EXHIBIT 10.2

FIRST DEFIANCE FINANCIAL CORP.

2010 EQUITY INCENTIVE PLAN

PERFORMANCE-BASED AWARD AGREEMENT

(SHORT-TERM INCENTIVE)

First Defiance Financial Corp. (the “Company”) hereby grants the undersigned
Participant a Performance-Based Award subject to the terms and conditions
described in the First Defiance Financial Corp. 2010 Equity Incentive Plan (the
“Plan”) and this Performance-Based Award Agreement (Short-Term Incentive) (this
“Award Agreement”).

 

1.

Name of Participant:                                 

 

2.

Performance Period: The 12 month period beginning January 1, 2011 and ending on
December 31, 2011 (the “Performance Period”).

 

3.

Target Award As Percentage of Base Salary:     %

 

4.

Earning an Award: At the end of the Performance Period, the Participant shall be
eligible to receive a cash payment equal to between 0% and 150% of the Target
Award based on the achievement of the Performance Objectives set forth in
Exhibit A during the Performance Period (the “Award”).

 

5.

Amount Payable: With respect to the Performance Period, the Committee shall
determine the amount payable with respect to the Award based on the level of
achievement of the Performance Objectives and any other factors that the
Committee deems relevant. The Committee, in its sole discretion, may adjust the
amount payable with respect to the Award.

 

6.

Limitations on Earning an Award: If the Participant’s employment terminates for
any reason prior to the end of the Performance Period, the Participant shall
forfeit any right to payment with respect to the Award. Notwithstanding the
foregoing:

 

  (a)

Death, Disability, Retirement: If the Participant, dies, becomes Disabled or
Retires during the Performance Period, the amount of the Participant’s Award
shall be based on the achievement of the Performance Objectives determined as of
the fiscal quarter ended nearest to the Participant’s death, Disability or
Retirement. Payment with respect to the Award will be made in a lump sum within
60 days following the Participant’s death, Disability or Retirement.

 

  (b)

Change in Control: If a Change in Control occurs during the Performance Period
and the Participant is terminated by the Company, other than for Cause (but in
no event after the end of the Performance Period), the amount of the
Participant’s Award shall equal the greater of: (i) the amount payable with
respect to the Award as though the Performance Objectives had been satisfied at
the “target” level of achievement for the Performance Period; or (ii) the amount
that would have been payable with respect to the Awards based on the actual
level of achievement of the Performance Objectives through the fiscal quarter
ended nearest to the Participant’s termination. The Award will be settled in a
lump sum within 60 days following the Participant’s termination.

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7.

Form of Payment: As a condition to receiving the Award, the Participant must
elect whether to receive payment of the Award in the form of cash and/or Shares
by completing the form attached as Exhibit B.

 

8.

Payment: Provided that the Participant remains employed by the Company or an
Affiliate on such date (each a “Payment Date”):

 

  (a)

50% of the Award shall be paid between January 1 and March 15 of the first
fiscal year following the end of the Performance Period;

 

  (b)

25% of the Award shall be paid between January 1 and March 15 of the second
fiscal year following the end of the Performance Period; and

 

  (c)

25% of the Award shall be paid between January 1 and March 15 of the third
fiscal year following the end of the Performance Period.

 

9.

Effect of Termination: Notwithstanding the foregoing:

 

  (a)

Death, Disability or Retirement. In the event of the Participant’s death,
Disability or Retirement prior to a Payment Date, the unpaid portion of the
Award shall be paid in a lump sum within 60 days following the Participant’s
death, Disability or Retirement.

 

  (b)

Change in Control. In the event of a Change in Control, the unpaid portion of
the Award shall be paid in a lump sum within 60 days following the Change in
Control.

 

  (c)

Termination for Cause. If the Participant is terminated for Cause (regardless of
whether such termination would also constitute a Retirement) during the
Performance Period, the Participant shall forfeit any further right to payment
with respect to the Award.

 

10.

Miscellaneous:

 

  (a)

Non-Transferability. The Award may not be sold, transferred, pledged, assigned
or otherwise alienated or hypothecated, except by will or the laws of descent
and distribution.

 

  (b)

Beneficiary. Payments with respect to the Award shall be made to the
Participant, except that, in the event of the Participant’s death, payment shall
be made to the Participant’s beneficiary. Unless otherwise specifically
designated by the Participant in writing, the Participant’s beneficiary shall be
the Participant’s spouse or, if none, the Participant’s estate.

 

  (c)

No Right to Continued Service or to Awards. The granting of an Award shall
impose no obligation on the Company or any Affiliate to continue the employment
of a Participant or interfere with or limit the right of the Company or any
Affiliate to terminate the employment of the Participant at any time, with or
without Cause, which right is expressly reserved.

 

  (d)

Tax Withholding. The Company or an Affiliate, as applicable, will have the power
and right to deduct, withhold or collect any amount required by law or
regulation to be withheld with respect to any taxable event arising with respect
to the Award. To the extent permitted by the Committee, in its sole discretion,
this amount may be:

 

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(i) withheld from other amounts due to the Participant, (ii) withheld from the
value of any Award being settled or any Shares transferred in connection with
payment of the Award, (iii) withheld from the vested portion of any Award
(including Shares transferable thereunder), whether or not being paid at the
time the taxable event arises, or (iv) collected directly from the Participant.
Subject to the approval of the Committee, the Participant may elect to satisfy
the withholding requirement, in whole or in part, by having the Company or an
Affiliate, as applicable, withhold Shares having a Fair Market Value on the date
the tax is to be determined equal to the minimum statutory total tax that could
be imposed on the transaction; provided that such Shares would otherwise be
distributable to the Participant at the time of the withholding and if such
Shares are not otherwise distributable at the time of the withholding, provided
that the Participant has a vested right to distribution of such Shares at such
time. All such elections will be irrevocable and made in writing and will be
subject to any terms and conditions that the Committee, in its sole discretion,
deems appropriate.

 

  (e)

Requirements of Law. The grant of the Award is subject to all applicable laws,
rules and regulations (including applicable federal and state securities laws)
and to all required approvals of any governmental agencies or national
securities exchange, market or other quotation system.

 

  (f)

Governing Law. The Plan and the Award Agreement shall be governed by and
construed in accordance with the laws of (other than laws governing conflicts of
laws) the State of Ohio.

 

  (g)

Award Subject to Plan. The Award is subject to the terms and conditions
described in this Award Agreement and the Plan, which is incorporated by
reference into and made a part of this Award Agreement. In the event of a
conflict between the terms of the Plan and the terms of this Award Agreement,
the terms of the Plan will govern. The Committee has the sole responsibility of
interpreting the Plan and this Award Agreement, and its determination of the
meaning of any provision in the Plan or this Award Agreement will be binding on
the Participant. Capitalized terms that are not defined in this Award Agreement
have the same meanings as in the Plan.

 

  (h)

Section 409A of the Code. This Award Agreement is intended, and shall be
construed and interpreted, to comply with Section 409A of the Code and if
necessary, any provision shall be held null and void to the extent such
provision (or part thereof) fails to comply with Section 409A of the Code or the
Treasury Regulations thereunder. For purposes of Section 409A of the Code, each
payment of compensation under the Award Agreement shall be treated as a separate
payment of compensation. Any amounts payable solely on account of an involuntary
termination shall be excludible from the requirements of Section 409A of the
Code, either as separation pay or as short-term deferrals to the maximum
possible extent. Nothing herein shall be construed as the guarantee of any
particular tax treatment to the Participant, and the Company shall have no
liability with respect to any failure to comply with the requirements of
Section 409A of the Code. Any reference to the Participant’s “termination” shall
mean the Participant’s “separation from service”, as defined in Section 409A of
the Code. In addition, if the Participant is determined to be a “specified
employee” (within the meaning of Section 409A of the Code and as determined
under the Company’s policy for determining specified employees), the Participant
shall not be entitled to payment or to distribution of any portion of an Award
that is subject to Section 409A of the Code (and for which no exception applies)
and is payable or distributable on account of the Participant’s

 

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termination until the expiration of six months from the date of such termination
(or, if earlier, the Participant’s death). Such Award, or portion thereof, shall
be paid or distributed on the first business day of the seventh month following
such termination.

 

  (i)

Signature in Counterparts. This Award Agreement may be signed in counterparts,
each of which will be deemed an original, but all of which will constitute one
and the same instrument.

 

PARTICIPANT

     

 

  

Date:

  

 

Signature

     

 

     

Print Name

     

FIRST DEFIANCE FINANCIAL CORP.

 

By:

  

 

  

Date:

  

 

Its:

  

 

     

 

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FIRST DEFIANCE FINANCIAL CORP.

2010 EQUITY INCENTIVE PLAN

PERFORMANCE-BASED AWARD AGREEMENT

(SHORT-TERM INCENTIVE)

EXHIBIT A

As described in Section 4 of the Award Agreement, at the end of the Performance
Period, the Participant may earn between 0% and 150% of the Target Award based
on the achievement of the Performance Objectives set forth below during the
Performance Period. When determining the level of achievement of the Performance
Objectives, the Committee may make such adjustments as it deems equitable to
account for unusual or non-recurring items Performance between two stated levels
will be interpolated when determining the percentage of the Target Award earned.
Each component of the Target Award is calculated separately and the
Participant’s Award for the Performance Period shall equal the sum of each
component.

 

(a)

25% of the Award is based on the Company’s diluted earnings per share, as
reported on the Company’s financial statements (“Diluted EPS”), at the end of
the Performance Period. The percentage of the Target Award earned will
correspond to Company’s Diluted EPS, as set forth below, multiplied by 25%:

 

Diluted Earnings Per Share

   Percentage of Award Component Earned  

Less than $1.21

     0 % 

$1.21

     50 % 

$1.24

     60 % 

$1.27

     70 % 

$1.30

     80 % 

$1.33

     90 % 

$1.34

     100 % 

$1.38

     110 % 

$1.42

     120 % 

$1.46

     130 % 

1.50

     140 % 

1.54

     150 % 

 

(b)

15% of the Award is based on the percentage of the Company’s net charge offs
compared to the Company’s average loans, each as reported on the Company’s
financial statements, at the end of the Performance Period (the “Net Charge Off
Percentage”). The percentage of the Target Award earned will correspond to Net
Charge Off Percentage, as set forth below, multiplied by 15%:

 

Net Charge Off Percentage

   Percentage of Award Component Earned  

More than 0.90%

     0 % 

0.90%

     50 % 

0.83%

     60 % 

0.76%

     70 % 

 

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0.69%

     80 % 

0.62%

     90 % 

0.55%

     100 % 

0.49%

     110 % 

0.43%

     120 % 

0.37%

     130 % 

0.31%

     140 % 

0.25%

     150 % 

 

(c)

15% of the Award is based on the percentage of the Company’s non-performing
assets compared to the Company’s total assets, each as reported on the Company’s
financial statements, at the end of the Performance Period (the “Non-Performing
Asset Percentage”). The percentage of the Target Award earned will correspond to
Non-Performing Asset Percentage, as set forth below, multiplied by 15%:

 

Non-Performing Asset

Percentage

   Percentage of Award Component Earned  

More than 2.78%

     0 % 

2.78%

     50 % 

2.62%

     60 % 

2.47%

     70 % 

2.31%

     80 % 

2.16%

     90 % 

2.00%

     100 % 

1.80%

     110 % 

1.60%

     120 % 

1.40%

     130 % 

1.20%

     140 % 

1.00%

     150 % 

 

(d)

25% of the Award is based on the percentage of the Company’s classified assets
compared to the Company’s total assets, each as reported on the Company’s
financial statements, at the end of the Performance Period (the “Classified
Asset Percentage”). The percentage of the Target Award earned will correspond to
Classified Asset Percentage, as set forth below, multiplied by 25%:

 

Classified Asset Percentage

   Percentage of Award Component Earned  

More than 6.81%

     0 % 

6.81%

     50 % 

6.35%

     60 % 

5.89%

     70 % 

5.43%

     80 % 

 

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4.97%

     90 % 

4.51%

     100 % 

4.26%

     110 % 

4.01%

     120 % 

3.75%

     130 % 

3.50%

     140 % 

3.25%

     150 % 

 

(e)

10% of the Award is based on the percentage of the Company’s return on average
equity, as reported on the Company’s financial statements, at the end of the
Performance Period (the “Return on Average Equity”). The percentage of the
Target Award earned will correspond to Return on Average Equity, as set forth
below, multiplied by 10%:

 

Return on Average Equity

   Percentage of Award Component Earned  

Less than 4.79%

     0 % 

4.79%

     50 % 

4.95%

     60 % 

5.12%

     70 % 

5.29%

     80 % 

5.46%

     90 % 

5.63%

     100 % 

6.19%

     110 % 

6.76%

     120 % 

7.32%

     130 % 

7.88%

     140 % 

8.45%

     150 % 

 

(f)

10% of the Award is based on the percentage of the Company’s return on average
assets, as reported on the Company’s financial statements, at the end of the
Performance Period (the “Return on Average Assets”). The percentage of the
Target Award earned will correspond to Return on Average Assets, as set forth
below, multiplied by 10%:

 

Return on Average Assets

   Percentage of Award Component Earned  

Less than 0.53%

     0 % 

0.53%

     50 % 

0.55%

     60 % 

0.57%

     70 % 

0.58%

     80 % 

0.60%

     90 % 

 

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0.62%

     100 % 

0.68%

     110 % 

0.74%

     120 % 

0.81%

     130 % 

0.87%

     140 % 

0.93%

     150 % 

 

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FIRST DEFIANCE FINANCIAL CORP.

2010 EQUITY INCENTIVE PLAN

PERFORMANCE-BASED AWARD AGREEMENT

(SHORT-TERM INCENTIVE)

EXHIBIT B

ELECTION AS TO FORM OF PAYMENT

I, the undersigned Participant, have been granted a Performance-Based Award
(Short-Term Incentive) (the “Short-Term Award”) pursuant to the First Defiance
Financial Corp. 2010 Equity Incentive Plan (the “Plan”).

By making the election described in this Election as to Form of Payment
(“Election Form”), I may elect to have all or a portion of my Short-Term Award
paid to me in the form of unrestricted Shares.

 

  I.

Election

I hereby irrevocably elect to have the following percentage of my Short-Term
Award paid in unrestricted Shares:

    % (the “Equity Election Amount”)

If I elect to receive any portion of my Short-Term Award in the form of
unrestricted Shares, I will receive a number of whole Shares determined by:
(a) multiplying (i) the Equity Election Amount by (ii) the amount payable on
each Payment Date; and dividing the product by (b) the reported closing price of
a Share on such Payment Date. Any fractional Shares will be settled in cash
based on the reported closing price of a Share on the Payment Date.

 

  II.

Acknowledgements

By signing below, I understand that:

 

  •  

My election is irrevocable once made;

 

  •  

The Short-Term Award is conditioned up my making the election and return this
Election Form to the Company within 10 business days following the Grant Date;

 

  •  

If I fail to make an election, 100% of my Award will be paid in cash.

Agreed and Acknowledged:

 

 

Participant Name

 

Signature Dated:             , 20    

 

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