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                                                                   EXHIBIT 10.26

                           MERCANTILE BANK CORPORATION
                     INDEPENDENT DIRECTOR STOCK OPTION PLAN


         1. Name and Purpose. This plan shall be called the Mercantile Bank
Corporation Independent Director Stock Option Plan (the "Plan"). The Plan is
intended to (a) encourage stock ownership by Independent Directors (as defined
below) of Mercantile Bank Corporation (the "Company") or any of the Company's
subsidiaries that adopts this Plan (individually, a "Subsidiary" and
collectively, the "Subsidiaries"), (b) to provide such directors with an
additional incentive to effectively manage the Company and/or the Subsidiaries
and to contribute to their success, and (c) to provide a form of compensation
which will attract and retain highly qualified individuals to serve as
directors.

         2. Effective Date and Term of the Plan. The Plan shall become effective
with respect to the Company upon the date of its approval (the "Effective Date")
by the Company's Board of Directors (the "Company Board"), and shall become
effective with respect to a Subsidiary upon the date of its approval by the
Board of Directors of the Subsidiary. However, the Plan is subject to approval
by the Company's stockholders, and if such stockholder approval is not granted
within twelve (12) months of the Effective Date, the Plan shall terminate.
Grants of options may be made prior to such stockholder approval, but any
options granted shall not be exercisable prior to such stockholder approval, and
shall automatically terminate if stockholder approval is not given. Options may
not be granted under the Plan after the tenth anniversary of the Effective Date
(the "Term"); provided, however, that all options outstanding as of that date
shall remain or become exercisable pursuant to their terms and the terms of the
Plan. The Company Board and the Boards of Directors of all of the Subsidiaries
are collectively referred to in this Plan from time to time as the "Board of
Directors" or the "Board," and the stockholders of the Company and of the
Subsidiaries are collectively referred to in this Plan from time to time as the
"Stockholders."

         3. Administration. The Plan shall be administered by a Committee of not
less than three (3) members of the Company Board (the "Committee"), none of whom
may be an employee of the Company or any subsidiary of the Company, and each of
whom must qualify as a Nonemployee Director, as defined in Rule 16b-3(b)(3)
promulgated by the Securities and Exchange Commission (the "SEC") pursuant to
the Securities Exchange Act of 1934, as amended (the "34 Act"). The members of
the Committee shall be appointed by the Company Board.

         The Committee may, from time to time, establish such regulations,
provisions and procedures, within the terms of the Plan, as in the opinion of
its members may be advisable in the administration of the Plan. The Committee
shall keep minutes of its meetings. A majority of the Committee shall constitute
a quorum, and the acts of a majority of a quorum at any meeting, or acts reduced
to or approved in writing by a majority of the members of the Committee, shall
be the valid acts of the Committee.




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         The interpretation and construction by the Committee of any provisions
of the Plan or of any option granted pursuant to the Plan shall be final and
binding upon the Company, each Subsidiary, the Board of Directors, the
Stockholders, any optionee and any Permitted Transferee (as defined below). No
member of the Board of Directors or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any option
granted pursuant thereto.

         4. Participation. Subject to the limitations contained in this Section
4, any Independent Director, may be granted options to purchase shares of the
Company's common stock ("Common Stock") in accordance and consistent with the
terms and conditions of the Plan. An optionee or a Permitted Transferee may hold
more than one option, but only on the terms and subject to the restrictions
hereafter set forth. The Committee shall from time to time determine (from those
who are eligible) the directors to be granted options, the amount of stock to be
optioned to each director, and the terms and conditions of the options to be
granted. The amount and other terms and conditions of options granted to a
director at any given time need not be the same as for any other grant of
options. An Independent Director is any director of the Company or a Subsidiary
who (a) is not a contractual nor common law employee of the Company or a
Subsidiary or any of their subsidiaries, (b) qualifies as a Nonemployee
Director, as defined in Rule 16b-3(b)(3) promulgated by the SEC pursuant to the
34 Act, and (c) does not directly or indirectly own beneficially more than five
percent (5%) of any outstanding security of the Company or a Subsidiary
(including being a stockholder, owner, partner, director or holder of more than
ten percent (10%) of the equity or capital of any entity which owns beneficially
more than five percent (5%) of any outstanding security of the Company or a
Subsidiary).

         5. Stock Available for Options. Subject to the adjustments as provided
in Section 6(h), the aggregate number of shares of Common Stock (the "Shares")
reserved for purposes of the Plan shall be sixty-five thousand (65,000)
authorized and unissued Shares or issued Shares reacquired by the Company.
Determinations as to the number of Shares that remain available for issuance
under the Plan shall be made in accordance with such rules and procedures as the
Committee shall determine from time to time, which shall be consistent with the
requirements of Rule 16b-3 promulgated by the SEC pursuant to the 34 Act, and
interpretations thereof. If any outstanding option under the Plan expires or is
terminated for any reason before the end of the Term of the Plan, the Shares
allocable to the unexercised portion of such option shall become available for
the grant of other options under the Plan. No Shares delivered to the Company in
full or partial payment upon exercise of an option pursuant to Section 6(d)
shall become available for the grant of other options under the Plan.

         6. Terms and Conditions of Options. Each option granted under this Plan
shall be evidenced by an agreement ("Option Agreement" or "Agreement") in such
form as the Committee shall from time to time approve. No person shall have any
right with respect to the grant of an option unless and until he or she has
executed an Option Agreement. Option Agreements shall comply with and be subject
to the following conditions:

                  (a) Optionee's Agreement. Each optionee shall agree to
         continue to serve as a director of the Company or a Subsidiary for the
         lesser of at least twelve (12) months from the date of the grant of the
         option or for the remainder of optionee's term as a director ("Minimum
         Service Requirement"). Such agreement shall not impose upon the



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         Company, a Subsidiary, the Board of Directors or the Stockholders any
         obligation to retain the optionee as a director for any period.

                  (b) Number of Shares and Term of Options. Each option shall
         state the number of Shares of the Common Stock of the Company to which
         it pertains. The term of each option shall be for a period of not
         greater than ten (10) years from the date of grant of the option.

                  (c) Option Price. The exercise price of each option shall not
         be less than one hundred twenty-five percent (125%) of the Fair Market
         Value of the Shares of Common Stock on the date of the grant of the
         option. For the purpose of this Section 6(c), the "Fair Market Value"
         per Share shall be the closing price on the national market list as
         quoted in the National Association of Securities Dealers Automated
         Quotation System ("NASDAQ") on the day the option is granted or if no
         sale of Shares is reflected in NASDAQ on that day, on the next
         preceding day on which there was a sale of Shares reflected in NASDAQ.
         If the Shares are not traded in the over-the-counter market but are
         listed upon an established stock exchange or exchanges, "Fair Market
         Value" shall be deemed to be the closing price of the Shares on such
         stock exchange or exchanges on the day the option is granted or if no
         sale of the Shares shall have been made on any stock exchange on that
         day, on the next preceding day on which there was a sale of the Shares.
         If Shares are not actively traded in any recognized market, "Fair
         Market Value" shall be the average price per Share at which purchasers
         and sellers, none of whom are directors or officers of the Company or
         any of its Subsidiaries, bought and sold Shares during the three (3)
         preceding months in transactions known to management of the Company
         involving one hundred (100) or more Shares, or if there have been no
         such transactions, the "Fair Market Value" shall be determined in good
         faith by the Committee.

                  (d) Medium of Payment. The option price shall be payable to
         the Company either (i) in United States dollars in cash or by check,
         bank draft, or money order payable to the order of the Company, (ii)
         through the delivery of Shares of the Company's Common Stock with a
         Fair Market Value on the date of the exercise equal to the option
         price, provided such Shares are utilized as payment to acquire at least
         one hundred (100) Shares of Common Stock, or (iii) by a combination of
         (i) and (ii) above. For the purpose of this Section 6(d), "Fair Market
         Value" will be determined in the manner specified in Section 6(c),
         except as to the date of determination, which shall be the date of
         exercise.

                  (e) Exercise of Options. Except as otherwise provided in
         Section 6(h) or as otherwise provided below, no option shall vest,
         either in whole or in part, prior to the expiration of sixty (60)
         months from the date of the grant of the option. Provided, however,
         that if an optionee has fulfilled his or her Minimum Service
         Requirement under Section 6(a) and the optionee (i) dies, (ii) resigns
         as a director because of a permanent and total disability preventing
         his or her continued service (as determined by the Committee in its
         sole discretion), or (iii) retires as a director upon or after reaching
         a normal retirement age (as determined by the Committee in its sole
         discretion), all options held by the optionee or his or her Permitted
         Transferee(s) shall immediately vest and be exercisable. Termination of
         service as a director for any of the reasons specified in (i), (ii), or
         (iii) above constitutes an "Immediate Vesting Termination." An option
         shall only be exercisable to the extent that it has vested. Subject to
         the foregoing, the Committee







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         shall have the authority to determine, at the time of the grant of each
         option, the times at which an option shall vest and be exercisable and
         any conditions precedent to the exercise of an option. Once vested, an
         option shall be exercisable upon written notice to the Chief Financial
         Officer of the Company, as to any or all Shares covered by the option,
         until its termination or expiration in accordance with the terms of the
         Agreement and the provisions of the Plan. Notwithstanding the
         foregoing, an option shall not at any time be exercisable with respect
         to less than one hundred (100) Shares unless the remaining Shares
         covered by the option are less than one hundred (100) Shares and the
         option is exercised with respect to all such remaining Shares. The
         purchase price of the Shares purchased pursuant to an option shall be
         paid in full upon delivery to the optionee or a Permitted Transferee of
         certificates for such Shares. Exercise by an optionee's heir or
         personal representative or any Permitted Transferee shall be
         accompanied by evidence of his or her authority to act, in a form
         reasonably satisfactory to the Company.

                  (f) Options Transferable. Except as otherwise specifically
         provided in this Section 6(f), options may not be transferred,
         assigned, pledged or hypothecated in any way and shall not be subject
         to execution, levy, attachment or similar process; and any attempted
         transfer, assignment, pledge, hypothecation, or other disposition of an
         option or any execution, levy attachment or similar process upon an
         option shall be null and void and without effect. The Committee may, in
         its discretion, authorize all or a portion of the options granted to an
         optionee to be on terms which permit the transfer of such options by
         the optionee to (i) the spouse, children or grandchildren of the
         optionee ("Immediate Family Members"), (ii) a trust or trusts for the
         exclusive benefit of the optionee and/or one or more of such Immediate
         Family Members, or (iii) a partnership or limited liability company in
         which the optionee and/or one or more of such Immediate Family Members
         are the only partners or members. (The persons or entities described in
         (i) through (iii) above shall be referred to as "Permitted
         Transferees"). However, (i) there may be no consideration for any such
         transfer, (ii) the Option Agreement pursuant to which such options are
         granted must be approved by the Committee, and must expressly provide
         for transferability in a manner consistent with this Section 6(f), and
         (iii) subsequent transfers of transferred options pursuant to this
         Section 6(f) shall be prohibited. Following a permitted transfer, (i)
         any transferred options shall continue to be subject to the same terms
         and conditions as were applicable immediately prior to the transfer,
         and (ii) without limiting the generality of the foregoing, the events
         of termination of service of Section 6(g) and the vesting requirements
         of Section 6(e) shall continue to be applied with reference to the
         original optionee. The Company shall not be obligated to notify any
         Permitted Transferee of the expiration or termination of any option. No
         option may be transferred except strictly in accordance with the terms
         and conditions set forth above and any additional terms and conditions
         set forth in the relevant Agreement.

                  (g) Termination of Service as Director. In the event an
         optionee shall cease to serve the Company or a Subsidiary as a director
         for any reason other than by reason of an Immediate Vesting
         Termination, each option held by the optionee or his or her Permitted
         Transferee(s) shall terminate to the extent not vested immediately
         prior to such termination of service. If an optionee ceases to be a
         director of the Company or a Subsidiary by reason of an Immediate
         Vesting Termination, each option held by the optionee or his or her
         Permitted Transferee(s) shall be fully vested. Following an optionee's
         termination of service as a director for any reason, any options held
         by the




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         optionee or his or her Permitted Transferee(s) shall, to the extent
         vested, be exercisable, for the shorter of the following periods: (i) a
         period of one (1) year from the date of the optionee's termination of
         service as a director, or (ii) the remaining term of the option,
         subject to limitations imposed by the Plan. In the event of termination
         as a result of death, the option may be exercised by the personal
         representative of the optionee's estate or by any person or persons who
         have acquired the option directly from the optionee by bequest or
         inheritance or by a Permitted Transferee(s). If an optionee dies during
         the exercise period following cessation of service as a director, the
         option, to the extent vested, may be exercised any time within one (1)
         year after the optionee's death, subject to the prior expiration of the
         term of the option and other limitations imposed by the Plan.

                  (h) Adjustment in Shares Covered by Option. The number of
         Shares covered by each outstanding option, and the purchase price per
         Share thereof, shall be proportionately adjusted for any increase or
         decrease in the number of issued and outstanding Shares resulting from
         a split in or combination of Shares or the payment of a stock dividend
         on the Shares or any other increase or decrease in the number of Shares
         effected without receipt of consideration by the Company.

                  If the Company is the surviving corporation in any merger or
         consolidation or if the Company is merged into a wholly-owned
         subsidiary solely for purposes of changing the Company's state of
         incorporation, each outstanding option shall pertain to and apply to
         the securities to which a holder of the number of Shares subject to the
         option would have been entitled. A dissolution or liquidation of the
         Company or a merger or consolidation in which the Company is not the
         surviving corporation, except as provided above, shall cause each
         outstanding option to terminate, provided, that each outstanding option
         shall become fully vested and be exercisable immediately prior to such
         dissolution or liquidation, or such merger or consolidation.

                  To the extent that the foregoing adjustments relate to stock
         or securities of the Company, such adjustments shall be made by the
         Committee, whose determination shall be final, binding and conclusive.
         Any such adjustment may provide for the elimination of any fractional
         Shares which might otherwise become subject to an option.

                  Except as expressly provided in this Section 6(h), an optionee
         or a Permitted Transferee shall have no rights by reason of any split
         or combination of shares of stock of any class or the payment of any
         stock dividend or any other increase or decrease in the number of
         shares of stock of any class or by reason of any dissolution,
         liquidation, merger, or consolidation or spinoff of assets or stock of
         another corporation, and any issuance by the Company of shares of stock
         of any class, or securities convertible into shares of stock of any
         class, shall not affect, and no adjustment by reason thereof shall be
         made with respect to, the number or price of Shares of stock subject to
         the option.

                  The grant of an option pursuant to the Plan shall not affect
         in any way the right or power of the Company to make adjustments,
         reclassifications, reorganizations, or changes of its capital or
         business structure, or to merge or to consolidate or to dissolve,
         liquidate or sell, or transfer all or any part of its business or
         assets.




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                  (i) Rights of a Stockholder. An optionee or a Permitted
         Transferee shall have no rights as a Stockholder with respect to any
         Shares covered by his or her option until the date on which he or she
         becomes the holder of record of such Shares. No adjustment shall be
         made for dividends, distributions, or other rights for which the record
         date is prior to the date on which he or she shall have become the
         holder of record thereof, except as provided in Section 6(h).

                  (j) Postponement of Delivery of Shares and Representations.
         The Company, in its discretion, may postpone the issuance and/or
         delivery of Shares upon any exercise of an option until completion of
         the registration or other qualification of such Shares under any state
         and/or federal law, rule or regulation as the Company may consider
         appropriate, and may require any person exercising an option to make
         such representations, including, without limitation, a representation
         that it is his or her intention to acquire the Shares for investment
         and not with a view to distribution thereof, and furnish such
         information as it may consider appropriate in connection with the
         issuance or delivery of the Shares in compliance with applicable laws,
         rules, and regulations. In such event, no Shares shall be issued to
         such holder unless and until the Company is satisfied with any such
         representations.

                  (k) Other Provisions. The Option Agreements authorized under
         the Plan shall contain such other provisions, including, without
         limitation, restrictions upon the exercise of the option, as the
         Committee shall deem advisable.

         7. Adjustments in Shares Available for Options. The adjustments in
number and kind of shares and the substitution of shares, affecting outstanding
options in accordance with Section 6(h), shall also apply to the number and kind
of shares reserved for issuance pursuant to the Plan, but not yet covered by
options.

         8. Amendment of the Plan. The Committee, insofar as permitted by law,
shall have the right from time to time, with respect to any Shares at the time
not subject to options, to suspend or discontinue the Plan or revise or amend it
in any respect whatsoever, except that, without approval of the Board of
Directors and the stockholders of the Company, no such revision or amendment
shall:

                  (a) increase the maximum number of Shares which may be subject
         to the Plan,

                  (b) materially increase the benefits accruing to option
         holders under the Plan,

                  (c) decrease the exercise price of options granted under the
         Plan,

                  (d) remove the administration of the Plan from the Committee,
         or

                  (e) permit the granting of options under the Plan after the
         end of the Term of the Plan.





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         9. Right to Terminate Director's Service. Nothing in this Plan or in
the grant of any option hereunder shall in any way limit or effect the right of
the Board of Directors or the Stockholders to remove any director or otherwise
terminate his or her service as a director, pursuant to law or the Articles of
Incorporation or Bylaws of the Company or a Subsidiary.

         10. Application of Funds. The proceeds received by the Company from the
sale of Shares pursuant to options will be used for general corporate purposes.

         11. No Obligation to Exercise Option. The granting of an option shall
impose no obligation upon the optionee or a Permitted Transferee to exercise
such option.

         12. Construction. This Plan shall be construed under the laws of the
State of Michigan, United States of America.














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