Document:

<PAGE>

                                                                   Exhibit 10.16

                                                                  Execution Copy

================================================================================

                     STOCK AND WARRANT PURCHASE AGREEMENT

                                     among

                          PRIME RESPONSE GROUP INC.,

                      GENERAL ATLANTIC PARTNERS 52, L.P.

                                      and

                      GAP COINVESTMENT PARTNERS II, L.P.

                        ______________________________

                              Dated March 2, 1999
                        ______________________________

================================================================================
<PAGE>

<TABLE>
<CAPTION>

                                                  Table of Contents

                                                                                                        Page #

<S>                                                                                                    <C>
ARTICLE I.            DEFINITIONS......................................................................   1
         A.           Definitions......................................................................   1
         B.           Accounting Terms; Financial Statements...........................................   5

ARTICLE II.           PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS................................   5
         A.           Purchase and Sale of Preferred Stock and Warrants................................   6
         B.           Certificate of Incorporation.....................................................   6
         C.           Closing..........................................................................   6

ARTICLE III.          REPRESENTATIONS AND WARRANTIES
                      OF THE COMPANY...................................................................   6
         A.           Corporate Existence and Power....................................................   6
         B.           Authorization; No Contravention..................................................   7
         C.           Governmental Authorization; Third Party Consents.................................   7
         D.           Binding Effect...................................................................   7
         E.           Capitalization...................................................................   7
         F.           Financial Statements.............................................................   8
         G.           No Default or Breach; Contractual Obligations....................................   9
         H.           No Material Adverse Change; Ordinary Course of Business..........................   9
         I.           Private Offering.................................................................   9
         J.           Broker's, Finder's or Similar Fees...............................................   9
         K.           Disclosure.......................................................................   9
         L.           Revised Product Plan of Record...................................................  10

ARTICLE IV.           REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.................................  10
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                                      <C>
         A.           Existence and Power...............................................................  10
         B.           Authorization; No Contravention...................................................  10
         C.           Governmental Authorization; Third Party Consents..................................  10
         D.           Binding Effect....................................................................  10
         E.           Purchase for Own Account..........................................................  11
         F.           Restricted Securities.............................................................  12
         G.           Investment Experience.............................................................  12
         H.           Broker's, Finder's or Similar Fees................................................  12

ARTICLE V.            CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE...........................  12

ARTICLE VI.           CONDITIONS TO THE OBLIGATION OF THE
                      COMPANY TO CLOSE..................................................................  14

ARTICLE VII.          INDEMNIFICATION...................................................................  14
         A.           Indemnification...................................................................  14
         B.           Notification......................................................................  15

ARTICLE VIII.         AFFIRMATIVE COVENANTS.............................................................  16
         A.           Financial Statements and Other Information........................................  16

ARTICLE IX.           MISCELLANEOUS.....................................................................  17
         A.           Survival of Representations and Warranties........................................  17
         B.           Notices...........................................................................  17
         C.           Successors and Assigns; Third Party Beneficiaries.................................  18
         D.           Amendment and Waiver..............................................................  19
         E.           Counterparts......................................................................  19
         F.           Headings..........................................................................  19
         G.           GOVERNING LAW.....................................................................  19
         H.           Severability......................................................................  19
</TABLE>

                                       ii
<PAGE>

<TABLE>

<S>                                                                                                      <C>
         I.           Entire Agreement..................................................................  19
         J.           Fees..............................................................................  20
         K.           Publicity.........................................................................  20
         L.           Further Assurances................................................................  20

</TABLE>

                                      iii
<PAGE>

EXHIBITS

A          Form of Stockholders Agreement Amendment
B          Form of Registration Rights Agreement Amendment
C          Form of GAP LP and GAPCO Warrants

SCHEDULES

2.1        Purchased Shares, Warrants and Purchase Price
3.5(a)     List of Stockholders and Capital Stock and Stock Equivalents
3.5(b)     Subsidiaries
<PAGE>

                     STOCK AND WARRANT PURCHASE AGREEMENT

          STOCK AND WARRANT PURCHASE AGREEMENT, dated February 26, 1999 (this
"Agreement"), among Prime Response Group Inc., a Delaware corporation (the
"Company"), General Atlantic Partners 52, L.P., a Delaware limited partnership
("GAP LP"), and GAP Coinvestment Partners II, L.P., a Delaware limited
partnership ("GAP Coinvestment" and, together with GAP LP, the "Purchasers").

          WHEREAS, upon the terms and conditions set forth in this Agreement,
the Company proposes to issue and sell to (a) GAP LP, for an aggregate purchase
price of $4,082,016, an aggregate of 680,200 shares of Series B Convertible
Participating Preferred Stock, par value $.01 per share, of the Company (the
"Preferred Stock") and a warrant (the "GAP LP Warrant") to purchase, subject to
the terms and conditions thereof, an aggregate of 340,100 shares of common
stock, par value $.01 per share, of the Company (the "Common Stock") at an
exercise price of $2.56 per share (subject to adjustment), containing the terms
and conditions set forth in the form of warrant attached hereto as Exhibit C;
                                                                   ---------
and (b) GAP Coinvestment, for an aggregate purchase price of $918,988, an
aggregate of 153,134 shares of Preferred Stock and a warrant (the "GAPCO
Warrant" and, together with the GAP LP Warrant, the "Warrants") to purchase,
subject to the terms and conditions thereof, an aggregate of 76,567 shares of
Common Stock, at an exercise price of $2.56 per share (subject to adjustment),
containing the terms and conditions set forth in the form of warrant attached
hereto as Exhibit C; and
          ---------

          WHEREAS, each share of Preferred Stock is convertible (subject to
adjustment) into one share of common stock, par value $.01 per share of the
Company (the "Common Stock").

          NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:

                                      I.

                                  DEFINITIONS
                                  -----------

          A.  Definitions.  As used in this Agreement, and unless the context
              -----------
requires a different meaning, the following terms have the meanings indicated:

          "Affiliate" shall mean any Person who is an "affiliate" as defined in
           ---------
Rule 12b2 of the General Rules and Regulations under the Exchange Act.  The
following shall be deemed to be Affiliates of GAP LP:  (a) GAP LLC, the members
of GAP LLC and the limited partners of GAP LP; (b) any Affiliate of GAP LLC, the
members of GAP LLC and the limited partners of GAP LP; and (c) any limited
liability company or partnership a majority of whose members or partners, as the
case may be, are members
<PAGE>

of GAP LLC. GAP LP and GAP Coinvestment shall be deemed to be Affiliates of one
another.

          "Agreement" means this Agreement as the same may be amended
           ---------
supplemented or modified in accordance with the terms hereof.

          "Audited Financial Statements" has the meaning set forth in Section
           ----------------------------
3.6 of this Agreement.

          "Board of Directors" means the Board of Directors of the Company.
           ------------------

          "Business Day" means any day other than a Saturday, Sunday or other
           ------------
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.

          "By-laws" means the by-laws of the Company in effect on the Closing
           -------
Date, as the same may be amended from time to time.

          "Certificate of Incorporation" means the Certificate of Incorporation
           ----------------------------
of the Company, as the same shall have been amended from time to time.

          "Claims" means any actions, suits, proceedings, claims, complaints,
           ------
disputes, arbitrations or investigations.

          "Closing" has the meaning set forth in Section 2.3 of this Agreement.
           -------

          "Closing Date" has the meaning set forth in Section 2.3 of this
           ------------
Agreement.

          "Commission" means the Securities and Exchange Commission or any
           ----------
similar agency then having jurisdiction to enforce the Securities Act.

          "Common Stock" has the meaning set forth in the recitals to this
           ------------
Agreement.

          "Company" has the meaning set forth in the recitals to this Agreement.
           -------

          "Condition of the Company" means the assets, business, properties,
           ------------------------
prospects, operations or financial condition of the Company and the
Subsidiaries, taken as a whole.

          "Contingent Obligation" means, as applied to any Person, any direct or
           ---------------------
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of another Person (the "primary obligor"),
                ------------------                           ---------------
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligation or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to
<PAGE>

maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet item, level of income
or financial condition of the primary obligor, or (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, or (d) otherwise to assure or hold harmless the owner
of any such primary obligation against loss or failure or inability to perform
in respect thereof. The amount of any Contingent Obligation shall, unless stated
to be otherwise in the instrument constituting the Contingent Obligation, be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by the Board of Directors.

          "Contractual Obligations" means as to any Person, any provision of any
           -----------------------
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.

          "Financial Statements" has the meaning set forth in Section 3.6.
           --------------------

          "GAAP" means generally accepted accounting principles in effect from
           ----
time to time in the United States or the United Kingdom, as the case may be.

          "GAP Coinvestment" has the meaning set forth in the recitals to this
           ----------------
Agreement.

          "GAP Coinvestment I" means GAP Coinvestment Partners, L.P., a New York
           ------------------
limited partnership.

          "GAP 48" means General Atlantic Partners 48, L.P., a Delaware limited
           ------
partnership.

          "GAP 42" means General Atlantic Partners 42, L.P., a Delaware limited
           ------
partnership.

          "GAP LLC" means General Atlantic Partners, LLC, a Delaware limited
           -------
liability company and the general partner of GAP LP, and any successor to such
entity.

          "GAP LP" has the meaning set forth in the recitals to this Agreement.
           ------

          "GAP LP Warrant" has the meaning assigned to such term in the recital
           --------------
to this Agreement.

          "GAPCO Warrant" has the meaning assigned to such term in the recital
           -------------
to this Agreement.

          "Governmental Authority" means the government of any nation, state,
           ----------------------
city, locality or other political subdivision thereof, any entity exercising
executive,
<PAGE>

legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.

          "Indemnified Party" has the meaning set forth in Section 7.1 of this
           -----------------
Agreement.

          "Indemnifying Party" has the meaning set forth in Section 7.1 of this
           ------------------
Agreement.

          "Lien" means any mortgage, deed of trust, pledge, hypothecation,
           ----
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences),
including, without limitation, those created by, arising under or evidenced by
any conditional sale or other title retention agreement, the interest of a
lessor under a Capital Lease Obligation, or any financing lease having
substantially the same economic effect as any of the foregoing.

          "Orders" has the meaning set forth in Section 3.2 of this Agreement.
           ------

          "Person" means any individual, firm, corporation, partnership, trust,
           ------
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, Governmental Authority or other entity of any kind,
and shall include any successor (by merger or otherwise) of such entity.

          "Preferred Stock" has the meaning set forth in the recitals to this
           ---------------
Agreement.

          "Purchased Shares" has the meaning set forth in Section 2.1 of this
           ----------------
Agreement.

          "Purchasers" has the meaning set forth in the recitals to this
           ----------
Agreement.

          "Registration Rights Agreement Amendment" means Amendment No. 2 to the
           ---------------------------------------
Registration Rights Agreement, dated as of October 24, 1997, among the Company,
GAP 42, GAP Coinvestment I and the stockholders named therein, substantially in
the form attached hereto as Exhibit B.
                            ---------

          "Requirements of Law" means, as to any Person, any law, statute,
           -------------------
treaty, rule, regulation, right, privilege, qualification, license or franchise
or determination of an arbitrator or a court or other Governmental Authority or
stock exchange, in each case applicable or binding upon such Person or any of
its property or to which such Person or any of its property is subject or
pertaining to any or all of the transactions contemplated or referred to herein.

          "Securities Act" means the Securities Act of 1933, as amended, and the
           --------------
rules and regulations of the Commission thereunder.
<PAGE>

          "Stock Equivalents" means any security or obligation which is by its
           -----------------
terms convertible into or exchangeable for shares of common stock or other
capital stock or equity securities of the Company, and any option, warrant or
other subscription or purchase right with respect to common stock or such other
capital stock or equity securities.

          "Stockholders Agreement" has the meaning set forth in Section 5.8 of
           ----------------------
this Agreement.

          "Stockholders Agreement Amendment" means Amendment No. 1 to the
           --------------------------------
Stockholders Agreement, dated as of October 24, 1997, among the Company, GAP 42,
GAP Coinvestment I and the stockholders named therein, substantially in the form
attached hereto as Exhibit A.
                   ---------

          "Subsidiaries" means Prime Response Limited, a company registered in
           ------------
England and Wales under number 2155722, and a corporation or other Person of
which 50% or more of the voting power of the outstanding voting equity
securities or 50% or more of the outstanding economic equity interest is held,
directly or indirectly, by such Person.  Unless otherwise qualified, or the
contest otherwise requires, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.

          "Transaction Documents" means collectively, this Agreement, the
           ---------------------
Stockholders Agreement Amendment and the Registration Rights Agreement
Amendment.

          "Unaudited Financial Statements" has the meaning set forth in Section
           ------------------------------
3.6 of this Agreement.

          "Warrant Shares" has the meaning set forth in Section 2.1 of this
           --------------
Agreement.

          "Warrants" has the meaning assigned to such term in the recital to
           --------
this Agreement.

          B.  Accounting Terms; Financial Statements.  All accounting terms
              --------------------------------------
used herein not expressly defined in this Agreement shall have the respective
meanings given to them in accordance with sound accounting practice.  The term
"sound accounting practice" shall mean such accounting practice as, in the
opinion of the independent certified public accountants regularly retained by
the Company, conforms at the time to GAAP applied on a consistent basis except
for changes with which such accountants concur.

                                      II.

               PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS
               -------------------------------------------------
<PAGE>

          A.  Purchase and Sale of Preferred Stock and Warrants.  Subject to
              -------------------------------------------------
the terms and conditions herein set forth, the Company agrees to issue and sell
to each of the Purchasers, and each of the Purchasers agrees that it will
purchase from the Company, at the Closing, the aggregate number of shares of
Preferred Stock, and the Warrants to purchase the aggregate number of shares of
Common Stock, set forth opposite such Purchaser's name on Schedule 2.1 hereto,
                                                          ------------
for the aggregate purchase price set forth opposite such Purchaser's name on
Schedule 2.1 hereto (all of the shares of Preferred Stock being purchased
------------
hereunder by the Purchasers being referred to herein as the "Purchased Shares"
and all of the shares of Common Stock issuable upon exercise of the Warrants
being purchased pursuant hereto being referred to herein as the "Warrant
Shares").

          B.  Certificate of Incorporation.  The Purchased Shares shall be
              ----------------------------
shares of Preferred Stock of the Company issued pursuant to the Certificate of
Incorporation.

          C.  Closing.  The closing of the sale and purchase of the Purchased
              -------
Shares and the Warrants (the "Closing") shall take place at the offices of Paul,
Weiss, Rifkind, Wharton & Garrison, no later than 4:00 p.m., New York time, on
the date hereof, or at such other time, place, and date that the Company and the
Purchasers may agree in writing (the "Closing Date").  On the Closing Date, the
Company shall deliver to each Purchaser (a) a certificate representing the
Purchased Shares being purchased by such Purchaser and (b) the Warrants, against
delivery by the Purchasers to the Company of the aggregate purchase price
therefor by wire transfer of immediately available funds.

                                     III.

                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
                 ---------------------------------------------

          The Company represents and warrants to the Purchasers as follows:

          A.  Corporate Existence and Power.  Each of the Company and the
              -----------------------------
Subsidiaries (a) is, in the case of the Company and its Subsidiaries (other than
Prime Response Limited), a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation, and in
the case of Prime Response Limited, is a company registered in England and Wales
under number 2155722; (b) has all requisite power and authority to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is currently, or is proposed to be, engaged; (c) is, in
the case of the Company and its Subsidiaries (other than Prime Response
Limited), duly qualified as a foreign corporation, licensed and in good
standing, and in the case of Prime Response Limited, is duly registered and
remains subsisting under the laws of each jurisdiction in which its ownership,
lease or operation of property or the conduct of its business requires such
qualification, except to the extent that the failure to do so would not have a
material adverse effect on the Condition of the Company; and (d) has the
corporate power and
<PAGE>

authority to execute, deliver and perform its obligations under this Agreement
and each of the other Transaction Documents to which it is a party. No
jurisdiction, other than those referred to in clause (c) above, has claimed, in
writing or otherwise, that the Company or any of the Subsidiaries is required to
qualify as a foreign corporation therein, and neither the Company nor the
Subsidiaries files any franchise, income or other tax returns in any other
jurisdiction based upon the ownership or use of property therein or the
derivation of income therefrom.

          B.  Authorization; No Contravention.  The execution, delivery and
              -------------------------------
performance by the Company of this Agreement and each of the other Transaction
Documents and the transactions contemplated hereby and thereby (a) have been
duly authorized by all necessary corporate action of the Company; (b) do not
contravene the terms of the Certificate of Incorporation or the By-laws, or any
certificate of incorporation or by-laws or other organizational documents of any
of the Subsidiaries; (c) do not violate, conflict with or result in any breach
or contravention of, or the creation of any Lien under, any Contractual
Obligation of the Company or any of the Subsidiaries, or any Requirement of Law
applicable to the Company or any of the Subsidiaries; and (d) do not violate any
judgment, injunction, writ, award, decree or order of any nature (collectively,
"Orders") of any Governmental Authority against, or binding upon, the Company or
any of the Subsidiaries.

          C.  Governmental Authorization; Third Party Consents.  No approval,
              ------------------------------------------------
consent, compliance, exemption, authorization or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, and no lapse of
a waiting period under a Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the sale, issuance and delivery of the Purchased Shares or the
Warrants) by, or enforcement against, the Company of this Agreement and the
other Transaction Documents or the transactions contemplated hereby and thereby.

          D.  Binding Effect.  Each of the Transaction Documents has been duly
              --------------
executed and delivered by the Company, and each constitutes the legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).

          E.  Capitalization.
              --------------

          (a) On the Closing Date, after giving effect to the transactions
contemplated by this Agreement, the authorized capital stock of the Company
shall consist of (i) 30,000,000 shares of Common Stock, of which 7,714,000
shares are issued and outstanding, (ii) 1,155,000 shares of Series A Convertible
Participating Preferred Stock of the Company, all of which are issued and
outstanding to GAP 42 and GAP Coinvestment I and (iii) 1,699,834 shares of
Preferred Stock, of which 866,500 shares are issued and outstanding to GAP 48,
GAP Coinvestment I, Richard S.
<PAGE>

Braddock and Allen Swann and of which 833,334 shares will be outstanding and
issued to the Purchasers. Schedule 3.5(a) sets forth, at and on the Closing
                          ---------------
Date, a true and complete list of (x) the stockholders of the Company (including
any trust or escrow agent arrangement created in connection with any employee
stock option plan) and, opposite the name of each stockholder, the amount of all
outstanding capital stock and Stock Equivalents owned by such stockholder and
(y) the holders of Stock Equivalents (other than the stockholders set forth in
clause (x) above) and, opposite the name of each such holder, the amount of all
Stock Equivalents owned by such holder.  As of the Closing Date, the Company
will have reserved an aggregate of 833,334 shares of Common Stock for issuance
upon conversion of the Purchased Shares and an aggregate of 416,667 Warrant
Shares. Except for the Warrants and as set forth on Schedule 3.5(a), there are
                                                    ---------------
no options, warrants, conversion privileges, subscription or purchase rights or
other rights presently outstanding to purchase or otherwise acquire (i) any
authorized but unissued, unauthorized or treasury shares of the Company's
capital stock, (ii) any Stock Equivalents or (iii) other securities of the
Company.  On the Closing Date, the Purchased Shares will be duly authorized, and
when issued and sold to the Purchasers, after payment therefor in accordance
herewith, will be validly issued, fully paid and nonassessable and will be
issued in compliance with the registration and qualification requirements of all
applicable United States federal, state and foreign securities laws (or pursuant
to exemptions therefrom).  The shares of Common Stock issuable upon conversion
of the Purchased Shares and the Warrants are duly authorized and, when issued in
compliance with the provisions of the Certificate of Incorporation or the
Warrants, as the case may be, will be validly issued, fully paid and
nonassessable and will be issued in compliance with the registration and
qualification requirements of all applicable United States federal, state and
foreign securities laws (or pursuant to exemptions therefrom).

          (b) Except as set forth in Schedule 3.5(b), neither the Company nor
                                     ---------------
any of the Subsidiaries directly or indirectly owns or has made any investment
in any of the capital stock of, or any other proprietary interest in, any Person
other than Prime Response Limited, a company registered in England and Wales
under number 2155722. The Company owns all of the issued and outstanding capital
stock of the Subsidiaries, free and clear of all Liens. All of such shares of
capital stock are duly authorized, validly issued and fully paid, and all of
such shares were issued in compliance with the requirements of all applicable
Requirements of Law. Except as set forth in Schedule 3.5(b), there are no
                                            ---------------
options, warrants, conversion privileges, subscription or purchase rights or
other rights to purchase or otherwise acquire any authorized but unissued shares
or other securities of, or any proprietary interest in, the Subsidiaries, and
there is no outstanding security of any kind convertible into or exchangeable
for such shares or proprietary interest.

          F.  Financial Statements.  By the Closing Date, the Company shall
              --------------------
have delivered to the Purchasers its audited consolidated financial statements
(balance sheet and statements of operation, cash flow and stockholders' equity,
together with the notes thereto) for the fiscal years ended December 31, 1996
and December 31, 1997 (the "Audited Financial Statements"), and its consolidated
unaudited financial statements (balance sheet and statement of operations) for
the fiscal quarters ending March 30, 1998, June 30, 1998 and September 30, 1998
(the "Unaudited Financial
<PAGE>

Statements" and, together with the Audited Financial Statements, the "Financial
Statements"). The Financial Statements shall be prepared in accordance with
United States GAAP applied on a consistent basis throughout the periods
indicated and with each other, except that the Unaudited Financial Statements
shall not contain footnotes or normal year-end adjustments. The Financial
Statements, at the time of their delivery to the Purchasers and at all other
times, shall fairly present the financial condition, operating results and cash
flows of the Company as of the respective dates and for the respective periods
indicated in accordance with United States GAAP, except that the Unaudited
Financial Statements shall not contain footnotes or normal year-end adjustments.

          G.  No Default or Breach; Contractual Obligations.  Neither the
              ---------------------------------------------
Company nor any of its Subsidiaries has received notice of, and is not in
default under, or with respect to, any Contractual Obligation in any respect,
which, individually or together with all such defaults, could have a material
adverse effect on (i) the Condition of the Company or (ii) the ability of the
Company to perform its obligations under this Agreement or the other Transaction
Documents to which it is a party.

          H.  No Material Adverse Change; Ordinary Course of Business.  Since
              -------------------------------------------------------
September 30, 1998, (a) there has not been any material adverse change, nor to
the knowledge of the Company is any such change threatened, in the Condition of
the Company, (b) the Company has not participated in any transaction or
otherwise acted outside the ordinary course of business, including, without
limitation, declaring or paying any dividend or declaring or making any
distribution to its stockholders except out of the earnings of the Company and
(c) the Company has not increased the compensation of any of its officers or the
rate of pay of any of its employees, except as part of regular compensation
increases in the ordinary course of business.

          I.  Private Offering.  No form of general solicitation or general
              ----------------
advertising was used by the Company or its representatives in connection with
the offer or sale of the Purchased Shares or the Warrants.  No registration of
the Purchased Shares, the Warrants or the Warrant Shares, pursuant to the
provisions of the Securities Act or any state securities or "blue sky" laws,
will be required by the offer, sale or issuance of the Purchased Shares, the
Warrants or the Warrant Shares.

          J.  Broker's, Finder's or Similar Fees.  There are no brokerage
              ----------------------------------
commissions, finder's fees or similar fees or commissions payable by the Company
or any of its Subsidiaries in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with the Company or
any of its Subsidiaries or any action taken by any such Person.

          K.  Disclosure.  This Agreement and the documents and certificates
              ----------
furnished to the Purchasers by the Company, taken as a whole, do not contain any
untrue statement of a material fact or to the Company's knowledge omit to state
a material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.
<PAGE>

          L.  Revised Product Plan of Record.  The Company has delivered to
              ------------------------------
each of the Purchasers a revised Product Plan of Record, including feature
functionality by release.

                                      IV.

               REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
               ------------------------------------------------

          Each of the Purchasers hereby represents and warrants (severally as to
itself and not jointly) to the Company as follows:

          A.  Existence and Power.  Each of GAP LP and GAP Coinvestment (a) is
              -------------------
a partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation, (b) has all requisite power and
authority to conduct the business in which it is currently, or is proposed to
be, engaged, and (c) has the requisite partnership power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the other Transaction Documents to which it is a party.

          B.  Authorization; No Contravention.  The execution, delivery and
              -------------------------------
performance by such Purchaser of this Agreement and each of the other
Transaction Documents to which it is a party and the transactions contemplated
hereby and thereby (a) have been duly authorized by all necessary partnership
action, (b) do not contravene the terms of such Purchaser's organizational
documents, or any amendment thereof, (c) do not violate, conflict with or result
in any breach or contravention of or the creation of any Lien under, any
Contractual Obligation of such Purchaser, or any Requirement of Law applicable
to such Purchaser and (d) do not violate any Orders of any Governmental
Authority against, or binding upon, such Purchaser.

          C.  Governmental Authorization; Third Party Consents.  No approval,
              ------------------------------------------------
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, and no lapse of
a waiting period under any Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the purchase of the Purchased Shares and the Warrants) by, or
enforcement against, such Purchaser of this Agreement and each of the other
Transaction Documents to which such Purchaser is a party or the transactions
contemplated hereby and thereby.

          D.  Binding Effect.  Each of the Transaction Documents to which such
              --------------
Purchaser is a party has been duly executed and delivered by such Purchaser, and
each constitutes the legal, valid and binding obligations of such Purchaser,
enforceable against it in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability (regardless of whether considered in a proceeding at law or in
equity).
<PAGE>

          E.  Purchase for Own Account.  The Purchased Shares and the Warrants
              ------------------------
to be acquired by such Purchaser pursuant to this Agreement, the shares of
Common Stock issuable upon conversion of the Purchased Shares and the Warrant
Shares are being or will be acquired for investment for its own account and with
no intention of distributing or reselling, or granting any participation in,
such Purchased Shares, such shares of Common Stock, such Warrants, such Warrant
Shares or any part thereof in any transaction that would be in violation of the
securities laws of the United States of America, or any state or foreign
jurisdiction, without prejudice, however, to the rights of such Purchaser at all
times to sell or otherwise dispose of all or any part of such Purchased Shares,
such shares of Common Stock, such Warrants or such Warrant Shares under an
effective registration statement under the Securities Act and under the
applicable state or foreign securities laws, or under an exemption from such
registration available under such laws, and subject, nevertheless, to the
disposition of such Purchaser's property being at all times within its control.
If such Purchaser should in the future decide to dispose of any of such
Purchased Shares, such shares of Common Stock, such Warrants or such Warrant
Shares, such Purchaser understands and agrees that it may do so only in
compliance with the Securities Act and applicable state and foreign securities
laws, as then in effect.  Such Purchaser agrees to the imprinting, so long as
required by law, of legends on certificates representing all of its Purchased
Shares, shares of Common Stock issuable upon conversion of its Purchased Shares
and Warrant Shares as required by any applicable state securities laws and to
the following effect (and acknowledges that the Company will make a notation on
its transfer books to such effect):

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
     LAWS OF ANY JURISDICTION OF THE UNITED STATES.  THE SECURITIES MAY NOT BE
     TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
     SUCH ACT AND UNDER THE APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
     OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL REASONABLY SATISFACTORY
     TO THE COMPANY, IF REQUESTED BY THE COMPANY, THAT THERE IS AN APPLICABLE
     EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

     THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
     DISPOSITION (EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES
     REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE
     STOCKHOLDERS AGREEMENT, DATED OCTOBER 24, 1997, AMONG PRIME RESPONSE GROUP
     INC. AND THE STOCKHOLDERS NAMED THEREIN AS AMENDED BY AMENDMENT NO. 1
     THERETO AND AS AMENDED BY AMENDMENT NO. 2 THERETO (THE "STOCKHOLDERS
     AGREEMENT").  THE COMPANY WILL NOT REGISTER THE
<PAGE>

     TRANSFER OF SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL
     THE TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE STOCKHOLDERS
     AGREEMENT. THE COMPANY WILL MAIL A COPY OF SUCH AGREEMENT, TOGETHER WITH A
     COPY OF THE EXPRESS TERMS OF THE SECURITIES AND THE OTHER CLASS OR CLASSES
     AND SERIES OF SHARES, IF ANY, WHICH THE COMPANY IS AUTHORIZED TO ISSUE, TO
     THE RECORD HOLDER OF THIS CERTIFICATE, WITHOUT CHARGE, WITHIN FIVE DAYS
     AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.

          F.  Restricted Securities.  Such Purchaser understands that the
              ---------------------
Purchased Shares and the Warrants will not be registered under the Securities
Act at the time of their issuance for the reason that the sale provided for in
this Agreement is exempt pursuant to Rule 506 of Regulation D promulgated under
the Securities Act and that the reliance of the Company on such exemption is
predicated in part on such Purchaser's representations set forth herein.  Such
Purchaser also represents that it is experienced in evaluating companies such as
the Company, has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of its investment and has
the ability to suffer the total loss of its investment.  Such Purchaser further
represents that it has had the opportunity to ask questions of and receive
answers from the Company concerning the terms and conditions of the offering and
the Company's business, management and financial affairs and to obtain
additional information to such Purchaser's satisfaction.

          G.  Investment Experience.  Such Purchaser is an investor in
              ---------------------
securities of companies in the development stage and acknowledges that it has,
by reason of its business and financial experience, the capacity to protect its
own interest in connection with the transaction and that it is able to bear the
economic risk of its investment in the transaction. GAP LP is an "Accredited
Investor" as defined in Rule 501(a) under the Securities Act.

          H.  Broker's, Finder's or Similar Fees.  There are no brokerage
              ----------------------------------
commissions, finder's fees or similar fees or commissions payable by such
Purchaser, in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with such Purchaser or any action taken
by such Purchaser.

                                      V.

                         CONDITIONS TO THE OBLIGATION
                          OF THE PURCHASERS TO CLOSE
                          --------------------------

          The obligation of the Purchasers to purchase the Purchased Shares and
the Warrants, to pay the purchase price therefor at the Closing and to perform
their
<PAGE>

other obligations hereunder shall be subject to the satisfaction as determined
by, or waiver by, the Purchasers of the following conditions on or before the
Closing Date:

          (a) Secretary's Certificate.  The Purchasers shall have received a
              -----------------------
certificate from the Company, in form and substance reasonably satisfactory to
the Purchasers, dated the Closing Date and signed by the Secretary or an
Assistant Secretary of the Company, certifying that the attached copies of the
Certificate of Incorporation, the By-laws and resolutions of the Board of
Directors approving this Agreement and each of the other Transaction Documents
to which the Company is a party and the transactions contemplated hereby and
thereby, are all true, complete and correct and remain unamended and in full
force and effect.

          (b) Amendment of Certificate of Incorporation.  The Certificate of
              -----------------------------------------
Incorporation shall have been amended, pursuant to an amendment in form and
substance satisfactory to the Purchasers, to increase the authorized number of
shares of Preferred Stock and such amendment shall have been duly filed by or on
behalf of the Company with the Secretary of State of the State of Delaware in
accordance with the General Corporation Law of the State of Delaware.

          (c) Stockholders Agreement Amendment.  The Company, James Carling,
              --------------------------------
Nevin Prakash, Richard S. Braddock and Allen Swann and the other stockholders
party thereto shall have duly executed and delivered the Stockholders Agreement
Amendment.

          (d) Registration Rights Agreement Amendment.  The Company, James
              ---------------------------------------
Carling and Nevin Prakash shall have duly executed and delivered the
Registration Rights Agreement Amendment.

          (e) Purchased Shares.  The Company shall be prepared to deliver to
              ----------------
each of the Purchasers certificates in definitive form representing the number
of Purchased Shares set forth opposite such Purchaser's name on Schedule 2.1
                                                                ------------
hereto, registered in the name of such Purchaser.

          (f) Warrants.  The Company shall have duly executed and delivered to
              --------
GAP LP the GAP LP Warrant and to GAP Coinvestment the GAPCO Warrant, each
substantially in the form attached hereto as Exhibit C, and registered in the
                                             ---------
name of GAP LP and GAP Coinvestment, respectively.

          (g) Revised Budget.  Each of the Purchasers shall have received a
              --------------
revised budget of the Company for each fiscal quarter of 1999 in form and
substance reasonably satisfactory to such Purchasers.

          (h) Revised Product Plan of Record.  Each of the Purchasers shall have
              ------------------------------
received Purchaser shall have received a revised Product Plan of Record,
including feature functionality by release.

          (i) Waivers.  James Carling, Nevin Prakash, Richard S. Braddock and
              -------
Allen Swann shall have waived any preemptive rights with respect to the
<PAGE>

Purchased Shares pursuant to Section 4 of the Stockholders Agreement, dated as
of October 24, 1997, among the Company, GAP 42, GAP Coinvestment and the
stockholders named therein, as amended (as so amended, the "Stockholders
Agreement").

                                      VI.

                         CONDITIONS TO THE OBLIGATION
                          OF THE COMPANY TO CLOSE
                          ---------------------------

          The obligation of the Company to issue and sell the Purchased Shares
and the Warrants and the obligation of the Company to perform its other
obligations hereunder, shall be subject to the satisfaction as determined by, or
waiver by, the Company of the following conditions on or before the Closing
Date:

          (a) Stockholders Agreement Amendment.  The Purchasers shall have duly
              --------------------------------
executed and delivered the Stockholders Agreement Amendment.

          (b) Registration Rights Agreement Amendment.  The Purchasers shall
              ---------------------------------------
have duly executed and delivered the Registration Rights Agreement Amendment.

          (c) Payment by the Purchasers.  Each of the Purchasers shall be
              -------------------------
prepared to pay the aggregate purchase price for its Purchased Shares and its
Warrants.

          (d) Waiver.  GAP 42, GAP 48 and GAP Coinvestment I shall have waived
              ------
any preemptive rights with respect to the Purchased Shares pursuant to Section 4
of the Stockholders Agreement.

                                     VII.

                                INDEMNIFICATION
                                ---------------

          A.  Indemnification.  Except as otherwise provided in this Article
              ---------------
7, the Company and each of the Purchasers, severally and not jointly, as
applicable (the "Indemnifying Party"), agrees to indemnify, defend and hold
harmless the Purchasers, in the case of indemnity by the Company, or the
Company, in the case of indemnity by the Purchasers, as applicable, and their
Affiliates and their respective officers, directors, agents, employees,
subsidiaries, partners, members and controlling persons (each, an "Indemnified
Party") to the fullest extent permitted by law from and against any and all
losses, Claims (including any Claim by a third party), damages, expenses
(including reasonable fees, disbursements and other charges of counsel incurred
by the Indemnified Party in any action between the Indemnifying Party and the
Indemnified Party or between the Indemnified Party and any third party or
otherwise) or other liabilities (collectively, "Losses") resulting from, arising
out of or relating to any
<PAGE>

breach of any representation or warranty, covenant or agreement by the
Indemnifying Party in this Agreement or the other Transaction Documents,
including, without limitation, any legal, administrative or other actions
(including actions brought by the Purchasers or the Company or any equity
holders or partners of such Persons or derivative actions brought by any Person
claiming through or in the Company's name or in the name of either of the
Purchasers), proceedings or investigations (whether formal or informal), or
written threats thereof, based upon, relating to or arising out of this
Agreement or the other Transaction Documents, the transactions contemplated
hereby and thereby, or any Indemnified Party's role therein or in transactions
contemplated thereby; provided, that the Indemnifying Party shall not be liable
under this Section 7.1 to an Indemnified Party to the extent that it is finally
judicially determined that such Losses resulted primarily from the material
breach by such Indemnified Party of any representation, warranty, covenant or
other agreement of such Indemnified Party contained in this Agreement; and
provided, further, that if and to the extent that such indemnification is
unenforceable for any reason, the Indemnifying Party shall make the maximum
contribution to the payment and satisfaction of such Losses which shall be
permissible under applicable laws. The amount of any payment by any Indemnifying
Party to any Indemnified Party herewith in respect of any Loss shall be of
sufficient amount to make such Indemnified Party whole, and, in the case of
indemnity by the Company, shall consist of an amount sufficient to make up any
diminution in the value of the Purchased Shares held by such Indemnified Party
resulting from the payment by the Company of such indemnification payment. In
connection with the obligation of the Indemnifying Party to indemnify for
expenses as set forth above, the Indemnifying Party shall, upon presentation of
appropriate invoices containing reasonable detail, reimburse each Indemnified
Party for all such expenses (including reasonable fees, disbursements and other
charges of counsel incurred by the Indemnified Party in any action between the
Indemnifying Party and the Indemnified Party or between the Indemnified Party
and any third party or otherwise) as they are incurred by such Indemnified
Party; provided, however, that if an Indemnified Party is reimbursed hereunder
for any expenses, such reimbursement of expenses shall be refunded to the extent
it is finally judicially determined that the Losses in question resulted
primarily from the willful misconduct or gross negligence of such Indemnified
Party. Notwithstanding the foregoing, indemnification with respect to this
Section 7.1 by the Company shall be limited to the aggregate consideration paid
by the Purchasers for the Purchased Shares, and indemnification by the
Purchasers shall be limited to the aggregate consideration paid by such
Purchaser for its Purchased Shares.

          B.  Notification.  Each Indemnified Party under this Article 7
              ------------
shall, promptly after the receipt of notice of the commencement of any action,
investigation, claim or other proceeding against such Indemnified Party in
respect of which indemnity may be sought from the Indemnifying Party under this
Article 7, notify the Indemnifying Party in writing of the commencement thereof.
The omission of any Indemnified Party to so notify the Indemnifying Party of any
such action shall not relieve the Indemnifying Party from any liability which it
may have to such Indemnified Party (a) other than pursuant to this Article 7 or
(b) under this Article 7 unless, and only to the extent that, such omission
results in the Indemnifying Party's forfeiture of substantive rights or
defenses.  In case any such action, claim or other proceeding shall be brought
against any Indemnified Party, and it shall notify the Indemnifying Party of
<PAGE>

the commencement thereof, the Indemnifying Party shall be entitled to assume the
defense thereof at its own expense, with counsel satisfactory to such
Indemnified Party in its reasonable judgment; provided, however, that any
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense at its own expense. Notwithstanding the foregoing,
in any action, claim or proceeding in which both the Indemnifying Party, on the
one hand, and an Indemnified Party, on the other hand, are, or are reasonably
likely to become, a party, such Indemnified Party shall have the right to employ
separate counsel at the expense of the Indemnifying Party and to control its own
defense of such action, claim or proceeding if, in the reasonable opinion of
counsel to such Indemnified Party, a conflict or potential conflict exists
between the Indemnifying Party, on the one hand, and such Indemnified Party, on
the other hand, that would make such separate representation advisable;
provided, however, that the Indemnifying Party shall not be liable for the fees
and expenses of more than one counsel to all Indemnified Parties. The
Indemnifying Party agrees that it will not, without the prior written consent of
the Indemnified Party, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the matters contemplated hereby (if any Indemnified Party is a party thereto or
has been actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of each Indemnified
Party from all liability arising or that may arise out of such claim, action or
proceeding. The Indemnifying Party shall not be liable for any settlement of any
claim, action or proceeding effected against an Indemnified Party without the
Indemnifying Party's written consent, which consent shall not be unreasonably
withheld. The rights accorded to an Indemnified Party hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise; provided, however, that notwithstanding the
foregoing or anything to the contrary contained in this Agreement, nothing in
this Article 7 should restrict or limit any rights that any Indemnified Party
may have to seek equitable relief.

                                     VIII.

                             AFFIRMATIVE COVENANTS
                             ---------------------

          The Company hereby covenants and agrees with the Purchasers as
follows:

          A.  Financial Statements and Other Information.  The Company shall
              ------------------------------------------
deliver to each Purchaser, in form and substance satisfactory to such Purchaser:

          (a) as soon as available, but not later than one hundred twenty (120)
days after the end of each fiscal year of the Company, a copy of the audited
balance sheet of the Company as of the end of such fiscal year and the related
statements of operations and cash flows for such fiscal year, setting forth in
each case in comparative form the figures for the previous year, all in
reasonable detail and accompanied by a management summary and analysis of the
operations of the Company for such fiscal year and by the opinion of a
nationally recognized independent certified public accounting firm which report
shall state without qualification that such financial
<PAGE>

statements present fairly the financial condition as of such date and results of
operations and cash flows for the periods indicated in conformity with GAAP
applied on a consistent basis;

          (b) commencing with the fiscal period ending on March 31, 1999, as
soon as available, but in any event not later than forty-five (45) days after
the end of each of the first three fiscal quarters of each fiscal year, the
unaudited balance sheet of the Company, and the related statements of operations
and cash flows for such quarter and for the period commencing on the first day
of the fiscal year and ending on the last day of such quarter, all certified by
an appropriate officer of the Company as presenting fairly the financial
condition as of such date and results of operations and cash flows for the
periods indicated in conformity with GAAP applied on a consistent basis, subject
to normal year-end adjustments and the absence of footnotes required by GAAP;
and

          (c) as promptly as practicable, but not later than five (5) days after
the end of each fiscal year of the Company, a certificate signed by the Chief
Executive Officer of the Company in customary form certifying that the Company
is not a "foreign person" within the meaning of Section 1445 of the Code.

          (d) Reservation of Common Stock and Preferred Stock.  The Company
              -----------------------------------------------
shall at all times (a) reserve and keep available out of its authorized shares
of Common Stock, solely for the purpose of issue or delivery upon conversion of
the Purchased Shares, and (b) reserve and keep available out of its authorized
shares of Common Stock, solely for the purpose of issue or delivery upon
exercise of the Warrants, as provided in the Certificate of Incorporation and
the Warrants (in the case of the Warrant Shares), the maximum number of shares
of Common Stock that may be issuable or deliverable upon such conversion or
exercise, as the case may be.  Such shares of Common Stock are duly authorized
and, when issued or delivered in accordance with the Certificate of
Incorporation and the Warrants (in the case of the Warrant Shares), as the case
may be, against payment therefor, shall be validly issued, fully paid and non-
assessable.  The Company shall issue such shares of Common Stock in accordance
with the terms of the Certificate of Incorporation or the Warrants, as the case
may be, and otherwise comply with the terms hereof and thereof.

                                      IX.

                                 MISCELLANEOUS
                                 -------------

          A.  Survival of Representations and Warranties.  All of the
              ------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of the Company or
the Purchasers, or acceptance of the Purchased Shares and the Warrants or
termination of this Agreement until the third anniversary of the Closing Date.

          B.  Notices.  All notices, demands and other communications provided
              -------
for or permitted hereunder shall be made in writing and shall be by registered
<PAGE>

or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:

               (a)  if to the Company:

                    Prime Response Group Inc.
                    Goat Wharf, Brentwood,
                    TW8OPD
                    United Kingdom
                    Telecopy:  011-441-814-003-133
                    Attention:  Nigel Cannings, Esq.

                    with a copy to:

                    Brobeck Phleger & Harrison LLP
                    Two Embarcadero Place
                    2200 Geng Road
                    Palo Alto, CA 94303
                    Telecopy:  (650) 496-2755
                    Attention:  Thomas A. Bevilacqua, Esq.

               (b)  if to the Purchasers:

                    c/o General Atlantic Service Corporation
                    3 Pickwick Plaza
                    Greenwich, Connecticut 06830
                    Telecopy:  (203) 622-8818
                    Attention:  William E. Ford

                    with a copy to:

                    Paul, Weiss, Rifkind, Wharton & Garrison
                    1285 Avenue of the Americas
                    New York, New York 10019-6064
                    Telecopy:  (212) 757-3990
                    Attention:  Matthew Nimetz, Esq.

          All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial courier service; five (5) Business Days
after being deposited in the mail, postage prepaid, if mailed; and when receipt
is mechanically acknowledged, if properly telecopied.

          C.  Successors and Assigns; Third Party Beneficiaries.  This
              -------------------------------------------------
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto.  Subject to applicable securities laws,
each of the Purchasers may assign any of its rights under any of the Transaction
Documents to any of its Affiliates.  The Company may not assign any of its
rights under this
<PAGE>

Agreement without the written consent of the holders of a majority of the
Purchased Shares. No Person other than the parties hereto and their successors
and permitted assigns is intended to be a beneficiary of this Agreement.

          D.  Amendment and Waiver.
              --------------------

          (a) No failure or delay on the part of the Company or the Purchasers
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.  The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
the Purchasers at law, in equity or otherwise.

          (b) Any amendment, supplement or modification of or to any provision
of this Agreement, any waiver of any provision of this Agreement, and any
consent to any departure by the Company or the Purchasers from the terms of any
provision of this Agreement, shall be effective only if it is made or given in
writing and signed by the Company and the holders of a majority of the Purchased
Shares. Except where notice is specifically required by this Agreement, no
notice to or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in similar or other circumstances.

          E.  Counterparts.  This Agreement may be executed in any number of
              ------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

          F.  Headings.  The headings in this Agreement are for convenience of
              --------
reference only and shall not limit or otherwise affect the meaning hereof.

          G.  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND
              -------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION.

          H.  Severability.  If any one or more of the provisions contained
              ------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.

          I.  Entire Agreement.  This Agreement, together with the exhibits
              ----------------
and schedules hereto and the other Transaction Documents, is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein.  There are no
restrictions, promises,
<PAGE>

warranties or undertakings, other than those set forth or referred to herein or
therein. This Agreement, together with the exhibits hereto, and the other
Transaction Documents supersede all prior agreements and understandings between
the parties with respect to such subject matter.

          J.  Fees.  Upon the Closing the Company shall reimburse GAP LP and
              ----
GAP Coinvestment, in an aggregate amount not to exceed $30,000, for their
reasonable fees, disbursements and other charges of counsel incurred in
connection with the transactions contemplated by this Agreement.  Except as
provided in the preceding sentence, each party hereto shall bear their own costs
and expenses in connection with the preparation, execution and delivery of this
Agreement and other Transaction Documents, and the transactions contemplated
hereby and thereby.

          K.  Publicity.  Except as may be required by any applicable
              ---------
Requirement of Law, none of the parties hereto shall issue a publicity release
or public announcement or otherwise make any disclosure concerning this
Agreement or the transactions contemplated hereby, without prior approval by the
other parties hereto (which approval shall not be unreasonably withheld);
provided, however, that nothing in this Agreement shall restrict any Purchaser
--------  -------
from disclosing information (a) that is already publicly available; (b) to the
prospective transferee in connection with any contemplated transfer of any of
the Purchased Shares or the Warrants; and (c) to its attorneys, accountants,
consultants and other advisors to the extent necessary to obtain their services
in connection with such Purchaser's investment in the Company.  GAP LLC may
disclose on its worldwide web page, www.gapartners.com, the name of the Company,
its address, the identity of its Chief Executive Officer, a description of the
Company's business (which description shall be reasonably acceptable to the
Company) and the aggregate dollar amount invested by GAP LLC and its Affiliates
in the Company.  If any announcement is required by any applicable Requirement
of Law to be made by any party hereto, prior to making such announcement such
party will deliver a draft of such announcement to the other parties and shall
give the other parties an opportunity to comment thereon.

          L.  Further Assurances.  Each of the parties shall execute such
              ------------------
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person, and otherwise fulfilling, or causing the fulfillment of, the
conditions to the Closing set forth in Articles 5 and 6) as may be reasonably
required or desirable to carry out or to perform the provisions of this
Agreement and to consummate and make effective as promptly as possible the
transactions contemplated by this Agreement.
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers hereunto duly authorized
on the date first above written.

                         PRIME RESPONSE GROUP INC.

                         By: /s/ James Carling
                             -------------------------------
                             Name: James Carling
                             Title:

                         GENERAL ATLANTIC PARTNERS 52, L.P.

                         By:  GENERAL ATLANTIC PARTNERS, LLC,
                              its General Partner

                              By: /s/ David C. Hodgan
                                  --------------------------
                                  Name: David C. Hodgan
                                  Title:  A Managing Member

                         GAP COINVESTMENT PARTNERS II, L.P.

                         By: /s/ David C. Hodgan
                             -------------------------------
                             Name: David C. Hodgan
                             Title:  A General Partner
<PAGE>

                                                            Schedule 2.1
                                                            ------------

                 Purchased Shares, Warrants and Purchase Price
                 ---------------------------------------------

<TABLE>
<CAPTION>
                                               Shares of Common Stock
Purchaser                 Purchased Shares         Issuable Upon           Purchase Price
---------                 ----------------      Exercise of Warrants       --------------
                                                --------------------
<S>                     <C>                    <C>                      <C>

GAP LP                               680,200                   340,100            $4,082,016

GAP Coinvestment                     153,134                    76,567               918,988
                                     -------                   -------            ----------

Total:                               833,334                   416,667            $5,001,004
</TABLE><PAGE>

                                                                   Exhibit 10.17

                                                                  Execution Copy

===============================================================================

                     STOCK AND WARRANT PURCHASE AGREEMENT

                                     among

                          PRIME RESPONSE GROUP INC.,

                      GENERAL ATLANTIC PARTNERS 52, L.P.

                                      and

                      GAP COINVESTMENT PARTNERS II, L.P.

                        ______________________________

                           Dated as of July 15, 1999
                        ______________________________

===============================================================================
<PAGE>

<TABLE>
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                                                         Table of Contents
                                                         -----------------

                                                                                                    Page #
                                                                                                    ------
<S>              <C>                                                                                <C>

ARTICLE I                  DEFINITIONS...................................................................1
         1.1      Definitions............................................................................1
         1.2      Accounting Terms; Financial Statements.................................................6

ARTICLE II                 PURCHASE AND SALE OF PREFERRED STOCK
                           AND WARRANTS..................................................................6
         2.1      Purchase and Sale of Preferred Stock...................................................6
         2.2      Purchase and Sale of Warrants..........................................................6
         2.3      Certificate of Designations............................................................6
         2.4      Use of Proceeds........................................................................6
         2.5      Closing................................................................................6

ARTICLE III                REPRESENTATIONS AND WARRANTIES OF
                           THE COMPANY...................................................................7
         3.1      Corporate Existence and Power..........................................................7
         3.2      Authorization; No Contravention........................................................7
         3.3      Governmental Authorization; Third Party Consents.......................................8
         3.4      Binding Effect.........................................................................8
         3.5      Capitalization.........................................................................8
         3.6      Financial Statements...................................................................9
         3.7      No Default or Breach; Contractual Obligations..........................................9
         3.8      No Material Adverse Change; Ordinary Course of Business...............................10
         3.9      Private Offering......................................................................10
         3.10     Broker's, Finder's or Similar Fees....................................................10
         3.11     Disclosure............................................................................10

ARTICLE IV                 REPRESENTATIONS AND WARRANTIES OF
                           THE PURCHASERS...............................................................10
         4.1      Existence and Power...................................................................10
         4.2      Authorization; No Contravention.......................................................11
         4.3      Governmental Authorization; Third Party Consents......................................11
         4.4      Binding Effect........................................................................11
         4.5      Purchase for Own Account..............................................................11
         4.6      Restricted Securities.................................................................13
         4.7      Investment Experience.................................................................13
         4.8      Broker's, Finder's or Similar Fees....................................................13

ARTICLE V                  CONDITIONS TO THE OBLIGATION
                           OF THE PURCHASERS TO CLOSE ..................................................13
         5.1      Secretary's Certificate...............................................................13
         5.2      Filing of Certificate of Designations.................................................14
         5.3      Stockholders Agreement Amendment......................................................14
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                                       i
<PAGE>

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         5.4      Registration Rights Agreement Amendment...............................................14
         5.5      Purchased Shares......................................................................14
         5.6      Warrants..............................................................................14
         5.7      Waivers...............................................................................14
         5.8      Opinion of Counsel....................................................................14
         5.9      Adjustments to Series A and Series B Conversion Prices................................14

ARTICLE VI                 CONDITIONS TO THE OBLIGATION
                           OF THE COMPANY TO CLOSE......................................................15
         6.1      Stockholders Agreement Amendment......................................................15
         6.2      Registration Rights Agreement Amendment...............................................15
         6.3      Payment by the Purchasers.............................................................15
         6.4      Waiver................................................................................15

ARTICLE VII                INDEMNIFICATION..............................................................15
         7.1      Indemnification.......................................................................15
         7.2      Notification..........................................................................16

ARTICLE VIII               AFFIRMATIVE COVENANTS........................................................17
         8.1      Financial Statements and Other Information............................................17

ARTICLE IX                 MISCELLANEOUS................................................................19
         9.1      Survival of Representations and Warranties............................................19
         9.2      Notices...............................................................................19
         9.3      Successors and Assigns; Third Party Beneficiaries.....................................20
         9.4      Amendment and Waiver..................................................................20
         9.5      Counterparts..........................................................................20
         9.6      Headings..............................................................................21
         9.7      GOVERNING LAW.........................................................................21
         9.8      Severability..........................................................................21
         9.9      Entire Agreement......................................................................21
         9.10     Fees..................................................................................21
         9.11     Publicity.............................................................................21
         9.12     Further Assurances....................................................................22
</TABLE>

EXHIBITS

A        Form of Certificate of Designations
B        Form of Stockholders Agreement Amendment
C        Form of Registration Rights Agreement Amendment
D        Form of Opinion of Brobeck Hale and Dorr International
E        Form of GAP LP Warrant and GAPCO Warrant

                                       ii
<PAGE>

SCHEDULES

2.1      Purchased Shares, Warrants and Purchase Price
3.5(a)   List of Stockholders and Capital Stock and Stock Equivalents

                                      iii
<PAGE>

                     STOCK AND WARRANT PURCHASE AGREEMENT

          STOCK AND WARRANT PURCHASE AGREEMENT, dated as of July 15, 1999 (this
"Agreement"), among Prime Response Group Inc., a Delaware corporation (the
"Company"), General Atlantic Partners 52, L.P., a Delaware limited partnership
("GAP LP"), and GAP Coinvestment Partners II, L.P., a Delaware limited
partnership ("GAP Coinvestment" and, together with GAP LP, the "Purchasers").

          WHEREAS, upon the terms and conditions set forth in this Agreement,
the Company proposes to issue and sell to (a) GAP LP, for an aggregate purchase
price of $2,442,855, an aggregate of 814,285 shares of Series C Convertible
Preferred Stock, par value $.01 per share, of the Company (the "Preferred
Stock") and a warrant (the "GAP LP Warrant") to purchase, subject to the terms
and conditions thereof, an aggregate of 273,099 shares of common stock, par
value $.01 per share, of the Company (the "Common Stock") at an exercise price
of $0.01 per share (subject to adjustment), containing the terms and conditions
set forth in the form of warrant attached hereto as Exhibit E; and (b) GAP
                                                    ---------
Coinvestment, for an aggregate purchase price of $557,145, an aggregate of
185,715 shares of Preferred Stock and a warrant (the "GAPCO Warrant" and,
together with the GAP LP Warrant, the "Warrants") to purchase, subject to the
terms and conditions thereof, an aggregate of 62,286 shares of Common Stock, at
an exercise price of $0.01 per share (subject to adjustment), containing the
terms and conditions set forth in the form of warrant attached hereto as Exhibit
                                                                         -------
E; and
-

          WHEREAS, each share of Preferred Stock is convertible (subject to
adjustment) into one share of Common Stock.

          NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:

                                  ARTICLE I.

                                 DEFINITIONS
                                 -----------

          A.  Definitions.  As used in this Agreement, and unless the context
              -----------
requires a different meaning, the following terms have the meanings indicated:

          "Affiliate" shall mean any Person who is an "affiliate" as defined in
           ---------
Rule 12b2 of the General Rules and Regulations under the Exchange Act.  The
following shall be deemed to be Affiliates of GAP LP:  (a) GAP LLC, the members
of GAP LLC and the limited partners of GAP LP; (b) any Affiliate of GAP LLC, the
<PAGE>

                                                                               2

members of GAP LLC and the limited partners of GAP LP; and (c) any limited
liability company or partnership a majority of whose members or partners, as the
case may be, are members of GAP LLC.  GAP LP and GAP Coinvestment shall be
deemed to be Affiliates of one another.

          "Agreement" means this Agreement as the same may be amended
           ---------
supplemented or modified in accordance with the terms hereof.

          "Board of Directors" means the Board of Directors of the Company.
           ------------------

          "Business Day" means any day other than a Saturday, Sunday or other
           ------------
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.

          "By-laws" means the by-laws of the Company in effect on the Closing
           -------
Date, as the same may be amended from time to time.

          "Certificate of Designations" means the Certificate of Designations
           ---------------------------
with respect to the Preferred Stock adopted by the Board of Directors and filed
with the Secretary of State of the State of Delaware on or before the Closing
Date substantially in the form attached hereto as Exhibit A.
                                                  ---------

          "Certificate of Incorporation" means the Certificate of Incorporation
           ----------------------------
of the Company, as the same shall have been amended from time to time.

          "Claims" means any actions, suits, proceedings, claims, complaints,
           ------
disputes, arbitrations or investigations.

          "Closing" has the meaning set forth in Section 2.5 of this Agreement.
           -------

          "Closing Date" has the meaning set forth in Section 2.5 of this
           ------------
Agreement.

          "Commission" means the Securities and Exchange Commission or any
           ----------
similar agency then having jurisdiction to enforce the Securities Act.

          "Common Stock" has the meaning set forth in the recitals to this
           ------------
Agreement.

          "Company" has the meaning set forth in the recitals to this Agreement.
           -------

          "Condition of the Company" means the assets, business, properties,
           ------------------------
prospects, operations or financial condition of the Company and the
Subsidiaries, taken as a whole.
<PAGE>

                                                                               3

          "Contingent Obligation" means, as applied to any Person, any direct or
           ---------------------
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of another Person (the "primary obligor"),
                ------------------                           ---------------
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligation or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, or (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss or failure or inability to perform in respect
thereof.  The amount of any Contingent Obligation shall, unless stated to be
otherwise in the instrument constituting the Contingent Obligation, be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by the Board of Directors.

          "Contractual Obligations" means as to any Person, any provision of any
           -----------------------
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.

          "Financial Statements" has the meaning set forth in Section 3.6.
           --------------------

          "GAAP" means generally accepted accounting principles in effect from
           ----
time to time in the United States or the United Kingdom, as the case may be.

          "GAP Coinvestment" has the meaning set forth in the recitals to this
           ----------------
Agreement.

          "GAP Coinvestment I" means GAP Coinvestment Partners, L.P., a New York
           ------------------
limited partnership.

          "GAPCO Warrant" has the meaning set forth in the recitals to this
           -------------
Agreement.

          "GAP 42" means General Atlantic Partners 42, L.P., a Delaware limited
           ------
partnership.

          "GAP 48" means General Atlantic Partners 48, L.P., a Delaware limited
           ------
partnership.
<PAGE>

                                                                               4

          "GAP LLC" means General Atlantic Partners, LLC, a Delaware limited
           -------
liability company and the general partner of GAP LP, and any successor to such
entity.

          "GAP LP" has the meaning set forth in the recitals to this Agreement.
           ------

          "GAP LP Warrant" has the meaning set forth in the recitals to this
           --------------
Agreement.

          "Governmental Authority" means the government of any nation, state,
           ----------------------
city, locality or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.

          "Indemnified Party" has the meaning set forth in Section 7.1 of this
           -----------------
Agreement.

          "Indemnifying Party" has the meaning set forth in Section 7.1 of this
           ------------------
Agreement.

          "Lien" means any mortgage, deed of trust, pledge, hypothecation,
           ----
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences),
including, without limitation, those created by, arising under or evidenced by
any conditional sale or other title retention agreement, the interest of a
lessor under a Capital Lease Obligation, or any financing lease having
substantially the same economic effect as any of the foregoing.

          "Orders" has the meaning set forth in Section 3.2 of this Agreement.
           ------

          "Person" means any individual, firm, corporation, partnership, trust,
           ------
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, Governmental Authority or other entity of any kind,
and shall include any successor (by merger or otherwise) of such entity.

          "Preferred Stock" has the meaning set forth in the recitals to this
           ---------------
Agreement.

          "Purchased Shares" has the meaning set forth in Section 2.1 of this
           ----------------
Agreement.

          "Purchasers" has the meaning set forth in the recitals to this
           ----------
Agreement.
<PAGE>

                                                                               5

          "Registration Rights Agreement Amendment" means Amendment No. 3 to the
           ---------------------------------------
Registration Rights Agreement, dated as of October 24, 1997, among the Company,
GAP 42, GAP Coinvestment I and the stockholders named therein, substantially in
the form attached hereto as Exhibit C.
                            ---------

          "Requirements of Law" means, as to any Person, any law, statute,
           -------------------
treaty, rule, regulation, right, privilege, qualification, license or franchise
or determination of an arbitrator or a court or other Governmental Authority or
stock exchange, in each case applicable or binding upon such Person or any of
its property or to which such Person or any of its property is subject or
pertaining to any or all of the transactions contemplated or referred to herein.

          "Securities Act" means the Securities Act of 1933, as amended, and the
           --------------
rules and regulations of the Commission thereunder.

          "Series A Preferred Stock" means the Series A Convertible
           ------------------------
Participating Preferred Stock, par value $.01 per share, of the Company.

          "Series B Preferred Stock" means the Series B Convertible
           ------------------------
Participating Preferred Stock, par value $.01 per share, of the Company.

          "Stock Equivalents" means any security or obligation which is by its
           -----------------
terms convertible into or exchangeable for shares of common stock or other
capital stock or equity securities of the Company, and any option, warrant or
other subscription or purchase right with respect to common stock or such other
capital stock or equity securities.

          "Stockholders Agreement" has the meaning set forth in Section 5.7 of
           ----------------------
this Agreement.

          "Stockholders Agreement Amendment" means Amendment No. 3 to the
           --------------------------------
Stockholders Agreement, dated as of October 24, 1997, among the Company, GAP 42,
GAP Coinvestment I and the stockholders named therein, substantially in the form
attached hereto as Exhibit B.
                   ---------

          "Subsidiaries" means Prime Response Limited, a company registered in
           ------------
England and Wales under number 2155722, and a corporation or other Person of
which 50% or more of the voting power of the outstanding voting equity
securities or 50% or more of the outstanding economic equity interest is held,
directly or indirectly, by such Person.  Unless otherwise qualified, or the
contest otherwise requires, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.

          "Transaction Documents" means collectively, this Agreement, the
           ---------------------
Stockholders Agreement Amendment, the Registration Rights Agreement Amendment
and the Warrants.
<PAGE>

                                                                               6

          "Warrants" has the meaning set forth in the recitals to this
           --------
Agreement.

          "Warrant Shares" has the meaning set forth in Section 2.2 of this
           --------------
Agreement.

          1.2  Accounting Terms; Financial Statements.  All accounting terms
               --------------------------------------
used herein not expressly defined in this Agreement shall have the respective
meanings given to them in accordance with sound accounting practice.  The term
"sound accounting practice" shall mean such accounting practice as, in the
opinion of the independent certified public accountants regularly retained by
the Company, conforms at the time to GAAP applied on a consistent basis except
for changes with which such accountants concur.

                                  ARTICLE II.

               PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS
               -------------------------------------------------

          2.1  Purchase and Sale of Preferred Stock.  Subject to the terms and
               ------------------------------------
conditions herein set forth, the Company agrees to issue and sell to each of the
Purchasers, and each of the Purchasers agrees that it will purchase from the
Company, at the Closing, the aggregate number of shares of Preferred Stock set
forth opposite such Purchaser's name on Schedule 2.1 hereto, for the aggregate
                                        ------------
purchase price set forth opposite such Purchaser's name on Schedule 2.1 hereto
                                                           ------------
(all of the shares of Preferred Stock being purchased hereunder by the
Purchasers being referred to herein as the "Purchased Shares").

          2.2  Purchase and Sale of Warrants.  Subject to the terms and
               -----------------------------
conditions herein set forth, the Company agrees to issue and sell to each of the
Purchasers, and each of the Purchasers agrees that it will purchase from the
Company, on the Closing Date, its Warrant, for the aggregate purchase price set
forth opposite such Purchaser's name on Schedule 2.1 hereto (all of the shares
                                        ------------
of Preferred Stock issuable upon exercise of the Warrants being referred to
herein as the "Warrant Shares").

          2.3  Certificate of Designations.  The Purchased Shares shall have
               ---------------------------
the rights and preferences set forth in the Certificate of Designations.

          2.4  Use of Proceeds.  The Company shall use the proceeds from the
               ---------------
issue and sale of the Purchased Shares and the Warrants to the Purchasers for
working capital needs of the Company.

          2.5  Closing.  The closing of the sale and purchase of the Purchased
               -------
Shares (the "Closing") shall take place at the offices of Paul, Weiss, Rifkind,
Wharton & Garrison, no later than 4:00 p.m., New York time, on the date hereof,
or at such other time, place, and date that the Company and the Purchasers may
agree in
<PAGE>

                                                                               7

writing (the "Closing Date"). On the Closing Date, the Company shall deliver to
each Purchaser (a) a certificate representing the Purchased Shares being
purchased by such Purchaser and (b) its Warrant, against delivery by such
Purchaser to the Company of the aggregate purchase price therefor by wire
transfer of immediately available funds.

                                 ARTICLE III.

                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
                 ---------------------------------------------

          The Company represents and warrants to the Purchasers as follows:

          3.1  Corporate Existence and Power.  Each of the Company and the
               -----------------------------
Subsidiaries (a) is, in the case of the Company and its Subsidiaries (other than
Prime Response Limited), a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation, and in
the case of Prime Response Limited, is a company registered in England and Wales
under number 2155722; (b) has all requisite power and authority to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is currently, or is proposed to be, engaged; (c) is, in
the case of the Company and its Subsidiaries (other than Prime Response
Limited), duly qualified as a foreign corporation, licensed and in good
standing, and in the case of Prime Response Limited, is duly registered and
remains subsisting under the laws of each jurisdiction in which its ownership,
lease or operation of property or the conduct of its business requires such
qualification, except to the extent that the failure to do so would not have a
material adverse effect on the Condition of the Company; and (d) has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and each of the other Transaction Documents to which it is
a party.  No jurisdiction, other than those referred to in clause (c) above, has
claimed, in writing or otherwise, that the Company or any of the Subsidiaries is
required to qualify as a foreign corporation therein, and neither the Company
nor the Subsidiaries files any franchise, income or other tax returns in any
other jurisdiction based upon the ownership or use of property therein or the
derivation of income therefrom.

          3.2  Authorization; No Contravention.  The execution, delivery and
               -------------------------------
performance by the Company of this Agreement and each of the other Transaction
Documents and the transactions contemplated hereby and thereby (a) have been
duly authorized by all necessary corporate action of the Company; (b) do not
contravene the terms of the Certificate of Incorporation or the By-laws, or any
certificate of incorporation or by-laws or other organizational documents of any
of the Subsidiaries; (c) do not violate, conflict with or result in any breach
or contravention of, or the creation of any Lien under, any Contractual
Obligation of the Company or any of the Subsidiaries, or any Requirement of Law
applicable to the Company or any of the Subsidiaries; and (d) do not violate any
judgment, injunction, writ, award, decree or
<PAGE>

                                                                               8

order of any nature (collectively, "Orders") of any Governmental Authority
against, or binding upon, the Company or any of the Subsidiaries.

          3.3  Governmental Authorization; Third Party Consents.  No approval,
               ------------------------------------------------
consent, compliance, exemption, authorization or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, and no lapse of
a waiting period under a Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the sale, issuance and delivery of the Purchased Shares) by, or
enforcement against, the Company of this Agreement and the other Transaction
Documents or the transactions contemplated hereby and thereby.

          3.4  Binding Effect.  Each of the Transaction Documents has been duly
               --------------
executed and delivered by the Company, and each constitutes the legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).

          3.5  Capitalization.
               --------------

          (a) On the Closing Date, after giving effect to the transactions
contemplated by this Agreement, the authorized capital stock of the Company
shall consist of (i) 30,000,000 shares of Common Stock, of which 10,228,300
shares are issued and outstanding, and (ii) 3,855,000 shares of preferred stock,
par value $.01 per share, of the Company, of which (x) 1,155,000 shares are
Series A Preferred Stock, all of which are issued and outstanding to GAP 42 and
GAP Coinvestment I, (y) 1,699,834 shares are Series B Preferred Stock, all of
which are issued and outstanding to GAP 48, GAP 52, GAP Coinvestment I, GAP
Coinvestment II, Richard S. Braddock and Allen Swann and (z) 1,000,000 shares
are Preferred Stock, all of which will be outstanding and issued to the
Purchasers.  Schedule 3.5(a) sets forth, at and on the Closing Date, a true and
             ---------------
complete list of (x) the stockholders of the Company (including any trust or
escrow agent arrangement created in connection with any employee stock option
plan) and, opposite the name of each stockholder, the amount of all outstanding
capital stock and Stock Equivalents owned by such stockholder and (y) the
holders of Stock Equivalents (other than the stockholders set forth in clause
(x) above) and, opposite the name of each such holder, the amount of all Stock
Equivalents owned by such holder.  As of the Closing Date, the Company will have
reserved an aggregate of 1,000,000 shares of Common Stock for issuance upon
conversion of the Purchased Shares and an aggregate of 335,385 shares of Common
Stock for issuance upon exercise of the Warrants.  Except as set forth on
Schedule 3.5(a), there are no options, warrants, conversion privileges,
---------------
subscription or purchase rights or other rights presently outstanding to
purchase or otherwise acquire (i) any authorized but unissued, unauthorized or
treasury shares of
<PAGE>

                                                                               9

the Company's capital stock, (ii) any Stock Equivalents or (iii) other
securities of the Company. On the Closing Date, the Purchased Shares and the
Warrants will be duly authorized, and when issued and sold to the Purchasers,
after payment therefor in accordance herewith, will be validly issued, fully
paid and nonassessable and will be issued in compliance with the registration
and qualification requirements of all applicable United States federal, state
and foreign securities laws (or pursuant to exemptions therefrom). The shares of
Common Stock issuable upon conversion of the Purchased Shares are duly
authorized and, when issued in compliance with the provisions of the Certificate
of Designations, will be validly issued, fully paid and nonassessable and will
be issued in compliance with the registration and qualification requirements of
all applicable United States federal, state and foreign securities laws (or
pursuant to exemptions therefrom). The Warrant Shares issuable upon exercise of
the Warrants are duly authorized and, when issued in compliance with the
provisions of the Warrants, will be validly issued, fully paid and non-
assessable and will be issued in compliance with the registration and
qualification requirements of all applicable United States federal, state and
foreign securities laws (or pursuant to exceptions therefrom).

          (b) Neither the Company nor any of the Subsidiaries directly or
indirectly owns or has made any investment in any of the capital stock of, or
any other proprietary interest in, any Person other than Prime Response Limited,
a company registered in England and Wales under number 2155722.  The Company
owns all of the issued and outstanding capital stock of the Subsidiaries, free
and clear of all Liens.  All of such shares of capital stock are duly
authorized, validly issued and fully paid, and all of such shares were issued in
compliance with the requirements of all applicable Requirements of Law.  There
are no options, warrants, conversion privileges, subscription or purchase rights
or other rights to purchase or otherwise acquire any authorized but unissued
shares or other securities of, or any proprietary interest in, the Subsidiaries,
and there is no outstanding security of any kind convertible into or
exchangeable for such shares or proprietary interest.

          3.6  Financial Statements.  By the Closing Date, the Company shall
               --------------------
have delivered to the Purchasers its unaudited consolidated financial statements
(balance sheet and statement of operations) for the period ending April 30,
1999, (the "Financial Statements").  The Financial Statements shall be prepared
in accordance with United States GAAP applied on a consistent basis throughout
the periods indicated and with each other, except that the Financial Statements
shall not contain footnotes or normal year-end adjustments.  The Financial
Statements, at the time of their delivery to the Purchasers and at all other
times, shall fairly present the financial condition, operating results and cash
flows of the Company as of the respective dates and for the respective periods
indicated in accordance with United States GAAP, except that the Financial
Statements shall not contain footnotes or normal year-end adjustments.

          3.7  No Default or Breach; Contractual Obligations.  Neither the
               ---------------------------------------------
Company nor any of its Subsidiaries has received notice of, and is not in
default
<PAGE>

                                                                              10

under, or with respect to, any Contractual Obligation in any respect, which,
individually or together with all such defaults, could have a material adverse
effect on (i) the Condition of the Company or (ii) the ability of the Company to
perform its obligations under this Agreement or the other Transaction Documents
to which it is a party.

          3.8   No Material Adverse Change; Ordinary Course of Business.  Since
                -------------------------------------------------------
January 1, 1999 (a) there has not been any material adverse change, nor to the
knowledge of the Company is any such change threatened, in the Condition of the
Company, (b) the Company has not participated in any transaction or otherwise
acted outside the ordinary course of business, including, without limitation,
declaring or paying any dividend or declaring or making any distribution to its
stockholders except out of the earnings of the Company and (c) the Company has
not increased the compensation of any of its officers or the rate of pay of any
of its employees, except as part of regular compensation increases in the
ordinary course of business.

          3.9   Private Offering.  No form of general solicitation or general
                ----------------
advertising was used by the Company or its representatives in connection with
the offer or sale of the Purchased Shares or the Warrants.  No registration of
the Purchased Shares, the Warrants or the Warrant Shares pursuant to the
provisions of the Securities Act or any state securities or "blue sky" laws,
will be required for the offer, sale or issuance of the Purchased Shares, the
Warrants or the Warrant Shares.

          3.10  Broker's, Finder's or Similar Fees.  There are no brokerage
                ----------------------------------
commissions, finder's fees or similar fees or commissions payable by the Company
or any of its Subsidiaries in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with the Company or
any of its Subsidiaries or any action taken by any such Person.

          3.11  Disclosure.  This Agreement and the documents and certificates
                ----------
furnished to the Purchasers by the Company, taken as a whole, do not contain any
untrue statement of a material fact or to the Company's knowledge omit to state
a material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.

                                  ARTICLE IV.

               REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
               ------------------------------------------------

          Each of the Purchasers hereby represents and warrants (severally as to
itself and not jointly) to the Company as follows:

          4.1  Existence and Power.  Each of GAP LP and GAP Coinvestment (a) is
               -------------------
 a partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation, (b) has all requisite power and
authority to
<PAGE>

                                                                              11

conduct the business in which it is currently, or is proposed to be, engaged,
and (c) has the requisite partnership power and authority to execute, deliver
and perform its obligations under this Agreement and each of the other
Transaction Documents to which it is a party.

          4.2  Authorization; No Contravention.  The execution, delivery and
               -------------------------------
performance by such Purchaser of this Agreement and each of the other
Transaction Documents to which it is a party and the transactions contemplated
hereby and thereby (including, without limitation, the purchase of the Purchased
Shares and the Warrants) (a) have been duly authorized by all necessary
partnership action, (b) do not contravene the terms of such Purchaser's
organizational documents, or any amendment thereof, (c) do not violate, conflict
with or result in any breach or contravention of or the creation of any Lien
under, any Contractual Obligation of such Purchaser, or any Requirement of Law
applicable to such Purchaser and (d) do not violate any Orders of any
Governmental Authority against, or binding upon, such Purchaser.

          4.3  Governmental Authorization; Third Party Consents.  No approval,
               ------------------------------------------------
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, and no lapse of
a waiting period under any Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the purchase of the Purchased Shares and the Warrants) by, or
enforcement against, such Purchaser of this Agreement and each of the other
Transaction Documents to which such Purchaser is a party or the transactions
contemplated hereby and thereby.

          4.4  Binding Effect.  Each of the Transaction Documents to which such
               --------------
Purchaser is a party has been duly executed and delivered by such Purchaser, and
each constitutes the legal, valid and binding obligations of such Purchaser,
enforceable against it in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability (regardless of whether considered in a proceeding at law or in
equity).

          4.5  Purchase for Own Account.  The Purchased Shares and the Warrants
               ------------------------
to be acquired by such Purchaser pursuant to this Agreement and the shares of
Common Stock issuable upon conversion of the Purchased Shares and its Warrant
Shares are being or will be acquired for investment for its own account and with
no intention of distributing or reselling, or granting any participation in,
such Purchased Shares, such shares of Common Stock, such Warrants, such Warrant
Shares or any part thereof in any transaction that would be in violation of the
securities laws of the United States of America, or any state or foreign
jurisdiction, without prejudice, however, to the rights of such Purchaser at all
times to sell or otherwise dispose of all or any part of such Purchased Shares,
such shares of Common Stock, such Warrants or such Warrant Shares under an
effective registration statement under the Securities
<PAGE>

                                                                              12

Act and under the applicable state or foreign securities laws, or under an
exemption from such registration available under such laws, and subject,
nevertheless, to the disposition of such Purchaser's property being at all times
within its control. If such Purchaser should in the future decide to dispose of
any of such Purchased Shares, such shares of Common Stock, such Warrants or such
Warrant Shares, such Purchaser understands and agrees that it may do so only in
compliance with the Securities Act and applicable state and foreign securities
laws, as then in effect. Such Purchaser agrees to the imprinting, so long as
required by law, of legends on certificates representing all of its Purchased
Shares, shares of Common Stock issuable upon conversion of its Purchased Shares
and its Warrant Shares as required by any applicable state securities laws and
to the following effect (and acknowledges that the Company will make a notation
on its transfer books to such effect):

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
     LAWS OF ANY JURISDICTION OF THE UNITED STATES.  THE SECURITIES MAY NOT BE
     TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
     SUCH ACT AND UNDER THE APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
     OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL REASONABLY SATISFACTORY
     TO THE COMPANY, IF REQUESTED BY THE COMPANY, THAT THERE IS AN APPLICABLE
     EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

     THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
     DISPOSITION (EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES
     REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE
     STOCKHOLDERS AGREEMENT, DATED OCTOBER 24, 1997, AMONG PRIME RESPONSE GROUP
     INC. AND THE STOCKHOLDERS NAMED THEREIN AS AMENDED BY EACH OF AMENDMENT NO.
     1, AMENDMENT NO. 2 AND AMENDMENT NO. 3 THERETO (THE "STOCKHOLDERS
     AGREEMENT").  THE COMPANY WILL NOT REGISTER THE TRANSFER OF SUCH SECURITIES
     ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER HAS BEEN MADE IN
     COMPLIANCE WITH THE TERMS OF THE STOCKHOLDERS AGREEMENT.  THE COMPANY WILL
     MAIL A COPY OF SUCH AGREEMENT, TOGETHER WITH A COPY OF THE EXPRESS TERMS OF
     THE SECURITIES AND THE OTHER CLASS OR CLASSES AND SERIES OF SHARES, IF ANY,
     WHICH THE COMPANY IS AUTHORIZED TO ISSUE, TO THE RECORD HOLDER OF THIS
     CERTIFICATE, WITHOUT CHARGE, WITHIN
<PAGE>

                                                                              13

     FIVE DAYS AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.

          4.6  Restricted Securities.  Such Purchaser understands that the
               ---------------------
Purchased Shares, its Warrant and the Warrant Shares issuable upon exercise of
its Warrant will not be registered under the Securities Act at the time of their
issuance for the reason that the sale provided for in this Agreement is exempt
pursuant to Rule 506 of Regulation D promulgated under the Securities Act and
that the reliance of the Company on such exemption is predicated in part on such
Purchaser's representations set forth herein.  Such Purchaser also represents
that it is experienced in evaluating companies such as the Company, has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment and has the ability to suffer
the total loss of its investment.  Such Purchaser further represents that it has
had the opportunity to ask questions of and receive answers from the Company
concerning the terms and conditions of the offering and the Company's business,
management and financial affairs and to obtain additional information to such
Purchaser's satisfaction.

          4.7  Investment Experience.  Such Purchaser is an investor in
               ---------------------
securities of companies in the development stage and acknowledges that it has,
by reason of its business and financial experience, the capacity to protect its
own interest in connection with the transaction and that it is able to bear the
economic risk of its investment in the transaction.  Such Purchaser is an
"Accredited Investor" as defined in Rule 501(a) under the Securities Act.

          4.8  Broker's, Finder's or Similar Fees.  There are no brokerage
               ----------------------------------
commissions, finder's fees or similar fees or commissions payable by such
Purchaser, in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with such Purchaser or any action taken
by such Purchaser.

                                  ARTICLE V.

                         CONDITIONS TO THE OBLIGATION
                          OF THE PURCHASERS TO CLOSE
                         ----------------------------

          The obligation of the Purchasers to purchase the Purchased Shares and
the Warrants, to pay the purchase price therefor at the Closing and to perform
their other obligations hereunder shall be subject to the satisfaction as
determined by, or waiver by, the Purchasers of the following conditions on or
before the Closing Date:

          5.1  Secretary's Certificate.  The Purchasers shall have received a
               -----------------------
certificate from the Company, in form and substance reasonably satisfactory to
the Purchasers, dated the Closing Date and signed by the Secretary or an
Assistant Secretary of the Company, certifying that the attached copies of the
Certificate of
<PAGE>

                                                                              14

Incorporation, the Certificate of Designations, the By-laws and resolutions of
the Board of Directors approving this Agreement and each of the other
Transaction Documents to which the Company is a party and the transactions
contemplated hereby and thereby, are all true, complete and correct and remain
unamended and in full force and effect.

          5.2  Filing of Certificate of Designations.  The Certificate of
               -------------------------------------
Designations shall have been duly filed by the Company with the Secretary of
State of the State of Delaware in accordance with the General Corporation Law of
the State of Delaware.

          5.3  Stockholders Agreement Amendment.  The Company, James Carling,
               --------------------------------
Nevin Prakash, Richard S. Braddock and Allen Swann and the other stockholders
party thereto shall have duly executed and delivered the Stockholders Agreement
Amendment.

          5.4  Registration Rights Agreement Amendment.  The Company, James
               ---------------------------------------
Carling and Nevin Prakash shall have duly executed and delivered the
Registration Rights Agreement Amendment.

          5.5  Purchased Shares.  The Company shall be prepared to deliver to
               ----------------
each of the Purchasers certificates in definitive form representing the number
of Purchased Shares set forth opposite such Purchaser's name on Schedule 2.1
                                                                ------------
hereto, registered in the name of such Purchaser.

          5.6  Warrants.  The Company shall have duly executed and delivered to
               --------
GAP LP the GAP LP Warrant and to GAP Coinvestment the GAPCO Warrant, each
substantially in the form attached hereto as Exhibit E, and registered in the
                                             ---------
name of GAP LP and GAP Coinvestment, respectively.

          5.7  Waivers.  James Carling, Nevin Prakash, Richard S. Braddock and
               -------
Allen Swann shall have waived any preemptive rights with respect to the
Purchased Shares pursuant to Section 4 of the Stockholders Agreement, dated as
of October 24, 1997, among the Company, GAP 42, GAP Coinvestment and the
stockholders named therein, as amended (as so amended, the "Stockholders
Agreement").

          5.8  Opinion of Counsel.    The Purchasers shall have received an
               ------------------
opinion of Brobeck Hale and Dorr, counsel to the Company, dated the Closing
Date, relating to the transactions contemplated by or referred to herein,
substantially in the form attached hereto as Exhibit D.
                                             ---------

          5.9  Adjustments to Series A and Series B Conversion Prices.    The
               ------------------------------------------------------
Purchasers shall have received resolutions of the Board of Directors, in form
and substance satisfactory to the Purchasers, approving the anti-dilution
adjustments to the conversion prices set forth in the certificates of
designations relating to the Series A
<PAGE>

                                                                              15

Preferred Stock and the Series B Preferred Stock respectively which are
triggered by the issuance of the shares of Series C Preferred Stock and the
Warrants contemplated by this Agreement.

                                  ARTICLE VI.

                         CONDITIONS TO THE OBLIGATION
                          OF THE COMPANY TO CLOSE
                         --------------------------

          The obligation of the Company to issue and sell the Purchased Shares
and the Warrants and the obligation of the Company to perform its other
obligations hereunder, shall be subject to the satisfaction as determined by, or
waiver by, the Company of the following conditions on or before the Closing
Date:

            6.1   Stockholders Agreement Amendment .  The Purchasers shall
                  --------------------------------
 have duly executed and delivered the Stockholders Agreement Amendment.

            6.2   Registration Rights Agreement Amendment .  The Purchasers
                  ---------------------------------------
shall have duly executed and delivered the Registration Rights Agreement
Amendment.

            6.3   Payment by the Purchasers .  Each of the Purchasers shall be
                  ---------------------------------------
prepared to pay the aggregate purchase price for its Purchased Shares and its
Warrant.

            6.4   Waiver.  GAP 42, GAP 48 and GAP Coinvestment I shall have
                  ------
waived any preemptive rights with respect to the Purchased Shares, the Warrants
and the Warrant Shares pursuant to Section 4 of the Stockholders Agreement.

                                 ARTICLE VII.

                                INDEMNIFICATION
                                ---------------

          7.1  Indemnification.  Except as otherwise provided in this Article
               ---------------
7, the Company and each of the Purchasers, severally and not jointly, as
applicable (the "Indemnifying Party"), agrees to indemnify, defend and hold
harmless the Purchasers, in the case of indemnity by the Company, or the
Company, in the case of indemnity by the Purchasers, as applicable, and their
Affiliates and their respective officers, directors, agents, employees,
subsidiaries, partners, members and controlling persons (each, an "Indemnified
Party") to the fullest extent permitted by law from and against any and all
losses, Claims (including any Claim by a third party), damages, expenses
(including reasonable fees, disbursements and other charges of counsel incurred
by the Indemnified Party in any action between the Indemnifying Party and the
Indemnified Party or between the Indemnified Party and any third party
<PAGE>

                                                                              16

or otherwise) or other liabilities (collectively, "Losses") resulting from,
arising out of or relating to any breach of any representation or warranty,
covenant or agreement by the Indemnifying Party in this Agreement or the other
Transaction Documents, including, without limitation, any legal, administrative
or other actions (including actions brought by the Purchasers or the Company or
any equity holders or partners of such Persons or derivative actions brought by
any Person claiming through or in the Company's name or in the name of either of
the Purchasers), proceedings or investigations (whether formal or informal), or
written threats thereof, based upon, relating to or arising out of this
Agreement or the other Transaction Documents, the transactions contemplated
hereby and thereby, or any Indemnified Party's role therein or in transactions
contemplated thereby; provided, that the Indemnifying Party shall not be liable
                      --------
under this Section 7.1 to an Indemnified Party to the extent that it is finally
judicially determined that such Losses resulted primarily from the material
breach by such Indemnified Party of any representation, warranty, covenant or
other agreement of such Indemnified Party contained in this Agreement; and
provided, further, that if and to the extent that such indemnification is
--------  -------
unenforceable for any reason, the Indemnifying Party shall make the maximum
contribution to the payment and satisfaction of such Losses which shall be
permissible under applicable laws.  The amount of any payment by any
Indemnifying Party to any Indemnified Party herewith in respect of any Loss
shall be of sufficient amount to make such Indemnified Party whole, and, in the
case of indemnity by the Company, shall consist of an amount sufficient to make
up any diminution in the value of the Purchased Shares or the Warrants held by
such Indemnified Party resulting from the payment by the Company of such
indemnification payment.  In connection with the obligation of the Indemnifying
Party to indemnify for expenses as set forth above, the Indemnifying Party
shall, upon presentation of appropriate invoices containing reasonable detail,
reimburse each Indemnified Party for all such expenses (including reasonable
fees, disbursements and other charges of counsel incurred by the Indemnified
Party in any action between the Indemnifying Party and the Indemnified Party or
between the Indemnified Party and any third party or otherwise) as they are
incurred by such Indemnified Party; provided, however, that if an Indemnified
                                    --------  -------
Party is reimbursed hereunder for any expenses, such reimbursement of expenses
shall be refunded to the extent it is finally judicially determined that the
Losses in question resulted primarily from the willful misconduct or gross
negligence of such Indemnified Party.  Notwithstanding the foregoing,
indemnification with respect to this Section 7.1 by the Company shall be limited
to the aggregate consideration paid by the Purchasers for the Purchased Shares
and the Warrants, and indemnification by the Purchasers shall be limited to the
aggregate consideration paid by such Purchaser for its Purchased Shares and its
Warrant.

          7.2  Notification.  Each Indemnified Party under this Article 7
               ------------
shall, promptly after the receipt of notice of the commencement of any action,
investigation, claim or other proceeding against such Indemnified Party in
respect of which indemnity may be sought from the Indemnifying Party under this
Article 7, notify the Indemnifying Party in writing of the commencement thereof.
The omission of any Indemnified Party to so notify the Indemnifying Party of any
such action shall not
<PAGE>

                                                                              17

relieve the Indemnifying Party from any liability which it may have to such
Indemnified Party (a) other than pursuant to this Article 7 or (b) under this
Article 7 unless, and only to the extent that, such omission results in the
Indemnifying Party's forfeiture of substantive rights or defenses. In case any
such action, claim or other proceeding shall be brought against any Indemnified
Party, and it shall notify the Indemnifying Party of the commencement thereof,
the Indemnifying Party shall be entitled to assume the defense thereof at its
own expense, with counsel satisfactory to such Indemnified Party in its
reasonable judgment; provided, however, that any Indemnified Party may, at its
                     --------  -------
own expense, retain separate counsel to participate in such defense at its own
expense. Notwithstanding the foregoing, in any action, claim or proceeding in
which both the Indemnifying Party, on the one hand, and an Indemnified Party, on
the other hand, are, or are reasonably likely to become, a party, such
Indemnified Party shall have the right to employ separate counsel at the expense
of the Indemnifying Party and to control its own defense of such action, claim
or proceeding if, in the reasonable opinion of counsel to such Indemnified
Party, a conflict or potential conflict exists between the Indemnifying Party,
on the one hand, and such Indemnified Party, on the other hand, that would make
such separate representation advisable; provided, however, that the Indemnifying
                                        --------  -------
Party shall not be liable for the fees and expenses of more than one counsel to
all Indemnified Parties. The Indemnifying Party agrees that it will not, without
the prior written consent of the Indemnified Party, settle, compromise or
consent to the entry of any judgment in any pending or threatened claim, action
or proceeding relating to the matters contemplated hereby (if any Indemnified
Party is a party thereto or has been actually threatened to be made a party
thereto) unless such settlement, compromise or consent includes an unconditional
release of each Indemnified Party from all liability arising or that may arise
out of such claim, action or proceeding. The Indemnifying Party shall not be
liable for any settlement of any claim, action or proceeding effected against an
Indemnified Party without the Indemnifying Party's written consent, which
consent shall not be unreasonably withheld. The rights accorded to an
Indemnified Party hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or otherwise;
provided, however, that notwithstanding the foregoing or anything to the
--------  -------
contrary contained in this Agreement, nothing in this Article 7 should restrict
or limit any rights that any Indemnified Party may have to seek equitable
relief.

                                 ARTICLE VIII.

                             AFFIRMATIVE COVENANTS
                             ---------------------

          The Company hereby covenants and agrees with the Purchasers as
follows:

          8.1  Financial Statements and Other Information.  The Company shall
               ------------------------------------------
deliver to each Purchaser, in form and substance satisfactory to such Purchaser:
<PAGE>

                                                                              18

          (a) as soon as available, but not later than one hundred twenty (120)
days after the end of each fiscal year of the Company, a copy of the audited
balance sheet of the Company as of the end of such fiscal year and the related
statements of operations and cash flows for such fiscal year, setting forth in
each case in comparative form the figures for the previous year, all in
reasonable detail and accompanied by a management summary and analysis of the
operations of the Company for such fiscal year and by the opinion of a
nationally recognized independent certified public accounting firm which report
shall state without qualification that such financial statements present fairly
the financial condition as of such date and results of operations and cash flows
for the periods indicated in conformity with GAAP applied on a consistent basis;

          (b) commencing with the fiscal period ending on June 30, 1999, as soon
as available, but in any event not later than forty-five (45) days after the end
of each of the first three fiscal quarters of each fiscal year, the unaudited
balance sheet of the Company, and the related statements of operations and cash
flows for such quarter and for the period commencing on the first day of the
fiscal year and ending on the last day of such quarter, all certified by an
appropriate officer of the Company as presenting fairly the financial condition
as of such date and results of operations and cash flows for the periods
indicated in conformity with GAAP applied on a consistent basis, subject to
normal year-end adjustments and the absence of footnotes required by GAAP; and

          (c) as promptly as practicable, but not later than five (5) days after
the end of each fiscal year of the Company, a certificate signed by the Chief
Executive Officer of the Company in customary form certifying that the Company
is not a "foreign person" within the meaning of Section 1445 of the Code.

          (d) Reservation of Common Stock.  The Company shall at all times (i)
              ---------------------------
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issue or delivery upon conversion of the Purchased Shares,
and (ii) reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issue or delivery upon exercise of the
Warrants, as provided in the Certificate of Designations and the Warrants (in
the case of the Warrant Shares), the maximum number of shares of Common Stock
that may be issuable or deliverable upon such conversion or exercise, as the
case may be.  Such shares of Common Stock are duly authorized and, when issued
or delivered in accordance with the Certificate of Designations and the Warrants
(in the case of the Warrant Shares), as the case may be, against payment
therefor, shall be validly issued, fully paid and non-assessable.  The Company
shall issue such shares of Common Stock in accordance with the terms of the
Certificate of Designations or the Warrants, as the case may be, and otherwise
comply with the terms hereof and thereof.
<PAGE>

                                                                              19

                                  ARTICLE IX

                                 MISCELLANEOUS
                                 -------------

         9.1  Survival of Representations and Warranties.  All of the
              ------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of the Company or
the Purchasers, or acceptance of the Purchased Shares and the Warrants or
termination of this Agreement until the third anniversary of the Closing Date.

         9.2  Notices.  All notices, demands and other communications provided
              -------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:

               (a)  if to the Company:

                    Prime Response Group Inc.
                    150 CambridgePark Drive
                    Cambridge, MA 02140
                    Telecopy: (617) 876-8383
                    Attention: Chief Executive Officer

                    with a copy to:

                    Brobeck Hale and Dorr
                    Hasilwood House
                    60 Bishopsgate
                    London EC2N 4AJ
                    England
                    Telecopy: 44 171 638 5888
                    Attention: David Ayres

               (b)  if to the Purchasers:

                    c/o General Atlantic Service Corporation
                    3 Pickwick Plaza
                    Greenwich, Connecticut 06830
                    Telecopy:  (203) 622-8818
                    Attention:  William E. Ford
<PAGE>

                                                                              20

                    with a copy to:

                    Paul, Weiss, Rifkind, Wharton & Garrison
                    1285 Avenue of the Americas
                    New York, New York 10019-6064
                    Telecopy:  (212) 757-3990
                    Attention:  Matthew Nimetz, Esq.

          All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial courier service; five (5) Business Days
after being deposited in the mail, postage prepaid, if mailed; and when receipt
is mechanically acknowledged, if properly telecopied.

         9.3  Successors and Assigns; Third Party Beneficiaries.  This
              -------------------------------------------------
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto.  Subject to applicable securities laws,
each of the Purchasers may assign any of its rights under any of the Transaction
Documents to any of its Affiliates.  The Company may not assign any of its
rights under this Agreement without the written consent of the holders of a
majority of the Purchased Shares.  No Person other than the parties hereto and
their successors and permitted assigns is intended to be a beneficiary of this
Agreement.

         9.4  Amendment and Waiver.
              --------------------

              (a) No failure or delay on the part of the Company or the
Purchasers in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company or the Purchasers at law, in equity or otherwise.

              (b) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company or the Purchasers from the terms of
any provision of this Agreement, shall be effective only if it is made or given
in writing and signed by the Company and the holders of a majority of the
Purchased Shares. Except where notice is specifically required by this
Agreement, no notice to or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.

         9.5  Counterparts.  This Agreement may be executed in any number of
              ------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
<PAGE>

                                                                              21

         9.6  Headings.  The headings in this Agreement are for convenience of
              --------
reference only and shall not limit or otherwise affect the meaning hereof.

         9.7  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND
              -------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION.

         9.8  Severability.  If any one or more of the provisions contained
              ------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.

         9.9  Entire Agreement.  This Agreement, together with the exhibits
              ----------------
and schedules hereto and the other Transaction Documents, is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein.  There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein.  This Agreement, together with the exhibits
and schedules hereto and the other Transaction Documents, supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

         9.10 Fees.  Upon the Closing the Company shall reimburse GAP LP and
              ----
GAP Coinvestment for their reasonable fees, disbursements and other charges of
counsel incurred in connection with the transactions contemplated by this
Agreement.  Except as provided in the preceding sentence, each party hereto
shall bear their own costs and expenses in connection with the preparation,
execution and delivery of this Agreement and other Transaction Documents, and
the transactions contemplated hereby and thereby.

         9.11 Publicity.  Except as may be required by any applicable
              ---------
Requirement of Law, none of the parties hereto shall issue a publicity release
or public announcement or otherwise make any disclosure concerning this
Agreement or the transactions contemplated hereby, without prior approval by the
other parties hereto (which approval shall not be unreasonably withheld);
provided, however, that nothing in this Agreement shall restrict any Purchaser
--------  -------
from disclosing information (a) that is already publicly available; (b) to the
prospective transferee in connection with any contemplated transfer of any of
the Purchased Shares; and (c) to its attorneys, accountants, consultants and
other advisors to the extent necessary to obtain their services in connection
with such Purchaser's investment in the Company.  GAP LLC may disclose on its
worldwide web page, www.gapartners.com, the name of the Company, its address,
the identity of its Chief Executive Officer, a description of the
<PAGE>

                                                                              22

Company's business (which description shall be reasonably acceptable to the
Company) and the aggregate dollar amount invested by GAP LLC and its Affiliates
in the Company. If any announcement is required by any applicable Requirement of
Law to be made by any party hereto, prior to making such announcement such party
will deliver a draft of such announcement to the other parties and shall give
the other parties an opportunity to comment thereon.

         9.12 Further Assurances.  Each of the parties shall execute such
              ------------------
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person, and otherwise fulfilling, or causing the fulfillment of, the
conditions to the Closing set forth in Articles 5 and 6) as may be reasonably
required or desirable to carry out or to perform the provisions of this
Agreement and to consummate and make effective as promptly as possible the
transactions contemplated by this Agreement.
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Stock and
Warrant Purchase Agreement to be executed and delivered by their respective
officers hereunto duly authorized on the date first above written.

                         PRIME RESPONSE GROUP INC.

                         By:  /s/ Peter J. Boni
                              ________________________________
                              Name: Peter J. Boni
                              Title: President & CEO

                         GENERAL ATLANTIC PARTNERS 52, L.P.

                         By:  GENERAL ATLANTIC PARTNERS, LLC,
                              its General Partner

                         By:  /s/ illegible
                              ___________________________
                              Name:
                              Title:  A Managing Member

                         GAP COINVESTMENT PARTNERS II, L.P.

                         By:  /s/ illegible
                              ________________________________
                              Name:
                              Title:  A General Partner
<PAGE>

                                                            Schedule 2.1
                                                            ------------

                 Purchased Shares, Warrants and Purchase Price
                 ---------------------------------------------

<TABLE>
<CAPTION>
                                               Shares of Common Stock
                                                   Issuable Upon
Purchaser                 Purchased Shares      Exercise of Warrants        Purchase Price
---------                 ----------------      --------------------        --------------
<S>                     <C>                   <C>                         <C>

GAP LP                        814,285                   273,099                $2,442,855

GAP Coinvestment              185,715                    62,286                   557,145
                            ---------                   -------                ----------

Total:                      1,000,000                   335,385                $3,000,000

</TABLE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00002-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00002-of-00352.parquet"}]]