SCHEDULE 14A

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Capital Holdings, Inc.

XXXXXXXXXXXXXXXX

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CAPITAL HOLDINGS, INC.

NOTICE OF ANNUAL MEETING

AND

PROXY STATEMENT

ANNUAL SHAREHOLDERS MEETING

MAY 18, 2000

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CAPITAL HOLDINGS, INC.
5520 Monroe Street
Sylvania, OH 43560

NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD
May 18, 2000

      TO THE HOLDERS OF SHARES OF COMMON STOCK:

      Notice is hereby given that the Annual Meeting of the Shareholders of Capital Holdings, Inc. (the “Corporation”) will be held at The Franciscan Life Center, Lourdes College, 6832 Convent Boulevard, Sylvania, Ohio, on Thursday, May 18, 2000, at 6:30 p.m. (local time), for the purpose of considering and voting upon the following matters:

1.		The election of five Class I Directors to serve a three-year term or until their successors shall have been elected and qualified.
2.		Approval of the Long-Term Incentive Compensation Plan — To consider and vote upon the approval of a new compensation plan, the Long-Term Incentive Compensation Plan (the “Plan”).
3.		To transact such other business as may properly come before the meeting or any adjournment thereof. The Board of Directors at present knows of no other business to be presented by or on behalf of the Corporation.

      Shareholders of record at the close of business on March 31, 2000, are the only shareholders entitled to notice of and to vote at the Annual Shareholders Meeting.

April 14, 2000

IMPORTANT

      WHETHER YOU EXPECT TO ATTEND THE MEETING OR NOT, PLEASE MARK, SIGN, DATE, AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED SELF-ADDRESSED ENVELOPE AS PROMPTLY AS POSSIBLE. NO POSTAGE IS REQUIRED.

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CAPITAL HOLDINGS, INC.
SYLVANIA, OHIO

PROXY STATEMENT

GENERAL INFORMATION

      This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Capital Holdings, Inc. (the “Corporation”) of proxies to be voted at the Annual Meeting of Shareholders to be held on Thursday, May 18, 2000, in accordance with the foregoing notice.

      Capital Holdings, Inc. is a registered bank holding company of which Capital Bank, N.A. (hereinafter collectively “Corporation”) is its principal subsidiary.

      The solicitation of proxies on the enclosed form is made on behalf of the Board of Directors of the Corporation. All costs associated with the solicitation will be borne by the Corporation. The Corporation does not intend to solicit proxies other than by use of the mails, but certain officers and regular employees of the Corporation or its subsidiaries, without additional compensation, may use their personal efforts, by telephone or otherwise, to obtain proxies. The proxy materials are first being mailed to shareholders on April 14, 2000.

      Any shareholder executing a proxy has the right to revoke it by the execution of a subsequently dated proxy, by written notice delivered to the Secretary of the Corporation prior to the exercise of the proxy or in person by voting at the meeting. The shares will be voted in accordance with the direction of the shareholder as specified on the proxy. In the absence of instructions, the proxy will be voted “FOR” the election of the five nominees for director listed in this Proxy Statement.

VOTING SECURITIES

      Only shareholders of record at the close of business on March 31, 2000, will be eligible to vote at the Annual Meeting or any adjournment thereof. As of February 29, 2000, the Corporation had outstanding 7,050,193 shares of no par value common stock. Shareholders are entitled to one vote for each share of common stock owned as of the record date, and shall have the right to cumulate votes in the election of Directors in accordance with Ohio law. Cumulative voting permits a shareholder to multiply the number of shares held by the number of directors to be elected, and cast those votes for one candidate or spread those votes among several candidates as he or she deems appropriate.

      All Directors and Named Executives of the Corporation as a group (comprised of eighteen individuals), beneficially held 1,744,263 shares of the Corporation’s common stock as of February 29, 2000, representing 24.06 percent of the outstanding common stock of the Corporation.

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PROPOSAL #1 ELECTION OF DIRECTORS AND INFORMATION
WITH RESPECT TO DIRECTORS AND OFFICERS

Classification System for the Election of Directors

      The Board of Directors of the Corporation is divided into three classes, designated as Class I, Class II and Class III. Each class consists of approximately one-third of the total number of directors. Directors serve staggered three-year terms.

Information with Respect to Nominees

      The following information is provided with respect to each Class I (term to expire in 2003) nominee for Director and each present and continuing Director whose term of office extends beyond the Annual Meeting of the Corporation’s Shareholders. Those nominees receiving the greatest number of votes will be elected as Directors. There is no minimum number of votes required to elect a Director.

THE DIRECTORS UNANIMOUSLY RECOMMEND A VOTE IN FAVOR OF THIS PROPOSAL #1.

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Information with Respect to Directors not Standing for Reelection

CLASS I I — (Continuing Directors with Term to Expire 2001)

{ THIS SPACE INTENTIONALLY LEFT BLANK}

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CLASS III — (Continuing Directors with Term to Expire 2002)

      The business experience of each of the above-listed nominees and Directors during the past five years was that typical to a person engaged in the principal occupation listed. Unless otherwise indicated, each of the nominees and Directors has had the same position or another executive position with the same employer during the past five years.

      Shareholders desiring to nominate individuals to serve as Directors may do so by following the procedure outlined in the Corporation’s Code of Regulations requiring advance notice to the Corporation of such nomination and certain information regarding the proposed nominee.

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Security Ownership of Certain Beneficial Owners and Management

      The table below sets forth the number and percentage of shares of common stock owned by the Directors and Named Executives of the Corporation and the name and address of any five percent or greater holder of the Corporation’s common stock.

*

Represents less than one percent.

      All shares shown as beneficially owned are shares over which the named person exercises sole voting or investment power except as set forth below and include options issued to Directors and Named Executives under the terms of the Corporation’s Incentive Stock Option Plans which are exercisable within 60 days of the date for which disclosure is provided.

(1)		Includes 15,063 option shares exercisable within 60 days.
(2)		Includes 1,070 shares held by spouse.
(3)		Includes 15,522 option shares exercisable within 60 days.
(4)		Includes 8,269 shares held by spouse, 22,414 shares held in child’s trust and 14,613 option shares exercisable within 60 days.
(5)		Includes 5,645 shares held as custodian for minor children and 8,680 option shares exercisable within 60 days.
(6)		Includes 1,375 option shares exercisable within 60 days.
(7)		Includes 40,302 shares held by spouse and 24,264 shares held as custodian for children and 4,083 option shares exercisable within 60 days.
(8)		Includes 15,522 option shares exercisable within 60 days.
(9)		Includes 5,253 shares held in child’s trust and 15,672 option shares exercisable within 60 days.
(10)		Includes 2,918 shares held in child’s trust and 11,730 option shares exercisable within 60 days.
(11)		Includes 15,222 option shares exercisable within 60 days.
(12)		Includes 56,048 shares held by The Lyden Company, 3,692 shares held by spouse, 444 shares held as custodian for children and 15,063 option shares exercisable within 60 days.
(13)		Includes 3,000 shares held by spouse and 15,972 option shares exercisable within 60 days.
(14)		Includes 15,054 option shares exercisable within 60 days.
(15)		Includes 8,088 shares held by spouse and 4,083 option shares exercisable within 60 days.
(16)		Includes 15,522 option shares exercisable within 60 days.
(17)		Includes 69,444 shares held by spouse, 13,330 shares held as custodian for children and 7,500 option shares exercisable within 60 days.
(18)		Includes 79,283 shares held by spouse, 13,875 shares held as custodian for children and 7,500 option shares exercisable within 60 days.

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Committees and Compensation of the Board of Directors

      The Board of Directors conducts its business through meetings of the Board and through its committees. In accordance with the Code of Regulations of the Corporation, the Board of Directors has appointed and maintains an Audit Committee, Compensation Committee, Investment Committee, Nominating Committee, Securities Committee and Loan Committee.

      The Audit Committee reviews with the Corporation’s independent auditors, the audit plan, the scope and results of their audit engagement and the accompanying management letter, if any; reviews the scope and results of the Corporation’s internal auditing procedures; consults with the independent auditors and management with regard to the Corporation’s accounting methods and the adequacy of its internal accounting controls; approves professional services provided by the independent auditors; reviews the independence of the independent auditors; and reviews the range of the independent auditors’ audit and nonaudit fees. The Audit Committee is composed of Messrs.  Feniger, Isaac, Kripke, Langenderfer, Levine and Sayre (Chairman). The Audit Committee met three times during 1999.

      The Compensation Committee is responsible for administering the Corporation’s employee benefit plans including its stock option plans; setting the compensation of the Chairman of the Board, President, Executive Vice President and all Senior Vice Presidents; reviewing the criteria that form the basis for management’s officer and employee compensation recommendations and reviewing management’s recommendations in this regard. The Compensation Committee is composed of Messrs. Isaac (Chairman), Levine, Noe, Romanoff, Sayre, Sullivan and Szuch. Messrs. Sullivan and Szuch do not participate in any decisions of the Compensation Committee regarding their own compensation as an Executive Officer. The Compensation Committee met four times during 1999.

      The Investment Committee is responsible for reviewing the securities portfolio of the Bank. The Corporation’s Securities Committee reviews and makes recommendations to the full Board on matters affecting the market for the Corporation’s common stock and the Corporation’s dividend policy. The Loan Committee reviews loan policy matters and approves loan requests as required by internal policy.

      The Nominating Committee is responsible for review of existing Directors whose terms are expiring to determine whether they meet the criteria for renomination for another term, recommendations for replacements or additions to the Board of Directors for presentation to the full Board, review of Director performance, and maintenance and review of a list of potential future candidates. The Nominating Committee is composed of Messrs. Kripke, Langenderfer, Lyden, Romanoff, Szuch and Sullivan (Chairman). The Nominating Committee met one time during 1999.

      The Board of Directors of the Corporation meets monthly for its regular meetings and upon call for special meetings. During 1999, the Board met 12 times. All Directors of the Corporation attended at least 75  percent of the Board and Committee Meetings that they were scheduled to attend during 1999.

      Prior to January 1, 2000, the Corporation compensated directors, other than those persons who serve as officers of the Corporation and its subsidiary, Capital Bank, N.A., in options of the Corporation’s common stock pursuant to the Capital Holdings, Inc. Nonemployee Director Stock

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Option Plan (the “Director Option Plan”). Pursuant to the Director Option Plan, directors of the Corporation received an option grant of 1,500 shares annually as a retainer and 150 shares per regular Board meeting attended. All options granted under the Director Option Plan contain an exercise price equal to the shares’ fair market value as of the date of grant. Directors received no cash compensation for their service as a director except for committee service, for which directors who are not employees of the Corporation, received $350 per committee meeting attended.

      Effective January 1, 2000, each non-employee director receives an annual retainer of $10,000 in the form of stock options based on the Black-Scholes option value. Non-employee directors also receive a cash fee of $500 for each Board of Directors meeting attended and a cash fee of $350 for each committee meeting attended. In addition, non-employee directors receive performance-based supplemental stock options based on the financial performance of the Corporation for the year.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

Summary of Cash and Certain Other Compensation

      The following table provides certain summary information concerning compensation paid or accrued by the Corporation and/or its subsidiaries, to or on behalf of the Corporation’s Chairman and Chief Executive Officer and the four most highly compensated individuals (the “Named Executives”) for the fiscal years ended December 31, 1999, 1998, and 1997.

Summary Compensation Table

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1999 Stock Option Grants Table

      The following table sets forth stock options granted to the Named Executives for 1999 under the Corporation’s Incentive Stock Option Plans. Under Securities and Exchange Commission regulations, companies are required to project an estimate of appreciation of the underlying shares of stock during the option term. The Corporation has elected to use the Black-Scholes valuation model in the presentation of option grant values presented below. In computing the option values under the Black-Scholes method, key assumptions included an estimated volatility of 23%, an expected dividend yield of 1.78%, and a risk free interest rate of 6.76%.

(1)		Options granted for 1999 are non-qualified stock options. The options are exercisable as follows: 25% immediately and 25% each anniversary date of the grant thereafter; however, all options become immediately exercisable in the event of a change in control of the Corporation. These options were granted for a term of 10 years, subject to earlier termination in certain events related to termination of employment.
(2)		Exercise price is the fair market value on the date of grant.

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1999 Stock Option Exercises and Year-End Value Table

      The following table sets forth the number and value of all unexercised stock options held by the Named Executives at year-end. The value of “in-the-money” options refers to options having an exercise price which is less than the market price of the Corporation’s stock on December 31, 1999. On that date, the Named Executives held exercisable options which were “in-the-money” as discussed in the following table. In addition, the table sets forth the number of options exercised by each of the Named Executives during 1999 and indicates the amount of value realized upon such exercise.

(1)		Represents estimated market value of the Corporation’s common stock at exercise date, less the exercise price.
(2)		Represents estimated market value of the Corporation’s common stock at December 31, 1999, less the exercise price.

Supplemental Executive Retirement Plan

      The Corporation has an unfunded, non-qualified supplemental executive retirement plan (the “Supplemental Retirement Plan”), due to limitations imposed by federal law on the amount of retirement income that may be paid through the Corporation’s Profit Sharing Plan. Under the Supplemental Retirement Plan, only employees selected by the Compensation Committee and approved by the Board of Directors are eligible to participate. Each of the Named Executives are participants in the Supplemental Retirement Plan. Assets for the purpose of paying benefits under the Supplemental Retirement Plan are set aside annually and are held in an irrevocable trust. Payments under the Supplemental Retirement Plan have no effect on the funding or availability of funds under the Corporation’s current Profit Sharing Plan nor on any future qualified plan.

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Report of the Compensation Committee of Capital Holdings, Inc. on Compensation

      Under rules established by the Securities and Exchange Commission (the “SEC”), the Corporation is required to provide certain data and information in regard to the compensation and benefits provided to the Corporation’s Chairman of the Board and Chief Executive Officer and, if applicable, the four other most highly compensated Executive Officers, whose compensation exceeded $100,000 during the Corporation’s fiscal year. The disclosure requirements, as applied to the Corporation, include the Corporation’s Chairman of the Board and Chief Executive Officer (John S. Szuch), its President and Chief Operating Officer (Robert A. Sullivan), its Executive Vice President (Bruce K. Lee) and two of its Senior Vice Presidents, Michael P. Killian and Stephen J. Kovatch. The disclosure includes the use of tables and a report explaining the rationale and considerations that led to fundamental executive compensation decisions affecting such officers. Capital Holdings, Inc. is a holding company and owns a single operating subsidiary, Capital Bank, N.A. Capital Holdings, Inc. has no direct employees. All disclosures contained in this Proxy Statement regarding executive compensation reflect compensation paid by Capital Bank, N.A. The Compensation Committee of the Corporation has the responsibility of determining the compensation policy and practices with respect to all Executive Officers. At the direction of the Board of Directors, the Compensation Committee has prepared the following report for inclusion in this Proxy Statement.

      Compensation Philosophy. This report reflects the Corporation’s compensation philosophy as endorsed by the Compensation Committee. The Compensation Committee makes a recommendation regarding the level of compensation for Mr. Szuch and Mr. Sullivan. The Compensation Committee determines the level of compensation for all other Executive Officers within the constraints of the amounts approved by the Board.

      Essentially, the executive compensation program of the Corporation has been designed to:

			Support a pay-for-performance policy that rewards Executive Officers for corporate performance. Compensation plans of the Corporation should strive to be more objective than discretionary while remaining flexible in order to adjust compensation of non-financial aspects of Executive Officer performance.
			Provide a competitive base salary.
			Motivate key Executive Officers to achieve strategic business goals, with appropriate compensation practices such as bonuses and long-term compensation components.
			Provide compensation opportunities which are comparable to those offered by other peer group companies; thus allowing the Corporation to compete for and retain talented executives who are critical to the Corporation’s long-term success. Generally, the Corporation strives to compensate its Executive Officers at an overall compensation level commensurate with the 75th percentile of its peers.

      Base Salary. Salaries of Executive Officers are determined by evaluation of the responsibilities of their position and by comparing salaries paid in the marketplace for executives with similar experience and responsibilities. A comparison group of bank holding companies was established based on one or more common traits with the Corporation, such as market capitalization, asset size, geographic location, similar line of business and financial returns on assets and equity. Individual salary increases are reviewed annually and are based on each Executive Officer’s performance and the Corporation’s overall earnings during the preceding year, and are generally targeted to be at the median of the peer group.

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      Cash Bonus Plan. The Corporation targets the total compensation of its Executive Officers at the 75th percentile of its peers with base salary targeted to the median of such peers, and the balance paid in cash bonus and long-term compensation. The Corporation maintains a cash bonus plan (the “Bonus Plan”), which allocates a portion of each Executive Officer’s total compensation to a cash bonus paid annually. The allocation between cash bonus and long-term compensation is generally targeted to be equal for the Corporation’s Chairman and CEO (Mr. Szuch) and President and COO (Mr. Sullivan), while slightly weighted toward cash bonus among other Executive Officers. The award of a bonus to any employee under the terms of the Bonus Plan is discretionary and in the case of Messrs. Szuch and Sullivan is determined by the Board of Directors upon the recommendation of the Compensation Committee, and in all other cases is determined by the Compensation Committee upon recommendation of management.

      Long-Term Compensation. Long-term incentive compensation is addressed by the Corporation’s option plans. These option plans are designed to provide long-term incentive to the Executive Officers of the Corporation, and to better align the interests of management with those of the Corporation’s shareholders. The Board generally believes that stock options provide an effective means of accomplishing its long-term compensation objectives, as the level of compensation is directly proportional to the level of appreciation in the market value of the Corporation’s common stock subsequent to the date of the option grant. During 1999, the Corporation implemented the long-term compensation philosophy adopted in late 1998 as a part of its overall compensation review. The Corporation has targeted the long-term component of compensation for Executive Officers at 15% — 30% of total compensation, depending upon officer position.

Chief Executive Officer’s and Chief Operating Officer’s Compensation

      The Compensation Committee considered the following factors in determining the base salary for 2000 for John S. Szuch, Chairman and CEO and Robert A. Sullivan, President and COO. The Compensation Committee has determined that while the job duties and responsibilities of Mr. Szuch and Mr. Sullivan are different, the relative contribution to attaining the Corporation’s profitability objectives of each such officer is substantially similar. Therefore, the Compensation Committee has recommended and the Board of Directors has approved equal compensation for the Chairman & CEO and President & COO. In determining the level of compensation to be paid to Mr. Szuch and Mr.  Sullivan, the Compensation Committee and the Board took into account comparative data for comparable bank holding companies. Based upon these factors, the Compensation Committee increased the base pay of Mr. Szuch and Mr. Sullivan effective January 1, 2000. In addition, the Compensation Committee approved a cash bonus to each of Mr. Szuch and Mr. Sullivan in December of 1999 based upon the specific measurable and subjective performance goals. The measurable performance goal was the attainment of the 1999 profit plan. The Compensation Committee also considered certain subjective criteria such as the attainment of superior growth, and the development of key personnel. The Compensation Committee also awarded options to Mr. Szuch and Mr. Sullivan during 1999 under the Corporation’s option plans incident to the Corporation’s long-term performance compensation objectives.

      Corporation’s Position on Compliance with Section 162(m) of the Internal Revenue Code. Section 162(m) of the Internal Revenue Code (the “Code”) limits the deduction allowable for federal income tax purposes to the Corporation for compensation paid to the Chief Executive Officer and each of the four other most highly compensated Executive Officers in any year to $1 million,

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excluding qualified performance-based compensation. The Committee will continue to work to structure components of its executive compensation package to achieve maximum deductibility under Section 162(m), while at the same time considering the goals of its executive compensation philosophy.

This Report on Compensation is submitted by the Compensation Committee Members:

Compensation Committee Interlocks and Insider Participation

      John S. Szuch, the Corporation’s Chairman of the Board and Chief Executive Officer, and Robert A. Sullivan, the Corporation’s President and Chief Operating Officer, served on the Compensation Committee of the Corporation, which is responsible for compensation matters (see “Report of the Compensation Committee of Capital Holdings, Inc. on Compensation” in this Proxy Statement).

      Although Messrs. Szuch and Sullivan served on the Compensation Committee, they did not participate in any decisions regarding their own compensation as an Executive Officer. Each year, the Compensation Committee recommends the amount of the bonus award for Messrs. Szuch and Sullivan (pursuant to the Cash Bonus Plan described elsewhere in this Proxy Statement) and salary for the ensuing year. Neither Mr. Szuch nor Mr. Sullivan participated in discussions or decision-making relative to their own or each other’s compensation.

{ THIS SPACE INTENTIONALLY LEFT BLANK}

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Performance Graph — Five-Year Shareholder Return Comparison

      The SEC requires that the Corporation include in this Proxy Statement a line-graph presentation comparing cumulative five-year shareholder returns on an indexed basis with a broad equity market index and either a nationally recognized industry standard or an index of peer companies selected by the Corporation. The Corporation has selected the Dow Jones Equity Market Index and the Dow Jones Regional Bank Index for purposes of this performance comparison. The chart below compares the value of $100 invested on December 31, 1994, in the Corporation’s stock, the Dow Jones Equity Market Index and the Dow Jones Regional Bank Index.

      *TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS

      ASSUMES $100 INVESTED ON DECEMBER 31, 1994 IN CAPITAL HOLDINGS, INC. COMMON STOCK, DOW JONES EQUITY MARKET INDEX AND DOW JONES REGIONAL BANK INDEX

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PROPOSAL #2 — APPROVAL OF THE LONG-TERM INCENTIVE COMPENSATION PLAN

      The Board of Directors of the Corporation adopted and approved a new stock compensation plan for directors and employees, the Long-Term Incentive Compensation Plan (the “Plan”) effective December 14, 1999. The shareholders of the Corporation are being asked to approve the Plan. The purpose of asking shareholders to approve the Plan is so that incentive stock options satisfying the requirements of Section 422 of the Internal Revenue Code (the “Code”) may be awarded to employees under the Plan, and so that awards under the Plan will be “performance-based compensation” under Section 162(m) of the Internal Revenue Code. The following summary of the material features of the Plan is qualified in its entirety by reference to the full text of the Plan, which is included as Appendix A hereto. Each shareholder is urged to review the Plan in its entirety.

General Information

      The Plan provides for the award of stock options, stock and restricted stock to directors and selected employees. The Board of Directors believes that stock awards and stock options are useful in motivating directors and employees, particularly in aligning their interests with those of shareholders. Accordingly, the Board of Directors believes it is appropriate to adopt the Plan.

      Because a committee of the Board of Directors of the Corporation will have full discretion to make awards under the Plan, the amount of such awards is not yet determinable.

Description of the Plan

      Purpose of the Plan. The Plan is intended to assist the Corporation in attracting and retaining employees and non-employee directors of outstanding ability and to promote the identification of their interests with those of the shareholders of the Corporation.

      Shareholder Approval of the Plan. Options granted under the terms of the Plan prior to shareholder approval are binding upon the Corporation in accordance with the terms of the Plan and the Option Agreements relating to such awards. As of the date of this Proxy Statement 96,500 option shares had been granted pursuant to the terms of the Plan. In the event shareholders fail to approve the Plan within one year of the date it was adopted by the Board of Directors, the Plan will immediately terminate and no further awards will be made.

      Types of Awards and Eligibility. The Plan authorizes a subcommittee of the Corporation’s Compensation Committee comprised solely of nonemployee directors of the Corporation (the “Option Committee”) to grant stock options, stock and restricted stock to employees and non-employee directors of the Corporation and its subsidiaries. Incentive stock options may be granted only to employees. Nonstatutory stock options, stock and restricted stock may be granted or awarded to employees or non-employee directors.

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      Administration. Subject to the provisions of the Plan, the Option Committee would have plenary authority and discretion to determine the terms of all awards under the Plan, including the exercise price of options, the time or times at which awards are made, the nature of the award, whether of stock options, restricted stock or stock, the number of shares of the Corporation’s common stock covered by awards, whether an option shall be an incentive stock option or a nonstatutory stock option, any provisions relating to vesting, the period during which options may be exercised, the period during which options are subject to restrictions, the manner of exercising options, the restrictions on any restricted stock award and the extent to which such restrictions lapse upon the recipient’s termination of service to the Corporation. These terms need not be identical for all awards. In determining the terms of awards under the Plan, the Option Committee may take into account the nature of the services rendered by the award recipients, their present and potential contributions to the success of the Corporation and its subsidiaries, and such other factors as the Option Committee in its discretion may deem relevant. Subject to the provisions of the Plan, the Option Committee also would have plenary authority to interpret the Plan, prescribe, amend and rescind rules and regulations relating to it, and make all other determinations deemed necessary or advisable for the administration of the Plan.

      Shares Subject to Grant and Adjustment. A maximum of 750,000 shares of the Corporation’s common stock in the aggregate would be authorized for issuance under the Plan. The number of shares of the Corporation’s common stock that may be awarded to any one individual under the Plan is limited to 90,000 shares in any one calendar year. The number of shares subject to the Plan (and the number of shares and terms of any award) may be adjusted by the Option Committee in the event of any change in the outstanding common stock of the Corporation by reason of any stock dividend, split-up, recapitalization, reclassification, combination or exchange of shares, merger, consolidation or liquidation or similar event.

      Amendment and Termination. The Board of Directors or the Option Committee may amend, alter, suspend or terminate the Plan in any respect at any time, provided that, no amendment, alteration or termination of the Plan may adversely affect the rights or obligations of the recipient of any award under the Plan made prior to the date of the amendment, alteration or termination, without such person’s consent.

      Unless sooner terminated by resolution of the Board, the Plan will terminate ten years from its Effective Date and no additional awards may be made under the Plan after that date. The termination of the Plan would not affect the validity of any award outstanding on the date of termination.

Stock Options

      Incentive stock options are stock options that satisfy the requirements of Section 422 of the Code. Nonstatutory stock options are stock options that do not satisfy the requirements of Section 422 of the Code. Options granted under the Plan would entitle the optionee, upon exercise, to purchase a specified number of shares of the Corporation’s common stock from the Corporation at a specified exercise price per share. The per share exercise price of an incentive stock option may not be less than the fair market value of a share of the Corporation’s common stock as of the date of grant, determined in the manner specified by the Plan. In the case of an optionee who owns or is

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treated as owning (under Section 424(d) of the Code) more than 10 percent of the total combined voting power of all classes of stock of the Corporation (a “Ten-Percent Shareholder”), the per share exercise price of an incentive stock option may not be less than 110 percent of the fair market value of a share of the Corporation’s common stock on the date of the grant.

      Exercise Period and Transferability. Options granted under the Plan may be exercised for a period of no more than ten years from the date of grant (five years in the case of incentive stock options granted to a Ten-Percent Shareholder). Awards under the Plan are not transferable other than by will or the laws of descent and distribution, with the exception that limited transfers of non-statutory stock options may be made as described in the Plan. All outstanding options awarded to an optionee become immediately exercisable upon a change in control of the Corporation or the death, disability or retirement of the optionee as described in the Plan. Options will also terminate one year from the date of termination of employment or service as a director, unless such termination is for cause, in which case the options terminate immediately upon termination of employment or service as a director.

      Payment of Exercise Price. An option may, subject to the terms of an applicable agreement under which it is granted, be exercised in whole or in part by the delivery to the Corporation written notice of the exercise, in such form as the Option Committee may prescribe, accompanied by full payment for the shares with respect to which the option is exercised. To the extent provided in the applicable option agreement, payment may be made in whole or in part by delivery of shares valued at fair market value on the date of exercise, so long as such shares have been held for six months.

Restricted Stock Awards

      The Plan authorizes the Option Committee to award shares of restricted stock to employees and non-employee directors, subject to the restrictions and other terms and conditions as are determined by the Option Committee. Transfers of shares of restricted stock will be prohibited until the restrictions are satisfied. A recipient of an award of restricted stock is treated as owner of record for purposes of voting, dividends and any other action taken with respect to the Common Stock during the restriction period. The Option Committee will determine the extent to which restrictions will lapse upon the recipient’s termination of service to the Corporation. Unless otherwise determined by the Option Committee, a participant will forfeit any restricted stock for which the restriction period has not expired at the time he or she terminates service with the Corporation for any reason.

      The Option Committee may grant shares of restricted stock to participants in the Plan, either in conjunction with or separate from other awards under the Plan. The participant may be required to meet certain performance standards to receive the restricted stock, and may be required to pay a purchase price for the shares of restricted stock.

      Upon a change in control of the Corporation, all restrictions will expire and the certificates representing shares of restricted stock will be delivered to participants.

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Stock Awards

      The Plan also authorizes the Option Committee to award shares of the Corporation’s Common Stock to employees and non-employee directors, subject to conditions established by the Option Committee, including the achievement of performance objectives. The Plan authorizes the Option Committee to determine what effect a change in control of the Corporation will have upon an award of shares of the Corporation’s Common Stock at the time such award is granted.

Summary of Certain Federal Income Tax Consequences

      Incentive Stock Options. An optionee will not recognize income on the grant or exercise of an incentive stock option. However, the difference between the exercise price and the fair market value of the stock on the date of exercise is an adjustment item for purposes of the alternative minimum tax. If an optionee does not exercise an incentive stock option within certain specified periods after termination of employment, the optionee will recognize ordinary income on the exercise of an incentive stock option in the same manner as on the exercise of a nonstatutory stock option, as described below.

      The general rule is that gain or loss from the sale or exchange of shares acquired on the exercise of an incentive stock option will be treated as capital gain or loss. If certain holding period requirements are not satisfied, however, the optionee generally will recognize ordinary income at the time of the disposition. Gain recognized on the disposition in excess of the ordinary income resulting therefrom will be capital gain, and any loss recognized will be capital loss. If an optionee recognizes ordinary income on exercise of an incentive stock option or as a result of a disposition of the shares acquired on exercise, the Corporation will be entitled to a deduction in the same amount.

      Nonstatutory Stock Options. An optionee will not recognize income at the time of grant of a nonstatutory stock option. At the time of exercise of a nonstatutory stock option, an optionee will recognize ordinary income equal to the excess of the fair market value of the shares at the time of exercise over the aggregate exercise price paid for the shares, regardless of whether the exercise price is paid in cash or in stock. The Corporation will be entitled to a deduction in the amount of ordinary income so recognized.

      Restricted Stock. The participant who receives a grant of restricted stock is not required to realize income (either actually or constructively) prior to expiration of the lapse of the restriction period (except as otherwise described in this paragraph). The participant is required to realize ordinary income in an amount equal to the dividends actually received during the restriction period as a result of his beneficial ownership of the restricted stock. Upon the lapse of the restriction period, the participant generally will realize ordinary income in an amount equal to the difference between the then fair market value of the shares of common stock granted as restricted stock and any price paid for such shares.

      The Corporation will be entitled to a deduction in the amount and generally at the time ordinary income or gain is realized by the recipients as a result of the payment of dividends on restricted stock, and the lapse of the restriction period on stock awards. Recipients of awards of common stock, not subject to restriction, will realize ordinary income at the time of the award in an amount equal to the difference between the then fair market value of the shares awarded and any price paid for such shares. The Corporation will be entitled to a deduction in the same amount.

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      Parachute Payments. Where payments to certain employees that are contingent on a change in control exceed limits specified in the Code, the employee generally is liable for a 20 percent excise tax on, and the corporation or other entity making the payment generally is not entitled to any deduction for, a specified portion of such payments. If the Option Committee awards options the vesting of which is accelerated by a change in control of the Corporation, such accelerated vesting would be relevant in determining whether the excise tax and deduction disallowance rules would be triggered with respect to certain employees of the Corporation.

      Performance-Based Compensation. Subject to certain exceptions, Section 162(m) of the Code disallows federal income tax deductions for compensation paid by a publicly-held corporation to certain executives to the extent the amount paid to an executive exceeds $1 million for the taxable year. The Plan has been designed to allow the Option Committee to make awards under the Plan that qualify under an exception to the deduction limit of Section 162(m) for “performance-based compensation.”

      General. The rules governing the tax treatment of options and the receipt of shares in connection with such grants or awards are quite technical, so that the above description of tax consequences is necessarily general in nature and does not purport to be complete. Moreover, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. Finally, the tax consequences under applicable state law may not be the same as under the federal income tax laws.

Accounting Treatment

      In October 1995, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 “Accounting for Stock-Based Compensation” (“FAS No. 123”). This statement defines a fair value based method of measuring and recording compensation cost associated with employee stock compensation plans. Under the fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized as income over the service period. FAS No. 123 encourages adoption of this method of accounting; however, it also allows an entity to continue to measure compensation cost using the method of accounting prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). Entities electing to continue using the accounting method in APB No. 25, as the Corporation has elected, must make pro forma disclosures of net income and earnings per share as if the fair value based method prescribed under FAS No. 123 had been applied.

      Under APB No. 25, as applied by the Corporation generally, neither the grant nor the exercise of an incentive stock option or a nonstatutory stock option under the Plan with an exercise price not less than the fair market value of the Corporation’s common stock at the date of grant requires a charge against earnings. Generally, the award of restricted stock will require a charge against earnings, the amount and timing of which is not determinable in advance. The award of common stock, not subject to restriction, will require a charge against earnings.

Certain Other Information

      Approval of the Plan requires the affirmative vote of a majority of the votes cast on the proposal.

      THE DIRECTORS UNANIMOUSLY RECOMMEND A VOTE IN FAVOR OF THIS PROPOSAL #2.

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Certain Relationships and Related Transactions

      Directors of the Corporation and their associates were customers of, and have had transactions with, the Corporation in the ordinary course of business during 1999.

      These transactions consisted of extensions of credit by the Corporation in the ordinary course of business and were made on substantially the same terms as those prevailing at the time for comparable transactions with other persons. In the opinion of the management of the Corporation, those transactions do not involve more than a normal risk of being collectible or present other unfavorable features. The Corporation expects to have, in the future, banking transactions in the ordinary course of its business with Directors and their associates on the same terms, including interest rates and collateral on loans, as those prevailing at the time of comparable transactions with others.

      Director Levine is of counsel to Spengler Nathanson, a law firm which performed services for the Corporation during 1999, and is expected to continue to provide services to the Corporation in the future.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

      Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation’s officers and Directors, and persons who own more than ten percent of a registered class of the Corporation’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, Directors and greater than ten percent shareholders are required by SEC regulation to furnish the Corporation with copies of all Section 16(a) forms they file.

      Based solely on review of the copies of such forms furnished to the Corporation or written representations that no Form 5s were required, the Corporation believes that during 1999 all Section 16(a) filing requirements applicable to its officers and Directors were complied with. The Corporation has no shareholders who are ten percent beneficial owners.

Selection of Auditors

      Ernst & Young LLP has been appointed to serve as the Independent Auditor for the Corporation and its subsidiary for the fiscal year ended December 31, 1999. It is the intention of the Corporation to appoint Ernst & Young LLP as Independent Auditor for 2000. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting to respond to appropriate questions from shareholders and to have the opportunity to make any statements they consider appropriate.

Shareholder Proposals and Director Nominations

      If any shareholder of the Corporation wishes to submit a proposal to be included in next year’s Proxy Statement and acted upon at the annual meeting of the Corporation to be held in 2001, the proposal must be received by the Secretary of the Corporation at the principal executive offices of

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the Corporation, 5520 Monroe Street, Sylvania, Ohio, 43560, prior to the close of business on December 15, 2000. On any other proposal raised by a shareholder for next year’s annual meeting, the Corporation intends that proxies received by it will be voted in the interest of the Corporation in accordance with the judgment of the persons named in the proxy and the proposal will be considered untimely, unless notice of the proposal is received by the Corporation not later than February 13, 2001.

      The Corporation’s Code of Regulations establishes advance notice procedures as to the nomination, other than by or at the direction of the Board of Directors, of candidates for election as directors. In order to make a director nomination at a shareholder meeting, it is necessary that you notify the Corporation not fewer than 14 days in advance of the meeting unless the Corporation provides shareholders less than 21 days notice of the meeting, and then notice of the nominations must be given not later than the seventh day after the notice of the meeting was mailed. In addition, the notice must meet all other requirements contained in the Code of Regulations. Any shareholder who wishes to take such action should obtain a copy of the Code of Regulations and may do so by written request addressed to the Secretary of the Corporation at the principal executive offices of the Corporation.

Other Matters

      The Board of Directors of the Corporation is not aware of any other matters that may come before the meeting. However, the enclosed Proxy will confer discretionary authority with respect to matters which are not known to the Board of Directors at the time of printing hereof and which may properly come before the meeting. A copy of the Corporation’s 1999 report filed with the Securities and Exchange Commission, on Form 10-K, will be available without charge to shareholders on request. Address all requests, in writing, for this document to David L. Mead, Chief Financial Officer, Capital Holdings, Inc., 5520 Monroe Street, Sylvania, Ohio 43560.

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          [ ] FOR     [ ] WITHHOLD AUTHORITY       [ ] FOR ALL EXCEPT

             [ ] FOR      [ ] AGAINST      [ ] ABSTAIN

Please be sure to sign and date this Proxy in the box below.
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