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                                                                   EXHIBIT 10.26



                         Ribi ImmunoChem Research, Inc.
                        1996 Directors' Stock Option Plan


     1.   Establishment and Purpose.

     (a) There is hereby adopted by the Company, the Ribi ImmunoChem Research,
Inc. 1996 Directors' Stock Option Plan. The Plan is intended to provide a means
whereby eligible members of the Board may be given an opportunity to purchase
shares of Stock pursuant to options which are not intended to qualify as
incentive stock options under Section 422 of the Code.

     (b) The purpose of the Plan is to enable the Company to attract the best
available individuals to serve as members of the Board, to provide additional
performance incentives to such individuals while serving as directors, and to
encourage their continued service on the Board.

     2.   Definitions.

     As used herein, the following definitions shall apply:

     (a) "Affiliate" shall mean any parent or subsidiary corporations of the
Company, as defined in Sections 424(e) and (f) of the Code (but substituting
"the Company" for "employer corporation"), including parents or subsidiaries of
the Company that become such after adoption of the Plan.

     (b) "Board" shall mean the Board of Directors of the Company.

     (c) "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (d) "Company" shall mean Ribi ImmunoChem Research, Inc., a Delaware
corporation.

     (e) "Director" shall mean a member of the Board.

     (f) "Employee" shall mean any person, including officers and Directors, who
is an employee of the Company, or any Affiliate of the Company, for purposes of
tax withholding under the Code. The payment of a director's fee by the Company
shall not be sufficient to constitute "employment" by the Company.

     (g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

     (h) "Fair Market Value" means, as of any date, the value of the Stock
determined as follows:

          (i) Where there exists a public market for the Stock, the Fair Market
Value shall be the closing sales price for a share of Stock for the trading day

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on which the options are granted ("Grant Date") (or, if no sales were reported
on that date, on the last trading date on which sales were reported) on the
NASDAQ National Market or the principal securities exchange on which the Stock
is listed for trading, whichever is applicable, as reported in The Wall Street
Journal or such other source as the Board deems reliable; or

          (ii) In the absence of an established market of the type described in
(i), above, for the Stock, the Fair Market Value thereof shall be determined in
good faith by the Board, and such determination shall be conclusive and binding
on all persons.

     (i) "Option" shall mean an option to purchase shares of Stock granted
pursuant to the Plan.

     (j) "Optionee" shall mean an Outside Director who receives an Option.

     (k) "Outside Director" shall mean a Director who is not an Employee.

     (l) "Plan" shall mean the Ribi ImmunoChem Research, Inc. 1996 Directors'
Stock Option Plan.

     (m) "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange Act
or any successor thereto.

     (n) "Securities Act" shall mean the Securities Act of 1933, as amended.

     (o) "Stock" shall mean the Common Stock, par value $.001 per share, of the
Company.

     3. Stock Subject to the Plan.

     Subject to the provisions of Section 13 of the Plan, the maximum number of
shares of Stock which may be made subject to Options and sold under the Plan is
two hundred ten thousand (210,000) shares of Stock. If an Option expires or
becomes unexercisable for any reason and has not been exercised in full, the
Stock subject to such Option shall be available for future grant under the Plan.
If Stock which was acquired upon exercise of an Option is subsequently
repurchased by the Company, such Stock shall not be available for future grant
under the Plan.

     4. Administration of the Plan.

     (a) The Plan is intended to be self-executing pursuant to the terms hereof,
however, any questions concerning the interpretation or execution of the Plan or
grants hereunder shall be decided by the Board. All decisions, determinations
and interpretations of the Board shall be final and binding on all holders of
any Options granted under the Plan.

     (b) Subject to the provisions and restrictions of the Plan, the Board



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shall have the authority to authorize any person to execute on behalf of the
Company any agreements or other documents in connection with grants of Options
under the Plan and to make all other determinations deemed necessary or
advisable for the implementation of the Plan.

     5.   Option Grants.

     (a) All grants of Options hereunder shall be automatic and nondiscretionary
and shall be made strictly in accordance with the provisions of this Section 5.
No person shall have any discretion to select which Outside Directors shall be
granted Options or to determine the number of shares of Stock to be covered by
Options granted to Outside Directors, the timing of such Option grants or the
exercise price thereof.

     (b) An Option to purchase thirty thousand (30,000) shares of Stock shall be
granted ("Initial Grant") to each Outside Director, such Initial Grant to be
made (i) to the then-existing Outside Directors upon approval of the Plan by the
Board ("Approval Date") and (ii) to other Outside Directors elected or appointed
to the Board after the Approval Date upon the date each such Outside Director
first becomes an Outside Director following the Approval Date. In addition,
immediately following each annual meeting of the Company's stockholders, each
Outside Director who continues as an Outside Director following such annual
meeting shall be granted an Option to purchase five hundred (500) shares of
Stock ("Subsequent Grant"). Each such Subsequent Grant shall be made as of the
date of the annual stockholders' meeting in question.

     (c)  Limitations.

          (i) Notwithstanding the provisions of Section 5(b), above, in the
event that a sufficient number of shares of Stock is not available under the
Plan, the remaining shares shall be prorated based upon the

number of shares each Outside Director was entitled to receive under the Plan.
Any further grants of Options shall then be deferred until such time that
additional shares become available for grant under the Plan. The Board shall
have the authority at any time to make additional shares available for grant
under the Plan, subject to obtaining stockholder approval of such increase to
the extent required under Section 14(a), below.

          (ii) Notwithstanding the provisions of Sections 5(b), above, any grant
of an Option made before the Company has obtained stockholder approval of the
Plan and any grant of an Option made after amendment of the Plan where such
amendment of the Plan requires stockholder approval under Section 14(a), below,
shall be conditioned upon obtaining such stockholder approval.

     6. Terms and Conditions of Options.

     (a) Each Option granted pursuant to the Plan shall be evidenced by a



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written stock option agreement in the form attached hereto as Exhibit A
("Directors' NonQualified Stock Option Agreement") executed by the Company and
the Outside Director.

     (b) The exercise price per share shall be 100% of the Fair Market Value per
share of Stock on the date of grant of the Option, subject to adjustment to the
extent provided in Section 13, below.

     (c) Each Initial Grant and Subsequent Grant shall be vested and exercisable
as to fifty percent (50%) of the total number of the shares of Stock covered by
the Option on the date of grant and the balance shall vest and become
exercisable at the rate of twenty-five percent (25%) of the total number of
shares of Stock covered by the Option on each anniversary of the date of grant,
beginning on the first anniversary of the date of grant such that the Option
will be fully vested and exercisable two (2) years after its date of grant;
provided, however, that no portion of the Option shall vest on an anniversary of
the date of grant if the Outside Director does not continue as an Outside
Director immediately following such anniversary.

     (d) The term of each Option shall be ten (10) years from the date of grant,
unless a shorter period is required to comply with any applicable law, in which
case such shorter period shall apply.

     7.   Eligibility.

     Options may be granted only to Outside Directors. The Plan shall not confer
upon any Outside Director any right with respect to continuation of service as a
Director or nomination to serve as a Director, nor shall it interfere in any way
with any rights that the Director or the Company may have to terminate his or
her directorship at any time.

     8.   Term of Plan; Effective Date.

     The Plan shall become effective upon its adoption by the Board. Options may
be granted under the Plan at any time on or before the tenth anniversary of the
date of adoption of the Plan.

     9.   Payment Upon Exercise.

     Payment of the exercise price upon exercise of any Option shall be made (i)
by cash or check; (ii) by delivery on a form prescribed by the Board of an
irrevocable direction to a securities broker approved by the Board to sell
shares and deliver all or a portion of the proceeds to the Company in payment
for the Stock; (iii) with shares of Stock owned by the Optionee; or (iv) any
combination of the foregoing.

     10.  Withholding Taxes.



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     No Stock shall be sold under the Plan to any individual until the
individual has made arrangements acceptable to the Board for the satisfaction of
applicable federal, state, and local income and employment tax withholding
obligations.

     11.  Exercise of Option.

     (a) An Option shall be deemed to be exercised when notice of such exercise
has been given to the Company in accordance with the terms of the Directors'
Nonqualified Stock Option Agreement by the person entitled to exercise the
Option and full payment for the Stock has been received by the Company. An
Option may not be exercised for a fraction of a share of Stock.

     (b) Notwithstanding the exercise of the Option, until the issuance (as
evidenced by the appropriate entry on the books of a duly authorized transfer
agent of the Company) of the certificate evidencing such Stock, no right to vote
or to receive dividends or to exercise any other rights as a stockholder shall
exist with respect to the Stock. A stock certificate for the number of shares of
Stock so acquired shall be issued to the Optionee as soon as practicable after
exercise of the Option. No adjustment will be made for a dividend or other right
if the record date is prior to the date the stock certificate is issued.

     (c) In event of a Change in Control of the Company, all outstanding Options
shall become immediately vested and exercisable. For purposes of this
subsection, a Change in Control shall be deemed to occur upon:

          (i) the first purchase of Stock pursuant to a tender offer or exchange
offer (other than an offer made by the Company) for all or part of the Stock;

          (ii) a third person, including a "group" as defined in Section
13(d)(3) of the Exchange Act, becomes the beneficial owner of Shares of the
Company having 25% or more of the total number of votes that may be cast for the
election of Directors;

          (iii) on any date on which the persons who were the Directors of the
Company ninety (90) days prior to such date no longer constitute a majority of
the Board of Directors of the Company or any successor to the Company;

          (iv) approval by the Company's stockholders of a merger or
consolidation in which the Company will not survive as an independent publicly
owned corporation; or

          (v) approval by the Company's stockholders of the sale or disposition
of all or substantially all of the assets of the Company.

     12.  Nontransferability of Options.



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     To the extent required by Rule 16b-3, no Option may be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution; provided, that if Rule 16b-3 is
amended after the date of the Board's adoption of the Plan to permit broader
transferability of Options under Rule 16b-3, the Options granted hereunder shall
be transferable to the fullest extent permitted by Rule 16b-3 as so amended. In
the event of any Rule 16b-3 permitted transfer of an Option hereunder, the
transferee shall be entitled to exercise the Option in the same manner and only
to the same extent as the Optionee (or his personal representative or the
persons who would have acquired the right to exercise the Option by bequest or
intestate succession) would have been entitled to exercise the Option had the
Option not been transferred.

     13.  Adjustment Upon Changes in Capitalization.

     In the event that the number of outstanding shares of Stock of the Company
is changed by a merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend (in excess of two percent (2%)), stock split, or
similar change in the capital structure of the Company without consideration,
the number of shares of Stock available under the Plan, the number of shares of
Stock deliverable in connection with any Option and the exercise price per share
of such Options shall be proportionately adjusted, subject to any required
action by the Board or stockholders of the Company and compliance with
applicable securities laws; provided, however, that fractional shares shall be
rounded to the nearest whole share.

     14. Amendment and Termination of the Plan.

     (a) The Board may amend the Plan from time to time in such respects as the
Board may deem advisable; provided, however, that to the extent necessary to
comply with Rule 16b-3 under the Exchange Act (or any other applicable law or
regulation), the Company shall obtain approval by the Company's stockholders to
amend the Plan to the extent and in the manner required by such law or
regulation. Notwithstanding the foregoing, the provisions set forth in sections
5 and 6 of the Plan (and any other sections of the Plan that affect the formula
award terms required to be specified in the Plan by Rule 16b-3) shall not be
amended more than once every six (6) months, other than to comport with changes
in the Code, the Employee Retirement Income Security Act of 1974, as amended, or
any applicable rules and regulations thereunder.

     (b) The Board, without further approval of the stockholders, may at any
time terminate or suspend the Plan. Except as otherwise provided herein, any
such termination or suspension of the Plan shall not affect Options already
granted hereunder and such Options shall remain in full force and effect as if
the Plan had not been terminated or suspended.

     15.  Conditions Upon Issuance of Stock.



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     (a) Stock shall not be issued pursuant to the exercise of an Option unless
the exercise of such Option and the issuance and delivery of such Stock pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act, the Exchange Act, the rules and regulations
promulgated thereunder, state securities laws, and the requirements of any stock
exchange upon which the Stock may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.

     (b) As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Stock is being purchased only for investment and without
any present intention to sell or distribute such Stock, if, in the opinion of
counsel for the Company, such a representation is required by any provisions of
applicable law.

     (c) Inability of the Company to obtain authority from any regulatory body
having jurisdictional authority deemed by the Company's counsel to be necessary
for the lawful issuance and sale of any Stock hereunder shall relieve the
Company of any liability for failure to issue or sell such Stock.

     16.  Reservation of Stock.

     The Company, during the term of the Plan, will at all times reserve and
keep available such number of shares of Stock as shall be sufficient to satisfy
the requirements of the Plan.

     17.  Stockholder Approval.

     Continuance of the Plan shall be subject to approval by the stockholders at
the next annual stockholder's meeting that occurs after the date the Plan is
adopted by the Board. Such shareholder approval shall be obtained in the degree
and manner required under applicable state and federal law and the rules of any
stock exchange upon which the Stock is listed. In the event that such
stockholder approval is not obtained, all Options previously granted hereunder
shall terminate.

     18. Additional Restrictions of Rule 16b-3.

     The terms and conditions of Options granted hereunder to persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. The Plan and the Options granted hereunder shall be deemed to
contain such additional conditions and restrictions as may be required for the
Plan to qualify as a "formula plan" under Rule 16b-3, as then applicable to the
Company, and to qualify for the maximum exemptions from Section 16 of the
Exchange Act with respect to transactions pursuant to the Plan.



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                                    Exhibit A

                         RIBI IMMUNOCHEM RESEARCH, INC.

                 DIRECTORS' NONQUALIFIED STOCK OPTION AGREEMENT

     This agreement (the "Agreement") is made as of __________, 199__ (the
"Grant Date") between Ribi ImmunoChem Research, Inc. (the "Company") and
___________________________("Optionee").

                                   WITNESSETH:

     WHEREAS, the Company has adopted the Ribi ImmunoChem Research, Inc. 1996
Directors' Stock Option Plan (the "Plan"), which Plan is incorporated in this
Agreement by reference and made a part of it (capitalized terms shall have the
meaning ascribed to them in the Plan);

     WHEREAS, the Plan provides for option grants to Outside Directors of the
Company;

     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties to this Agreement hereby agree as follows:

     1. OPTION GRANT. The Company hereby grants to Optionee the right and option
to purchase from the Company on the terms and conditions hereinafter set forth,
all or any part of an aggregate of _______________ (_________) shares of the
Common Stock of the Company (the "Stock"). The exercise price of the Stock
subject to this option shall be $_________ per share, which price is the per
share Fair Market Value as of the Grant Date. This grant is an Initial Grant
under the Plan.

     2. OPTION PERIOD. This option shall be exercisable only during the Option
Period, and during such Option Period, the exercisability of the option shall be
subject to the limitations of paragraph 3 and the vesting provisions of
paragraph 4. The Option Period shall commence on the Grant Date and, except as
provided in paragraph 3, shall end on the Terminal Date which shall be ten (10)
years from the Grant Date.

     3. LIMITS ON OPTION PERIOD. The Option period may end before the Terminal
Date, as follows:

     (a) If Optionee ceases to be a Director for any reason other than
disability (within the meaning of subparagraph (c), below) or death during the
Option Period, the Option Period shall terminate three (3) months after the date
Optionee ceases to be a Director or on the Terminal Date, whichever shall first
occur, and the option shall be exercisable only to the extent exercisable under
paragraph 4 on the date Optionee ceases to be a Director.

     (b) If Optionee dies while serving on the Board or within three (3) months
of the date the Optionee ceases to be a Director, the Option Period shall end
one (1) year after the date of death or on the Terminal Date, whichever



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shall first occur, and Optionee's executor or administrator or the person or
persons to whom Optionee's rights under this option shall pass by will or by the
applicable laws of descent and distribution may exercise this option only to the
extent exercisable under paragraph 4 on the date of Optionee's death.

     (c) If Optionee ceases to be a Director by reason of disability, as defined
below, the Option Period shall end one (1) year after the date Optionee ceases
to be a Director or on the Terminal Date, whichever shall first occur, and this
option shall be exercisable only to the extent exercisable under paragraph 4 on
the date Optionee ceases to be a Director. For purposes of this subparagraph
(c), an individual is disabled if he is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than twelve (12) months.
An individual shall not be considered to be disabled unless he furnishes proof
of the existence thereof in such form and manner, and at such time, as the Board
may require.

     4. VESTING OF RIGHT TO EXERCISE OPTIONS. This option will be vested and
exercisable as to fifty percent (50%) of the total number of shares of Stock
covered by the option on the Grant Date and the balance shall vest and become
exercisable at the rate of twenty-five percent (25%) of the total number of
shares of Stock covered by the option on each anniversary of the Grant Date,
beginning on the first anniversary of the Grant Date such that the option will
be fully vested and exercisable two (2) years after the Grant Date; provided,
however, that no portion of the option shall vest on an anniversary of the Grant
Date if the Optionee does not continue as a Director immediately following such
anniversary. No partial exercise of this option may be for less than five
percent (5%) of the total number of shares then available under this option to
purchase shares of Stock. In no event shall the Company be required to issue
fractional shares. Notwithstanding the foregoing, all options granted under this
Agreement shall be subject to the provisions of Subsection 11(c) of the Plan
(relating to the acceleration of vesting upon the occurrence of a Change in
Control).

     5. METHOD OF EXERCISE. Optionee may exercise the option with respect to all
or any part of the shares of Stock then subject to such exercise as follows:

     (a) By giving the Secretary of the Company written notice of such exercise,
specifying the number of such shares as to which this option is exercised. Such
notice shall be accompanied by an amount equal to the exercise price of such
shares, in the form of any one or combination of the following: (1) cash or
check; (2) by delivery on a form prescribed by the Board of an irrevocable
direction to a securities broker approved by the Board to sell shares of Stock
and deliver all or a portion of the proceeds to the Company in payment for the
Stock; or (3) with shares of Stock owned by Optionee.

     (b) If required by the Company, Optionee shall give the Company
satisfactory assurance in writing, signed by Optionee or Optionee's legal
representative, as the case may be, that such shares are being purchased for
investment and not with a view to the distribution thereof, provided that such



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assurance shall be deemed inapplicable to (1) any sale of such shares by such
Optionee made in accordance with the terms of a registration statement covering
such sale, which has heretofore been (or may hereafter be) filed and become
effective under the Securities Act of 1933, as amended, and with respect to
which no stop order suspending the effectiveness thereof has been issued, and
(2) any other sale of such shares with respect to which, in the opinion of
counsel of the Company, such assurance is not required to be given in order to
comply with the provisions of the Securities Act of 1933, as amended.

     (c) As soon as practicable after receipt of the notice required in
paragraph 5(a) and satisfaction of the conditions set forth in paragraph 5(b),
the Company shall, without transfer or issue tax and without other incidental
expense to Optionee, deliver to Optionee at the office of the Company, at 553
Old Corvallis Road, Hamilton, Montana 59840, attention of the Corporate
Secretary, or such other place as may be mutually acceptable to the Company and
Optionee, a certificate or certificates of such shares of Stock; provided,
however, that the time of such delivery may be postponed by the Company for such
period as may be required for it with reasonable diligence to comply with
applicable registration requirements under the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, any applicable listing
requirements of any securities exchange upon which the Stock may then be listed,
and requirements under any other law or regulation applicable to the issuance or
transfer of such shares.

     6. CHANGES IN CAPITALIZATION. If there should be any change in a class of
Stock subject to this option, through merger, consolidation, reorganization,
recapitalization, reincorporation, stock split, stock dividend (in excess of two
percent {2%}) or other change in the capital structure of the Company without
consideration, the Company shall make appropriate adjustments in order to
preserve, but not to increase, the benefits to Optionee including adjustments of
the number and kind of shares of such Stock subject to this option and of the
price per share. Any adjustment made pursuant to this paragraph 6 as a
consequence of a change in the capital structure of the Company shall not
entitle Optionee to acquire a number of shares of such Stock of the Company or
shares of stock of any successor company greater than the number of shares
Optionee would receive if, prior to such change, Optionee had actually held a
number of shares of such Stock equal to the number of shares subject to this
option; provided, however, that fractional shares shall be rounded to the
nearest whole share.

     7. LIMITATIONS ON TRANSFER. To the extent required by Rule 16b-3 of the
Securities Exchange Act of 1934, this option shall not be transferable by
Optionee other than by operation of law or by will or by the laws of descent or
distribution; provided that, if Rule 16b-3 is amended after the Board's adoption
of the Plan to permit greater transferability of an option, the option hereunder
shall be transferable to the fullest extent provided by Rule 16b-3 as so
amended. In the event of any Rule 16b-3 permitted transfer of the option, the
transferee shall be entitled to exercise the option in the same manner and only
to the same extent as Optionee (or his personal representative or the person who
would have acquired the right to exercise the option by bequest or intestate
succession) would have been entitled to exercise the option had the option not



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been transferred.

     8. NO STOCKHOLDER RIGHTS. Neither Optionee nor any person entitled to
exercise Optionee's rights shall have any of the rights of a stockholder with
respect to the shares of Stock subject to this option except to the extent the
certificates for such shares shall have been issued upon the exercise of this
option.

     9. NOTICE. Any notice required to be given under the terms of this
Agreement shall be addressed to the Company in care of its Secretary at the
office of the Company at 553 Old Corvallis Road, Hamilton, Montana 59840, and
any notice to be given to Optionee shall be addressed to Optionee at the address
given by Optionee beneath Optionee's signature to this Agreement, or such other
address as either party to this Agreement may hereafter designate in writing to
the other. Any such notice shall be deemed to have been duly given when enclosed
in a properly sealed envelope addressed as aforesaid, registered or certified
and deposited (postage and registration or certification fee prepaid) in a post
office or branch post office regularly maintained by the United States.

     10. SUCCESSORS. This Agreement shall be binding upon and insure to the
benefit of any successor or successors of the Company. Where the context
permits, "Optionee" as used in this Agreement shall include any transferee,
Optionee's executor, administrator or other legal representative or the person
or persons to whom Optionee's rights pass by will or the applicable laws of
descent and distribution.

     11. WITHHOLDING. Optionee agrees to make appropriate arrangements with the
Company for satisfaction of any applicable federal, state or local income tax
withholding requirements or social security requirements.

     12. APPLICABLE LAW. The interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of Montana.



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     IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first written above.

                    Ribi ImmunoChem Research, Inc.
                    a Delaware corporation.


                    By  __________________________
                    Its Chief Executive Officer,
                    President & Chairman



                    ______________________________
                    Optionee
                    Address:

                    ______________________________
                    ______________________________
                    ______________________________



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