FIRST DEFIANCE FINANCIAL CORP.
                      2001 STOCK OPTION AND INCENTIVE PLAN


     1. Purpose.  The purpose of the First Defiance  Financial Corp., 2001 Stock
Option and Incentive  Plan (this "Plan") is to promote and advance the interests
of First  Defiance  Financial  Corp.  (the  "Company") and its  shareholders  by
enabling the Company to reward  directors  and  employees of the Company and any
Subsidiary  (hereinafter  defined), and to strengthen the mutuality of interests
between the directors and employees and the Company's  shareholders by providing
directors  and employees  with a proprietary  interest in pursuing the long-term
growth, profitability and financial success of the Company.

     2.  Definitions.  For purposes of this Plan, the following terms shall have
the meanings set forth below:

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

               (b) "Code" means the Internal  Revenue Code of 1986,  as amended,
          or  any  successor  thereto,  together  with  rules,  regulations  and
          interpretations promulgated thereunder.

               (c) "Committee"  means the Committee of the Board  constituted as
          provided in Section 3 of this Plan.

               (d) "Common Shares" means the common shares,  $0.01 par value per
          share,  of the  Company  or any  security  of the  Company  issued  in
          substitution, in exchange or in lieu thereof.

               (e)  "Company"  means First  Defiance  Financial  Corp.,  an Ohio
          corporation, or any successor corporation.

               (f) "Employment"  means regular  employment with the Company or a
          Subsidiary and does not include service as a director only.

               (g) "Exchange Act" means the Securities  Exchange Act of 1934, as
          amended, or any successor statute.

               (h) "Fair Market Value" shall be determined as follows:

                    (i) If the Common  Shares  are  quoted on The  Nasdaq  Stock
               Market  at the date of the grant of the  Stock  Option,  then the
               Fair Market  Value shall be the mean  between the closing bid and
               closing  asked  quotation for a Common Share on the grant date on
               The Nasdaq Stock Market.

                    (ii)  If  the  Common   Shares  are  traded  on  a  national
               securities  exchange  at the time of grant of the  Stock  Option,
               then the Fair  Market  Value  shall be the average of the highest
               and the lowest  selling  price on such  exchange on the date such
               Stock  Option is granted or, if there were no sales on such date,
               then on the next prior business day on which there was a sale.

                    (iii) If the  Common  Shares  are not  traded on a  national
               securities  exchange or quoted on The Nasdaq Stock  Market,  then
               the Fair Market Value shall be as determined by the Committee.

               (i)  "Incentive  Stock  Option"  means any Stock  Option  that is
          intended to be and is specifically  designated as an "incentive  stock
          option" within the meaning of Section 422 of the Code.

               (j)  "Non-Qualified  Stock Option" means any Stock Option that is
          not specifically designated as an Incentive Stock Option.

<PAGE>


               (k) "Participant" means an employee or director of the Company or
          a Subsidiary  who is granted a Stock  Option under this Plan.  For the
          purposes of the  granting of any  Incentive  Stock  Option  under this
          Plan,  the term  "Participant"  shall  include  only  employees of the
          Company or a Subsidiary.

               (l) "Plan" means the First Defiance  Financial Corp.,  2001 Stock
          Option  and  Incentive  Plan,  as set  forth  herein  and as it may be
          hereafter amended from time to time.

               (m)  "Stock  Option"  means an award to  purchase  Common  Shares
          granted pursuant to the provisions of Section 6 of this Plan.

               (n)  "Subsidiary"  means any  corporation  or entity in which the
          Company  directly  or  indirectly  controls  50% or more of the  total
          voting  power of such  corporation  or entity  and  includes,  without
          limitation,  First  Federal Bank of the Midwest,  First  Insurance and
          Investments, Inc. and The Leader Mortgage Company, LLC.

               (o)  "Terminated  for Cause"  means any  removal of a director or
          discharge of an employee for the  personal  dishonesty,  incompetence,
          willful  misconduct,  breach  of  fiduciary  duty  involving  personal
          profit,   intentional  failure  to  perform  stated  duties,   willful
          violation  of a  material  provision  of any law,  rule or  regulation
          (other than  traffic  violations  or similar  offenses)  or a material
          violation of a final cease-and-desist order or for any other action of
          a director or employee  which results in a substantial  financial loss
          to the Company or a Subsidiary.

3. Administration.

               (a)  This  Plan  shall be  administered  by the  Committee  to be
          comprised  of not fewer  than two of the  members  of the  Board.  The
          members of the Committee  shall be appointed  from time to time by the
          Board.  Members of the  Committee  shall serve at the  pleasure of the
          Board, and the Board may from time to time remove members from, or add
          members to, the Committee.  A majority of the members of the Committee
          shall  constitute a quorum for the transaction of business.  An action
          approved  in  writing  by all of the  members  of the  Committee  then
          serving  shall be as  effective  as if the  action  had been  taken by
          unanimous vote at a meeting duly called and held.  Notwithstanding the
          foregoing,  if, at the time a Stock Option is granted,  the  Committee
          includes directors who are also employees of the Company, the grant of
          the Stock Option must be approved by the entire Board.

               (b) The Committee is  authorized  to construe and interpret  this
          Plan and to make all other  determinations  necessary or advisable for
          the  administration  of this Plan. The Committee may designate persons
          other than members of the Committee to carry out its  responsibilities
          under  such  conditions  and  limitations  as it  may  prescribe.  Any
          determination,  decision or action of the Committee in connection with
          the  construction,  interpretation,  administration  or application of
          this Plan shall be final,  conclusive  and  binding  upon all  persons
          participating  in this Plan and any person  validly  claiming under or
          through persons  participating  in this Plan. The Company shall effect
          the granting of Stock Options under this Plan, in accordance  with the
          determinations  made by the Committee,  by execution of instruments in
          writing in a form approved by the Committee.

4. Duration of, and Common Shares Subject to, this Plan.

               (a) Term. This Plan shall terminate on the date which is ten (10)
          years from the  effective  date of the Plan,  except  with  respect to
          Stock Options then outstanding.

               (b) Common  Shares  Subject to Plan.  Common  Shares  that may be
          issued under this Plan may be either authorized and unissued shares or
          issued shares which have been reacquired by the Company. No fractional
          shares shall be issued under this Plan.  The maximum  number of Common
          Shares that may be issued pursuant to Stock Options granted under this
          Plan,  subject to  adjustment  as provided in Section 10 of this Plan,
          shall be 343,000  Common  Shares.  If any Stock Options are forfeited,
          terminated   or  exchanged   for  other  Stock   Options,   or  expire
          unexercised, the Common Shares which were

                                       2

<PAGE>

          subject to such  Stock  Options  shall  again be  available  for Stock
          Options under this Plan to the extent of such  forfeiture, termination
          or expiration.

         5.  Eligibility  and Grants.  Persons  eligible for Stock Options under
this  Plan  shall  consist  of  directors  and  employees  of the  Company  or a
Subsidiary whose performance or potential  contribution,  in the judgment of the
Committee,  will benefit the future  success of the Company or a Subsidiary.  In
selecting  the directors and employees to whom Stock Options will be awarded and
the number of shares subject to such Stock Options, the Committee shall consider
the position,  duties and  responsibilities of the directors and employees,  the
value of their  services  to the  Company  and the  Subsidiaries  and any  other
factors the Committee may deem relevant.

         6. Stock Options.

          (a) Grant. Stock Options granted under this Plan may be in the form of
     Incentive  Stock Options or  Non-Qualified  Stock  Options,  and such Stock
     Options  shall be  subject  to the terms and  conditions  set forth in this
     Plan,  shall be in such form as the Committee may from time to time approve
     and shall  contain such  additional  terms and  conditions as the Committee
     shall deem desirable,  not inconsistent with the express  provisions of the
     Plan.

          (b) Stock Option Price. The per share exercise price of a Stock Option
     shall  be  determined  by the  Committee  at the time of  grant;  provided,
     however,  that in no event shall the  exercise  price of a Stock  Option be
     less than 100% of the Fair Market Value of the Common Shares on the date of
     the grant of such Stock Option.  Notwithstanding the foregoing, in the case
     of a Participant who owns Common Shares  representing  more than 10% of the
     outstanding Common Shares at the time an Incentive Stock Option is granted,
     the  exercise  price shall in no event be less than 110% of the Fair Market
     Value of the  Common  Shares at the time  such  Incentive  Stock  Option is
     granted.

          (c) Stock Option Terms. Subject to the right of the Company to provide
     for  earlier  termination  in the  event  of  any  merger,  acquisition  or
     consolidation involving the Company, the term of each Stock Option shall be
     fixed by the Committee; provided, however, that the term of Incentive Stock
     Options will not exceed ten years after the date the Incentive Stock Option
     is granted;  provided further,  however,  that in the case of a Participant
     who owns a number of Common Shares representing more than 10% of the Common
     Shares  outstanding at the time the Incentive Stock Option is granted,  the
     term of the Incentive Stock Option shall not exceed five years.

          (d)   Exercisability.   Exercisability   of  Stock  Options  shall  be
     determined by the Committee at the time of grant. With respect to Incentive
     Stock Options  granted  under this Plan,  to the extent the aggregate  Fair
     Market  Value  (determined  as of the date the  Incentive  Stock  Option is
     granted)  of the number of shares  with  respect to which  Incentive  Stock
     Options are exercisable  under all plans of the Company or a Subsidiary for
     the first time by a Participant  during any calendar year exceeds $100,000,
     or such other  limit as may be  required  by the Code,  such Stock  Options
     shall be Non-Qualified  Stock Options to the extent of such excess.


          (e) Method of Exercise.  A Stock Option may be exercised,  in whole or
     in part, by giving written notice of exercise to the Company specifying the
     number of Common Shares to be purchased.  Such notice shall be  accompanied
     by payment in full of the purchase  price in cash or, if  acceptable to the
     Committee in its sole  discretion,  in Common  Shares  already owned by the
     Participant,  or by surrendering  outstanding Stock Options.  The Committee
     may also permit  Participants,  either on a selective or  aggregate  basis,
     simultaneously  to exercise  Stock Options and sell Common  Shares  thereby
     acquired,  pursuant  to a  brokerage  or similar  arrangement  approved  in
     advance by the Committee, and use the proceeds from such sale as payment of
     the purchase price of such shares.  In such event, the Committee may permit
     the exercise price to be paid as soon as practicable after exercise.

                                       3
<PAGE>


         7. Termination and Change of Control.

               (a) General rule.  Except as otherwise  provided in paragraph (b)
          or (c) of this  Section 7, any Stock  Option  which has not yet become
          exercisable  shall terminate and be of no further force or effect when
          any  Participant  who was a director  ceases to be a  director  of the
          Company or any Subsidiary or when any  Participant who was an employee
          ceases to be an employee of the Company or any Subsidiary, and, unless
          the Committee shall  specifically  state otherwise at the time a Stock
          Option is granted or  thereafter,  any Stock  Option  which has become
          exercisable shall terminate if it is not exercised within three months
          of the termination of Board membership or Employment, as applicable.

               (b) Death,  Disability or Retirement.  Unless the Committee shall
          specifically  state  otherwise  at the time a Stock Option is granted,
          all Stock Options granted under this Plan shall become  exercisable in
          full on the  date of  termination  of a  Participant's  Employment  or
          directorship  with the Company or a  Subsidiary  because of his death,
          disability  or  retirement.   Further,   unless  the  Committee  shall
          specifically  state otherwise at the time a Stock Option is granted or
          thereafter,  all Stock Options shall terminate if not exercised within
          12 months of the  Participant's  death or  disability  or within  five
          years of the Participant's retirement.  Notwithstanding the foregoing,
          any option  intended to qualify as an  Incentive  Stock Option must be
          exercised within three months of a Participant's retirement.

               (c)   Termination   for  Cause.   Unless  the   Committee   shall
          specifically state otherwise at the time a Stock Option is granted, in
          the event the  Employment  or the  directorship  of a  Participant  is
          Terminated  for Cause,  any Stock  Option that has not been  exercised
          shall thereupon terminate and be of no further force or effect.

               (d) Change of Control All outstanding  Stock Options shall become
          immediately  exercisable  in the event of a change in  control  of the
          Company, as determined by the Committee.  For purposes of this Section
          7,  "change  in  control"  shall  mean the  acquisition,  directly  or
          indirectly,  of the  beneficial  ownership  (within the meaning of the
          term  "beneficial  ownership"  as defined  under  Section 13(d) of the
          Exchange Act and the rules  promulgated  thereunder) of 25% or more of
          the outstanding voting securities of the Company by any person, trust,
          entity or group.

         8.  Non-transferability  of Stock  Options.  No Stock Option under this
Plan, and no rights or interests therein, shall be assignable or transferable by
a Participant except by will or the laws of descent and distribution. During the
lifetime of a Participant,  Stock Options are exercisable  only by, and payments
in settlement of Stock Options will be payable only to, the  Participant  or his
or her legal representative.

         9. No Limitation on Certain  Corporate  Actions.  The existence of this
Plan and the Stock Options granted hereunder shall not affect or restrict in any
way the right or power of the Board or the  shareholders  of the Company to make
or authorize the following: any adjustment, recapitalization,  reorganization or
other change in the Company's  capital  structure or its  business;  any merger,
acquisition or consolidation of the Company; any issuance of bonds,  debentures,
preferred or prior preference stocks ahead of or affecting the Company's capital
stock or the rights  thereof;  the  dissolution or liquidation of the Company or
any sale or transfer of all or any part of its assets or business;  or any other
corporate act or  proceeding,  including any merger or  acquisition  which would
result in the exchange of cash,  stock of another company or options to purchase
the stock of another  company for any Stock  Option  outstanding  at the time of
such corporate  transaction or which would involve the  termination of all Stock
Options outstanding at the time of such corporate transaction.

         10.  Adjustments  Upon Changes in  Capitalization.  In the event of any
change in capitalization  affecting the Common Shares of the Company,  such as a
stock dividend, stock split, recapitalization,  merger, consolidation, spin-off,
split-up, combination or exchange of shares or other form of reorganization,  or
any other change  affecting the Common Shares,  including a distribution  (other
than  normal  cash   dividends)  of  company   assets  to   shareholders,   such
proportionate  adjustments,  if any,  as the  Board in its  discretion  may deem
appropriate  to reflect such change shall be made with respect to the  aggregate
number of Common  Shares  for which  Stock  Options in  respect  thereof  may be
granted under this Plan,  the maximum  number of Common Shares which may be sold

                                       4

<PAGE>

or  awarded to any  Participant,  the  number of Common  Shares  covered by each
outstanding  Stock  Option,  and the  exercise  price  per share in  respect  of
outstanding Stock Options.

         11. Amendment and Termination of this Plan. Without further approval of
the shareholders, the Board may at any time terminate this Plan, or may amend it
from time to time in such respects as the Board may deem advisable,  except that
the Board may not,  without  approval of the  shareholders,  make any  amendment
which  would (a)  increase  the  aggregate  number of Common  Shares that may be
issued  under this Plan (except for  adjustments  pursuant to Section 10 of this
Plan),   (b)  materially   modify  the   requirements   as  to  eligibility  for
participation in this Plan, or (c) materially  increase the benefits accruing to
Participants under this Plan. Notwithstanding the foregoing, the Board may amend
this Plan to take into account changes in applicable securities,  federal income
tax and other applicable laws.

         12.  Modification of Options.  The Board may authorize the Committee to
direct the execution of an  instrument  providing  for the  modification  of any
outstanding Stock Option which the Board believes to be in the best interests of
the Company; provided, however, that no such modification,  extension or renewal
shall confer on the holder of such Stock Option any right or benefit which could
not be  conferred  on him by the  grant of a new  Stock  Option at such time and
shall not materially decrease the Participant's  benefits under the Stock Option
without  the  consent of the  holder of the Stock  Option,  except as  otherwise
permitted under this Plan.

         13. Miscellaneous.

               (a) Tax  Withholding.  The Company shall have the right to deduct
          from any  settlement,  including the delivery of Common  Shares,  made
          under this Plan any federal, state or local taxes of any kind required
          by law to be withheld  with  respect to such  payments or to take such
          other  action as may be  necessary  in the  opinion of the  Company to
          satisfy  all  obligations  for the  payment of such  taxes.  If Common
          Shares are used to  satisfy  tax  withholding,  such  shares  shall be
          valued  based on the Fair  Market  Value when the tax  withholding  is
          required to be made.

               (b) No Right to Employment. Neither the adoption of this Plan nor
          the granting of any Stock Option shall confer upon any employee of the
          Company or a  Subsidiary  any right to continued  Employment  with the
          Company or a Subsidiary, as the case may be, nor shall it interfere in
          any way with the right of the Company or a Subsidiary to terminate the
          Employment of any of its employees at any time, with or without cause.

               (c)  Annulment  of Stock  Options.  The grant of any Stock Option
          payable in Common Shares is provisional until the Participant  becomes
          entitled to the  certificate in settlement  thereof.  In the event the
          Employment  or the  directorship  of a Participant  is Terminated  for
          Cause,  any Stock Option which is provisional  shall be annulled as of
          the date of such termination.

               (d) Other Company Benefit and Compensation Programs. Payments and
          other  benefits  received by a  Participant  under a Stock Option made
          pursuant  to this Plan  shall not be deemed a part of a  Participant's
          regular,  recurring  compensation  for  purposes  of the  termination,
          indemnity  or  severance  pay  law of any  country  and  shall  not be
          included  in, nor have any effect on, the  determination  of  benefits
          under any other employee benefit plan or similar arrangement  provided
          by the Company or a  Subsidiary  unless  expressly so provided by such
          other plan or  arrangement,  or except where the  Committee  expressly
          determines  that a Stock Option or portion of a Stock Option should be
          included to accurately reflect competitive  compensation  practices or
          to recognize that a Stock Option has been made in lieu of a portion of
          competitive  annual cash  compensation.  Stock Options under this Plan
          may be made in combination  with or in tandem with, or as alternatives
          to,  grants,  stock  options or payments  under any other plans of the
          Company or a Subsidiary. This Plan notwithstanding, the Company or any
          Subsidiary may adopt such other  compensation  programs and additional
          compensation arrangements as it deems necessary to attract, retain and
          reward  directors and employees for their service with the Company and
          its Subsidiaries.

               (e) Securities Law Restrictions. No Common Shares shall be issued
          under this Plan unless counsel for the Company shall be satisfied that
          such issuance will be in compliance with applicable  federal and state
          securities  laws.  Certificates for Common Shares delivered under this
          Plan  may  be   subject  to  such

                                       5

<PAGE>

          stop-transfer  orders and other restrictions as the Committee may deem
          advisable under the rules,  regulations and other requirements of the
          Securities and Exchange Commission,  any stock exchange upon which the
          Common Shares are  then listed, and  any  applicable federal or  state
          securities  law. The Committee may cause a legend or legends to be put
          on any  such  certificates  to  make  appropriate  reference  to  such
          restrictions.

               (f) Stock Option  Agreement.  Each Participant  receiving a Stock
          Option under this Plan shall enter into an agreement  with the Company
          in a form  specified  by the  Committee  agreeing  to  the  terms  and
          conditions  of the  Stock  Option  and  such  related  matters  as the
          Committee shall, in its sole discretion, determine.

               (g) Cost of Plan.  The costs and expenses of  administering  this
          Plan shall be borne by the Company.

               (h)  Governing  Law.  This Plan and all actions  taken  hereunder
          shall be governed by and construed in accordance  with the laws of the
          State of Ohio.

               (i) Effective Date. This Plan shall be effective upon adoption by
          the Board.  This Plan shall be  submitted to the  shareholders  of the
          Company for approval at an annual or special  meeting of  shareholders
          to be held no later than twelve months after the effective date.


                                       6