<PAGE>

                                                                    Exhibit 10.1
                          FIRST MIDWEST BANCORP, INC.
                NON-EMPLOYEE DIRECTORS' 1997 STOCK OPTION PLAN
                                 (As Restated)
                                 -------------

Section 1.  Establishment, Purposes and Effective Date of Plan

     1.1  Establishment. First Midwest Bancorp, Inc., a Delaware corporation,
hereby restates the "NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN" (the "Plan").
The Plan provides for the grant of nonqualified stock options to the Company's
Non-Employee Directors.

     1.2  Purposes.  The purpose of the Plan is to advance the interests of the
Company and its stockholders by augmenting the Company's traditional
compensation program for Non-Employee Directors with awards of nonqualified
stock options, thereby increasing their stake in the future growth and
prosperity of the Company, and furthering the Directors' identity of interest
with those of the Company's stockholders.  By thus compensating Non-Employee
Directors, the Company seeks to attract, retain, compensate and motivate those
highly competent individuals whose judgment, initiative, leadership, and efforts
are important to the success of the Company.

     1.3  Effective Date.  The effective date of the Plan is May 21, 1997.

Section 2.  Definitions

     As used herein, the following terms shall have the meanings hereinafter set
forth:

          (a) "Board" means the Board of Directors of the Company.

          (b) "Code" means the Internal Revenue Code of 1986, as amended.

          (c) "Common Stock" or "Share" means the Common Stock, par value $.01
     per share, of the Company or such other class of shares or other securities
     as may be applicable pursuant to the provisions of subsection 4.3.

          (d) "Company" means First Midwest Bancorp, Inc., a Delaware
     corporation.

          (e) "Director Options" means options granted hereunder to non-employee
     directors.

          (f) "Effective Date" means May 21, 1997, the date on which the Plan
     was approved by the Board.

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

          (h) "Fair Market Value" means, as to any date, the average of the
     highest and lowest prices of a share of Common Stock as reported in the
     consolidated tape of the
<PAGE>

     NASDAQ National Market System. In the event there are no transactions
     reported for such date, the Fair Market Value shall be determined as of the
     immediately preceding date on which such prices of Common Stock are so
     quoted.

          (i) "Grant Date" means, with respect to the annual grant of Directors
     Options described in Section 5.1(a), November 19, 1997, with respect to
     each individual who is a Non-Employee Director on that date, and
     thereafter, means with respect to each individual who is a Non-Employee
     Director, the date of the first regularly-scheduled Board meeting held in
     each calendar year (generally in February), beginning with the first Board
     meeting held in 1998. With respect to any individual who first becomes a
     Non-Employee Director after the date of the first Board meeting held in
     1998, the date the individual first becomes a Non-Employee Director shall
     also be a Grant Date. In addition, Grant Date shall mean any other date on
     which a Director Option is granted to a non-Employee Director pursuant to
     Section 5.1(b).

          (j) "Non-Employee Director", with respect to the annual grant of
     Directors Options described in Section 5.1(a) means any person who is a
     member of the Board and who is not, as of the date of an award under the
     Plan, an employee of the Company or any of its subsidiaries.

Section 3.  Eligibility

     Each Non-Employee Director as of the Effective Date and each person who
becomes a Non-Employee Director after the Effective Date shall be eligible to
participate in the Plan.

Section 4.  Shares of Common Stock Available

     4.1  Number. The total number of shares of Common Stock of the Company
subject to issuance under the Plan, and subject to adjustment upon occurrence of
any of the events indicated in subsection 4.3, may not exceed 25,000. The Shares
to be delivered under the Plan may consist, in whole or in part, of authorized
but unissued stock or treasury stock not reserved for any other purpose.

     4.2  Unused Stock. In the event any shares of Common Stock that are subject
to an Director Option which, for any reason, expires, terminates or is canceled
as to such shares, such shares again shall become available for issuance under
the Plan.

     4.3  Adjustment in Capitalization. In the event of any change in the
outstanding shares of Common Stock that occurs after ratification of the Plan by
the stockholders of the Company by reason of a Common Stock dividend or split,
recapitalization, merger, consolidation, combination, exchange of shares, or
other similar corporate change, the aggregate number of shares of Common Stock
subject to Director Options to be granted or outstanding pursuant to Section 5
hereof, and/or the stated option price, shall be appropriately adjusted by the
Board, whose determination shall

                                       2
<PAGE>

be conclusive; provided, however, that fractional shares shall be rounded to the
nearest whole share.

Section 5.  Director Options

     5.1  Grant and Eligibility.

          (a) On each Grant Date, Director Options for the purchase of shares of
Common Stock will be granted to each individual who is a Non-Employee Director.
The number of shares of Common Stock subject to each Director Option shall be
determined by dividing (a) the average cash compensation earned by the Non-
Employee Directors during the calendar year immediately preceding the calendar
year in which the Grant Date occurs, by (b) the Fair Market Value of the Common
Stock on the Grant Date (provided, however, that such number shall be rounded
down to the nearest whole Share).

          (b) Director Options may be granted to Non-Employee Directors at any
time and from time to the time as the Board shall determine.

     5.2  Director Option Agreement. Each Director Option shall be evidenced by
a Director Option Agreement that shall specify the option price, the duration of
the option, the number of shares of Common Stock to which the option pertains,
and such other provisions as the Board shall determine.

     5.3  Tax Status. Director Options shall be options in the form of
nonqualified stock options which are intended not to fall under the provisions
of Code Section 422.

     5.4  Option Price and Payment. The option price of each share of Common
Stock subject to a Director Option shall be 100% of the Fair Market Value on the
Grant Date. Director Options shall be exercised by the delivery of a written
notice to the Company setting forth the number of shares of Common Stock with
respect to which the option is to be exercised, accompanied by full payment for
the Shares. Upon exercise of any Director Option, the option price shall be
payable to the Company in full either (a) in cash or its equivalent (including
for this purpose, the proceeds from a cashless exercise as permitted under the
Federal Reserve Board's Regulation T, or other borrowed funds), or (b) by
tendering previously-acquired Common Stock having an aggregate Fair Market Value
at the time of exercise equal to the total option price (including for this
purpose Shares deemed tendered by affirmation of ownership), or (c) by a
combination of (a) and (b). Notwithstanding the foregoing, the exercise price
payable upon the exercise of a Director Option by a Non-Employee Director who
has a deferral election in effect under the Company's Nonqualified Stock Option-
Gain Deferral Plan or similar plan (the "Gain Deferral Plan"), shall be made
solely by tendering previously-acquired Shares in accordance with clause (b)
above.

                                       3
<PAGE>

     5.5  Vesting and Duration of Options. Each Director Option shall vest and
become exercisable in full upon the first to occur of (a) the expiration of one
year after the Grant Date with respect to the Director Options described in
Section 5.1(a) or six months after the Grant Date with respect to any other
Director Options, unless prior thereto the Non-Employee Director has ceased to
be a director for any reason other than death or disability, (b) the death or
disability of the Non-Employee Director, or (c) a Change in Control (as provided
in Section 6.1 hereof). Once vested, Director Options shall expire upon the
first to occur of the date which is (I) three years following termination of the
director's Board membership for any reason other than death, or (ii) one year
following the date of the Non-Employee Director's death; provided, however, in
no event may any Director Option be exercised beyond the tenth anniversary of
its Grant Date, or such shorter period which may be set forth in the Director
Option agreement.

     5.6  Delivery of Certificate. As soon as practicable after receipt of each
notice of exercise and full payment of the exercise price, the Company shall
deliver to the Non-Employee Director a certificate or certificates representing
acquired shares of Common Stock. Notwithstanding the foregoing, in the event the
Non-Employee Director has in effect a deferral election under the Gain Deferral
Plan, the Company shall deliver to the trustee of the trust established under
the Gain Deferral Plan, a certificate or certificates representing such number
of Shares determined by dividing (a) the excess of the (I) Fair Market Value of
the Shares purchased pursuant to the option exercise, over (ii) the exercise
price for the Shares purchased, by (b) the Fair Market Value of one Share. The
Company shall deliver a certificate or certificates for the remainder of the
Shares, representing Shares with a Fair Market Value equal to the option
exercise price paid. For purposes of the foregoing, Fair Market Value shall be
determined on the date the Director Option is exercised.

Section 6. Coordination with 1989 Omnibus Stock and Incentive Plan

     The following provisions of the Company's 1989 Omnibus Stock and Incentive
Plan, as from time to time amended (the "Omnibus Plan"), shall be applicable to
the Director Options as if such provisions were set forth in this Plan in full:

     6.1  Change in Control. For purposes of this Plan, a "Change in Control"
shall be deemed to have occurred on the date a Change in Control occurs under
the Omnibus Plan. Notwithstanding any other provision of the Plan, if a Change
in Control occurs, then each Director Option shall become fully vested and
exercisable as of the date of the Change in Control.

     6.2  Limited Transferability of Options; Beneficiary Designations. No
Director Option granted under this Plan may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, otherwise than by will or the
laws of descent and distribution. Notwithstanding the foregoing, the Board may,
in its discretion, authorize all or a portion of the Director Options to be on
terms which permit the transfer by the Non-Employee Director to the extent the
Committee under the Omnibus Plan may permit such transfers. Non-Employee
Directors may designate

                                       4
<PAGE>

beneficiaries with respect to Director Options granted hereunder on the same
basis as applicable to options under the Omnibus Plan.

Section 7.  Amendment and Termination

     The Board, or any committee to the extent authorized by the Board, may make
such modifications to the Plan as it shall deem advisable. The Plan shall
continue in effect unless and until the Board otherwise determines.

Section 8.  Miscellaneous

     8.1  Rights of Directors.  Neither the Plan nor any action taken hereunder
shall be construed as giving any Non-Employee Director any right to continue to
serve as a Director of the Company or otherwise to be retained in the service of
the Company.

     8.2  Indemnification.  Each person who is or shall have been a member of
the Board shall be indemnified and held harmless by the Company against and from
any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him in connection with or resulting from any claim, action, suit or
proceeding to which he may be a party or in which he may be involved by reason
of any action taken or failure to act under the Plan and against and from any
and all amounts paid by him in settlement thereof, with the Company's approval,
or paid by him in satisfaction of any judgment in any such action, suit or
proceeding against him, provided he shall give the Company an opportunity, at
its expense, to handle and defend the same before he undertakes to handle and
defend it on his own behalf.  The foregoing right of indemnification shall not
be exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Certificate of Incorporation or Bylaws, as a matter
of law or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.

     8.3  Requirements of Law.  The granting of Director Options and the
issuance of shares of Common Stock with respect to an option exercise, shall be
subject to all applicable laws, rules and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be required.

     8.4  Governing Law.  The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Delaware.

     8.5  Administration.  The Board may establish such rules and regulations
with respect to the proper administration of the Plan as it may determine, and
may amend or revoke any rule or regulation so established.  This Plan shall be
interpreted by and all questions arising in connection therewith shall be
determined by a majority of the Board, whose interpretation or determination,
when made in good faith, shall be conclusive and binding.


                                       5
<PAGE>

                     [LOGO]    First Midwest Bancorp, Inc.



                            Non-Employee Directors'

                            1997 Stock Option Plan


                                   * * * * *

                              SUMMARY DESCRIPTION



THIS DOCUMENT (INCLUDING THE APPENDICES HERETO) CONSTITUTES PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

THE DATE OF THIS SUMMARY DESCRIPTION IS OCTOBER 1, 1998
<PAGE>

                          FIRST MIDWEST BANCORP, INC.

                            Non-Employee Directors'

                            1997 Stock Option Plan

                              Summary Description

                               Table of Contents
                               -----------------

<TABLE>
<CAPTION>
                                                                                                 Page
                                                                                                 -----
<S>                                                                                        <C>
Introduction..............................................................................              1

Available information.....................................................................              1

Resale of Shares..........................................................................              2

Appendix A - General Information Regarding Director  Stock Option Grants.................. A - 1 to A - 3

Appendix B - General Information Regarding Reload Stock Options........................... B - 1 to B - 4

Appendix C - General Information Regarding Transferability of Director Stock Options ..... C - 1 to C - 2

Appendix D - General Information Regarding Director Stock Option Loan Program............. D - 1 to D - 2

Appendix E - General Information Regarding Nonqualified Stock Option Gain Deferral Plan... E - 1 to E - 2
</TABLE>
<PAGE>

                          FIRST MIDWEST BANCORP, INC.

                            Non-Employee Directors'

                            1997 Stock Option Plan

                              SUMMARY DESCRIPTION

                                   * * * * *
                                 Introduction
                                 ------------

In May, 1997 the Board of Directors of First Midwest Bancorp, Inc. ("First
Midwest" or Company") established the First Midwest Bancorp, Inc. Non-Employee
Directors' 1997 Stock Option Plan (the "Plan") for directors.

The Plan permits the granting of 25,000 nonqualified stock options. The purpose
of the Plan is to advance the interests of First Midwest by encouraging the
acquisition of an equity interest by Directors and by enabling the Company to
attract and retain the services of Directors.
This Summary Description provides general information about the Plan. Appendices
A through E attached hereto provide information about the nonqualified stock
options granted under the Plan and the exercise of such options.

                             Available Information
                             ---------------------

The Company has filed a Registration Statement with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Act of 1933 (the "Securities
Act") with respect to the shares of Common Stock which may be issued under the
Plan. Pursuant to the rules of the SEC, this Summary Description does not
contain all of the information set forth in the Registration Statement and
exhibits thereto, to which reference is made.

The Company will provide, without charge, to each person to whom this Summary
Description is delivered, upon written or oral request of such person, a copy of
any and all of the following documents which have been incorporated by reference
into the Registration Statement:

     -    The Company's latest Annual Report on Form 10-K filed with the SEC.

     -    All quarterly and other reports filed by the Company with the SEC
          pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
          1934 (the "Exchange Act").

     -    The description of the Company's Company Stock and its Preferred Share
          Purchase Rights contained in applicable registration statements and
          other reports filed by the Company with the SEC under Section 12 of
          the Exchange Act.

In addition, a copy of First Midwest's most recent Annual Report to Stockholders
accompanies this Summary Description or has been furnished previously. The
Company will provide to each Director who has received this Summary Description
copies of all reports, proxy statements and other communications distributed by
the Company to its stockholders generally. In the event a recipient of this
Summary Description misplaces any such documents, another will be furnished,
without charge, upon written request.
<PAGE>

Requests for copies of any of the documents referred to above, or any questions
regarding the Plan or its administration, should be directed to the office of
the Corporate Controller, First Midwest Bancorp, Inc. 300 Park Blvd., Suite 405,
Itasca, IL 60143 (telephone (630) 875-7459).

                               Resale of Shares
                               ----------------

The Plan does not apply any specific restrictions on the resale of shares of
Common Stock issued to Directors under the Plan. However, the Securities Act and
Exchange Act may impose certain limitations on such resale.

Under the Securities Act, all Directors of the Company may be deemed to be
"affiliates" of the Company for purposes of the Securities Act. Because such
affiliates are so closely identified with the Company, sales of Common Stock by
such persons may be deemed to be sales of Common Stock by the Company. Rule 144,
promulgated under the Securities Act, sets forth a "safe harbor" procedure for
affiliates to sell shares yet not have the sale be deemed a distribution of
Common Stock on behalf of the Company. Rule 144 restricts the number of shares
of Common Stock which may be sold by an affiliate during any 90-day period,
designates a manner of sale and requires the filing of a notice of proposed sale
with the SEC. Any affiliates of the Company should consult with a qualified
legal advisor regarding his or her own situation before making any resales of
Common Stock issued pursuant to the Plan.

Section 16(b) of the Exchange Act provides that, in certain circumstances, the
profit realized by an affiliate of the Company on the purchase and sale, or sale
and purchase, of Common Stock within a six-month time frame, is recoverable by
the Company from the affiliate if it is a prohibited "short-swing profit".
Accordingly, Directors of the Company should review the implications of the
"short-swing profit" prohibitions prior to exercising any rights pursuant to any
awards received under the Plan or prior to disposing of any shares of Common
Stock purchased or otherwise received under the Plan. General information about
the applicability of Section 16(b) and the rules promulgated thereunder to the
particular forms of awards granted under the Plan is included in the applicable
Appendix describing such awards.

                                       2
<PAGE>

                      [LOGO] First Midwest Bancorp, Inc.



                            Non-Employee Directors'

                            1997 Stock Option Plan


                              SUMMARY DESCRIPTION

                                   * * * * *

                                  APPENDIX A

                              GENERAL INFORMATION

                                   REGARDING

                         DIRECTOR STOCK OPTION GRANTS


                                                                 October 1, 1998
<PAGE>

                          FIRST MIDWEST BANCORP, INC.

                            Non-Employee Directors'

                        1997 Stock Option Plan ("Plan")

                              SUMMARY DESCRIPTION

                                   * * * * *

                                  APPENDIX A

                       GENERAL INFORMATION PERTAINING TO
                         DIRECTOR STOCK OPTION GRANTS

                                 Introduction
                                 ------------

Nonqualified stock options are granted to non-employee directors ("Directors")
on each grant date, as defined in the Plan. Generally, the grant date will be
the date of the first regularly scheduled Board Meeting held in each calendar
year. With respect to any individual who becomes a Director after the date of
such first Board Meeting, the date the individual first becomes a Director shall
also be a grant date, and the stock options granted will be pro-rated.

        Calculation and Exercise Price of Director Stock Option Grants
        --------------------------------------------------------------

Directors stock option grants are expressed as the number of shares of First
Midwest Common Stock (the "Common Stock") that may be purchased by such grant.
The number of shares of Common Stock subject to each Director stock option grant
is determined by dividing the average cash compensation earned by Directors
during the prior calendar year by the fair market value of the Common Stock on
the grant date. The fair market value of the Common Stock on the grant date is
the average of the high and low sale prices for the Common Stock as quoted by
NASDAQ on the date of the grant.

In the event of any change in outstanding shares of Common Stock by reason of a
stock dividend, split or similar Corporate change, the aggregate number of
shares of Common Stock subject to each outstanding Director stock option grant,
and the stated exercise price, shall be adjusted.

                   Exerciseability of Director Stock Options
                   -----------------------------------------

Except as otherwise approved, nonqualified stock options shall be exercisable
(i.e. vested) as follows:

     .    No options are exercisable until one year following the date of the
          grant.
     .    One year following the date of the grant, the option is exercisable
          with respect to 100% of the number of shares of Common Stock covered
          thereby.
     .    Upon the death or disability of the Director, or upon a change in
          control of First Midwest, as defined in the Plan, all options will be
          immediately exercisable in full.

                                      A-1
<PAGE>

The options expire ten years after the date of the grant. If the Director's
Board membership terminates prior to the expiration date, the options, to the
extend exercisable as of the date of such termination will remain exercisable
for 3 years after the date on which membership is terminated and will then
expire. In the case of a Director's death, the Director stock option shall
expire one year following such date.

                 Director Stock Option Grant Letter Agreement
                 --------------------------------------------

Within a reasonable period of time after each Director stock option grant is
approved by the Committee, a Letter Agreement between First Midwest and the
Director will be executed along with the appropriate beneficiary forms. The
Director will also be supplied with forms and other information related to the
procedures for the exercise of options.

                       Federal Income Tax Considerations
                       ---------------------------------

The following is a brief summary of the principal income tax consequences under
the Internal Revenue Code of 1986, as amended (the "Code") relating to
nonqualified stock options granted under the Plan. This summary is not intended
to be exhaustive and, among other things, does not describe the impact of any
state and local taxes.

     General - In general, a Director  will not realize income for federal
     -------
     income tax purposes at the time a Director stock option is granted. The
     Director will recognize ordinary income upon exercise of the Director stock
     option in an amount equal to the difference between the aggregate exercise
     price paid for the shares of Common Stock purchased and the fair market
     value of such shares as of the date of exercise. Upon disposition of the
     shares acquired upon exercise, appreciation (or depreciation) after the
     date of exercise will be treated as either short-term or long-term capital
     gain (or loss) depending upon the holding period of the shares sold.

     The Plan allows Directors to pay for the exercise price of nonqualified
     stock options by surrendering shares of Common Stock that the Director
     currently owns having a fair market value equal to such exercise price if
     such shares have been held for at least 6 months prior to the date of
     exercise (the "previously acquired shares"). If the Director pays the
     exercise price, in full or in part, with previously acquired shares of
     Common Stock, the use of such shares will not affect the tax treatment of
     the exercise. No gain or loss will be recognized with respect to the shares
     of Common Stock tendered to the Company in payment of the exercise price or
     with respect to the equivalent number of shares of Common Stock issued in
     connection with the option exercise. Such number of shares of Common Stock
     received upon exercise will have the same basis and holding period for
     purposes of determining capital gain or loss upon subsequent disposition as
     did the previously acquired shares. The shares of Common Stock received
     upon exercise in excess of the number of previously acquired shares
     tendered will have a basis equal to the fair market value of such
     previously acquired shares as of the date ordinary income is recognized
     with respect to the option exercise and the holding period will commence on
     that date.

                                      A-2
<PAGE>

     To the extent that the Director recognizes ordinary income on the exercise
     of the option, the Company will be entitled to a tax deduction in an amount
     equal to the amount of ordinary income recognized.

     No Withholding Taxes Due on Exercise - No withholding taxes (either income
     ------------------------------------
     or FICA/Medicare) are due on the exercise of Director stock options. This
     tax treatment is the same as that applied to Directors' fees, where no tax
     withholding is required. A Form 1099 will be issued to Directors exercising
     stock options for the calendar year in which the exercise occurs.

     Accordingly, Directors should be aware that estimated tax payments may be
     required for the years in which Director stock options are exercised.

                        Section 16 of the Exchange Act
                        ------------------------------

In general, an affiliate subject to the reporting obligations of Section 16(a)
and the short-swing profit recovery provisions of Section 16(b) of the Exchange
Act will be deemed to have "purchased" shares of Common Stock as of the date any
stock option is granted to the affiliate. Such purchase will, however, generally
be exempt from reporting and from any short-swing profit recovery. Such options
should, however, be reported on the first Form 4 or Form 5 filed by the
affiliate following the date of grant. The exercise of a Director stock option
is not considered a "purchase" for purposes of the short-swing profit recovery
rules, but must be reported on a Form 4 by the 10th day of the month following
the option exercise. Any subsequent sale of the shares received is a reportable
transaction that can give rise to a short-swing profit recovery. Affiliates are
encouraged to consult with the Corporate Secretary of the Holding Company
regarding the Form 4 and Form 5 reporting and short-swing profit recovery
implications of the exercise and subsequent sale of shares of Common Stock prior
to any such exercise or sale.

                                      A-3
<PAGE>

                      [LOGO]  First Midwest Bancorp, Inc.



                            Non-Employee Directors'

                            1997 Stock Option Plan



                              SUMMARY DESCRIPTION

                                   * * * * *

                                  APPENDIX B

                              GENERAL INFORMATION

                                   REGARDING

                             RELOAD STOCK OPTIONS

                                                                 October 1, 1998
<PAGE>

                          FIRST MIDWEST BANCORP, INC.

                            Non-Employee Directors'

                        1997 Stock Option Plan ("Plan")

                              SUMMARY DESCRIPTION

                                   * * * * *

                                  APPENDIX  B

                         GENERAL INFORMATION REGARDING

                             RELOAD STOCK OPTIONS
                             --------------------


                                 Introduction
                                 ------------

Reload Stock Options may be granted to Directors at any time and on such terms
as set forth by the Board of Directors of First Midwest Bancorp, Inc. (the
"Board"). The Board has determined that Reload Stock Options will be granted at
such times and under such terms as discussed in the sections below.

                Definition and Purpose of Reload Stock Options
                ----------------------------------------------

First Midwest's Director Stock Option Letter Agreements provide that First
Midwest Common Stock ("Common Stock") may be used as consideration for the
exercise price of option exercises.

As part of its program to encourage ownership of Common Stock by its Directors,
the Board approved the granting of Reload Stock Options ("Reloads") when Common
Stock is tendered as consideration for a Director stock option exercise. The
purpose of granting Reloads is to enable the Director to maintain the same
"upside potential" when tendering Common Stock to pay for the exercise price.
The benefit to First Midwest through the granting of Reloads, and the holding
requirements of the underlying shares imposed thereon, are not only increased
ownership on the part of the Director but also the realization of a tax benefit
by the Company from such exercise.

                        Eligibility for Reload Options
                        -------------------------------

Reloads will be granted in situations where the Director is an active director.
                                                               ------
Reloads will be granted only for shares tendered in an option exercise that are
already owned for at least 6 months prior to the option exercise. Shares
tendered for option exercises will be considered as newly-held for purposes of
the 6 month holding rule and may not be used for a subsequent option exercise
for at least 6 months. A Director stock option grant will be reloaded only three
times.

                        Date of the Reload Option Grant
                        -------------------------------

The date of the Reload grant will be the same date on which the Common Stock is
tendered in consideration for the Director stock option exercise. Until the
Board determines otherwise, Reloads will be granted, and canceled if appropriate
(see below), automatically, with no further action by the Board required.

                                      B-1
<PAGE>

                              Reload Option Price
                              -------------------

The Reload exercise price will be the average of the high and low market prices
quoted on the NASDAQ National Market System on the date of the option exercise
for which Common Stock is used as consideration and the Reload is granted.  This
also represents the methodology used for valuing the Common Stock used for
consideration  and for the annual granting of Director stock options.

                              Reload Option Term
                              ------------------

The term, or maturity, of the Reload will be the same as the remaining term of
                                                             --------------
the underlying Director stock option that is exercised.

                             Reload Option Vesting
                             ---------------------

Reloads will vest on a date that is the earlier of 6 months after the Reload is
granted or 30 days prior to the expiration of the underlying Director stock
        --
option for which the Reload is granted.

                           Reload Option Cancellation
                           --------------------------

If any Common Stock is sold by a Director who receives Reloads while such
   ---
Director holds unvested Reloads, a like number of the unvested Reloads will be
canceled.  The cancellation will be first applied  to the unvested Reloads with
the longest remaining term.  Once vested, the Reload will only be canceled to
the extent the Director sells the Common Stock that was received when the
underlying option was exercised.  Since the purpose of granting Reloads is to
enable a Director to maintain the same upside potential on Common Stock, any
voluntary reduction in such upside potential (through the sale of  Common Stock
by the Director) should be reflected by a like reduction in the Reloads held by
the Director.

                    Examples of Reload Stock Option Grants
                    --------------------------------------

Pages B - 3 and B - 4 are examples of Reloads granted in both taxable stock
option exercises and stock option exercises under the Nonqualified Stock Option
Gain Deferral Plan (see Appendix D to the Summary Description).

             Actions Necessary To Be Granted Reload Stock Options
             ----------------------------------------------------

Until the Board amends or modifies the Reload feature, Reloads will
automatically be granted upon the exercise of Director stock options where the
purchase price is paid with Common Stock held 6 months or longer. The Reload
will be made in the form of a Letter Agreement (similar to the Director Letter
Agreement) which will be provided to the Director within 30 days after the
eligible exercise.

                                      B-2
<PAGE>

                     Example of Reload Stock Option Grants
                           Taxable Option Exercises


Note:  Reload Stock Option Grants are only applicable to stock option
       exercises when FMBI Common Stock is tendered for payment of
       the option exercise price.


 .    FMBI Stock Price is $50 per share.
 .    Director does not elect gain deferral and owns 680 shares of FMBI.
 .    Options to be exercised are as follows:

<TABLE>
<S>                         <C>              <C>                      <C>
(a) 500 options @$10;       exp. date 1999;  exercise price $ 5,000;  Profit - $20,000
(b) 1,000 options @ $20;    exp. date 2000;  exercise price $20,000;  Profit - $30,000
(c) 300 options @ $30;      exp. date 2001;  exercise price $ 9,000;  Profit - $ 6,000
</TABLE>

     .                                                           FMBI stock
required to exercise all 1,800 options:

     (a)  $34,000 exercise price / $50 FMV = 680 shares tendered for exercise

 .    Director receives 1,800 shares of FMBI Common Stock.

 .    Reduction in Director's "upside potential" before and after exercise is 680
     shares, as follows:

<TABLE>
<CAPTION>
                                Before Exercise           After Exercise
                              -------------------       -------------------
<S>                           <C>                       <C>
Outstanding Options                       1,800                        ---
Shares tendered for exercise                680                        ---
Shares from option exercise                  --                      1,800
                              -------------------       -------------------
Total                                     2,480                      1,800
                              ===================       ===================
</TABLE>

 .    Reload Options granted at $50 per share applicable to the exercise price
     are as follows:

<TABLE>
<CAPTION>
   Expiration Date   Reload Options Granted    Methodology
   ---------------   ----------------------    ------------
   <S>               <C>                       <C>
        1999                  100              Exercise price of each grant
                                               exercised / total exercise price
        2000                  400              x reduction in upside potential
                                               (680 shares) applicable to
        2001                  180              exercise.
                           ---------
        Total                 680
</TABLE>

                                      B-3
<PAGE>

                     Example of Reload Stock Option Grants
                   Option Exercises under Gain Deferral Plan

Note:  Reload Stock Option Grants are only applicable to stock option
       exercises when FMBI common stock is tendered for payment of the
       option exercise price.

 .      FMBI Stock Price is $50 per share.
 .      Director  elects gain deferral and owns 680 shares of FMBI.
 .      Options to be exercised are as follows:

<TABLE>
<S>                         <C>              <C>                      <C>
(a) 500 options @$10;       exp. date 1999;  exercise price $ 5,000;  Profit - $20,000
(b) 1,000 options @ $20;    exp. date 2000;  exercise price $20,000;  Profit - $30,000
(c) 300 options @ $30;      exp. date 2001;  exercise price $ 9,000;  Profit - $ 6,000
</TABLE>

     .    FMBI stock required to exercise all 1,800 options (which are then
immediately returned to Director under terms of the tax-free exchange):

          $34,000 exercise price / $50 FMV = 680 shares

 .    "Profit Shares" to be deposited in the Gain Deferral Plan:

          $56,000 profit / $50 FMV = 1,120 shares

 .    Reduction in Director's "upside potential" before and after exercise is 680
     shares as follows:

<TABLE>
<CAPTION>
                                Before Exercise           After Exercise
                              -------------------      -------------------
<S>                             <C>                    <C>
Outstanding Options                       1,800                       --
Shares tendered for exercise                680                      680
Shares in Gain Deferral Plan                 --                    1,120
                              -------------------      -------------------
Total                                     2,480                    1,800
                              ===================      ===================
</TABLE>

 .    Reload Options granted at $50 per share applicable to the exercise price
     are as follows:

<TABLE>
<CAPTION>
   Expiration Date   Reload Options    Methodology
   ---------------   --------------    -----------
                         Granted
                         -------
   <S>               <C>               <C>
        1999               100         Exercise price of each grant exercised /
                                       total exercise price x reduction in
        2000               400         upside potential (680 shares).

        2001               180
                         -------
        Total              680
</TABLE>

                                      B-4
<PAGE>

[LOGO]                    First Midwest Bancorp, Inc.


                            Non-Employee Directors'

                            1997 Stock Option Plan


                              SUMMARY DESCRIPTION

                                   * * * * *

                                  APPENDIX C

                              GENERAL INFORMATION

                                   REGARDING

                              TRANSFERABILITY OF

                            DIRECTOR STOCK OPTIONS



                                                                 October 1, 1998
<PAGE>

                          FIRST MIDWEST BANCORP, INC.

                            Non-Employee Directors'

                        1997 Stock Option Plan ("Plan")

                              SUMMARY DESCRIPTION

                                   * * * * *
                                  APPENDIX  C

                         GENERAL INFORMATION REGARDING
                   TRANSFERABILITY OF DIRECTOR STOCK OPTIONS
                   -----------------------------------------

                    Purpose of Stock Option Transferability
                    ---------------------------------------

Transferability of stock options by Directors of First Midwest who hold stock
options enable Directors to enhance the after-tax value of stock options by
allowing maximum flexibility for  gift and estate tax planning purposes.

                     Eligibility to Transfer Stock Options
                     -------------------------------------

In order to transfer stock options in accordance with the requirements outlined
below, the Director must be an active Director of First Midwest; retirees are
not eligible.

                        Requirements for Transferability
                        --------------------------------

For Directors transferring stock options, the following requirements must be
meet:

     1.   Transferability is limited to immediate family members only, as
defined in the Plan.

     2.   The transfer must be a bonafide gift that is not made in exchange for
any consideration.

     3.   The transferred option will continue to be subject to the same terms
and conditions which were applicable prior to the transfer such as vesting
requirements and expiration dates.

                       Example of a Stock Option Transfer
                       ----------------------------------

The following is an example of the steps necessary to affect a stock option
transfer:
<PAGE>

     1.   Based upon the restrictions outlined in the Plan and the Letter
Agreement, a Director will assign the stock option to a family member - donee
and pay all appropriate gift taxes.

     2.   The potential appreciating asset represented by the stock option is
thereby removed from the estate of the optionee - donor through the transfer to
the family member.

     3.   Prior to the stock option expiration date, the family member can
exercise the stock option.

     4.   After the stock option exercise, if the shares of First Midwest are
retained by the family member exercising the stock option, such shares are
considered "restricted" stock and are subject to SEC Rule 144 and 145 governing
resale. The First Midwest Corporate Secretary should be contacted if the family
member wishes to resell such shares.

                               Tax Considerations
                               ------------------

As noted above, transfer of options is intended to provide flexibility to
optionees with regard to gift and estate planning purposes.  The tax rules
governing the transfer of options are complex.  Accordingly a Director
considering a transfer of options should consult with his or her tax advisor
prior to initiating an option transfer.

               Actions Necessary to Make a Stock Option Transfer
               -------------------------------------------------

If a Director wishes to make a transfer of stock options (whether vested or
unvested), he/she should contact the Corporate Controller of First Midwest who
will initiate the appropriate transfer documentation.
<PAGE>

[LOGO]                    First Midwest Bancorp, Inc.



                            Non-Employee Directors'

                            1997 Stock Option Plan

                              SUMMARY DESCRIPTION

                                   * * * * *

                                  APPENDIX D

                              GENERAL INFORMATION

                                   REGARDING

                      DIRECTOR STOCK OPTION LOAN PROGRAM



                                                                 October 1, 1998
<PAGE>

                          FIRST MIDWEST BANCORP, INC.

                            Non-Employee Directors'

                        1997 Stock Option Plan ("Plan")

                              SUMMARY DESCRIPTION

                                   * * * * *
                                  APPENDIX  D

                         GENERAL INFORMATION REGARDING
                      DIRECTOR STOCK OPTION LOAN PROGRAM
                      ----------------------------------

                            Purpose of Loan Program
                            -----------------------

First Midwest has established a Loan Program to facilitate both the exercise of
Director stock options and the retention of the acquired shares for the purpose
of increasing First Midwest stock ownership.

                      Eligibility for Stock Option Loans
                      ----------------------------------

Directors eligible for stock option loans must be active Directors of First
Midwest; retirees are not eligible.

                                Loan Collateral
                                ---------------

All stock option loans will be fully recourse. In addition, all First Midwest
Common Stock ("Common Stock") acquired upon the exercise of a stock option that
is funded by the stock option loan will be collateral for such loan. For
example, if a Director exercises 1,000 options and pays for 1/2 of the exercise
price with a stock option loan, 500 shares of the Common Stock acquired will be
held as collateral for the loan.

                                   Loan Term
                                   ---------

The term of the stock option loan will be established at the inception of the
loan and cannot exceed five years.

                              Loan Interest Rate
                              ------------------

The Applicable Federal Rate ("A.F.R.") as defined by the Internal Revenue Code
("IRC") on the date that the loan is made will be the interest rate applicable
to such loan. The A.F.R. is the lowest rate allowable under the IRC without
imputing interest income to the borrower. As an example, the May 1998 A.F.R.'s
are as follows:

     .    Loans of three years or less - 5.61%
     .    Loans over three years and up to five years - 6.10%

                                      D-1
<PAGE>

                           Loan Interest Calculation
                           -------------------------

Interest on stock option loans will be calculated on a 365 day basis and will be
compounded annually.  Interest will be payable at the maturity of the loan, but
may be paid prior to maturity at the election of the Director.

                              Maximum Loan Amount
                              -------------------

The maximum amount of a stock option loan will be the full stock option exercise
price. The maximum amount of all stock option loans outstanding at any one time
to a Director will be $250,000.

                    Impact of Subsequent Common Stock Sales
                    ---------------------------------------

Stock option loans must be repaid on a pro-rata basis if any of the underlying
collateral is sold. For example, if a Director sells 50% of the shares acquired
in a stock option exercise funded by the Loan Program, the Director must repay
50% of the outstanding loan balance, including any accrued interest applicable
to such balance. Conversely, if a portion of the principal balance of the loan
is repaid, a pro-rata portion of the underlying collateral will be returned.
Tendering of the underlying collateral for purposes of taxable, as well as gain
deferral, stock option exercises is permitted under the Stock Option Loan
Program and will not require loan repayment as long as an identical number of
shares is returned as collateral for the loan after the exercise.

                               Repayment Schedule
                               ------------------

All principal and interest on a stock option loan will be payable at the end of
the term of the loan.

                     Effect of Termination of Directorship
                     -------------------------------------

Upon termination of a Directorship for any reason, including after a change in
control, as defined in the Plan, the stock option loan will continue under the
same terms and conditions until the end of the term of the loan or loans.

                                      D-2
<PAGE>

[LOGO]                    First Midwest Bancorp, Inc.



                            Non-Employee Directors'

                            1997 Stock Option Plan


                              SUMMARY DESCRIPTION

                                   * * * * *

                                  APPENDIX E

                              GENERAL INFORMATION

                                   REGARDING

                 NONQUALIFIED STOCK OPTION GAIN DEFERRAL PLAN



                                                                 October 1, 1998
<PAGE>

                          FIRST MIDWEST BANCORP, INC.

                            Non-Employee Directors'

                        1997 Stock Option Plan ("Plan")

                              SUMMARY DESCRIPTION

                                   * * * * *

                                  APPENDIX E

                         GENERAL INFORMATION REGARDING
                 NONQUALIFIED STOCK OPTION GAIN DEFERRAL PLAN
                 --------------------------------------------

The purpose of this Appendix E is to provide general information about the Gain
Deferral Plan and is qualified in its entirety by the Summary Description of the
Gain Deferral Plan and the text of the Gain Deferral Plan document. The Gain
Deferral Plan provides the Compensation Committee of the Board of Directors of
First Midwest Bancorp, Inc. (the "Committee") with the responsibility for the
administration of the Gain Deferral Plan. The Committee is authorized to
interpret the Gain Deferral Plan, to prescribe and modify its rules and
procedures, and to make all other determinations necessary in its
administration.

                       Purpose of the Gain Deferral Plan
                       ---------------------------------

The purpose of the Gain Deferral Plan is to further stock ownership by Directors
of First Midwest by facilitating deferral of gains resulting from the exercise
of Director stock options ("options"). In order to defer receipt of gains
resulting from such exercises, Directors must make appropriate elections and
must exercise their options only through the exchange of First Midwest Common
Stock held for six months prior to the exercise date. Deferred gains can only be
invested in First Midwest Common Stock ("Common Stock"); dividends earned on
such Common Stock held by the Gain Deferral Plan can likewise only be
reinvested.

                         Eligibility for Participation
                         -----------------------------

The Gain Deferral Plan is structured as a "Nonqualified Plan" under applicable
IRS and Department of Labor guidelines. As such, eligibility for participation
must be monitored closely to ensure that the Gain Deferral Plan maintains
compliance with these rules, regulations and limitations and is not
disqualified.

For 1998, participation in the Gain Deferral Plan has been restricted to First
Midwest Directors, key executives with a base salary of $98,800 or more and all
members of the First Midwest Bank Executive Committee ("Participants").
Additionally, the ability to defer gains from option exercises is further
restricted to participants who own 500 or more shares of Common Stock in their
own name, in joint tenancy with their spouse or in an alternative ownership from
whereby the participant has sole voting and investment power (such as a Trust).
The Common Stock ownership limitation will be reviewed annually.

                                      E-1
<PAGE>

Election to Participate
-----------------------

In order to effectuate participation in the Gain Deferral Plan, the participant
must execute a Deferral Election Form within 30 days following the participant's
commencement date. The deferral election will apply to all options exercised
where Common Stock is used as the sole payment of the exercise price. If a
participant does not execute a form with 30 days following his/her participation
commencement date, the deferral election will become effective only for options
exercised in the calendar year following, and at least six months after, the
execution date of the Deferral Election Form.

A participant may execute additional forms, or a Deferral Election Revocation
Form, with each subsequent form superseding all prior forms in accordance with
the timing provisions contained in the Gain Deferral Plan.

If a participant executes a Deferral Election Form, it will apply to all option
exercises that utilize Common Stock as consideration until revoked. However, the
participant may still exercise options using cash as consideration (or in
cashless exercises) to the maximum extent allowed by the Plan.

                                      E-2