Document:

EXH 10.3
                            EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT, effective as of October 11, 2000 (hereafter
"Effective Date"), by and between FRONT PORCH DIGITAL INC., a Nevada corporation
(the "Company"), and DR. GIANCARLO GAGGERO, an individual residing at 1621
Potomac Drive, Houston, Texas (the "Employee").

                              W I T N E S S E T H:

     WHEREAS, the Company desires to employ the Employee as its Senior Vice
President of Media Technologies and wishes to acquire and be assured of
Employee's services on the terms and conditions hereinafter set forth; and

     WHEREAS, the Employee desires to be employed by the Company as its Senior
Vice President of Media Technologies, and to perform and to serve the Company on
the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the mutual terms, covenants, agreements
and conditions hereinafter set forth, the Company and the Employee hereby agree
as follows:

     1. EMPLOYMENT. (a) The Company hereby employs the Employee to serve as a
full time employee of the Company, and the Employee hereby accepts such
employment with the Company, for the period set forth in Section 2 hereof.

        (b) The Employee affirms and represents that (i) the Employee is under
no obligation to any former employer or other party that is in any way
inconsistent with, or that imposes any restriction upon, the Employee's
acceptance of employment hereunder with the Company, the employment of the
Employee by the Company, or the Employee's undertakings under this Agreement and
(ii) his performance of all the terms of this Agreement and his employment by
the Company does not and will not breach any agreement to keep in confidence
proprietary information acquired by him in confidence or in trust prior to his
employment by the Company.

     2. TERM. Unless earlier terminated as provided in this Agreement, the term
of the Employee's employment under this Agreement shall be for a period of four
(4) years beginning on the date hereof and ending on October 11, 2004 (such
period or, if the Employee's employment hereunder is earlier terminated, such
shorter period, being hereinafter called the "Employment Term").

     3. DUTIES.

        (a) The Employee shall be employed as the Senior Vice President of Media
Technologies. The Employee shall faithfully and competently perform such duties
at such times and places and in such manner as the Company may from time to time
reasonably direct or such other duties appropriate to a senior executive
managerial position as the Board of Directors or Chief

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Executive Officer of the Company shall from time to time determine. Employee
shall report directly to the Chief Executive Officer of the Company.

        (b) Except as may otherwise be approved in writing by the Board of
Directors or Chief Executive Officer of the Company, and except during vacation
periods and reasonable periods of absence due to sickness, personal injury or
other disability, the Employee shall devote his full time throughout the
Employment Term to the services required of Employee hereunder. The Employee
shall render his services exclusively to the Company during the Employment Term
and shall use his best efforts, judgment and energy to improve and advance the
business and interests of the Company in a manner consistent with the duties of
Employee's position.

        (c) Employee's place of employment shall be Houston, Texas. However,
Employee will, at Employer's request, relocate . Employer shall pay his and his
family's reasonable moving and relocation expenses. In case of relocation
outside the United States, Employer shall furthermore provide Employee with a
permanent work authorization at his place of employment if such authorization is
needed. Employer shall assist Employee in compliance with all immigration laws
and shall pay the reasonable costs of such compliance, specifically including
attorneys' fees. In the event of relocation, Executive's base salary shall be
adjusted upward to reflect any additional taxation and other cost of living
increases associated with the relocation. The amount of increase will be
determined by any applicable CPI (Consumer Price Index) or other valid indicator
generally relied upon by the industry or agreed upon by Employer and Employee.

        4. SALARY AND BONUS.

        (a) BASE SALARY. In consideration for the services of the Employee
rendered to the Company hereunder, the Company shall pay the Employee a base
salary at an annual rate of One Hundred Fifty Thousand Dollars ($150,000.00)
during the Employment Term, payable in regular intervals in accordance with the
Company's payroll practices (the "Base Salary"). The Base Salary may be
increased from time to time as the Board of Directors, in its sole discretion,
deems appropriate.

        (b) STOCK OPTIONS. Upon the execution and delivery of this Agreement,
the Company shall grant stock options to Employee pursuant to and subject to the
terms and conditions of the 2000 Equity Incentive Plan of the Company to
purchase 250,000 shares of Common Stock, par value $.001 per share (the "Common
Stock"), of the Company, which options shall be at an exercise price of $2.00
per share and shall vest in three equal annual installments, with the first
installment vesting on the first anniversary of the Effective Date, the second
installment vesting on the second anniversary of the Effective Date and the
third installment vesting on the third anniversary of the Effective Date. All
such stock options shall expire on the fifth anniversary of the Effective Date.
All such stock options, whether or not vested, will be subject to forfeiture or
termination in the event of a breach by the Employee of the provisions of
Section 6 or 8 hereof.

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<PAGE>

        (c) BONUSES. In addition to the Base Salary, the Employee shall be
eligible to receive bonuses in an aggregate amount of forty percent (40%) of his
Base Salary if the Employee meets certain criteria to be mutually agreed upon
and approved by the Board of Directors; PROVIDED, HOWEVER, that the Employee's
minimum annual bonus shall be $50,000 regardless of whether the criteria are
met.

        (d) WITHHOLDING, ETC. The payment of any salary or bonuses hereunder
shall be subject to income tax, social security and other applicable
withholdings, as well as such deductions as may be required under the Company's
employee benefit plans.

     5. BENEFITS.

        (a) During the Employment Term, the Employee shall be:

                        (i) eligible to participate in all employee fringe
            benefits and any pension and/or profit sharing plans that may be
            provided by the Company for its executive employees in accordance
            with the provisions of any such plans, as the same may be in effect
            on and after the date hereof;

                        (ii) eligible to participate in any medical and health
            plans or other employee welfare benefit plans that may be provided
            by the Company for its executive employees in accordance with the
            provisions of any such plans, as the same may be in effect on and
            after the date hereof;

                        (iii) entitled to four weeks paid time off each year in
            accordance with the Company's standard employee vacation policy,
            which shall be taken at such time or times as will not unreasonably
            hinder or interfere with the Company's business or operations; and

                        (iv) entitled to reimbursement for all reasonable and
            necessary out-of-pocket business expenses incurred by the Employee
            in the performance of the Employee's duties hereunder in accordance
            with the Company's policies applicable (on and after the date
            hereof) thereto, specifically including the cost of first class
            airfare for Employee and a companion for all business travel.

        (b) Employee shall cooperate with the Company in the event the Company
wishes to obtain key-man insurance on the Employee. Such cooperation shall
include, but not be limited to, taking any physical examinations that may be
requested by the insurance company.

     6. INVENTIONS AND CONFIDENTIAL INFORMATION. The parties hereby covenant,
agree and acknowledge as follows:

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<PAGE>

        (a) The Company is engaged in a continuous program of research, design,
development, production, marketing and servicing with respect to its businesses.

        (b) The Employee's employment hereunder creates a relationship of
confidence and trust between the Employee and the Company with respect to
certain information pertaining to the business of the Company and its Affiliates
(as hereinafter defined) or pertaining to the business of any client or customer
of the Company or its Affiliates which may be made known to the Employee by the
Company or any of its Affiliates or by any client or customer of the Company or
any of its Affiliates or learned by the Employee during the period of Employee's
employment by the Company.

        (c) The Company possesses and will continue to possess information that
has been created, discovered or developed by, or otherwise become known to it
(including, without limitation, information created, discovered or developed by,
or made known to, the Employee during the period of Employee's employment or
arising out of Employee's employment) or in which property rights have been or
may be assigned or otherwise conveyed to the Company, which information has
commercial value in the business in which the Company is engaged and is treated
by the Company as confidential.

        (d) Any and all inventions, products, discoveries, improvements,
processes, manufacturing, marketing and services methods or techniques,
formulae, designs, styles, specifications, data bases, computer programs
(whether in source code or object code), know-how, strategies and data, whether
or not patentable or registrable under copyright or similar statutes, made,
developed or created by the Employee (whether at the request or suggestion of
the Company, any of its Affiliates, or otherwise, whether alone or in
conjunction with others, and whether during regular hours of work or otherwise)
during the period of Employee's employment by the Company which may pertain to
the business, products, or processes of the Company or any of its Affiliates
(collectively hereinafter referred to as "Inventions"), will be promptly and
fully disclosed by the Employee to an appropriate executive officer of the
Company (other than the Employee) without any additional compensation therefor,
all papers, drawings, models, data, documents and other material pertaining to
or in any way relating to any Inventions made, developed or created by Employee
as aforesaid. For the purposes of this Agreement, the term "Affiliate" or
"Affiliates" shall mean any person, corporation or other entity directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company. For the purposes of this definition, "control" when
used with respect to any person, corporation or other entity means the power to
direct the management and policies of such person or entity, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

        (e) The Employee will keep confidential and will hold for the Company's
sole benefit any Invention made by him during the Employment Term which is to be
the exclusive

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<PAGE>

property of the Company under this Section 6 for which no patent, copyright,
trademark or other right or protection is issued.

        (f) The Employee also agrees that the Employee will not without the
prior written consent of the Board of Directors or Chief Executive Officer of
the Company (i) use for Employee's benefit or disclose at any time during
Employee's employment by the Company, or thereafter, except to the extent
required by law or by the performance by the Employee of the Employee's duties
as an employee of the Company, any information obtained or developed by Employee
while in the employ of the Company with respect to any Inventions or with
respect to any customers, clients, suppliers, products, employees, financial
affairs, or methods of design, distribution, marketing, service, procurement or
manufacture of the Company or any of its Affiliates, or any confidential matter
relating to the business of the Company or any of its Affiliates, EXCEPT
information which at the time is generally known to the public other than as a
result of disclosure by the Employee not permitted hereunder, or about which
Employee discloses to his attorneys for the purpose of obtaining legal advice,
after informing his attorneys of this non-disclosure provision, or (ii) take
with the Employee upon leaving the employ of the Company any document or paper
relating to any of the foregoing or any physical property of the Company or any
of its Affiliates.

        (g) The Employee acknowledges and agrees that a remedy at law for any
breach or threatened breach of the provisions of this Section 6 would be
inadequate and, therefore, agrees that the Company and its Affiliates shall be
entitled to injunctive relief in addition to any other available rights and
remedies in case of any such breach or threatened breach; PROVIDED, HOWEVER,
that nothing contained herein shall be construed as prohibiting the Company or
any of its Affiliates from pursuing any other rights and remedies available for
any such breach or threatened breach.

        (h) The Employee agrees that upon termination of Employee's employment
by the Company for any reason, the Employee shall immediately return to the
Company all documents and other property in Employee's possession belonging to
the Company or any of its Affiliates.

        (i) Without limiting the generality of Section 9 hereof, the Employee
hereby expressly agrees that the foregoing provisions of this Section 6 shall be
binding upon the Employee's heirs, successors and legal representatives.

     7. TERMINATION. (a) The Employee's employment hereunder shall be terminated
upon the occurrence of any of the following:

                        (i) death of the Employee;

                        (ii) termination of the Employee's employment hereunder
            by the Employee at any time for any reason whatsoever (including,
            without limitation, resignation or retirement), other than for "good
            reason" as contemplated by clause (v)(B) below;

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<PAGE>

                        (iii) termination of the Employee's employment hereunder
            by the Company because of the Employee's inability to perform
            Employee's duties on account of disability or incapacity for a
            period of ninety (90) or more days, whether or not consecutive,
            occurring within any period of twelve (12) consecutive months if and
            only if the Company has provided at least sixty (60) days' written
            notice of its contention that a disability or incapacity has caused
            an alleged inability to perform AND the Company has made "reasonable
            accommodation" for any disability, as that term is defined by the
            Americans with Disabilities Act;

                        (iv) termination of the Employee's employment hereunder
            by the Company at any time for "cause" (as hereinafter defined),
            such termination to take effect immediately upon written notice from
            the Company to the Employee; and

                        (v) termination of the Employee's employment hereunder
            (A) by the Company at any time, other than termination by reason of
            disability or incapacity as contemplated by clause (iii) above or
            termination by the Company for "cause" as contemplated by clause
            (iv) above and (B) by the Employee for "good reason" (as hereinafter
            defined).

     The following actions, failures or events shall constitute "cause" for
termination within the meaning of clause (iv) above: (i) the Employee's
conviction of, admission of guilt to or plea of NOLO CONTENDERE or similar plea
(which, through lapse of time or otherwise, is not subject to appeal) with
respect to any crime or offense that constitutes a felony in the jurisdiction
involved; (2) acts of dishonesty or moral turpitude which are materially
detrimental to the Company and/or its Affiliates, (3) failure by the Employee to
obey the reasonable and lawful orders of the Board of Directors or Chief
Executive Officer of the Company, (4) any act by the Employee in violation of
Section 8 hereof, any statement or disclosure by the Employee in violation of
Section 6 hereof, or any material breach by the Employee of a representation or
warranty contained in Section 1(b) hereof; (5) following written notice from the
Board of Directors or Chief Executive Officer of the Company of prior similar
actions by Employee, excessive absenteeism (other than by reason of disability);
(6) following written notice from the Board of Directors or the Chief Executive
Officer of the Company of prior similar actions by Employee, excessive
alcoholism or addiction to drugs not prescribed by a qualified physician or (7)
gross negligence by the Employee in the performance of, or willful disregard by
the Employee of, the Employee's obligations hereunder; PROVIDED, HOWEVER, that
none of the actions, failures or events set forth in clauses (3), (4), (5), (6)
or (7) above shall constitute "cause" until the Company shall have furnished
Employee written notice that such actions, failures or events constitute "cause"
for termination of this Agreement and provide the Employee 20 days to cure the
actions, failures or events that constitute such "cause".

     The following actions, failures or events shall constitute "good reason"
within the meaning of clause (V)(B) above: (1) any decrease in Employer's
compensation or change in his eligibility to participate in Employer's benefit
plans, insurance programs, incentive and bonus plans

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<PAGE>

and deferred compensation plans; or (2) any attempt to adversely change
Employee's eligibility for Employer's stock; or (3) any material adverse change
in Employee's title, reporting or responsibilities; or (4) any material breach
by Company of any term or provision of this Agreement; or (5) the sale or
transfer in one transaction or a series of related transactions of more than
fifty percent (50%) of the beneficial ownership interest in the equity of the
Company to an entity or entities not affiliated with the Company.

        (b) In the event that the Employee's employment is terminated by the
Company prior to October 11, 2004 for any reason other than "cause," or by
Employee for "good reason," then (i) the Company shall pay to the Employee, as
severance pay or liquidated damages or both, the amount of Base Salary, if any,
which the Employee would have otherwise been entitled to receive pursuant to
Section 4(a) hereof from the date of termination had the Employee's employment
not been so terminated until October 11, 2004 (such amount being herein referred
to as the "Severance Payments" and such period being herein referred to as the
"Severance Period"); PROVIDED, HOWEVER, that (1) if the Employee's employment is
terminated on or after October 11, 2003, the Severance Payments shall be in an
amount equal to the Base Salary of the Employee and (2) the Severance Payments
shall be reduced by any salary, bonus or other compensation received by the
Employee in respect of such Severance Period or received by the Employee in
respect of any other employment or consulting arrangement secured by the
Employee subsequent to the termination of the Employee's employment hereunder
and (ii) all options granted to the Employee pursuant to Section 4(b) hereof
which have not vested shall immediately vest and (iii) any bonus payments shall
be pro-rated and payable for the period of the Employment Term, any provision of
any bonus plan notwithstanding.

        (c) Notwithstanding anything to the contrary expressed or implied
herein, except as required by applicable law and except as set forth in
paragraph (b) above, the Company (and its Affiliates) shall not be obligated to
make any payments to the Employee or on Employee's behalf of whatever kind or
nature by reason of the Employee's cessation of employment (including, without
limitation, by reason of termination of the Employee's employment by the Company
for "cause"), other than (i) such amounts, if any, of Employee's salary and
bonus as shall have accrued and remained unpaid as of the date of said cessation
and (ii) such other amounts which may be then otherwise payable to the Employee
from the Company's benefits plans or reimbursement policies, if any.

        (d) No interest shall accrue on or be paid with respect to any portion
of any payments hereunder.

     8. NON-COMPETITION. (a) The term "Non-Compete Term" shall mean the period
during which Employee is employed hereunder and the one-year period following
the termination of this Agreement.

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     During the Non-Compete Term:

                        (i) the Employee will not make any statement or perform
            any act intended to advance an interest of any existing or
            prospective competitor of the Company or any of its Affiliates in
            any way that will or may injure an interest of the Company or any of
            its Affiliates in its relationship and dealings with existing or
            potential customers or clients, or solicit or encourage any other
            employee of the Company or any of its Affiliates to do any act that
            is disloyal to the Company or any of its Affiliates or inconsistent
            with the interest of the Company or any of its Affiliate's interests
            or in violation of any provision of this Agreement;

                        (ii) the Employee will not discuss with any existing or
            potential customers or clients of the Company or any of its
            Affiliates the present or future availability of services or
            products of a business, if the Employee has or expects to acquire a
            proprietary interest in such business or is or expects to be an
            employee, officer or director of such business, where such services
            or products are competitive with services or products which the
            Company or any of its Affiliates provides;

                        (iii) the Employee will not make any statement or do any
            act intended to cause any existing or potential customers or clients
            of the Company or any of its Affiliates to make use of the services
            or purchase the products of any competitive business in which the
            Employee has or expects to acquire a proprietary interest or in
            which the Employee is or expects to be made an employee, officer or
            director, if such services or products in any way compete with the
            services or products sold or provided or expected to be sold or
            provided by the Company or any of its Affiliates to any existing or
            potential customer or client; and

                        (iv) the Employee will not directly or indirectly (as a
            director, officer, employee, manager, consultant, independent
            contractor, advisor or otherwise) engage in competition with, or own
            any interest in, perform any services for, participate in or be
            connected with (i) any business or organization which engages in
            competition with the Company or any of its Affiliates in any
            geographical area where any business is presently carried on by the
            Company or any of its Affiliates, or (ii) any business or
            organization which engages in competition with the Company or any of
            its Affiliates in any geographical area where any business shall be
            hereafter, during the period of the Employee's employment by the
            Company, carried on by the Company or any of its Affiliates, if such
            business is then being carried on by the Company or any of its
            Affiliates in such geographical area; PROVIDED, HOWEVER, that the
            provisions of this Section 8(a) shall not be deemed to prohibit the
            Employee's ownership of not more than one percent (1%) of the total
            shares of all classes of stock outstanding of any publicly held
            company.

        (b) During the Non-Compete Term, the Employee will not directly or
indirectly hire, engage, send any work to, place orders with, or in any manner
be associated with any supplier,

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<PAGE>

contractor, subcontractor or other person or firm which rendered manufacturing
or other services, or sold any products, to the Company or any of its Affiliates
if such action by Employee would have a material adverse effect on the business,
assets or financial condition of the Company or any of its Affiliates.

        (c) It is understood and agreed that the covenants made by the Employee
in this Section 8 (and in Section 6 hereof) shall survive the expiration or
termination of this Agreement.

        (d) For purposes of this Section 8, proprietary interest in a business
is ownership, whether through direct or indirect stock holdings or otherwise, of
one percent (1%) or more of such business. The Employee shall be deemed to
expect to acquire a proprietary interest in a business or to be made an officer
or director of such business if such possibility has been discussed with any
officer, director, employee, agent, or promoter of such business.

        (e) The Employee acknowledges and agrees that a remedy at law for any
breach or threatened breach of the provisions of this Section 8 would be
inadequate and, therefore, agrees that the Company and any of its Affiliates
shall be entitled to injunctive relief in addition to any other available rights
and remedies in cases of any such breach or threatened breach; PROVIDED,
HOWEVER, that nothing contained herein shall be construed as prohibiting the
Company or any of its Affiliates from pursuing any other rights and remedies
available for any such breach or threatened breach.

     9. NON-ASSIGNABILITY. (a) Neither this Agreement nor any right or interest
hereunder shall be assignable by the Employee, Employee's beneficiaries, or
legal representatives without the Company's prior written consent; PROVIDED,
HOWEVER, that nothing in this Section 9(a) shall preclude the Employee from
designating a beneficiary to receive any benefit payable hereunder upon
Employee's death or incapacity.

        (b) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation or to exclusion,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.

     10. BINDING EFFECT. Without limiting or diminishing the effect of Section 9
hereof, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, successors, legal representatives and
assigns.

     11. NOTICE. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and either delivered in person or
sent by first class certified or registered mail, postage prepaid, if to the
Company, at the Company's principal place of business, attention: Chief
Executive Officer (with a copy to Pryor Cashman Sherman & Flynn LLP, 410 Park
Avenue, New

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York, New York 10022, Attention: Eric M. Hellige, Esq.), and if to
the Employee, at Employee's home address set forth above, or to such other
address or addresses as either party shall have designated in writing to the
other party hereto.

     12. SEVERABILITY. The Employee agrees that in the event that any court of
competent jurisdiction shall finally hold that any provision of Section 6 or 8
hereof is void or constitutes an unreasonable restriction against the Employee,
such provision shall not be rendered void but shall apply with respect to such
extent as such court may judicially determine constitutes a reasonable
restriction under the circumstances. If any part of this Agreement other than
Section 6 or 8 is held by a court of competent jurisdiction to be invalid,
illegible or incapable of being enforced in whole or in part by reason of any
rule of law or public policy, such part shall be deemed to be severed from the
remainder of this Agreement for the purpose only of the particular legal
proceedings in question and all other covenants and provisions of this Agreement
shall in every other respect continue in full force and effect and no covenant
or provision shall be deemed dependent upon any other covenant or provision.

     13. WAIVER. Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any right or
power hereunder at any one or more times be deemed a waiver or relinquishment of
such right or power at any other time or times.

     14. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement constitutes the entire
and final expression of the agreement of the parties with respect to Employee's
employment and supersedes all prior agreements, oral and written, between the
parties hereto with respect to the subject matter hereof. This Agreement may be
modified or amended only by an instrument in writing signed by both parties
hereto.

     15. RELEVANT LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Texas, without regard to its
conflicts of law principles.

     16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     17. SURVIVAL. The termination of Employee's employment hereunder shall not
affect the enforceability of Sections 6 or 8.

     18. FURTHER ASSURANCES. The parties agree to execute and deliver all such
further instruments and take such other and further action as may be reasonably
necessary or appropriate to carry out the provisions of this Agreement.

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     19. HEADINGS. The Section headings appearing in this Agreement are for
purposes of easy reference and shall not be considered a part of this Agreement
or in any way modify, amend or affect its provisions.

     IN WITNESS WHEREOF, the Company and the Employee have duly executed and
delivered this Agreement as of the day and year first above written.

                        FRONT PORCH DIGITAL INC.

                        By: /s/  Jean Reiczyk
                            --------------------------------------
                                 Name:  Jean Reiczyk
                                 Title: Chief Executive Officer

                            /s/  Giancarlo Gaggero
                            --------------------------------------
                                 DR. GIANCARLO GAGGERO

                                       11EXH 10.4
                              EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT, effective as of October 11, 2000, by and between
FRONT PORCH DIGITAL INC., a Nevada corporation (the "Company"), and MELTON
EDWARD LADD, an individual residing at 15806 Winding Moss Drive, Houston, Texas
77068 (the "Employee").

                              W I T N E S S E T H:

     WHEREAS, the Company desires to employ the Employee as its Chief Engineer
and wishes to acquire and be assured of Employee's services on the terms and
conditions hereinafter set forth; and

     WHEREAS, the Employee desires to be employed by the Company as its Chief
Engineer, and to perform and to serve the Company on the terms and conditions
hereinafter set forth.

     NOW, THEREFORE, in consideration of the mutual terms, covenants, agreements
and conditions hereinafter set forth, the Company and the Employee hereby agree
as follows:

     1. EMPLOYMENT. (a) The Company hereby employs the Employee to serve as a
full time employee of the Company, and the Employee hereby accepts such
employment with the Company, for the period set forth in Section 2 hereof.

        (b) The Employee affirms and represents that (i) the Employee is under
no obligation to any former employer or other party that is in any way
inconsistent with, or that imposes any restriction upon, the Employee's
acceptance of employment hereunder with the Company, the employment of the
Employee by the Company, or the Employee's undertakings under this Agreement and
(ii) his performance of all the terms of this Agreement and his employment by
the Company does not and will not breach any agreement to keep in confidence
proprietary information acquired by him in confidence or in trust prior to his
employment by the Company.

     2. TERM. Unless earlier terminated as provided in this Agreement, the term
of the Employee's employment under this Agreement shall be for a period of three
(3) years beginning on the date hereof and ending on October 11, 2003 (such
period or, if the Employee's employment hereunder is earlier terminated, such
shorter period, being hereinafter called the "Employment Term").

<PAGE>

     3. DUTIES.

        (a) The Employee shall be employed as the Chief Engineer. The Employee
shall faithfully and competently perform such duties at such times and places
and in such manner as the Company may from time to time reasonably direct or
such other duties appropriate to a senior executive managerial position as the
Board of Directors or Chief Executive Officer of the Company shall from time to
time determine.

        (b) Except as may otherwise be approved in writing by the Board of
Directors or Chief Executive Officer of the Company, and except during vacation
periods and reasonable periods of absence due to sickness, personal injury or
other disability, the Employee shall devote his full time throughout the
Employment Term to the services required of Employee hereunder. The Employee
shall render his services exclusively to the Company during the Employment Term
and shall use his best efforts, judgment and energy to improve and advance the
business and interests of the Company in a manner consistent with the duties of
Employee's position.

     4. SALARY AND BONUS.

        (a) BASE SALARY. In consideration for the services of the Employee
rendered to the Company hereunder, the Company shall pay the Employee a base
salary at an annual rate of One Hundred Twenty-Five Thousand Dollars ($125,000)
during the Employment Term, payable in regular intervals in accordance with the
Company's payroll practices (the "Base Salary"). The Base Salary may be
increased from time to time as the Board of Directors, in its sole discretion,
deems appropriate.

        (b) STOCK OPTIONS. Upon the execution and delivery of this Agreement,
the Company shall grant stock options to Employee pursuant to and subject to the
terms and conditions of the 2000 Equity Incentive Plan of the Company to
purchase 150,000 shares of Common Stock, par value $.001 per share (the "Common
Stock"), of the Company, of which options to purchase 100,000 shares shall be at
an exercise price of $5.00 per share and options to purchase 50,000 shares shall
be at an exercise price of $2.00 per share. Such options shall vest in three
equal annual installments with the first installment vesting on the first
anniversary of the date hereof, and shall expire on the fifth anniversary of the
date hereof. All such stock options, whether or not vested, will be subject to
forfeiture or termination in the event of a breach by the Employee of the
provisions of Sections 6 or 8 hereof.

        (c) BONUSES. In addition to the Base Salary, the Employee shall be
eligible to receive bonuses in an aggregate amount of forty percent (40%) of his
Base Salary if the Employee meets certain criteria to be mutually agreed upon
and approved by the Board of Directors.

                                       2
<PAGE>

        (d) WITHHOLDING, ETC. The payment of any salary or bonuses hereunder
shall be subject to income tax, social security and other applicable
withholdings, as well as such deductions as may be required under the Company's
employee benefit plans.

     5. BENEFITS. (a) During the Employment Term, the Employee shall be:

                        (i) eligible to participate in all employee fringe
            benefits and any pension and/or profit sharing plans that may be
            provided by the Company for its key executive employees in
            accordance with the provisions of any such plans, as the same may be
            in effect on and after the date hereof;

                        (ii) eligible to participate in any medical and health
            plans or other employee welfare benefit plans that may be provided
            by the Company for its key executive employees in accordance with
            the provisions of any such plans, as the same may be in effect on
            and after the date hereof;

                        (iii) entitled to paid time off each year in accordance
            with the Company's standard employee vacation policy, which shall be
            taken at such time or times as will not unreasonably hinder or
            interfere with the Company's business or operations; and

                        (iv) entitled to reimbursement for all reasonable and
            necessary out-of-pocket business expenses incurred by the Employee
            in the performance of the Employee's duties hereunder in accordance
            with the Company's policies applicable (on and after the date
            hereof) thereto.

        (b) Employee shall cooperate with the Company in the event the Company
wishes to obtain key-man insurance on the Employee. Such cooperation shall
include, but not be limited to, taking any physical examinations that may be
requested by the insurance company.

     6. INVENTIONS AND CONFIDENTIAL INFORMATION. The Employee hereby covenants,
agrees and acknowledges as follows:

        (a) The Company is engaged in a continuous program of research, design,
development, production, marketing and servicing with respect to its businesses.

        (b) The Employee's employment hereunder creates a relationship of
confidence and trust between the Employee and the Company with respect to
certain information pertaining to the business of the Company and its Affiliates
(as hereinafter defined) or pertaining to the business of any client or customer
of the Company or its Affiliates which may be made known to the Employee by the
Company or any of its Affiliates or by any client or customer of the Company or
any of its Affiliates or learned by the Employee during the period of Employee's
employment by the Company.

                                       3
<PAGE>

        (c) The Company possesses and will continue to possess information that
has been created, discovered or developed by, or otherwise become known to it
(including, without limitation, information created, discovered or developed by,
or made known to, the Employee during the period of Employee's employment or
arising out of Employee's employment) or in which property rights have been or
may be assigned or otherwise conveyed to the Company, which information has
commercial value in the business in which the Company is engaged and is treated
by the Company as confidential.

        (d) Any and all inventions, products, discoveries, improvements,
processes, manufacturing, marketing and services methods or techniques,
formulae, designs, styles, specifications, data bases, computer programs
(whether in source code or object code), know-how, strategies and data, whether
or not patentable or registrable under copyright or similar statutes, made,
developed or created by the Employee (whether at the request or suggestion of
the Company, any of its Affiliates, or otherwise, whether alone or in
conjunction with others, and whether during regular hours of work or otherwise)
during the period of Employee's employment by the Company which may pertain to
the business, products, or processes of the Company or any of its Affiliates
(collectively hereinafter referred to as "Inventions"), will be promptly and
fully disclosed by the Employee to an appropriate executive officer of the
Company (other than the Employee) without any additional compensation therefor,
all papers, drawings, models, data, documents and other material pertaining to
or in any way relating to any Inventions made, developed or created by Employee
as aforesaid. For the purposes of this Agreement, the term "Affiliate" or
"Affiliates" shall mean any person, corporation or other entity directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company. For the purposes of this definition, "control" when
used with respect to any person, corporation or other entity means the power to
direct the management and policies of such person or entity, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

        (e) The Employee will keep confidential and will hold for the Company's
sole benefit any Invention which is to be the exclusive property of the Company
under this Section 6 for which no patent, copyright, trademark or other right or
protection is issued.

        (f) The Employee also agrees that the Employee will not without the
prior written consent of the Board of Directors or Chief Executive Officer of
the Company (i) use for Employee's benefit or disclose at any time during
Employee's employment by the Company, or thereafter, except to the extent
required by the performance by the Employee of the Employee's duties as an
employee of the Company, any information obtained or developed by Employee while
in the employ of the Company with respect to any Inventions or with respect to
any customers, clients, suppliers, products, employees, financial affairs, or
methods of design, distribution, marketing, service, procurement or manufacture
of the Company or any of its Affiliates, or any confidential matter, except
information which at the time is generally known to

                                       4
<PAGE>

the public other than as a result of disclosure by the Employee not permitted
hereunder, or (ii) take with the Employee upon leaving the employ of the Company
any document or paper relating to any of the foregoing or any physical property
of the Company or any of its Affiliates.

        (g) The Employee acknowledges and agrees that a remedy at law for any
breach or threatened breach of the provisions of this Section 6 would be
inadequate and, therefore, agrees that the Company and its Affiliates shall be
entitled to injunctive relief in addition to any other available rights and
remedies in case of any such breach or threatened breach; PROVIDED, HOWEVER,
that nothing contained herein shall be construed as prohibiting the Company or
any of its Affiliates from pursuing any other rights and remedies available for
any such breach or threatened breach.

        (h) The Employee agrees that upon termination of Employee's employment
by the Company for any reason, the Employee shall immediately return to the
Company all documents and other property in Employee's possession belonging to
the Company or any of its Affiliates.

        (i) Without limiting the generality of Section 9 hereof, the Employee
hereby expressly agrees that the foregoing provisions of this Section 6 shall be
binding upon the Employee's heirs, successors and legal representatives.

     7. TERMINATION. (a) The Employee's employment hereunder shall be terminated
upon the occurrence of any of the following:

                   (i) death of the Employee;

                   (ii) termination of the Employee's employment hereunder by
            the Employee at any time for any reason whatsoever (including,
            without limitation, resignation or retirement) other than for "good
            reason" as contemplated by clause (v)(B) below;

                   (iii) termination of the Employee's employment hereunder by
            the Company because of the Employee's inability to perform
            Employee's duties on account of disability or incapacity for a
            period of ninety (90) or more days, whether or not consecutive,
            occurring within any period of twelve (12) consecutive months;

                   (iv) termination of the Employee's employment hereunder by
            the Company at any time for "cause" (as hereinafter defined), such
            termination to take effect immediately upon written notice from the
            Company to the Employee; and

                   (v) termination of the Employee's employment hereunder (A) by
            the Company at any time, other than termination by reason of
            disability or incapacity as contemplated by clause (iii) above or
            termination by the Company for "cause" as

                                       5
<PAGE>

            contemplated by clause (iv) above and (B) by the Employee for "good
            reason" (as hereinafter defined).

     The following actions, failures or events shall constitute "cause" for
termination within the meaning of clause (iv) above: (i) the Employee's
conviction of, admission of guilt to or plea of NOLO CONTENDERE or similar plea
(which, through lapse of time or otherwise, is not subject to appeal) with
respect to any crime or offense that constitutes a felony in the jurisdiction
involved; (2) acts of dishonesty or moral turpitude which are materially
detrimental to the Company and/or its Affiliates, (3) failure by the Employee to
obey the reasonable and lawful orders of the Board of Directors or Chief
Executive Officer of the Company, (4) any act by the Employee in violation of
Section 8 hereof, any statement or disclosure by the Employee in violation of
Section 6 hereof, or any material breach by the Employee of a representation or
warranty contained in Section 1(b) hereof; (5) following written notice from the
Board of Directors or Chief Executive Officer of the Company of prior similar
actions by Employee, excessive absenteeism (other than by reason of disability);
(6) following written notice from the Board of Directors or the Chief Executive
Officer of the Company of prior similar actions by Employee, excessive
alcoholism or addiction to drugs not prescribed by a qualified physician or (7)
gross negligence by the Employee in the performance of, or willful disregard by
the Employee of, the Employee's obligations hereunder.

     The following actions, failures or events shall constitute "good reason"
within the meaning of clause (V)(B) above: (1) a material breach by the Company
of its obligations under this Agreement or (2) a material diminution of the
Employee's responsibilities or authority hereunder.

        (b) In the event that the Employee's employment is terminated by the
Company prior to October 11, 2003 for any reason other than "cause" or by
Employee for "good reason," then (i) the Company shall pay to the Employee, as
severance pay or liquidated damages or both, the amount of Base Salary, if any,
which the Employee would have otherwise been entitled to receive pursuant to
Section 4(a) hereof from the date of termination had the Employee's employment
not been so terminated until October 11, 2003 (such amount being herein referred
to as the "Severance Payments" and such period being herein referred to as the
"Severance Period"); PROVIDED, HOWEVER, that (1) if the Employee's employment is
terminated on or after October 11, 2002, the Severance Payments shall be in an
amount equal to the Base Salary of the Employee and (2) the Severance Payments
shall be reduced by any salary, bonus or other compensation received by the
Employee in respect of such Severance Period or received by the Employee in
respect of any other employment or consulting arrangement secured by the
Employee subsequent to the termination of the Employee's employment hereunder
and (ii) all options granted to the Employee pursuant to Section 4(b) hereof
which have not vested shall immediately vest.

        (c) Notwithstanding anything to the contrary expressed or implied
herein, except as required by applicable law and except as set forth in
paragraph (b) above, the Company

                                       6
<PAGE>

(and its Affiliates) shall not be obligated to make any payments to the Employee
or on Employee's behalf of whatever kind or nature by reason of the Employee's
cessation of employment (including, without limitation, by reason of termination
of the Employee's employment by the Company for "cause"), other than (i) such
amounts, if any, of Employee's salary and bonus as shall have accrued and
remained unpaid as of the date of said cessation and (ii) such other amounts
which may be then otherwise payable to the Employee from the Company's benefits
plans or reimbursement policies, if any.

        (d) No interest shall accrue on or be paid with respect to any portion
of any payments hereunder.

     8. NON-COMPETITION. (a) The term "Non-Compete Term" shall mean the period
during which Employee is employed hereunder and (x) in the event Employee's
employment is terminated by the Company for any reason other than "cause" or by
Employee for "good reason," the one-year period following such termination, (y)
in the event Employee's employment is terminated by the Company for "cause" or
by Employee for any reason other than "good reason," the two-year period
following such termination.

            During the Non-Compete Term:

                        (i) the Employee will not make any statement or perform
            any act intended to advance an interest of any existing or
            prospective competitor of the Company or any of its Affiliates in
            any way that will or may injure an interest of the Company or any of
            its Affiliates in its relationship and dealings with existing or
            potential customers or clients, or solicit or encourage any other
            employee of the Company or any of its Affiliates to do any act that
            is disloyal to the Company or any of its Affiliates or inconsistent
            with the interest of the Company or any of its Affiliate's interests
            or in violation of any provision of this Agreement;

                        (ii) the Employee will not discuss with any existing or
            potential customers or clients of the Company or any of its
            Affiliates the present or future availability of services or
            products of a business, if the Employee has or expects to acquire a
            proprietary interest in such business or is or expects to be an
            employee, officer or director of such business, where such services
            or products are competitive with services or products which the
            Company or any of its Affiliates provides;

                        (iii) the Employee will not make any statement or do any
            act intended to cause any existing or potential customers or clients
            of the Company or any of its Affiliates to make use of the services
            or purchase the products of any competitive business in which the
            Employee has or expects to acquire a proprietary interest or in
            which the Employee is or expects to be made an employee, officer or
            director, if such services or products in any way compete with the
            services or products sold or provided or

                                       7
<PAGE>

            expected to be sold or provided by the Company or any of
            its Affiliates to any existing or potential customer or client; and

                        (iv) the Employee will not directly or indirectly (as a
            director, officer, employee, manager, consultant, independent
            contractor, advisor or otherwise) engage in competition with, or own
            any interest in, perform any services for, participate in or be
            connected with (i) any business or organization which engages in
            competition with the Company or any of its Affiliates in any
            geographical area where any business is presently carried on by the
            Company or any of its Affiliates, or (ii) any business or
            organization which engages in competition with the Company or any of
            its Affiliates in any geographical area where any business shall be
            hereafter, during the period of the Employee's employment by the
            Company, carried on by the Company or any of its Affiliates, if such
            business is then being carried on by the Company or any of its
            Affiliates in such geographical area; PROVIDED, HOWEVER, that the
            provisions of this Section 8(a) shall not be deemed to prohibit the
            Employee's ownership of not more than one percent (1%) of the total
            shares of all classes of stock outstanding of any publicly held
            company.

        (b) During the Non-Compete Term, the Employee will not directly or
indirectly hire, engage, send any work to, place orders with, or in any manner
be associated with any supplier, contractor, subcontractor or other person or
firm which rendered manufacturing or other services, or sold any products, to
the Company or any of its Affiliates if such action by Employee would have a
material adverse effect on the business, assets or financial condition of the
Company or any of its Affiliates.

        (c) In connection with the foregoing provisions of this Section 8, the
Employee represents that Employee's experience, capabilities and circumstances
are such that such provisions will not prevent Employee from earning a
livelihood. The Employee further agrees that the limitations set forth in this
Section 8 (including, without limitation, any time or territorial limitations)
are reasonable and properly required for the adequate protection of the
businesses of the Company and its Affiliates. It is understood and agreed that
the covenants made by the Employee in this Section 8 (and in Section 6 hereof)
shall survive the expiration or termination of this Agreement.

        (d) For purposes of this Section 8, proprietary interest in a business
is ownership, whether through direct or indirect stock holdings or otherwise, of
one percent (1%) or more of such business. The Employee shall be deemed to
expect to acquire a proprietary interest in a business or to be made an officer
or director of such business if such possibility has been discussed with any
officer, director, employee, agent, or promoter of such business.

        (e) The Employee acknowledges and agrees that a remedy at law for any
breach or threatened breach of the provisions of this Section 8 would be
inadequate and, therefore, agrees that the Company and any of its Affiliates
shall be entitled to injunctive relief in

                                       8
<PAGE>

addition to any other available rights and remedies in cases of any such breach
or threatened breach; PROVIDED, HOWEVER, that nothing contained herein shall be
construed as prohibiting the Company or any of its Affiliates from pursuing any
other rights and remedies available for any such breach or threatened breach.

     9. NON-ASSIGNABILITY. (a) Neither this Agreement nor any right or interest
hereunder shall be assignable by the Employee, Employee's beneficiaries, or
legal representatives without the Company's prior written consent; PROVIDED,
HOWEVER, that nothing in this Section 9(a) shall preclude the Employee from
designating a beneficiary to receive any benefit payable hereunder upon
Employee's death or incapacity.

        (b) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation or to exclusion,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.

     10. BINDING EFFECT. Without limiting or diminishing the effect of Section 9
hereof, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, successors, legal representatives and
assigns.

     11. NOTICE. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and either delivered in person or
sent by first class certified or registered mail, postage prepaid, if to the
Company, at the Company's principal place of business, attention: Chief
Executive Officer (with a copy to Pryor Cashman Sherman & Flynn LLP, 410 Park
Avenue, New York, New York 10022, Attention: Eric M. Hellige, Esq.), and if to
the Employee, at Employee's home address set forth above, or to such other
address or addresses as either party shall have designated in writing to the
other party hereto.

     12. SEVERABILITY. The Employee agrees that in the event that any court of
competent jurisdiction shall finally hold that any provision of Section 6 or 8
hereof is void or constitutes an unreasonable restriction against the Employee,
such provision shall not be rendered void but shall apply with respect to such
extent as such court may judicially determine constitutes a reasonable
restriction under the circumstances. If any part of this Agreement other than
Section 6 or 8 is held by a court of competent jurisdiction to be invalid,
illegible or incapable of being enforced in whole or in part by reason of any
rule of law or public policy, such part shall be deemed to be severed from the
remainder of this Agreement for the purpose only of the particular legal
proceedings in question and all other covenants and provisions of this Agreement
shall in every other respect continue in full force and effect and no covenant
or provision shall be deemed dependent upon any other covenant or provision.

     13. WAIVER. Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition, nor shall

                                       9
<PAGE>

any waiver or relinquishment of any right or power hereunder at any one or more
times be deemed a waiver or relinquishment of such right or power at any other
time or times.

     14. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement constitutes the entire
and final expression of the agreement of the parties with respect to the subject
matter hereof and supersedes all prior agreements, oral and written, between the
parties hereto with respect to the subject matter hereof. This Agreement may be
modified or amended only by an instrument in writing signed by both parties
hereto.

     15. RELEVANT LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Nevada without regard to the
conflicts of law principles thereof.

     16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     17. SURVIVAL. The termination of Employee's employment hereunder shall not
affect the enforceability of Sections 6 or 8.

     18. FURTHER ASSURANCES. The parties agree to execute and deliver all such
further instruments and take such other and further action as may be reasonably
necessary or appropriate to carry out the provisions of this Agreement.

     19. HEADINGS. The Section headings appearing in this Agreement are for
purposes of easy reference and shall not be considered a part of this Agreement
or in any way modify, amend or affect its provisions.

     20. ARBITRATION. The parties agree that all disputes or questions arising
in connection with this Agreement and/or the termination of Employee's
employment hereunder shall be settled by a single arbitrator pursuant to the
Rules of the American Arbitration Association in the State of Nevada, and the
award of the arbitration shall be final, non-appealable, conclusive and
enforceable in a court of competent jurisdiction; PROVIDED, HOWEVER,
notwithstanding the foregoing, in no event shall any dispute, claim or
disagreement arising under Sections 6, 7 and 8 of this Agreement that requires
injunctive or other equitable relief be required to be submitted to arbitration
pursuant to this provision or otherwise.

     21. ATTORNEY'S FEES. In the event any dispute between the parties regarding
this Agreement, the prevailing party shall be entitled to be reimbursed for such
prevailing party's attorneys fees and costs of court (or cost of arbitration, as
applicable) by the non-prevailing party.

                                       10
<PAGE>

     IN WITNESS WHEREOF, the Company and the Employee have duly executed and
delivered this Agreement as of the day and year first above written.

                                 FRONT PORCH DIGITAL INC.

                                 By: /s/ MELANIE R. FENDT
                                 ---------------------------------------
                                    Name:  Melanie R. Fendt
                                    Title: Chief Administrative Officer

                                     /s/ MELTON EDWARD LADD
                                 --------------------------------------
                                         MELTON EDWARD LADD

                                       11

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