Document:

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                                                                   Exhibit 10.38

                                              [PRIME RESPONSE LOGO APPEARS HERE]

                PRINCIPAL STATEMENT OF TERMS AND CONDITIONS OF
                              EMPLOYMENT BETWEEN
                            PRIME RESPONSE LIMITED
                                      AND
                                 GARY DANIELS

COMMENCEMENT DATE:  30 November, 1998

JOB TITLE:          VP Product Development

DEPARTMENT:         Development

REPORTING TO:       Terry Osborne, CEO - Group

ANNUAL SALARY:      (Pounds)140,000

I am pleased to confirm Prime Response Limited's offer on the following terms
and conditions. In this document, "Company" shall refer to Prime Response
Limited:

1.   COMMENCEMENT DATE:
     -----------------

     Your commencing date of employment is as set out above, and is the first
     day of your period of continuous employment with the Company.

2.   LOCATION:
     --------

     You will be based at the Company's offices at Goat Wharf, Brentford
     travelling to other locations as reasonably required in the performance of
     your duties. The Company expects you to be flexible, and may during the
     course of your employment require you to work at such other locations as
     may be reasonable, given the nature and status of your job.

3.   SALARY:
     ------

3.1  Your salary is set out above, and is payable monthly in arrears in 12 equal
     instalments on the 28th of each month.

3.2  The Company may withhold the payment of any money owed or due to be paid to
     you if you are in breach of the terms of this contract and may withhold or
     deduct any money owing or due to be paid by it to you under this contract
     or otherwise from any money owing or due to be paid to you.

3.3  The Company operates a discretionary bonus scheme, based on company
     results, and revenue recognisable under the US Generally Accepted
     Accounting Principles.

3.4  Any sales targets, and commission scheme for which you may be eligible, are
     detailed in a separate attachment to this letter.
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3.5  Any petrol expenses incurred, whether business or private, will be
     reimbursed in accordance with the Company's expense policy, and will be
     taxed in accordance with current Inland Revenue guidelines.

3.6  The Company's expenses policy, benefits package and stock option scheme are
     described in the Company Handbook, which is attached to this Agreement.

4.   HOURS OF WORK:
     -------------

     Your normal hours of work will be 37.5 hours per week from 9:00 a.m. to
     5:30 p.m. on each day from Monday to Friday with one hour for lunch each
     day to be taken between 12 noon and 2 p.m., except where agreed with your
     departmental head. Overtime is only paid in exceptional circumstances and
     at the sole discretion of a director or your departmental head, who has
     approved such overtime in advance.

5.   HOLIDAY:
     -------

5.1  Your entitlement to paid holiday is 25 working days each calendar year of
     which not more than two weeks and two days may be taken consecutively
     unless by prior arrangement in writing from the Company. If you join the
     Company during the year, your holiday entitlement is calculated on a pro
     rata basis. No more than five days entitlement to holiday not taken in a
     given calendar year may be carried forward into the next calendar year
     without the prior permission in writing of the Company and no additional
     payment will be made in respect of holidays not taken. All holidays carried
     over must be taken by 31st March of the following year.

5.2  In addition to the above, you are entitled to all statutory holidays with
     pay. A compensatory day's holiday will be given when any of these days fall
     on a Saturday or Sunday.

5.3  In the event of you leaving the Company, you will be paid in lieu of any
     outstanding holiday entitlement on a pro rata basis.

5.4  One day's pay (whether for the purposes of holiday or where you work for
     part of a month) will be calculated at the rate of annual salary.
                                                        -------------

5.5  In the event that at your date of termination, you have already taken more
     holiday than you are entitled to, the Company will have the right to
     recover from you payment in respect for the excess.

6.   TERMS AND CONDITIONS RELATING TO INABILITY TO WORK DUE TO ILLNESS:
     -----------------------------------------------------------------

6.1  If you are unable to attend the office through illness, you must telephone
     (or have someone telephone on your behalf) before 10.00 a.m. on the morning
     of your illness.  Appropriate medical certificates must be received by the
     Company to cover all periods of illness in excess of five working days or
     the Company reserves the right to
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                                              [PRIME RESPONSE LOGO APPEARS HERE]

     withhold payment of salary in respect of those days. Any payments of salary
     for periods of sickness will always be at the discretion of the Board of
     Directors. If payment of salary is withheld during periods of sickness and
     providing you are appropriately qualified and have complied with this
     clause, then statutory sick pay will be paid.

6.2  In the event that you are absent from work for more than five working days,
     you may be requested to submit yourself to a medical examination at the
     Company's expense by a suitably qualified person of the Company's choice if
     you are unable to perform your duties for the Company as a result of ill
     health or injury. If that person is unable to confirm that you are fit to
     perform your duties, you will co-operate in ensuring the prompt delivery of
     all relevant medical reports to the Company and will allow the Company
     access to any relevant medical report which has been prepared by a medical
     practitioner responsible for your care.

7.   TERMINATION OF EMPLOYMENT:
     -------------------------

7.1  Your employment is subject to a notice period of six months on either side
     after a three months probationary period, but in the event of a hostile
     take-over bid this will be increased to 12 months. The Company may elect to
     pay you in lieu of any notice period.

7.2  No accrued holiday entitlement calculated in accordance with Clause 5 above
     may be treated as counting towards the period of notice which you are
     required to give to the Company.

7.3  Notwithstanding any other provision to the contrary in this Agreement, the
     Company may, during your notice period, place you on "gardening leave",
     whereby you will be required to not perform any duties on behalf of the
     Company, and you will be required to not attend the Company's premises, or
     those of its customers, except as required by the Company. During this
     period, you will remain an employee of the Company, and therefore you may
     not undertake any other employment or engagement, and you remain bound by
     this contract of employment.

8.   GRIEVANCE PROCEDURE:
     -------------------

8.1  If you have any grievance relating to your employment, you should raise it
     with your line manager either orally or in writing. If in your view the
     grievance remains unresolved, you should raise it with your departmental
     head. If in your view the grievance remains unresolved, you should raise it
     with the General Manager for EMEA, who will make the final decision
     together with the Personnel Officer. In the event that you departmental
     head is the General Manager for EMEA, the final decision shall be taken by
     the Chairman of the Company.

8.2  The Company's grievance procedure is set out more fully in the Company
     Handbook.

9.   PENSION SCHEME:
     --------------

     The Company does not operate a Pension Scheme.
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                                              [PRIME RESPONSE LOGO APPEARS HERE]

10.  SECURITY OF CONFIDENTIAL INFORMATION:
     ------------------------------------

10.1 During your employment you will have access to and will be entrusted with
     confidential information and trade secrets relating to the business of the
     Company, which may include information entrusted to the Company by its
     clients. You may not during your employment, otherwise than in the proper
     performance of your duties (and then only to those who need to know such
     information or secrets) or afterwards (otherwise than with the prior
     written consent of the your department head or a director or as required by
     law) use or disclose any confidential information or trade secrets
     concerning the business of the Company or in respect of which the Company
     may be bound by an obligation of confidence to a third party and you should
     also use your best endeavors to prevent the publication or disclosure of
     such information or secrets. All notes, memoranda and other records
     (including those stored on computer software) made during your employment
     and relating to the business of the Company belong to the Company and
     should promptly be handed over to the Company on request, or on termination
     of your employment for whatever reason..

10.2 Any documents or equipment provided for you by the Company remain the
     property of the Company and must be returned when your employment ceases.

10.3 Any discovery, invention, secret process or improvement in procedure
     discovered, invented, developed or devised by you during your employment
     with the Company (and whether or not in conjunction with a third party) and
     in the course of your duties affecting or relating to the business of the
     Company or capable of being used or adapted for use in it, should
     immediately be disclosed to the Company and subject to such rights as you
     may have under the Patents Act 1977 will belong to the Company.

10.4 Any other works created by you in the course of your employment, or using
     Company property or equipment, shall belong to the Company, and you will,
     where necessary, assign all rights in such works to the Company on request.
     You may not use such works, other than in the course of your employment.

10.5 Any breach of security will be treated as in accordance with the Company's
     disciplinary procedure, and may, result in instant dismissal and could make
     you liable to prosecution.

11.  DISCIPLINE:
     ----------

     The Company's disciplinary procedure is set out in the Company Handbook, a
     copy of which is supplied with this contract.

12.  JOB DESCRIPTION & DUTIES:
     ------------------------

     Your detailed job description will be separately notified to you by your
     line manager, who will also have responsibility for determining your
     duties.
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13.  COMPANY HANDBOOK:
     ----------------

     The Company Handbook, which is supplied with these terms and conditions and
     as the same shall be amended from time to time, forms part of your contract
     of employment.

14.  DATA PROTECTION:
     ---------------

     From time to time the Company will gather personal data from you which may
     be subject to the Data Protection Act 1984, and any successor legislation.
     By signing this contract, you authorise the Company to disclose this data
     to certain third parties for the purposes of, inter alia, assessing you
     eligibility to health and other benefits the Company may from time to time
     consider. In the event that you do not wish any personal data to be
     disclosed, you may notify your line manager at any time.

This agreement supersedes any previous agreement between the parties whether
written, oral or implied.

If you accept the above terms and conditions, please sign and return one copy of
this form.

                       PRIME RESPONSE LIMITED         EMPLOYEE

Signed by:             /s/ Michelle Rose              /s/ Gary Daniels
                       -----------------------        --------------------------

Name (in Capitals):        MICHELLE ROSE                  GARY DANIELS
                       -----------------------        --------------------------

Date:                      30/11/98                       17/th/ October 98
                       -----------------------        --------------------------

Title:                     PERSONNEL
                       -----------------------

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           [PRIME RESPONSE BRENTFORD, U.K. LETTERHEAD APPEARS HERE]

Prime Response Ltd.

Gary Daniels
Garden Cottage
Holmbury Hill Road
Holmbury St. Mary
Near Dorking
Surrey RH5 6NR

                                                                6/th/ October 98

Dear Gary,

I am delighted to offer you the position of Vice President Product Development
reporting to the CEO based in Brentford. Your responsibilities will include
bringing together existing product maintenance and support into a single code
stream, developing now product versions with a variety of front end
architectures including NT and web. You will also be responsible for porting the
product to different architectures maintaining version control and consistency
and improving the productivity and quality within the development function
through the implementation of control, quality and testing processes.

Your remuneration will consist of a basic salary of (Pounds)140,000 which
includes car allowance, plus a performance bonus of 50% or (Pounds)70,000.
As discussed we will jointly agree the components of the bonus.

In addition you will be granted on joining 35,000 options of pre flotation
stock. It is our intent to float the Company in the US during the next 24 month
period. The full details of the stock grant scheme are currently being produced
and you will receive information at the appropriate time.  As discussed in the
event of a take-over either pre or post IPO, all shares will be accelerated.

Your notice period will be 6 months on either side after a three month
probationary period, but in the event of a hostile take-over it will be
increased to 12 months. You will be entitled to 25 days holiday per annum, with
pro rata entitlement.

This offer is subject to satisfactory references, which are currently being
sought and assumes a start date to be agreed. I know that you will be discussing
notice period, we would obviously want you on board as soon as possible in 1998.

This is a very exciting opportunity to join an organization in its formative
stages that has a great product and a very desirable blue chip client base.

We can build a formidable team that will lead this company to great success and
I know you will play a major role. I very much look forward to your joining.

Best Regards,

/s/ James Carling

James Carling
Chairman

I accept the terms of this offer.

Signed /s/ Gary Daniels                       Date:  6/th/ October 98<PAGE>

                                                                  Exhibit 10.39

October 22, 1999

Paul Lavallee
442 Carpenter Road
Whitinsville, MA  01588

Dear Paul:

I am pleased to offer you the position of President of the Americas for Prime
Response, Inc. (the "Company"), reporting directly to me.  In that role, you
will have complete revenue and P&L responsibility for all sales, professional
services and customer support activities throughout the United States, Canada
and Latin America.

Compensation for the position includes a base salary of $250,000 per year and an
annual incentive compensation equal to 50% of your base salary ($125,000).  You
will be eligible to earn one fourth of that incentive for the remainder of 1999
($31,250).  Half of that ($15,620) will be guaranteed.  Over achievement of $2
million in license revenue for the fourth quarter of 1999 will result in
additional earnings.

In addition, a stock option to purchase 200,000 shares of the Company's common
stock at $5.00 per share will be granted.  As we reviewed, since Prime Response
is legally considered to be in registration, pricing on stock options is to be
calculated at a 10% discount to the low end of the filing range.  The Company is
expected to file for a public listing during the week of November 1.  Final IPO
pricing has yet to be determined and trading pricing is unknown.  With regard to
the pricing difference that we have discussed, we are prepared to price your
stock options at $5.00 per share.

Twenty percent of these stock options (40,000 shares) will be vested
immediately.  The remaining shares (160,000) will be vested according to the
Company stock option standards over a four-year period of time.

General Atlantic Partners, a principal investor and holder of a company board
seat, has agreed to allow your purchase of up to $150,000 of Prime Response
common stock owned by them for $3.00 per share.  This transaction must be
concluded with General Atlantic not later than October 31, 1999.

Furthermore, you will have the opportunity to participate in Prime Response
benefits which include 3 weeks of vacation annually, health and life insurance
and a 401K retirement plan, which includes Company contribution.
<PAGE>

Paul Lavallee
October 22, 1999
Page 2

Should you be terminated without cause, your cash compensation of base salary
and incentive potential (not less than $375,000 as described above) shall
continue for one year.  In addition, the Company will allow you to become vested
in an additional year's worth of stock options to be exercised within one year
of termination.  The same terms shall apply if you elect to terminate in the
event that your position is eliminated, you are offered a position of lesser
responsibility, or if you are not selected for a promotion should a higher
position be created or vacated.

Should you be terminated without cause at a change of control or should you be
offered a position at a change of control that is of lesser responsibility than
the position being offered in this letter, these stock options shall be 100%
vested.  In that event, you will be offered a severance program that continues
your cash compensation of base salary band incentive potential (not less than
$375,000 as described above), as well as all Company paid health and life
insurance for one year.

For purposes of this offer, "cause" condition only occurs if the Company
terminates you after you:  (a) shall have been convicted of any felony
including, but not limited to, a felony involving fraud, theft,
misappropriation, dishonesty, or embezzlement; (b) shall have committed
intentional acts of gross misconduct that materially impairs the goodwill or
business of the Company or cause material damage to its property, goodwill, or
business; or (c) shall have refused to, or willfully failed to, perform his
material duties, provided, however, that no termination under this subparagraph
shall be effective unless you do not cure such refusal or failure to the
Company's satisfaction as soon as practicable after the Company gives you
written notice identifying such refusal or failure (and, in any event, within
thirty (30) calendar days after receipt of such written notice).  No act or
failure to act on the part of you shall be considered "willful" unless it is
done, or omitted to be done, by you in bad faith or without reasonable belief
that this action or omission was in the best interests of the Company.

Should your termination result from your death or disability, you or your estate
can exercise the vested portion of your stock options within the life of the
stock option.

The Company will promptly reimburse you for all reasonable business expenses
incurred by you in connection with and commensurate with the performance of your
duties for the Company, upon substantiation of such business expenses in
accordance with the policies of the Company in effect from time to time.

In recognition of your large physical stature, airline travel one step up from
coach will be provided for all flights over one hour in duration.  Should there
be the opportunity to purchase full fare coach tickets and then participate in
airline upgrade programs in order to secure that step up from coach, you agree
to take every opportunity to do so.

It is recognized that you currently participate in a variety of outside boards
and advisory boards and receive compensation from these activities.  This may
continue providing that it does not interfere with your duties in the Company
and is not considered to be in conflict with the
<PAGE>

Paul Lavallee
October 22, 1999
Page 3

Company's interests. It is understood that this may include one to two days per
month. Should the Company believe there is material interference, you will be
notified in writing and shall have 60 days to cure that interference in an
appropriate manner.

Your entrance to Prime Response comes at a very exciting time for the Company
and the industry at large.  Your background, experience and achievements to date
will be put to invaluable use as we work together to build a world class
Company.  I'm excited by the opportunity to work with you toward that end as you
continue to build your career with Prime Response.

It is anticipated that you will begin your employment with Prime Response on
Monday, October 25th.  Among our first initiatives will be travel to Toronto to
participate in the DMA show.

                                       Sincerely,

                                       /s/ Peter J. Boni
                                       Peter J. Boni
                                       President and Chief Executive Officer
Accepted and agreed to:

/s/ Paul B. Lavallee
----------------------------
Paul B. Lavallee

This Agreement shall be governed by and construed, interpreted and enforced in
accordance with the laws of the Commonwealth of Massachusetts.  This Agreement's
terms will prevail, in favor of Paul B. Lavallee, with respect to any conflict
arising between terms of this Agreement and others he may sign with the Company
(including, but not limited to, the Stock Option Agreement and/or any Employment
Agreement).

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