<PAGE>

                                                                    EXHIBIT 10.4

                           PRIME RESPONSE GROUP, INC.

                             STOCK OPTION AGREEMENT
                             ----------------------


          RECITALS
          --------

          A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the board
of directors of any Parent or Subsidiary and consultants and other independent
advisors in the service of the Corporation (or any Parent or Subsidiary).

          B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.

          C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.

          NOW, THEREFORE, it is hereby agreed as follows:

          1.  GRANT OF OPTION.   The Corporation hereby grants to Optionee, as
              ---------------
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.

          2.  OPTION TERM.  This option shall have a term of ten (10) years
              -----------
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.

          3.  LIMITED TRANSFERABILITY.  During Optionee's lifetime, this option
              -----------------------
shall be exercisable only by Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following Optionee's death .

          4.  DATES OF EXERCISE.  This option shall become exercisable for the
              -----------------
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

          5.  CESSATION OF SERVICE.  The option term specified in Paragraph 2
              --------------------
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

              (a) Should Optionee cease to remain in Service for any reason
(other than death, Disability or Misconduct) while this option is outstanding,
then Optionee shall have a period of three (3) months (commencing with the date
of such cessation of Service) during which
<PAGE>

to exercise this option, but in no event shall this option be exercisable at any
time after the Expiration Date.

              (b)  Should Optionee die while this option is outstanding, then
the personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or in accordance with
the laws of inheritance shall have the right to exercise this option. Such right
shall lapse, and this option shall cease to be outstanding, upon the earlier of
                                                                     -------
(i) the expiration of the twelve (12)-month period measured from the date of
Optionee's death or (ii) the Expiration Date.

              (c)  Should Optionee cease Service by reason of Disability while
this option is outstanding, then Optionee shall have a period of twelve (12)
months (commencing with the date of such cessation of Service) during which to
exercise this option. In no event shall this option be exercisable at any time
after the Expiration Date.

          Note:  Exercise of this option on a date later than three (3) months
          ----
          following cessation of Service due to Disability will result in loss
          of favorable Incentive Option treatment, unless such Disability
          constitutes Permanent Disability.  In the event that Incentive Option
          treatment is not available, this option will be taxed as a Non-
          Statutory Option upon exercise.

              (d)  During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
Option Shares in which Optionee is, at the time of Optionee's cessation of
Service, vested pursuant to the Vesting Schedule specified in the Grant Notice
or the special vesting acceleration provisions of Paragraph 6. Upon the
expiration of such limited exercise period or (if earlier) upon the Expiration
Date, this option shall terminate and cease to be outstanding for any vested
Option Shares for which the option has not been exercised. To the extent
Optionee is not vested in the Option Shares at the time of Optionee's cessation
of Service, this option shall immediately terminate and cease to be outstanding
with respect to those shares.

              (e) Should Optionee's Service be terminated for Misconduct, then
this option shall terminate immediately and cease to remain outstanding.


          6.  ACCELERATED VESTING.
              -------------------

              (a)  In the event of any Corporate Transaction, the Option Shares
at the time subject to this option but not otherwise vested shall automatically
vest in full so that this option shall, immediately prior to the effective date
of the Corporate Transaction, become fully exercisable for all of the Option
Shares as fully-vested shares and may be exercised for any or all of those
vested shares. However, the Option Shares shall NOT vest on such an accelerated
basis if and to the extent: (i) this option is assumed by the successor
corporation (or parent thereof) in the Corporate Transaction and the
Corporation's repurchase rights with respect to the unvested Option Shares are
assigned to such successor corporation (or parent thereof) or (ii) this option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested Option Shares at the time of
the Corporate Transaction (the

                                       2
<PAGE>

excess of the Fair Market Value of those Option Shares over the Exercise Price
payable for such shares) and provides for subsequent payout in accordance with
the same Vesting Schedule applicable to those unvested Option Shares as set
forth in the Grant Notice.

              (b)  Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.

              (c)  If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
       --------

              (d)  The Option Shares may also vest upon an accelerated basis in
accordance with the terms and conditions of any special addendum attached to
this Agreement.

              (e)  This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

              7.  ADJUSTMENT IN OPTION SHARES.  Should any change be made to the
                  ---------------------------
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.

              8.  STOCKHOLDER RIGHTS.  The holder of this option shall not have
                  ------------------
any stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become the record holder
of the purchased shares.

              9.  MANNER OF EXERCISING OPTION.
                  ---------------------------

              (a)  In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:

                   (i) Execute and deliver to the Corporation a Purchase
        Agreement for the Option Shares for which the option is exercised.

                   (ii) Pay the aggregate Exercise Price for the purchased
        shares in one or more of the following forms:

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<PAGE>

                        (A)  cash or check made payable to the Corporation; or

                        (B)  a promissory note payable to the Corporation, but
              only to the extent authorized by the Plan Administrator in
              accordance with Paragraph 14.

              Should the Common Stock be registered under Section 12 of the 1934
              Act at the time the option is exercised, then the Exercise Price
              may also be paid as follows:

                        (C)  in shares of Common Stock held by Optionee (or any
              other person or persons exercising the option) for the requisite
              period necessary to avoid a charge to the Corporation's earnings
              for financial reporting purposes and valued at Fair Market Value
              on the Exercise Date; or

                        (D)  to the extent the option is exercised for vested
              Option Shares, through a special sale and remittance procedure
              pursuant to which Optionee (or any other person or persons
              exercising the option) shall concurrently provide irrevocable
              instructions (a) to a Corporation-designated brokerage firm to
              effect the immediate sale of the purchased shares and remit to the
              Corporation, out of the sale proceeds available on the settlement
              date, sufficient funds to cover the aggregate Exercise Price
              payable for the purchased shares plus all applicable Federal,
              state and local income and employment taxes required to be
              withheld by the Corporation by reason of such exercise and (b) to
              the Corporation to deliver the certificates for the purchased
              shares directly to such brokerage firm in order to complete the
              sale.

              Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the Exercise Price
must accompany the Purchase Agreement delivered to the Corporation in connection
with the option exercise.

              (iii)  Furnish to the Corporation appropriate documentation that
the person or persons exercising the option (if other than Optionee) have the
right to exercise this option.

              (iv) Execute and deliver to the Corporation such written
representations as may be requested by the Corporation in order for it to comply
with the applicable requirements of Federal and state securities laws.

              (v)  Make appropriate arrangements with the Corporation (or Parent
or Subsidiary employing or retaining Optionee) for the satisfaction of all
Federal, state and local income and employment tax withholding requirements
applicable to the option exercise.

                                       4
<PAGE>

              (b)  As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.


              (c)  In no event may this option be exercised for any fractional
shares.

        10.  REPURCHASE RIGHTS.  ALL OPTION SHARES ACQUIRED UPON THE EXERCISE OF
             -----------------
THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS
ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE
PURCHASE AGREEMENT.

        11.  COMPLIANCE WITH LAWS AND REGULATIONS.
             ------------------------------------
              (a)  The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.

              (b)  The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.

        12.  SUCCESSORS AND ASSIGNS.  Except to the extent otherwise provided in
             ----------------------
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.

        13.  NOTICES.  Any notice required to be given or delivered to the
             -------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

        14.  FINANCING.  The Plan Administrator may, in its absolute discretion
             ---------
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased Option Shares by delivering a full-recourse, interest-bearing
promissory note secured by those Option Shares. The payment schedule in effect
for any such promissory note shall be established by the Plan Administrator in
its sole discretion.

        15.  CONSTRUCTION.  This Agreement and the option evidenced hereby are
             ------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under

                                       5
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the Plan or this Agreement shall be conclusive and binding on all persons having
an interest in this option.

        16.  GOVERNING LAW.  The interpretation, performance and enforcement of
             -------------
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.

        17.  STOCKHOLDER APPROVAL.  If the Option Shares covered by this
             --------------------
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may be issued under the Plan as last approved by the stockholders, then
this option shall be void with respect to such excess shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.

        18.  ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION.  In the event
             --------------------------------------------------
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:

              (a) This option shall cease to qualify for favorable tax treatment
as an Incentive Option if (and to the extent) this option is exercised for one
or more Option Shares: (i) more than three (3) months after the date Optionee
ceases to be an Employee for any reason other than death or Permanent Disability
or (ii) more than twelve (12) months after the date Optionee ceases to be an
Employee by reason of Permanent Disability.

              (b)  This option shall not become exercisable in the calendar year
in which granted if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which this option would
otherwise first become exercisable in such calendar year would, when added to
the aggregate value (determined as of the respective date or dates of grant) of
the Common Stock and any other securities for which one or more other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. To the extent the exercisability of this
option is deferred by reason of the foregoing limitation, the deferred portion
shall become exercisable in the first calendar year or years thereafter in which
the One Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18(b)
would not be contravened, but such deferral shall in all events end immediately
prior to the effective date of a Corporate Transaction in which this option is
not to be assumed, whereupon the option shall become immediately exercisable as
a Non-Statutory Option for the deferred portion of the Option Shares.

              (c)  Should Optionee hold, in addition to this option, one or more
other options to purchase Common Stock which become exercisable for the first
time in the same calendar year as this option, then the foregoing limitations on
the exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

                                       6
<PAGE>

                                    APPENDIX
                                    --------

          The following definitions shall be in effect under the Agreement:

          A.  AGREEMENT shall mean this Stock Option Agreement.
              ---------

          B.  BOARD shall mean the Corporation's Board of Directors.
              -----

          C.  CODE shall mean the Internal Revenue Code of 1986, as amended.
              ----

          D.  COMMON STOCK shall mean the Corporation's common stock.
              ------------

          E.  CORPORATE TRANSACTION shall mean either of the following
              ---------------------
stockholder-approved transactions to which the Corporation is a party:

              (i) a merger or consolidation in which securities possessing more
     than fifty percent (50%) of the total combined voting power of the
     Corporation's outstanding securities are transferred to a person or persons
     different from the persons holding those securities immediately prior to
     such transaction, or

             (ii) the sale, transfer or other disposition of all or
     substantially all of the Corporation's assets in complete liquidation or
     dissolution of the Corporation.

          F.  CORPORATION shall mean Prime Response Group, Inc., a Delaware
              -----------
corporation.


          G.  DISABILITY shall mean the inability of Optionee to engage in any
              ----------
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute PERMANENT DISABILITY in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.

          H.  EMPLOYEE shall mean an individual who is in the employ of the
              --------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

          I.  EXERCISE DATE shall mean the date on which the option shall have
              -------------
been exercised in accordance with Paragraph 9 of the Agreement.

          J.  EXERCISE PRICE shall mean the exercise price payable per Option
              --------------
Share as specified in the Grant Notice.

                                      A-1
<PAGE>

          K.  EXPIRATION DATE shall mean the date on which the option expires as
              ---------------
specified in the Grant Notice.

          L.  FAIR MARKET VALUE per share of Common Stock on any relevant date
              -----------------
shall be determined in accordance with the following provisions:

                    (i)  If the Common Stock is at the time traded on the Nasdaq
          National Market, then the Fair Market Value shall be the closing
          selling price per share of Common Stock on the date in question, as
          the price is reported by the National Association of Securities
          Dealers on the Nasdaq National Market. If there is no closing selling
          price for the Common Stock on the date in question, then the Fair
          Market Value shall be the closing selling price on the last preceding
          date for which such quotation exists.

                    (ii) If the Common Stock is at the time listed on any Stock
          Exchange, then the Fair Market Value shall be the closing selling
          price per share of Common Stock on the date in question on the Stock
          Exchange determined by the Plan Administrator to be the primary market
          for the Common Stock, as such price is officially quoted in the
          composite tape of transactions on such exchange. If there is no
          closing selling price for the Common Stock on the date in question,
          then the Fair Market Value shall be the closing selling price on the
          last preceding date for which such quotation exists.

                    (iii) If the Common Stock is at the time neither listed on
          any Stock Exchange nor traded on the Nasdaq National Market, then the
          Fair Market Value shall be determined by the Plan Administrator after
          taking into account such factors as the Plan Administrator shall deem
          appropriate.

          M.  GRANT DATE shall mean the date of grant of the option as specified
              ----------
in the Grant Notice.

          N.  GRANT NOTICE shall mean the Notice of Grant of Stock Option
              ------------
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

          O.  INCENTIVE OPTION shall mean an option which satisfies the
              ----------------
requirements of Code Section 422.

          P.  MISCONDUCT shall mean the commission of any act of fraud,
              ----------
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).

                                      A-2
<PAGE>

          Q.  1934 ACT shall mean the Securities Exchange Act of 1934, as
              --------
amended.

          R.  NON-STATUTORY OPTION shall mean an option not intended to satisfy
              --------------------
the requirements of Code Section 422.

          S.  OPTION SHARES shall mean the number of shares of Common Stock
              -------------
subject to the option.

          T.  OPTIONEE shall mean the person to whom the option is granted as
              --------
specified in the Grant Notice.

          U.  PARENT shall mean any corporation (other than the Corporation) in
              ------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

          V.  PLAN shall mean the Corporation's 1998 Stock Option/Stock Issuance
              ----
Plan.

          W.  PLAN ADMINISTRATOR shall mean either the Board or a committee of
              ------------------
the Board acting in its capacity as administrator of the Plan.

          X.  PURCHASE AGREEMENT shall mean the stock purchase agreement in
              ------------------
substantially the form of Exhibit B to the Grant Notice.

          Y.  SERVICE shall mean the Optionee's performance of services for the
              -------
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or an independent consultant.

          Z.  STOCK EXCHANGE shall mean the American Stock Exchange or the New
              --------------
York Stock Exchange.

         AA.  SUBSIDIARY shall mean any corporation (other than the Corporation)
              ----------
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

         BB.  VESTING SCHEDULE shall mean the vesting schedule specified in the
              ----------------
Grant Notice pursuant to which the Optionee is to vest in the Option Shares in a
series of installments over his or her period of Service.

                                      A-3
<PAGE>

                                    ADDENDUM
                                       TO
                             STOCK OPTION AGREEMENT


     The following provisions are hereby incorporated into, and are hereby made
a part of, that certain Stock Option Agreement dated                      199
(the "Option Agreement") by and between Prime Response Group, Inc.  (the
"Corporation") and
("Optionee") evidencing the stock option (the "Option") granted on such date to
Optionee under the terms of the Corporation's 1998 Stock Option/Stock Issuance
Plan, and such provisions shall be effective immediately.  All capitalized terms
in this Addendum, to the extent not otherwise defined herein, shall have the
meanings assigned to them in the Option Agreement.

                       INVOLUNTARY TERMINATION FOLLOWING
                             CORPORATE TRANSACTION

     1.  To the extent the Option is, in connection with a Corporate
Transaction, to be assumed in accordance with Paragraph 6 of the Option
Agreement, none of the Option Shares shall vest on an accelerated basis upon the
occurrence of that Corporate Transaction, and Optionee shall accordingly
continue, over his or her period of Service following the Corporate Transaction,
to vest in the Option Shares in one or more installments in accordance with the
provisions of the Option Agreement. However, upon an Involuntary Termination of
Optionee's Service within eighteen (18) months following such Corporate
Transaction, all the Option Shares at the time subject to the Option shall
automatically vest in full on an accelerated basis so that the Option shall
immediately become exercisable for all the Option Shares as fully-vested shares
and may be exercised for any or all of those Option Shares as vested shares.
The Option shall remain so exercisable until the earlier of (i) the Expiration
Date or (ii) the expiration of the one (1)-year period measured from the date of
the Involuntary Termination.

     2.  For purposes of this Addendum, an Involuntary Termination shall mean
the termination of Optionee's Service by reason of:

         (i)   Optionee's involuntary dismissal or discharge by the Corporation
     for reasons other than for Misconduct, or

         (ii)  Optionee's voluntary resignation following (A) a change in
     Optionee's position with the Corporation (or Parent or Subsidiary employing
     Optionee) which materially reduces Optionee's duties and responsibilities
     or the level of management to which he or she reports, (B) a reduction in
     Optionee's level of compensation (including base salary, fringe benefits
     and target bonuses under any corporate-performance based incentive
     programs) by more than fifteen percent (15%) or (C) a relocation of
     Optionee's place of employment by more than fifty (50) miles, provided and
     only if such change, reduction or relocation is effected by the Corporation
     without Optionee's consent.




<PAGE>

     3.  The provisions of Paragraph 1 of this Addendum shall govern the period
for which the Option is to remain exercisable following the Involuntary
Termination of Optionee's Service within eighteen (18) months after the
Corporate Transaction and shall supersede any provisions to the contrary in
Paragraph 5 of the Option Agreement.  The provisions of this Addendum shall also
supersede any provisions to the contrary in Paragraph 18 of the Option Agreement
concerning the deferred exercisability of the Option.

     IN WITNESS WHEREOF, Prime Response Group, Inc.  has caused this Addendum to
be executed by its duly-authorized officer as of the Effective Date specified
below.


                              PRIME RESPONSE GROUP, INC.

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

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


EFFECTIVE DATE:           , 199
               -----------     --




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