Exhibit 10.3

                         FIRST DEFIANCE FINANCIAL CORP.

                       COMPENSATORY STOCK OPTION AGREEMENT
                             1996 STOCK OPTION PLAN

      A COMPENSATORY  STOCK OPTION  ("Option")  for a total of (number  granted)
shares of Common Stock,  par value $.01 per share,  of First Defiance  Financial
Corp. (the  "Corporation") is hereby granted to (option holder) (the "Optionee")
pursuant to the First Defiance  Financial  Corp. 1996 Stock Option Plan ("Option
Plan").  The Option  granted  hereby is subject in all respects to the terms and
provisions  of the Option  Plan and this  Agreement.  The Option  Plan is hereby
incorporated  herein  by  reference.  The  Option  granted  hereunder  is not an
"incentive  stock option" as that term is defined in Section 422 of the Internal
Revenue Code of 1986, as amended.

      1. Exercise Price. The exercise price shall be $ (exercise price) for each
share of Common Stock eligible to be exercised  hereunder,  which price is equal
to the  fair  market  value  of the  Common  Stock  on the date of grant of this
Option, as determined in accordance with Section 8.03 of the Option Plan.

      2. Exercise of Option.  (a) This Option shall become vested at the rate of
20% per year on each of the first five  anniversaries  of the date of grant. Any
vested portion of this Option shall be exercisable,  in whole or in part, at any
time on or after it vests until ten (10) years  after the date of grant,  except
as set forth in Section 4 hereof and in the Option Plan.

            (b)  Method of  Exercise.  This  Option  shall be  exercisable  by a
written notice which shall:

                  (i) state the election to exercise  the Option,  the number of
                  shares with respect to which it is being exercised, the person
                  in whose name the stock  certificate or certificates  for such
                  shares of Common Stock is to be registered, his or her address
                  and Social  Security  number (or if more than one,  the names,
                  addresses  and  Social  Security   numbers  of  each  of  such
                  persons);

                  (ii) be signed by the person or persons  entitled  to exercise
                  the Option and, if the Option is being exercised by any person
                  or persons other than the Optionee,  be  accompanied by proof,
                  satisfactory to counsel for the  Corporation,  of the right of
                  such person or persons to exercise the Option; and
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                  (iii) be in writing and  delivered  in person or by  certified
                  mail to the Corporation at its main office.

Payment of the purchase  price of any shares with respect to which the Option is
being  exercised  shall be by cash or by certified or cashier's check payable to
the Corporation,  in shares of common Stock (including  shares acquired pursuant
to the  exercise of this  Option)  with a fair market  value  equivalent  to the
purchase price of the shares to be acquired  pursuant to this Option,  or by any
combination of the foregoing.

            (c) Restriction on Exercise. This Option may not be exercised if the
issuance of the shares upon such  exercise  would  constitute a violation of any
applicable  federal or state  securities  law or other law or  regulation.  As a
condition to the exercise of this Option, the Corporation may require the person
exercising this Option to make any representation or warranty to the Corporation
as may be required by any applicable law or regulation.

      3.  Non-transferability  of Option.  This Option may not be transferred in
any manner otherwise than by will or the laws of descent and  distribution,  and
may be exercised during the lifetime of the Optionee only by the Optionee or the
Optionee's guardian or legal  representative.  The terms of this Option shall be
binding  upon  the  executors,  administrators,  heirs,  successors,  guardians,
assigns or legal representatives of the Optionee.

      4. Term of Option.  This Option may not be exercised  after the earlier of
(i) ten years from the date of grant of this Option, (ii) three (3) months after
the date on which the  Optionee  ceases to be employed (or in the service of the
Board of Directors in the case of a  non-employer  director) by the  Corporation
and all Subsidiary Companies,  unless the committee in its discretion decides at
the  time of grant  or  thereafter  to  extend  such  period  of  exercise  upon
termination  of  employment  or service to a period not  exceeding one (1) year,
except in the case of  termination  due to death or disability in which case the
term  shall  not  terminate  for one  (1)  year  following  the  termination  of
employment  resulting from such death or disability or (iii) removal from office
for cause pursuant to the Corporation's Bylaws.

      5.  Withholding.  The  Corporation  shall be entitled to withhold from any
compensation  or other  payments  then or  thereafter  due to the Optionee  such
amounts as may be necessary to satisfy any  withholding  requirements of federal
or state law or  regulation  and,  further,  to collect  from the  Optionee  any
additional amounts which may be required for such purpose.

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      6.  Option  Subject to  Compliance  with Law and  Regulations.  The Option
granted  hereby is subject to all applicable  federal and state laws,  rules and
regulations and to such approvals by any government or regulatory  agency as may
be required.

                                                     ON BEHALF OF THE PROGRAM
                                                       ADMINISTRATORS OF THE
                                                  FIRST DEFIANCE FINANCIAL CORP.
                                                      1996 STOCK OPTION PLAN


                                            By: ________________________________

Date of Grant:


                                        Attest: ________________________________

Agreed to and accepted this __________ day of __________ , 200_:


_______________________________________________________________
Optionee