interest  from the date due until  paid at a per annum  rate  equal to the
maximum  lawful  rate in  effect  from time to time.  Notwithstanding  any other
provision  of this Note,  interest on the  indebtedness  evidenced  by this Note
shall  not  exceed  the  maximum  amount  of  nonusurious  interest  that may be
contracted  for,  charged or received  under  applicable law and any interest in
excess of that amount  shall be credited on the unpaid  principal  amount of the
indebtedness  or,  if  that  has  been  paid,  refunded.   Except  as  otherwise
specifically  provided  herein,  the obligations of the Company set forth herein
may not be waived,  modified or amended  without the prior written  agreement of
the  Holder  hereof.  If  suit  or an  arbitration  proceeding  is  brought  for
collection  of this  Note or if it is  collected  through  bankruptcy  or  other
judicial  process,  the Company  shall pay, in addition to all other amounts due
hereon, the Holder's costs of collection,  including reasonable attorneys' fees.
The Company shall be responsible  for  reimbursing  Holder for its legal fees in
connection with consummation of this transaction;  provided,  that the Company's
obligation  for such  legal  fees do not  exceed  $5,000.00.  THIS NOTE HAS BEEN
EXECUTED  AND  DELIVERED  IN  NORTHBROOK,  ILLINOIS  AND SHALL BE  ENFORCED  AND
CONSTRUED  IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF  ILLINOIS.  EACH  PARTY
HEREBY  IRREVOCABLY  WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,  A
JURY  TRIAL FOR THE  ADJUDICATION  OF ANY  DISPUTE  HEREUNDER  OR IN  CONNECTION
HEREWITH  OR  ARISING  OUT OF THIS  AGREEMENT  OR ANY  TRANSACTION  CONTEMPLATED
HEREBY. Any dispute arising between the Holder and the Company shall be resolved
by  arbitration in the County of the principal  place of business of Holder.  No
failure or delay on the part of this Note in the exercise of any power, right or
privilege  hereunder shall operate as a waiver thereof,  nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

         THE  WRITTEN  AGREEMENTS  FOR THE LOAN OR OTHER  EXTENSIONS  OF  CREDIT
DESCRIBED ABOVE REPRESENT THE FINAL AGREEMENT  BETWEEN THE PARTIES,  AND MAY NOT
BE  CONTRADICTED  BY  EVIDENCE OF PRIOR,  CONTEMPORANEOUS,  OR  SUBSEQUENT  ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL  AGREEMENTS  BETWEEN THE
PARTIES.

                                       10
<PAGE>

         IN WITNESS  WHEREOF,  the  Company has caused this Note to be signed by
its duly authorized officer.

                                       FRONT PORCH DIGITAL, INC.

                                       By:
                                           -------------------------------------

                                       Name:
                                             -----------------------------------

                                       Title:
                                              ----------------------------------

                                              ----------------------------------

                                       By:
                                           -------------------------------------

                                              By:

                                                  ------------------------------

                                       11EXHIBIT 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:

                                        1
<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

                                       2
<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

                                       4
<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

                                       4
<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

                                       6
<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

                                       9

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