<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.1a-11(c) or (S)240.1a-12
Kaneb Services, Inc.
--------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Kaneb Services, Inc.
--------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11;*
4) Proposed maximum aggregate value of transaction:
*Set forth amount on which the filing is calculated and state how it was
determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Notes:
<PAGE>
KANEB SERVICES, INC.
2400 Lakeside Boulevard
Richardson, Texas 75082
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 20, 1994
To the Stockholders of
Kaneb Services, Inc.
Notice is hereby given that the Annual Meeting of Shareholders of Kaneb
Services, Inc. (the "Company") will be held at 100 N. Broadway, Wichita, Kansas
67202, at 10:00 a.m., Central time, on May 20, 1994, for the following purposes:
(1) To elect a board of directors;
(2) To consider and vote upon a proposal to approve the Kaneb Services,
Inc. 1994 Stock Incentive Plan in the form attached as Appendix A to
the Proxy Statement; and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on April 20, 1994, will be
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
Stockholders are cordially invited to attend the meeting in person. Those
who will not attend and who wish their stock voted are requested to sign, date
and promptly mail the enclosed proxy for which a stamped return envelope is
provided.
By Order of the Board of Directors
Stephen M. Hoffner
Vice President and Secretary
Dallas, Texas
April 25, 1994
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING, YOU ARE URGED TO
SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD PROMPTLY. IF YOU ATTEND THE
MEETING, YOU CAN VOTE EITHER IN PERSON OR BY YOUR PROXY.
<PAGE>
KANEB SERVICES, INC.
2400 Lakeside Boulevard
Richardson, Texas 75082
PROXY STATEMENT
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies of the holders of Common Stock on behalf of the Board of Directors of
Kaneb Services, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on May 20, 1994, at 100 N. Broadway,
Wichita, Kansas 67202, at 10:00 a.m. Central time, or at any adjournment of
such meeting. Copies of the Notice, Proxy Statement and form of proxy are being
mailed to stockholders on or about April 25, 1994.
A proxy received by management of the Company may be revoked by the
stockholder giving the proxy at any time before it is exercised. However, mere
attendance at the meeting will not itself have the effect of revoking the proxy.
A stockholder may revoke his proxy by notification in writing (or in person if
he attends the meeting) given to Stephen M. Hoffner, Vice President and
Secretary of the Company, 2400 Lakeside Boulevard, Richardson, Texas 75082. A
proxy may also be revoked by proper execution of a proxy bearing a later date.
A proxy in the accompanying form when properly executed and returned will be
voted in accordance with the instructions contained therein. A proxy received by
management which does not withhold authority to vote or on which no
specification has been indicated will be voted in favor of the proposals set
forth in the proxy.
The Company's principal executive offices are located at 2400 Lakeside
Boulevard, Richardson, Texas, 75082, and its telephone number is (214) 699-4000.
The cost of preparing and mailing the proxy, Notice and Proxy Statement
will be paid by the Company. In addition to mailing copies of this material to
all stockholders, the Company has retained D.F. King & Co. to request banks and
brokers to forward copies of such material to persons for whom they hold stock
of the Company and to request authority for execution of the proxies. The
Company will pay D.F. King & Co. a fee of $4,000.00, excluding expenses, and
will reimburse banks and brokers for their reasonable out-of-pocket expenses
incurred in connection with the distribution of proxy materials.
At the date of this Proxy Statement, the management of the Company does not
know of any business to be presented at the meeting other than as set forth in
the Notice accompanying this Proxy Statement. If any other business should
properly come before the meeting, it is intended that the shares represented by
proxies will be voted with respect to such business in accordance with the
judgment of the persons named in the proxy.
COMMON STOCK OUTSTANDING AND PRINCIPAL HOLDERS THEREOF
The Board of Directors of the Company has fixed the close of business on
April 20, 1994, as the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting. At that date there were
outstanding 32,510,682 shares of Common Stock of the Company, and the holders
thereof of record on that date will be entitled to one vote for each share held
by them for each proposition to be presented at the meeting.
As of April 12, 1994, all directors and officers of the Company as a group
owned beneficially an aggregate of 2,767,978 shares, representing 8.3% of the
outstanding shares of Common Stock of the Company. Such ownership number
includes 936,436 shares which can be acquired by officers and directors of the
Company during the next 60 days pursuant to the exercise of outstanding stock
options.
1
<PAGE>
The following table sets forth information with respect to the shares of
the Company's Common Stock owned of record or beneficially as of April 12, 1994,
by all persons who own of record or are known by the Company to own beneficially
more than 5% of such class of securities:
<TABLE>
<CAPTION>
Name and Address Type of Number Percent
of Stockholder Ownership of Shares of Class
- - - - - - - ---------------- ---------- --------- ---------
<S> <C> <C> <C>
Gabelli Group (1) Beneficial 2,783,509 8.6%
19 Rector Street
New York, New York 10006
Wisconsin State Board Beneficial 3,021,000 9.3%
Investment Board
121 East Wilson Street
Madison, Wisconsin 53703
</TABLE>
(1) According to information contained in Amendment No. 10 to Schedule 13-D,
dated July 22, 1993, filed with the Securities and Exchange Commission
("S.E.C.") pursuant to the Securities Exchange Act of 1934 (the "1934 Act").
The Gabelli Group consists of Gabelli Funds, Inc., Gamco Investors, Inc.,
Gabelli & Company, Inc. and two other affiliates.
ELECTION OF DIRECTORS
At the Annual Meeting of Stockholders of the Company, six directors,
constituting the entire Board of Directors of the Company, are to be elected by
the holders of Common Stock to hold office until the next annual meeting of
stockholders and until their respective successors are elected and qualified.
All six nominees proposed by the Board of Directors of the Company for election
by the holders of Common Stock are incumbent directors. Although the Board of
Directors does not contemplate that any of the nominees will be unable to serve,
if such should occur prior to the meeting, proxies which do not withhold
authority to vote for directors will be voted for a substitute in accordance
with the best judgment of the person or persons voting.
The enclosed form of proxy provides a means for stockholders to vote for
all the nominees listed therein, to withhold authority to vote for one or more
of such nominees or to withhold authority to vote for all of such nominees.
Each properly executed proxy received in time for the meeting will be voted as
specified therein. If a stockholder does not specify otherwise, the shares
represented by his or her proxy will be voted for the nominees listed therein or
as noted above for other nominees selected by the Board of Directors. Unless a
stockholder who withholds authority votes in person at the meeting or votes by
means of another proxy, the withholding of authority will have no effect upon
the election of directors because the Company's By-Laws provide that directors
are elected by a plurality of the votes cast. However, the shares held by each
stockholder who signs and returns the enclosed form of proxy will be counted for
purposes of determining the presence of a quorum at the meeting.
2
<PAGE>
Nominees for Directors
The following table sets forth (i) the name and age of each nominee listed
in the enclosed form of proxy, (ii) his principal occupation, (iii) the year
during which he first became a director of the Company and (iv) the number of
shares of Common Stock beneficially owned by him at April 12, 1994. Each nominee
has sole voting power and sole investment power with respect to the shares
attributed to him.
<TABLE>
<CAPTION>
If Applicable, Shares of Common Percent
Year First Stock Beneficially of Out-
Become a Owned at standing
Name Principal Occupation Director Age April 12, 1994(1) Shares
- - - - - - - ---- -------------------- -------------- --- ----------------- --------
<S> <C> <C> <C> <C> <C>
John R. Barnes Chairman of the Board, 1986 49 1,615,160 4.8%
President and Chief Executive
Officer of the Company
C.E. Bentley President of Bentley 1979 72 163,633 *
Investment Corp., a
private investment firm(2)
Preston A. Peak President of P.A. Peak, 1987 71 30,000 *
Inc., a general partner of
Dorchester Hugoton, Ltd.,
an oil and gas exploration
and production partnership(3)
Sangwoo Ahn General Partner of 1989 55 101,000 *
Morgan Lewis Githens & Ahn,
an investment banking firm(4)
James R. Whatley Investments(5) 1956 67 91,933 *
Ralph A. Rehm President and Chairman of 1991 48 28,507 *
Vericon Systems, Inc., a
private investment firm (6)
- - - - - - - ------------------------------------------------------------------------------------------------------------------
</TABLE>
*Less than one percent.
(1) Shares listed include those beneficially owned by the person indicated, his
spouse or children living at home and those subject to options exercisable
by him within the next 60 days.
(2) Mr. Bentley has been President of Bentley Investment Corp. for more than
the past five years.
(3) Mr. Peak has held the position described above for more than the past five
years.
(4) Mr. Ahn has been a partner of Morgan Lewis Githens & Ahn for over five
years and currently serves as a director of Broadcasting Partners, Inc.,
Haynes international, Inc., Interactive Technologies, Inc. PAR Technology
Corp. and Quaker Fabric Corporation.
(5) Mr. Whatley previously served as Chairman of the Board of Directors of the
Company from February 1981 until April 1989 and also serves as a director
of United Financial Group, Inc..
(6) Mr. Rehm is currently performing consulting services on behalf of several
of the Company's foreign subsidiaries. He previously was engaged in
financial consulting services for Northlake Consultants from June 1989 to
May 1990, prior to which he served as Senior Vice President of Finance and
Administration of the Company from December 1986.
3
<PAGE>
Executive Officers
The following table sets forth the names, ages and positions with the
Company of the executive officers of the Company.
<TABLE>
<CAPTION>
Years of Service
Name Office Age In Office
- - - - - - - ---- ------ --- ----------------
<S> <C> <C> <C>
John R. Barnes Chairman of the 49 7
Board, President and Chief
Executive Officer
Jere M. Denton Senior Vice President 47 7
Edward D. Doherty Senior Vice President 57 5 (1)
Stephen M. Hoffner Vice President - 46 7
General Counsel
and Secretary
Howard C. Wadsworth Vice President - 49 4 (1)
Administration
and Treasurer
Tony M. Regan Controller 34 3 (1)
</TABLE>
- - - - - - - ---------------------
(1) Mr. Doherty was President and Chief Executive Officer of Northlea
Corporation for more than five years and a partner in the law firm of
Russell, Patton & Hoffman from 1987 to 1989 prior to becoming Senior Vice
President in 1989. Prior to joining the Company in October 1990, Mr.
Wadsworth served for more than five years as the General Manager of
Dorchester Hugoton, Ltd. Mr. Regan has been employed by the Company since
July 1990, prior to which he was a certified public accountant with Ernst &
Young for eight years.
Meetings and Committees of the Board of Directors
During 1993, the Board of Directors of the Company held 8 regularly
scheduled meetings. Each incumbent director attended more than 75% of the
aggregate of the total number of such meetings and the total number of meetings
held by all committees of the Board of Directors on which he served, except Mr.
Whatley who was unable to attend 3 board meetings and one committee meeting.
The Board of Directors of the Company has an Audit Committee composed of
Preston A. Peak (Chairman), Sangwoo Ahn and Ralph A. Rehm. The functions of the
Audit Committee, which held one meeting during 1993, include planning for the
annual audit, review of the results of the examination of the Company's
financial statements, approval of fee estimates for the annual audit and
approval of non-audit services and consideration of the effect of such non-audit
services on the auditors' independence. The Board of Directors of the Company
also has a standing Compensation Committee composed of James R. Whatley
(Chairman) and C.E. Bentley. The function of the Compensation Committee, which
held one meeting in 1993, is to establish and review the compensation programs
for the executive officers of the Company and its subsidiaries and to formulate,
recommend and implement incentive, stock option or other bonus plans or programs
for the officers and key employees of the Company and its subsidiaries. The
Board of Directors of the Company also has an Executive Committee composed of
James R. Whatley, Preston A. Peak and John R. Barnes. The function of the
Executive Committee, which did not meet during 1993, is to exercise all of the
powers, within certain limitations, of the Board of Directors in the management
of the business of the Company during intervals between meetings of the Board.
The Board of Directors of the Company also has a Nominating Committee,
composed of non-employee directors, which has the duty and responsibility to
consider and recommend future nominees to the Board of Directors of the Company.
The Nominating Committee also considers nominees recommended by stockholders of
the Company. Such recommendations for 1995 nominees must be submitted in
writing by January 1, 1995, to Stephen M. Hoffner, Vice President and Secretary
of the Company, 2400 Lakeside Boulevard, Richardson, Texas 75082. The submitted
recommendations must be accompanied by a statement of qualifications of the
recommended nominee and a letter from the nominee affirming that he will agree
to serve as a director of the Company if elected by the stockholders.
4
<PAGE>
EXECUTIVE COMPENSATION
Executive Officers
The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to the Company paid for the
fiscal years ended December 31, 1993, 1992 and 1991 to the chief executive
officer and the four most highly compensated executive officers of the Company
whose cash compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
-------------------------------------- -------------------------
Name Number
and Restricted of All Other
Principal Salary Bonus Other Stock Options/ Compensation
Position Year (1) (2) (3)(4) Awards(5) SARS (4)(7)
- - - - - - - --------- ---- -------- ----- ------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John R. Barnes 1993 $313,296 $ 9,388
Chairman, President 1992 313,296 450,000 9,115
and Chief Executive 1991 313,296 $90,000
Officer
Edward D. Doherty 1993 180,000 $ 88,000 7,442
Senior Vice President 1992 180,000 57,180 $14,400 85,467(6)
1991 180,000 22,500
Jere M. Denton 1993 180,000 12,000 8,271
Senior Vice President 1992 180,000 8,138
1991 180,000 22,500
Howard C. Wadsworth 1993 150,000 3,174
Vice President - 1992 150,000 11,250 15,000 3,361
Administration and 1991 150,000
Treasurer
Stephen M. Hoffner 1993 125,000 1,129 4,589
Vice President, 1992 123,938 9,135 4,630
General Counsel 1991 120,750
and Secretary
</TABLE>
- - - - - - - --------------------------
(1) Includes compensation representing employee contributions to the
Company's thrift plan and health benefits plan.
(2) Annual incentive bonus amount earned during year indicated but paid in
the following year.
(3) Consists of lump-sum payments in lieu of cost-of living only salary
increases for the year 1992 and a portion of the year 1991 for Messrs.
Doherty, Wadsworth and Hoffner, and supplemental pay in connection with
a temporary foreign assignment for Mr. Hoffner during 1992 and 1993.
(4) In accordance with the transitional provisions applicable to the
revised rules on executive officer and director compensation disclosure
adopted by the Securities and Exchange Commission, amounts of Other
Annual Compensation and All Other Compensation are excluded for the
year 1991.
5
<PAGE>
(5) In April 1991, Messrs. Barnes, Doherty and Denton were awarded stock
grants of 400, 100 and 100 shares, respectively, of the Company's Adjustable
Rate Cumulative Class A Preferred Stock, Series C ("Series C Preferred").
Series C Preferred has a nominal preference value of $1.00 per share and is
only entitled to a dividend if the value of the Company's common stock
increases. Dividends otherwise payable for a year in which the Company has a
net loss will not be paid until redemption, liquidation or completion of a
year in which the Company has a net profit. The Series C Preferred also has
both mandatory and optional redemption provisions.
(6) Includes the value of 25,000 shares of previously restricted stock
issued to Mr. Doherty in 1989, restrictions on which lapsed during
1992.
(7) Includes the Company's payments to its defined contribution thrift plan
and the imputed value of Company-paid term life insurance for coverage in
excess of $50,000. The defined contribution plan covers all full-time
domestic employees of the Company. The plan allows for employee
contributions of up to 12% of pay which may be directed to any of four
investments, including Company stock. The initial 6% of employee
contributions to the plan are matched by the Company with stock at a rate of
50% for Company stock investments and 25% for other investments. The Company
also contributes the equivalent of an additional 2% of pay to the plan
investment(s) of choice for each participant.
Aggregated Option/SAR Exercises in Last Fiscal Year
And Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised,
Shares Options Held at Fiscal In-the-Money
Acquired on Value Year End Options at Fiscal Year End
Name Exercise (1) Realized Exercisable Unexercisable Exercisable Unexercisable
- - - - - - - ------------------ ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John R. Barnes -0- $ -0- 146,250 303,750 $ -0- $ -0-
Edward D. Doherty -0- -0- 195,000 55,000 3,750 -0-
Jere M. Denton -0- -0- 178,936 5,000 118,439 -0-
Howard C. Wadsworth -0- -0- 65,000 -0- -0- -0-
Stephen M. Hoffner -0- -0- 150,000 -0- 108,750 -0-
</TABLE>
- - - - - - - ---------------------------
(1) There were no options or SAR's exercised by the named executives or any
other option holders during 1993. Options on 61,000 shares were
exercised by other option holders at prices ranging from $1.50 to $2.25
per share during the year.
Directors' Fees
In 1993, each member of the Board of Directors of the Company who was not
also an employee of the Company was paid an annual retainer of $20,000 in lieu
of any attendance fees for board or committee meetings. Through April 12, 1994,
outside directors have been granted non-qualified options to purchase 130,000
shares of Common Stock at an average price of $4.33 per share, representing 100%
of the fair market value of the common stock on the dates of grant. These
options each provide for expiration at the end of 10 years from the date of
grant or within three months after such person ceases to be a director of the
Company, which ever is sooner. At April 12, 1994, Messrs. Ahn, Bentley, Peak and
Whatley held options to purchase 30,000 shares each and Mr. Rehm held options to
purchase 10,000 shares of the Company's Common Stock.
6
<PAGE>
Certain Transactions
In February 1993, Mr. Rehm, who is currently a director standing for
reelection, began a special foreign assignment on behalf of one of the
Company's German subsidiaries. From March through December 1993, Mr. Rehm
received remuneration for his services at the rate of approximately $14,600
per month and reimbursement of recurring travel and living expenses of
approximately $3,600 per month, which amounts were borne by the subsidiary.
Although his current foreign assignment is expected to conclude in May 1994,
Mr. Rehm may be asked to perform other special assignments for the Company
from time to time and, accordingly, would receive appropriate remuneration and
expense reimbursement for any such services.
Termination Agreements
From time to time, the Company has entered into termination agreements
with key employees of the Company and its subsidiaries which provide, as
amended, that the Company will pay into an escrow account an amount equal to
the then current annual base salary of the employee if (i) shares of Common
Stock of the Company have been acquired other than directly from the Company
by one person or corporation who thereby becomes the owner of more than 10% of
the issued and outstanding shares of Common Stock of the Company, or (ii) any
shareholder or other person or corporation has made a tender offer for shares
of Common Stock of the Company. If after either of the foregoing events
occurs, the employment of the employee terminates, voluntarily or
involuntarily, for any reason other than for cause, disability, retirement at
normal age, or death, the escrow agent will pay the escrowed sum to the
employee immediately upon his demand, but only if (i) a new director of the
Company is elected who was not nominated by management of the Company, or (ii)
more than 20% of the issued and outstanding shares of Common Stock of the
Company are owned by one person or corporation other than a person who is a
present officer or director of the Company. In addition, Messrs. Barnes,
Denton and Doherty entered into termination agreements which provide that
should their employment be terminated as a consequence of a change in control,
the Company will pay each individual an amount equal to 299% of their average
salary for the five years prior to the change of control as defined in the
agreement. At present, 7 officers and key employees of the Company and its
subsidiaries have entered termination agreements with the Company. If a change
of control of the Company as set forth above were to occur at the present
time, an aggregate of $2,556,534 would be payable to these individuals.
Compensation Committee Interlocks and Insider Participation
In addition to Messrs. Whatley and Bentley, William E. Cornell served on
the Company's Compensation Committee until his resignation from the Board of
Directors effective August 15, 1993. Mr. Whatley was formerly an officer of
the Company.
Board Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors is responsible for
establishing the types and levels of compensation for executive officers of
the Company, and will administer its 1994 Stock Incentive Plan ("1994 Plan")
recently adopted by the Board of Directors subject to requisite stockholder
approval. The Compensation Committee is composed of two independent, non-
employee directors, among whom only Mr. Whatley has ever previously served as
an officer of the Company. Following review and approval by the Committee,
decisions relating to executive compensation are typically reported to the
full Board of Directors.
The Committee has directed the preparation of this report and has
approved its contents and its submission to the stockholders. As provided by
the rules of the Securities and Exchange Commission, this report is not deemed
to be filed with the Commission nor incorporated by reference into any prior
or future fillings under the Securities Act of 1933 or the Securities and
Exchange Act of 1934.
Levels of executive compensation, in the Committee's opinion, generally
should be determined based upon the performance of the Company and the
contributions of individual officers to such performance and in comparison to
persons with comparable responsibilities in business enterprises similar in
size or nature. Compensation plans should align executive compensation with
returns to stockholders giving due consideration
7
<PAGE>
to the achievement of both long-term and short-term objectives. Such
compensation policies and practices have allowed the Company to attract,
retain and motivate its key executives.
The compensation of the officers of the Company consists primarily of
base salaries and the opportunity to participate in certain incentive
arrangements, including the 1994 Plan, the grant of contractual non-qualified
stock options and awards of the Company's Adjustable Rate Cumulative Class A
Preferred Stock, Series C Preferred ("Series C Preferred"). Officers have also
previously participated in the Company's 1984 stock option plan ("1984 Option
Plan") which expired by its own terms in March 1994. The value of these plan
benefits is or was directly related to the future performance of the Company's
common stock.
In addition, two of the named executive officers, Messrs. Denton and
Doherty, are entitled to receive cash bonuses related to earnings performance
in the areas of operation under their individual responsibility. Each will be
paid a cash bonus equal to 2% of the annual increase in before-tax profits
from subsidiaries under their direct supervision for a three year period
commencing in 1991, and thereafter, on a year to year basis. The Committee
believes that an improvement in pre-tax earnings is an appropriate standard
for measuring subsidiary performance and directly links the individual
participant's total potential remuneration with the accomplishment of
established growth targets. As a result of attaining such goals in 1993, Mr.
Doherty and Mr. Denton received incentive bonus payments of $88,000 and
$12,000, respectively. This incentive arrangement has been extended to Messrs.
Doherty and Denton for 1994.
Just like all other full-time Company employees, the named executive
officers are also eligible to participate in the Company's defined
contribution thrift plan. The Committee believes that this plan encourages
longer-term employment through gradual service-based vesting of Company
contributions. By virtue of larger employer matching contributions relative to
participant contributions invested in the Company's common stock, the
Committee provides an incentive to the employees, including the named
executive officers, who elect to tie their own financial interests, in part,
to those of the Company's stockholders.
During 1993, with management's recommendation, the base salaries of the
executive officers, including the chief executive, were not increased. The
decision in this regard was based primarily on Company-wide efforts to reduce
costs in order to mitigate, in part, the disappointing financial results from
1992. In establishing levels of executive compensation, the Committee reviews
the performance of similar businesses, as well as business in general, and the
compensation levels of persons with comparable responsibilities. Salaries are
also based on an assessment of each individual's performance, experience and
other factors relevant to comparison with compensation data contained in
published and well recognized surveys. The Committee believes that salaries
and total compensation of the executive officers ranks within close proximity
or below the median level of most comparative data.
The Company offers additional incentive for stock growth and total
stockholder return through the use of two plans whose benefits depend on
common stock performance. Shares of Series C Preferred were issued in 1991, as
described in the Summary Compensation Table and no further awards were made in
1992 or 1993. Stock options have been granted to executive officers and other
employees of the Company, from time to time, pursuant to the 1984 Option Plan,
primarily based upon the executive's or employee's ability to influence the
Company's future business objectives. All outstanding options granted pursuant
to the 1984 Option Plan were granted at not less than 100% of the fair market
value of the Company's Common Stock on the dates such options were granted.
The Committee believes that stock options, stock appreciation rights and stock
grants are a desirable form of long-term compensation that closely connect the
interests of management with stockholder value. Accordingly, upon termination
of the 1984 Option Plan, the Board adopted the 1994 Plan which provides for
the grant of stock options and stock appreciation rights. No awards have been
made yet under the 1994 Plan which is being proposed for stockholder approval
at the next annual shareholder's meeting.
Under the 1984 Option Plan, stock options have been granted to certain of
the named executive officers after the Committee had reviewed individual
awards, taking into consideration relative accountability, anticipated
performance requirements and contributions of each executive officer. The
award to Mr. Barnes in 1992 was made separately and outside of the 1984 Option
Plan and was based, among other things, on the Committee's perception of his
expected contributions to the Company's achievement of long-range performance
goals.
8
<PAGE>
During 1993, no stock options were granted either pursuant to or outside of
the 1984 Option Plan to any of the named executive officers. The same
factors will also be considered in the future when benefits are awarded
under the 1994 Plan.
Compensation Committee
James R. Whatley, Chairman
C.E. Bentley
Performance Graph
The following graph compares the cumulative total stockholder return on
the Common Stock of the Company with the New York Stock Exchange and a peer
group of eight industry-related companies which, in addition to the Company,
include ABM Industries, Buckeye Partners L.P., GATX Corp., Interprovincial
Pipe Line Systems, Safety Kleen Corp., Santa Fe Pipe Line Partners, L.P. and
Team Inc., for the period January 1, 1989 to December 31, 1993, assuming an
initial investment of $100 and the reinvestment of all dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
<TABLE>
<CAPTION>
- - - - - - - -----------------------------FISCAL YEAR ENDING--------------------------------
COMPANY 1988 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C>
KANEB SERVICES INC 100 235.29 170.59 200.00 152.94 135.29
PEER GROUP 100 126.72 135.45 154.55 152.59 172.59
BROAD MARKET 100 127.57 122.36 158.35 165.80 188.25
</TABLE>
9
<PAGE>
PROPOSED 1994 STOCK INCENTIVE PLAN
General
The Company has previously adopted or assumed through the acquisition of
other companies various stock option plans covering shares of Common Stock of
the Company. On March 26, 1994, the Company's only remaining stock option plan
expired by its own terms. The Board of Directors believes that the
availability of the Company's Common Stock under a stock option program
promotes the interests of the Company and its shareholders by providing
substantial incentives to attract and retain employees capable of furthering
the future success of the Company and by aligning their economic interests
with those of the Company's shareholders. Accordingly, the Board of directors
adopted the 1994 Stock Incentive Plan (the "1994 Plan"), effective March 24,
1994.
Under the 1994 Plan, a total of 1,600,000 shares of Common Stock of the
Company are reserved for options or SARs and all employees, including
officers, of the Company or any of its subsidiaries, are eligible to
participate. The shares reserved for the 1994 Plan are subject to adjustment
or substitution in the event of a subdivision or consolidation of shares,
other capital adjustments, stock dividends, increases in shares without
receipt of consideration and decreases in shares without distribution of
property. Further, commencing January 1, 1995, the shares reserved for the
1994 Plan are subject to an increase of 5% per year of the amount, if any, by
which the total number of shares of Common Stock outstanding as of the last
day of the Company's fiscal year exceeds the total number of shares of Common
Stock outstanding as of the first day of such fiscal year.
The 1994 Plan is to be administered by the Compensation Committee of the
Board of Directors of the Company (the "Committee"). The members of this
Committee are not eligible to receive options under the 1994 Plan while
serving on the Committee and are not eligible to receive such options for the
year prior to serving on the Committee. The Committee will designate the
persons to whom the options are to be granted, will fix the number of shares
to be subject to each option and will fix the option price. Options granted
under the 1994 Plan will be evidenced by option agreements in a form to be
determined by the Committee. No awards have been granted under the 1994 Plan.
The 1994 Plan authorizes the grant of stock appreciation rights ("SARS"),
non-qualified options and incentive stock options ("ISOs") intended to qualify
under Section 422 of the Internal Revenue Code of 1986 (the "Code"). Options
may be granted with or without tandem SARs and SARs may be granted with or
without a related option. The Committee may issue new options or SARs in
exchange for previously granted options or SARs including those previously
granted having higher exercise prices. Likewise, the Committee may substitute
new options for previously granted SARs or new SARs for previously granted
options including those SARs or options that were granted at higher exercise
prices. No participant under the 1994 Plan may be granted ISOs or tandem SARs
which are first exercisable in any calendar year for Common Stock having an
aggregate fair market value, determined as of the date of grant, exceeding
$100,000.
Under the 1994 Plan, the exercise price per share for Common Stock
covered by the options or SARs will be at such price as may be determined by
the Committee, but not less than 100% of the fair market value of the Common
Stock on the date the option or SAR is granted, and the term of each option or
SAR cannot be longer than 10 years. Options will not be transferrable except
by will or by descent and distribution. If any holder ceases to be an employee
of the Company or any subsidiary for reason other than death, total disability
or attainment of normal retirement age, his option or SAR may be exercised
within 30 days of the date of termination of employment, or within 90 days
provided such termination occurs more than two years after the granting of the
option or SAR. Upon the total disability or attainment of retirement age by
the holder, the option or SAR may be exercised in full within 90 days of the
date of disability or retirement, and if a holder dies, his option, if
otherwise valid, may be exercised by his estate within 180 days of the date of
his death.
10
<PAGE>
Upon exercise of any option under the 1994 Plan, the purchase price for
the shares as to which an option is exercised shall be paid in full in cash at
the time of exercise, except that in lieu of cash, a holder may exercise an
option by tendering to the Company shares of Common Stock owned by the holder
and having a fair market value equal to the cash exercise price. The fair
market value of each share of such tendered stock shall be the closing sale
price of a share of Common Stock of the Company on the New York Stock Exchange
on the date of the option exercise, or if the Common Stock was not traded on
such exchange on that date, then on the next preceding date on which the
Common Stock was traded on such exchange. Upon exercise of a SAR, the holder
would receive an amount equal to the excess of the fair market value of the
Company's Common Stock on the date of exercise over its fair market value on
the date of grant. The amount is payable in cash or the equivalent in shares
of the Company's Common Stock at the discretion of the Committee.
No options may be granted under the 1994 Plan after March 23, 2004, on
which date the 1994 Plan shall expire. The 1994 Plan is subject to amendment,
suspension or termination by the Board of Directors of the Company except that
the Board may not, without further stockholder approval, increase the total
number of shares as to which awards may be granted under the 1994 Plan, change
the class of employees eligible to receive options or SARs or extend the term
of the 1994 Plan. No modification or amendment may effect the rights of a
participant under an outstanding award.
The Company is submitting the 1994 Plan to stockholders for approval, in
part, for the purposes of qualifying the 1994 Plan for the grant of ISOs and
to enable the recipients of options to qualify for certain exemptive treatment
from the short-swing profit recapture provisions of Section 16(b) of the
Securities Exchange Act of 1934. As a result of revisions to the regulations
under Section 16(b), so long as certain criteria are met, an executive officer
receiving an option award may be able to exercise such option and sell the
underlying shares of Common Stock on the same day without incurring short-
swing profit recapture liability under Section 16(b). The ability to
concurrently exercise the option and sell the Common Stock eliminates the
market risk to the participant in exercising the option in the event that the
market price is above the exercise price.
The exercise of options will have a dilutive effect on the ownership
interests of existing stockholders. Further, the exercise of options may
render more difficult or discourage, a merger, tender offer or other takeover
attempt even if such transaction would be beneficial to stockholders
generally, the assumption of control by a holder of a large block of the
Company's Common Stock, a proxy contest or the removal of incumbent
management.
Federal Income Tax Consequences
No income would result to a holder upon the granting of any options or
SARs under the 1994 Plan. Upon the exercise of a nonqualified stock option,
the amount by which the fair market value of the shares on the date of
exercise exceeds the option price would be taxed to the holder as ordinary
compensation income. The Company would be entitled to a deduction in the same
amount. Upon a subsequent sale of any of those shares, the holder would
realize capital gain or loss (long-term or short-term, depending on whether
the shares were held for more than twelve months before sale) in an amount
equal to the difference between his tax basis in the shares and the selling
price.
The holder of an ISO would not be subject to federal income tax upon the
exercise of the ISO, and the Company would not be entitled to a tax deduction
by reason of the exercise. A sale of the shares received upon the exercise of
an ISO which occurs both more than one year after the exercise of the ISO and
more than two years after the grant of the ISO would result in the realization
of long-term capital gain or loss in the amount of the difference between the
amount realized on the sale and the option price for the shares. Generally,
upon a prior disposition of the shares, the holder would recognize ordinary
compensation income equal to the lesser of (i) the excess of the fair market
value of the shares on the date of transfer to the holder over the option
price or (ii) the excess of the amount realized on the disposition over the
option price for the shares. The excess of the fair market value of the shares
at the time of the exercise of an ISO over the option price is an item of tax
preference subject to the alternative minimum tax, unless a subsequent
disqualifying disposition occurs.
11
<PAGE>
Upon the exercise of SARs, the holder would realize ordinary compensation
income in an amount equal to the sum of the cash and/or the fair market value
of the shares received upon exercise, and the Company would be entitled to a
corresponding deduction. If the holder receives shares upon exercise of SARs,
the shares would have a tax basis of their fair market value on the date of
exercise, and the holding period of the shares would commence on the day
following that date. A subsequent sale of those shares would have the same tax
consequence as the sale of shares acquired pursuant to a nonqualified stock
option.
The preceding discussion is based upon the Code as presently in effect,
which is subject to change, and does not purport to be a complete description
of the federal income tax aspects of options and SARs under the 1994 Plan.
Market Price of Common Shares
The closing price of the Company's Common Stock on the New York Stock
Exchange on April 12, 1994 was $3.38 per share.
The complete text of the 1994 Plan is attached to this Proxy Statement as
Appendix A hereto. The affirmative vote of a majority of the shares of Common
Stock of the Company represented in person or by proxy and voted at the
meeting will be necessary for approval of the 1994 Plan. The Board of
Directors of the Company recommends a vote FOR the approval of the 1994 Plan.
INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors of the Company has not met
to select the principal accountants to audit the accounts of the Company for
the calendar year ending December 31, 1994. Price Waterhouse, the Company's
independent auditors for the calendar year ended December 31, 1993, has
advised the Company that it will have in attendance at the Annual Meeting of
Stockholders a representative who will respond to appropriate questions
presented at such meeting regarding the Company's financial results and
condition at the close of its most recent fiscal year. Representatives of the
firm will be afforded an opportunity to make statements if they wish to do so.
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock of the Company intended to be
presented at the Annual Meeting of Stockholders of the Company to be held in
1995 must be received by the Company, addressed to Stephen M. Hoffner, Vice
President and Secretary of the Company, 2400 Lakeside Boulevard, Richardson,
Texas 75082, no later than January 1, 1995 to be included in the Proxy
Statement and form of proxy relating to that meeting. If the date of the 1995
annual meeting is advanced by more than 30 calendar days or delayed by more
than 90 calendar days from the date of the 1994 annual meeting to which this
Proxy Statement relates, the Company will inform stockholders of such change
and the date by which proposals of stockholders must be received.
OTHER MATTERS
The Board of Directors knows of no other matters than those described
above which are likely to come before the meeting. If any other matters
properly come before the meeting, persons named in the accompanying form of
proxy intend to vote such proxy in accordance with their best judgement on
such matters. A copy of the Company's 1993 Annual Report is being mailed,
concurrently with the mailing of this Proxy Statement, to stockholders who
have not previously received a copy of the Annual Report.
By Order of the Board of Directors
John R. Barnes
Chairman of the Board, President
and Chief Executive Officer
Dated: April 25, 1994
12
<PAGE>
APPENDIX A
KANEB SERVICES, INC.
1994 STOCK INCENTIVE PLAN
Purpose
This plan is intended to assist the Company in recruiting and retaining
employees with ability and initiative by enabling employees to participate in
its future success and to associate their interests with those of the Company
and its shareholders. The plan is intended to permit the grant of SARs, and the
grant of both Options qualifying under Section 422 of the Code ("incentive stock
options") and Options not so qualifying. No option that is intended to be an
incentive stock option shall be invalid for failure to qualify as an incentive
stock option. The proceeds received by the Company from the sale of Common
Stock pursuant to this Plan shall be used for general corporate purposes.
Article I
Definitions
1.01 "Agreement" means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the
terms and conditions under which an Option or SAR is granted to such
Participant.
1.02 "Board" means the Board of Directors of the Company.
1.03 "Code" means the Internal Revenue Code of 1986, and any amendments thereto.
1.04 "Committee" means the Compensation Committee of the Board appointed to
administer the Plan.
1.05 "Common Stock" means the Common Stock, without par value, of the Company.
1.06 "Company" means Kaneb Services, Inc., a Delaware corporation.
1.07 "Corresponding SAR" means an SAR that is granted in relation to a
particular Option and that can be exercised only upon surrender to the
Company, unexercised, of that portion of the Option to which the SAR
relates.
1.08 "Date of Exercise" means (i) with respect to a particular Option, the date
that the Option price is received by the Company and (ii) with respect to
an SAR, the date that the notice of exercise is received by the Company.
1.09 "Fair Market Value" means, on any given date, the closing price of the
Common Stock. If the Common Stock was not traded on such date, then the
"Fair Market Value" is determined with reference to the preceding day that
the Common Stock was so traded.
1.10 "Initial Value" means with respect of an SAR, the Fair Market Value of one
share of Common Stock on the date of grant, as set forth in the Agreement.
1.11 "Option" means a stock option that entitles the holder to purchase from the
Company a stated number of shares of Common Stock at the price set forth in
an Agreement.
1.12 "Participant" means an employee of the Company or an Affiliate, including
an employee who is a member of the Board, who satisfies the requirements of
Article III and is selected by the Committee to receive an Option, an SAR,
or a combination thereof.
1.13 "Plan" means The Kaneb Services, Inc. 1994 Stock Incentive Plan.
1.14 "SAR" means a stock appreciation right that entitles the holder to receive,
with respect to each share of Common Stock encompassed by the exercise of
such SAR, the amount determined by the Committee and specified in the
Agreement. In the absence of such a determination, the holder shall be
entitled to receive, with respect to each share of Common Stock encompassed
by the exercise of such SAR, the excess, at the election of the Committee,
payable in cash or the equivalent value in Common Stock, of the Fair Market
Value on the Date of Exercise over the Initial Value. References to "SARs"
include both Corresponding SARS and SARs granted independently of Options
unless the context requires otherwise.
1.15 "Subsidiary" means any "subsidiary corporation" as such term is defined in
Section 424 of the Code.
<PAGE>
ARTICLE II
Administration
Except as provided in this Article II, the Plan shall be administered by
the Committee. The Committee shall have the authority to grant Options and SARs
upon such terms (not inconsistent with this Plan) as the Committee shall
consider appropriate. Such terms may include conditions (in addition to those
contained in this Plan) on the exercisability of all or any part of an Option or
SAR. Notwithstanding any such conditions, the Committee may, in its discretion,
accelerate the time at which any Option or SAR may be exercised. In addition,
the Committee shall have complete authority to interpret all provisions of this
Plan; to prescribe the form of Agreements; to adopt, amend, and rescind rules
and regulations pertaining to the administration of the Plan; and to make all
other determinations necessary or advisable for the administration of this Plan.
The express grant in the Plan of any specific power to the Committee shall not
be construed as limiting any power or authority of the Committee. Any decision
made, or action taken, by the Committee or in connection with the administration
of this Plan shall be final and conclusive. No member of the Committee shall be
liable for any act done in good faith with respect to this Plan or any
Agreement, Option, or SAR award. All expenses of administering this Plan shall
be borne by the Company.
The Committee, in its discretion, may delegate to one or more officers of
the Company, all or part of the Committee's authority and duties with respect to
Participants who are not subject to reporting and other provisions of Section 16
of the Securities Exchange Act of 1934, as in effect from time to time.
In the event of such delegation, references in the Plan to the Committee
shall be encompassed by the delegation, references in the Plan to the Committee
shall be interpreted as a reference to the Committee's delegate or delegates.
The Committee may revoke or amend the terms of a delegation at any time but such
action shall not invalidate any prior actions of the Committee's delegate or
delegates that were consistent with the terms of the Plan.
ARTICLE III
Eligibility
3.01 General. Any employee of the Company or of any Subsidiary (including any
-------
corporation that becomes a Subsidiary after the adoption of this Plan) is
eligible to participate in this Plan if the Committee, in its sole discretion,
determines that such person has contributed or can be expected to contribute to
the profits or growth of the Company or a Subsidiary. Any such employee may be
granted one or more Options, SARs, or Options and SARs. A Director of the
Company who is an employee of the Company or a Subsidiary may be granted Options
or SARs under this Plan.
3.02 Grants. The Committee will designate individuals to whom Options and SARs
------
are to be granted and will specify the number of shares of Common Stock subject
to each award or grant. An Option may be granted with or without a related SAR.
An SAR may be granted with or without a related Option. All Options and SARs
granted, under this Plan shall be evidenced by Agreements which shall be subject
to applicable provisions of this Plan and to such other provisions as the
Committee may adopt. The Committee may substitute new Options or SARs for
previously granted Options or SARs including those previously granted having
higher exercise prices. The Committee may also substitute new SARs for
previously granted Options or new Options for previously granted SARs including
those SARs or Options theretofore granted having higher exercise prices. No
Participant may be granted incentive stock options or related SARs (under all
incentive stock option plans of the Company and its Subsidiaries) which are
first exercisable in any calendar year for stock having an aggregate Fair Market
Value (determined as of the date an option is granted) exceeding $100,000. The
preceding annual limitation shall not apply with respect to Options that are not
incentive stock options.
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<PAGE>
ARTICLE IV
Stock Subject to Plan
4.01 Source of Shares. Upon the exercise of any Options or SARs, the Company
----------------
may issue authorized but unissued Common Stock or Common Stock held by the
Company in its Treasury for delivery to the Participant (or to the Participant's
broker if the Participant so directs).
4.02 Maximum Number of Shares. The maximum aggregate number of shares of Common
-------------------------
Stock that may be utilized pursuant to the exercise of Options and SARs under
this Plan is 1,600,000, subject to increases and adjustments as provided in this
Article IV and Article VIII.
4.03 Replenishment. The maximum number of shares authorized for issuance under
--------------
this Plan under Section 4.02 shall be increased each year by 5% (the
Replenishment Percentage) of the amount, if any, by which the total number of
shares of Common Stock outstanding as of the last day of the Company's fiscal
year exceeds the total number of shares of Common Stock outstanding as of the
first day of such fiscal year. The issuance of shares of Common Stock under
this Plan and the application of Article VIII shall be disregarded for purposes
of applying the preceding sentence. This section 4.03 shall first apply to the
fiscal year beginning on January 1, 1995.
4.04 Incentive Stock Options. Section 4.02 to the contrary notwithstanding, the
------------------------
maximum aggregate number of shares of Common Stock that may be issued pursuant
to the exercise of Options that are incentive stock options under this Plan is
1,600,000, subject to adjustments as provided in Article VIII.
4.05 Forfeitures. If an option or SAR is terminated, in whole or in part, for
------------
any reason other than its exercise, the number of shares of Common Stock
allocated to the Option or SAR or portion thereof may be reallocated to other
Options or SARs to be granted under this Plan.
ARTICLE V
Option Price
The price per share for Common Stock purchased on the exercise of an Option
shall be determined by the Committee on the date of grant; provided, however,
that the price per share for Common Stock purchased on the exercise of any
Option, including an Option that is an incentive stock option, shall not be less
than the Fair Market Value on the date the Option is granted.
ARTICLE VI
Exercise of Options
6.01 Maximum Option or SAR Period. The maximum period in which an Option or SAR
-----------------------------
may be exercised shall be determined by the Committee on the date of grant
except that no Option that is an incentive stock option and any Corresponding
SAR that relates to such Option shall be exercisable after the expiration of 10
years from the date the Option or SAR was granted. The terms of any Option or
SAR may provide that it is exercisable for a period less than such maximum
period.
6.02 Transferability. Any Option or SAR granted under this Plan shall be
----------------
nontransferable except by will or by laws of descent and distribution. In the
event of any such transfer, the Option and any Corresponding SAR that relates to
such Option must be transferred to the same person or persons or entity or
entities. During the lifetime of the Participant to whom the Option or SAR is
granted, the Option or SAR may be exercised only by the Participant. No right
or interest of a Participant in any Option or SAR shall be liable for, or
subject to, any lien, obligation, or liability of such Participant.
2
<PAGE>
6.03 Employee Status. For purposes of determining the applicability of Section
----------------
422 of the Code (relating to incentive stock options), or in the event that the
terms of any Option or SAR provide that it may be exercised only during
employment or within a specified period of time after termination of employment,
the Committee may decide to what extent leaves of absence for government or
military service, illness, temporary disability, or other reasons shall not be
deemed interruptions of continuous employment. In the absence of terms
established in an Option and or SAR Agreement by the Committee, the following
shall apply:
(a) Death. In the event of death while employed, Options and SARs may be
------
exercised for a period of one hundred eighty (180) days after the Participant's
death or until the expiration of the Option or SAR (if sooner), to the extent of
the shares with respect to which the Option or SAR could have been exercised by
the Participant on the date of the Participant's death, by the Participant's
estate or personal representative, or by the person who acquired the right to
exercise the Option or SAR by bequest or inheritance or by reason of the
Participant's death;
(b) Disability. In the event of termination of employment as the result of
-----------
a total and permanent disability (as defined in Section 105(d) (4) of the Code),
the Option or SAR may be exercised by the Participant or his guardian for a
period of ninety (90) days after the Participant's termination or until
expiration of the Option or SAR period (if sooner) to the extent of the shares
with respect to which the Option or SAR could have been exercised by the
Participant on the date of such termination;
(c) Termination. Provided an Option or SAR has been in effect for at least
------------
two (2) years, a Participant may exercise such Option or SAR in the event the
Company terminates his employment without cause for a period of ninety (90) days
after the Participant's termination or until expiration of the Option or SAR
period (if sooner) to the extent of the shares with respect to which the Option
or SAR could have been exercised by the Participant on the date of termination.
Termination of employment by the Company without cause in the case of Options or
SARs which have been in effect for less than two (2) years, or, the voluntary
termination of a Participant not specifically covered under paragraphs (b) or
(d) of this Section 6.03, shall result in allowing the Participant a period of
thirty (30) days after the Participant's termination or until expiration of the
Option or SAR period (if sooner) to the extent of the shares with respect to
which the Option or SAR could have been exercised by the Participant on the date
of termination. For purposes of this paragraph, "cause" shall be defined to
mean a Participant's willful misconduct or dishonesty, which is directly and
materially harmful to the business or reputation of the Company;
(d) "Retirement". In the event of retirement from employment, a
-------------
Participant may exercise Options or SARs for a period of ninety (90) days after
the Participant's retirement or until expiration of the Option or SAR period (if
sooner) to the extent of the shares with respect to which the Option or SAR
could have been exercised by the Participant on the date of retirement. For
purposes of this paragraph, "retirement" shall mean the voluntary or involuntary
termination of employment by the Company of the Participant after his attainment
of 55 years of age, and whose employment was not terminated for cause as defined
in paragraph (c) above.
6.04 Terms. The Committee may provide for the terms of the Participant's
------
eligibility to exercise Options or SARs in installments or under any such
conditions and restrictions as it may determine. In the absence of such terms
established in an Option or SAR Agreement by the Committee, the Option or SAR
shall be exercisable in its entirety on the date of grant, subject to any
applicable law or statute and as otherwise provided for in this Article VI,
including the proviso that any participant who is required to report under
Section 16 of the Securities Exchange Act of 1934 may not exercise an Option or
related SAR prior to the lapse of six months from the date of its grant.
3
<PAGE>
ARTICLE VII
Method of Exercise
7.01 Exercise. An Option or SAR granted under this Plan shall be deemed to have
---------
been exercised on the Date of Exercise. Subject to the provisions of Articles
VI and IX, an Option or SAR may be exercised in whole at any time or in part at
any time at such times and in compliance with such requirements as the Committee
shall determine; provided, however, that a Corresponding SAR that is related to
an incentive stock option may be exercised only to the extent that the related
Option is exercisable and only when the Fair Market Value exceeds the option
price of the related Option. An Option or SAR granted under this Plan may be
exercised with respect to any number of whole shares less than the full number
of whole shares for which the Option or SAR could be exercised. A partial
exercise of an Option or SAR shall not affect the right to exercise the Option
or SAR from time to time in accordance with this Plan and the applicable
Agreement with respect to remaining shares subject to the Option or related to
the SAR. The exercise of either an Option or Corresponding SAR shall result in
the termination of the other to the extent of the number of shares with respect
to which the Option or Corresponding SAR is exercised.
7.02 Payment. Unless otherwise provided by the Agreement, payment of the Option
--------
price shall be made in cash, a cash equivalent acceptable to the Committee, or
in Common Stock. All or part of the Option price may be paid by surrendering
shares of Common Stock to the Company. If Common Stock is used to pay all or
part of the Option price, the shares surrendered must have a Fair Market Value
(determined as of the day preceding the Date of Exercise) that is not less than
such price or part thereof. A fractional share of Common Stock shall not be
deliverable upon the exercise of an SAR or Option but a cash payment will be
made in lieu thereof.
7.03 Shareholder Rights. No Participant shall have any rights as a stockholder
-------------------
with respect to shares subject to his Option or SAR until the Date of Exercise
of such Option or SAR.
ARTICLE VIII
Adjustment Upon Change in Common Stock
8.01 General. The maximum number of shares as to which Options and SARs may
--------
be granted under this Plan and the Replenishment Percentage of Section 4.03
shall be proportionately adjusted, and the terms of outstanding Options and SARs
shall be adjusted, as the Committee shall determine to be equitably required in
the event that the Company effects one or more stock dividends, stock split-ups,
subdivisions or consolidations of shares. Any determination made under this
Article VIII by the Committee shall be final and conclusive. This issuance by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property, or for labor or services,
either upon direct sale or upon exercise of rights or warrants to subscribe
therefore, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect and no
adjustment by reason thereof shall be made with respect to, outstanding Options
or SARs. The Committee may grant Options, and may grant SARs in substitution
for stock awards, stock options, stock appreciation rights, or similar awards
held by an individual who becomes an employee of the Company or a Subsidiary in
connection with a transaction described in the first paragraph of this Article
VIII. Notwithstanding any provision of the Plan (other than the limitation of
Article IV), the terms of such substituted Option or SAR grants shall be as the
Committee, in its discretion, determines is appropriate.
8.02 Liquidation or Dissolution. In case the Company shall, at any time while
---------------------------
any unexercised Option or SAR shall be in force and remain unexpired under this
Plan, (1) sell all or substantially all its property and thereafter distribute
in partial or total liquidation of the Company, or (ii) dissolve, liquidate, or
wind up its affairs, then each Participant may thereafter receive upon exercise
of Options or SARs (in lieu of each share of Common Stock of the Company which
such Participant would have been entitled to receive) the same
4
<PAGE>
kind and amount of any securities or assets as may be issuable, distributable or
payable upon any such sale, dissolution, liquidation, or winding up with respect
to each share of Common Stock of the Company. In the event that the Company
shall, at any time prior to the expiration of any Option or SAR make any partial
distribution of its assets (but not including dividends payable in capital stock
of the Company), in the nature of a partial liquidation, whether payable in cash
or in kind (but excluding the distribution of a cash dividend payable out of
earned surplus and designated as such) then in such event the exercise prices
then in effect with respect to each outstanding Option or SAR shall be reduced,
on the payment date of such distribution, in proportion to the percentage
reduction in the tangible book value of the shares of the Company's Common Stock
(determined in accordance with generally accepted accounting principles)
resulting by reason of such distribution.
8.03 Change of Control. The following acceleration and valuation provisions
------------------
shall apply in the event of a "Change of Control" or "Potential Change of
Control," as defined in this Section 8.03:
(a) In the event of a "Change of Control" as defined in paragraph (b)(1)
of this Section 8.03, unless otherwise determined by the Committee or Board in
writing at or after grant but prior to the occurrence of such Change of Control,
or, if and to the extent so determined by the Committee or the Board at or after
grant, in the event of a "Potential Change of Control," any Options or SARs
awarded under the Plan not previously exercisable, shall be fully exercisable.
(b) Definitions.
------------
(1) For the purposes of this Section 8.03, "Change of Control" means the
occurrence of any one or more of the following events:
(i) any Person (defined below) becomes the Beneficial Owner (defined
below) of securities of the Company having 20% or more of the total votes
that may be cast for the election of directors of the Company; or
(ii) the stockholders of the Company approve the sale or other
disposal of all or substantially all of the assets of the Company
(including a plan of liquidation or dissolution) or the merger or
consolidation of the Company with or into another corporation, in
accordance with the requirements of the Certificate of Incorporation of the
Company and applicable law; or
(iii) as a result of or in connection with any tender offer, exchange
offer, merger or other business combination, sale of assets or contested
election of directors, or any combination of the foregoing, the individuals
who are directors of the Company immediately prior to such event shall
cease to constitute the majority of the Company's Board.
(2) For purposes of this Section 8.03, a "Potential Change of Control"
means the entering into an agreement by the Company, the consummation of
which would result in a "Change of Control" of the Company as defined in
paragraph (b)(1) of the Section 8.03.
(3) A "Person" means any individual, firm corporation, partnership, trust
or other entity. Two or more Persons who agree to act together for the
purpose of acquiring, holding, voting, or disposing of securities of the
Company shall be deemed a "Person". Excluded from the definition of
"Person" are the Company and any Affiliates of the Company, whether
individually or in any combination.
(4) A Person is a "Beneficial Owner" of securities of the Company if such
Person or any of such Person's Affiliates (defined below) or Associates
(defined below) has or shares, directly or indirectly, through any
contract, arrangement, understanding or otherwise, the power to vote or
direct the voting of securities of the Company or the power to dispose or
direct the disposition of securities of the Company. A Person shall be the
"Beneficial Owner" of securities of the Company that such
5
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Person or any of such Person's Affiliates or Associates has the right to
become the "Beneficial Owner" of (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrants, options, or otherwise.
(5) An "Affiliate" of a specified Person is a Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Person specified.
(6) An "Associate" of a specified Person is (i) any corporation or
organization (other than the Company or any Subsidiary of the Company) of
which such Person is an officer or partner or is, directly or indirectly,
the Beneficial Owner of 10% or more of any class of equity securities, (ii)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar
fiduciary capacity, or (iii) any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person or who is a
director or officer of the Company or any Subsidiary or Parent (defined
below) of the Company.
(7) A "Parent" of a specified Person is an Affiliate controlling such
Person directly, or indirectly through one or more intermediaries.
(8) "Securities" of the Company for the purposes of this Section 8.03
shall mean, unless the context requires otherwise, equity securities of
the Company or any Subsidiary or Parent or any securities or instruments
entitling the holder thereof to acquire upon exercise, exchange or
conversion thereof equity securities of the Company, entitles the holder,
by trust, proxy or any other agreement, arrangement or understanding or
otherwise, to vote in the election of directors of the Company.
ARTICLE IX
Compliance With Law and Approval of Regulatory Bodies
No Option or SAR shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance will all applicable federal and
state laws and regulations (including without limitation, withholding tax
requirements) and the rules of all domestic stock exchanges on which the
Company's shares may be listed. The Company shall have the right to rely on an
opinion of its counsel as to such compliance. Any share certificate issued to
evidence Common Stock for which an Option or SAR is exercised may bear such
legends and statements as the Committee may deem advisable to assure compliance
with federal and state laws and regulations. No Option or SAR shall be
exercisable, no Common Stock Shall be issued, no certificate for shares shall be
delivered, and no payment shall be made under this Plan until the Company has
obtained such consent or approval as the Committee may deem advisable from
regulatory bodies having jurisdiction over such matters.
ARTICLE X
General Provisions
10.01 Effect on Employment. Neither the adoption of this Plan, its operation,
---------------------
nor any documents describing or referring to this Plan (or any part thereof)
shall confer upon any employee any right to continue in the employ of the
Company or a Subsidiary or in any way effect any right and power of the Company
or a Subsidiary to terminate the employment of any employee at any time with or
without assigning a reason therefor.
6
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10.02 Unfunded Plan. The Plan, insofar as it provides for grants, shall not be
--------------
required to segregate any assets that may at any time be represented by grants
under this Plan. Any liability of the Company to any person with respect to any
grant under this Plan shall be based solely upon any contractual obligations
that may be created pursuant to this Plan. No such obligation of the Company
shall be deemed to be secured by any pledge of, or other encumbrance on, any
property of the Company.
10.03 Rules of Construction. Headings are given to the articles and sections
----------------------
of this Plan solely as a convenience to facilitate reference. The reference to
any statute, regulation, or other provision of law shall be construed to refer
to any amendment to or successor of such provision of law.
ARTICLE XI
Amendment
The Board may amend or terminate this Plan from time to time, provided,
however, that no amendment may become effective until shareholder approval is
obtained if (i) the amendment increases the aggregate number of shares of Common
Stock that may be issued under the Plan or (ii) the amendment changes the class
of individuals eligible to become Participants or (iii) the amendment extends
the duration of the Plan, as defined in Article XIII. No amendment shall
without a Participant's consent adversely affect any rights of such Participant
under any Option or SAR outstanding at the time such amendment is made.
ARTICLE XII
Duration of Plan
No Option or SAR may be granted under this Plan more than 10 years after
the earlier of the date that the Plan is adopted by the Board or the date that
the Plan is approved by the shareholders as provided for in Article XIII.
Options and SARs granted before that date shall remain valid in accordance with
their terms.
ARTICLE XIII
Effective Date of Plan
Options and SARs may be granted under this Plan upon its adoption by the
Board, provided that no Option or SAR will be effective unless this Plan is
approved by shareholders holding a majority of the Company's outstanding voting
stock voting either in person or by proxy at a duly held shareholders' meeting
within twelve months of such adoption.
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KANEB SERVICES, INC.
PROXY - ANNUAL MEETING OF STOCKHOLDERS - MAY 20, 1994
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints JOHN R. BARNES and HOWARD C. WADSWORTH,
and any one or both of them, with power of substitution in each, proxies for
the undersigned, to represent the undersigned and to vote all the Common
Stock of the Company which the undersigned would be entitled to vote, as fully
as the undersigned could vote and act if personally present, at the Annual
Meeting of Stockholders to be held on May 20, 1994 at 10:00 a.m., Central
Daylight Savings Time, at the offices of Kaneb Pipe Line Company located at
100 North Broadway, Wichita, Kansas or at any adjournment thereof.
The Proxies are authorized to vote in their discretion upon all matters
properly brought before the meeting, including any matter of which Management
was not aware a reasonable time before the solicitation of this proxy.
1. Election of the six directors who are to be elected by the holders of
Common Stock: Sangwoo Ahn, John R. Barnes, C.E. Bentley, Preston A. Peak,
Ralph A. Rehm and James R. Whatley
[ ] FOR All Nominees [ ] WITHHELD for All Nominees
Withheld for the following only (write the name of the nominee(s) on the space
below)
- - - - - - - -------------------------
2. Proposal to adopt the Kaneb Services, Inc. 1994 Stock Incentive Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To transact such other business as may properly come before the meeting or
any adjournment thereof; all as more particularly described in the Proxy
Statement, dated April 25, 1994, relating to such meeting, receipt of
which is hereby acknowledged.
The shares represented by this proxy will be voted as directed by the
stockholder. If no direction is made, this proxy will be voted FOR all
Nominees and FOR Proposal 2.
Dated __________________________, 1994
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Signature of Stockholder
Please mark, date and sign as your name(s)
appear(s) to the left and return it in the
enclosed envelope. If acting as an executor,
administrator, trustee, guardian, etc., you
should so indicate when signing. If the signer
is a corporation, please sign the full
corporate name, by duly authorized officer. If
shares are held jointly, each stockholder
named should sign.
