<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
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 Section 240.1a-11(c) or Section
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> 2
KANEB SERVICES, INC.
2435 North Central Expressway
Richardson, Texas 75080
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 30, 1996
To the Stockholders of Kaneb Services, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of Kaneb
Services, Inc., a Delaware corporation (the "Company") will be held at 321
Seventeenth Street, Denver, Colorado 80202, at 9:00 A.M., Mountain Time, on
May 30, 1996, for the following purposes:
(1) to elect a Board of Directors; and,
(2) 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 March 29, 1996, 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
Howard C. Wadsworth
Vice President, Treasurer and Secretary
Richardson, Texas
April 12, 1996
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> 3
KANEB SERVICES, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 30, 1996
------------------------------
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies of the holders of the common stock, no par value (the "Common
Stock"), of Kaneb Services, Inc. (the "Company") on behalf of the Board of
Directors of the Company for use at the Annual Meeting of Stockholders to be
held on May 30, 1996, at 321 Seventeenth Street, Denver, Colorado 80202, at
9:00 A.M., Mountain Time, or at any adjournment of such meeting. Copies of the
accompanying Notice of Annual Meeting of Stockholders (the "Notice"), Proxy
Statement and form of proxy are being mailed to stockholders on or about April
12, 1996.
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 Howard C. Wadsworth, Vice
President, Treasurer and Secretary of the Company, 2435 North Central
Expressway, Richardson, Texas 75080. 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 2435 North
Central Expressway, Richardson, Texas 75080, 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, 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 March 29, 1996 as the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting (the "Record Date"). At
that date, there were outstanding 33,286,634 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 March 29, 1996, all Directors and executive officers of the
Company as a group owned beneficially an aggregate of 2,763,126 shares,
representing approximately 8.30% of the outstanding shares of Common Stock of
the Company. Such ownership amount includes 1,056,436 shares which can be
acquired by Directors and
1
<PAGE> 4
executive officers of the Company pursuant to the exercise of outstanding stock
options within 60 days of March 29, 1996.
The following table sets forth information with respect to the shares
of the Company's Common Stock owned of record or beneficially as of March 29,
1996, by all persons other than Directors and executive officers of the Company
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>
State of Wisconsin Beneficial 3,171,000 9.53%
Investment Board (1)
121 East Wilson Street
Madison, Wisconsin 53703
Cowen & Company Beneficial 2,044,600 6.14%
Financial Square (2)
New York, New York 10005
</TABLE>
(1) The information included herein was obtained from information contained in
Amendment No. 7 to Schedule 13G, dated February 13, 1995, filed by the
stockholder with the Securities and Exchange Commission ("SEC"), pursuant
to the Securities Exchange Act of 1934 (the "1934 Act"). The State of
Wisconsin Investment Board is a state government agency which manages
public pension funds, subject to provisions comparable to ERISA.
(2) The information included herein was obtained from information in Schedule
13G, dated February 13, 1996, filed by the stockholder with the SEC,
pursuant to the 1934 Act. Cowen & Company, as a broker-dealer and an
investment advisor, holds a portion of such securities on behalf of its
clients, none of whose individual interests exceeds five percent.
ELECTION OF DIRECTORS
At the Annual Meeting of Stockholders of the Company, six Directors,
constituting the entire Board of Directors of the Company (the "Board"), are to
be elected by the holders of Common Stock to hold office until the next annual
meeting of stockholders and thereafter until their respective successors are
elected and qualified. All six nominees proposed by the Board for election by
the holders of Common Stock are incumbent Directors. Although the Board 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 authorized by such proxies to vote.
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 advance of the commencement of 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. 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> 5
NOMINEES FOR DIRECTORS
The following table sets forth: (i) the name and age of each nominee
listed in the enclosed form of proxy; (ii) the principal occupation of such
nominee; (iii) the year during which such nominee first became a Director of
the Company; and, (iv) the number of shares of Common Stock beneficially owned
by such nominee as of March 29, 1996. Each nominee has sole voting power and
sole investment power with respect to all or substantially all of the shares
attributed to him.
<TABLE>
<CAPTION>
Shares of Common Percent
Year First Stock Beneficially of Out-
Became a Owned at standing
Name Principal Occupation Director Age March 29, 1996(1) Shares
---- -------------------- -------- --- ----------------- ------
<S> <C> <C> <C> <C> <C>
John R. Barnes Chairman of the Board, 1986 51 1,740,456 5.23%
President and Chief Executive
Officer of the Company (1)
Charles R. Cox Industrial Group President 1995 53 10,000 *
Fluor Daniel, Inc., an
international services
company (2)
Preston A. Peak President of P.A. Peak, Inc., 1987 73 50,000 *
a general partner of
Dorchester Hugoton, Ltd.,
a natural gas production
partnership (3)
Sangwoo Ahn General Partner of Morgan 1989 57 151,000 *
Lewis Githens & Ahn, L.P.
an investment banking firm (4)
James R. Whatley Investments (5) 1956 69 108,933 *
Ralph A. Rehm President of NorthLake Consulting 1991 50 53,507 *
Company, a financial consulting
service firm (6)
</TABLE>
- --------------------------
*Less than one percent.
(1) Shares listed include those beneficially owned by the person indicated
or his spouse or children living at home, as well as those shares that
are subject to options exercisable by such person within 60 days of
March 29, 1996.
(2) Mr. Cox has held senior executive level positions for more than the
past five years of his twenty-six year career with Fluor Daniel, Inc.
(3) Mr. Peak held the described position for more than the past five
years.
(4) Mr. Ahn has been a partner of Morgan Lewis Githens & Ahn, L.P. for
more than the past five years and currently serves as a director of
Haynes International, Inc., ITI Technologies, Inc., PAR Technology
Corporation, Quaker Fabric Corporation, and Stuart Entertainment, Inc.
(5) Mr. Whatley served as Chairman of the Board of Directors of the
Company from February 1981 until April 1989 and currently serves as
Chairman of the Board of Directors of First Heritage Bank N.A.
(6) Mr. Rehm has held the described position for more than the past 5
years (See: "Certain Transactions").
3
<PAGE> 6
EXECUTIVE OFFICERS
The following table sets forth the names, ages, positions with the Company
and ownership of the Company's Common Stock for the executive officers of the
Company.
<TABLE>
<CAPTION>
Shares of Common Percent
Years of Stock Beneficially of Out-
Service in Owned at standing
Name Office Office Age March 29, 1996(1) Shares
---- ------ ------ --- ----------------- ------
<S> <C> <C> <C> <C> <C>
John R. Barnes Chairman of the Board, 9 51 1,740,456 5.23%
President and Chief Executive
Officer of the Company
Jere M. Denton Senior Vice President 9 49 254,723 *
Edward D. Doherty Senior Vice President 7 60 292,434 *
Joseph P. Lahey Senior Vice President (2) -- 49 -0- *
Howard C. Wadsworth Vice President, Treasurer 5 51 80,811 *
and Secretary
Tony M. Regan Controller 5 36 21,698 *
</TABLE>
- --------------------------
*Less than one percent.
(1) Shares listed include those beneficially owned by the person indicated
or his spouse or children living at home, as well as those shares that
are subject to options exercisable by such person within 60 days of
March 29, 1996.
(2) Mr. Lahey joined the Company in March 1996. From 1993 to 1996, Mr.
Lahey was Senior Vice President of Liberty Technologies, Inc. and from
1988 to 1993 he served as President and Chief Executive Officer of
Barnard and Burk Group Inc.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1995, the Board held ten 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 on which
he served.
The Board has an Audit Committee composed of Preston A. Peak
(Chairman), Sangwoo Ahn and Ralph A. Rehm. The functions of the Audit
Committee, which held two meetings during 1995, include planning and fee
estimate approval for the annual audit of the Company's financial statements,
review of the results of the examination by the Company's independent
accountants of the Company's financial statements, and approval of any
non-audit services performed by the Company's independent accountants and
consideration of the effect of such non-audit services on the auditors'
independence. The Board also has a standing Compensation Committee composed of
James R. Whatley (Chairman), Charles R. Cox and Ralph A. Rehm. The function
of the Compensation Committee, which met four times in 1995, 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.
4
<PAGE> 7
The Board also has a Nominating Committee, composed of all of the
non-employee Directors, which has the duty and responsibility to consider and
recommend future nominees to the Board. The Nominating Committee also
considers nominees recommended by stockholders of the Company. Such
recommendations for 1997 nominees must be submitted in writing by December 1,
1996, to Howard C. Wadsworth, Vice President, Treasurer and Secretary of the
Company, 2435 North Central Expressway, Richardson, Texas 75080. 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.
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, 1995, 1994 and 1993 to the chief executive
officer and the four most highly compensated executive officers of the Company
whose cash compensation in 1995 exceeded $100,000 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------- ------------
All Other
Name and Salary Bonus Number of Compensation
Principal Position Year (1) (2) Options/SARS (3)
------------------ ----- ------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John R. Barnes 1995 $ 313,296 $ 7,788
Chairman of the Board, 1994 313,296 7,788
President and Chief 1993 313,296 9,388
Executive Officer
Edward D. Doherty 1995 190,633 $ 133,100 6,096
Senior Vice President 1994 180,417 40,000 6,833
1993 180,000 88,000 7,442
Jere M. Denton 1995 190,633 2,588 7,674
Senior Vice President 1994 180,417 37,000 7,674
1993 180,000 12,000 8,271
Howard C. Wadsworth 1995 170,833 30,000 3,288
Vice President, 1994 150,833 25,000 3,305
Treasurer and Secretary 1993 150,000 3,174
Tony M. Regan 1995 101,667 10,000 4,006
Controller
</TABLE>
- ----------------------
(1) Includes compensation representing employee contributions to the
Company's thrift, 401(k), and health benefits plans, as applicable.
(2)
RepresenannuincentiboamounearndurtyeshowhiamounwpafollowiyeunleotherwinAmo
un19incluadditionnon-recurrbonawaMessrDentWadswor$25,eathwearned during
1993 and 1994, and were paid during 1994, for performance and effort in
connection with a foreign assignment.
5
<PAGE> 8
(3) Includes the Company's payments to its defined contribution thrift plan
and the imputed value of Company-paid group term life insurance for
coverage in excess of $50,000. The defined contribution plan covers all
full-time domestic employees of the Company and allows for employee
contributions of up to 12% of pay, which may be directed to a variety of
investments. Contributions to the plan are matched by the Company with
Common Stock at a rate of 50% for Company Common Stock investments and
25% for other investments. The Company also contributes the equivalent
of an additional 2% of pay to the plan investment(s) of choice for each
participant.
OPTIONS/SAR'S GRANTED DURING LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total
Granted Computed Value Using
Number of Options/ To Employees Exercise Price Expiration Black Scholes Option
Name SAR's Granted During Year ($/Share) Date Pricing Model (1)
---- ------------------ ------------ -------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Howard C. Wadsworth 30,000 17.1% $1.75 March 21, 2005 $22,532
Tony M. Regan 10,000 5.7% $2.50 June 15, 2005 $10,457
</TABLE>
(1) The assumptions used in the above Black Scholes calculation include a
five-year expected life for the options, stock price variance
(volatility) based on weekly average variance for a five-year period, a
risk free rate of return based on the 30 year U.S. Treasury bill rate for
the expected option life and exercise of options at the end of the
expected life of the options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options Held at Fiscal In-the-Money
Shares Year End Options at Fiscal Year End
Acquired on Value --------------------------- --------------------------
Name Exercise (1) Realized Exercisable Unexercisable Exercisable Unexercisable
- --------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John R. Barnes -0- $ -0- 315,000 135,000 $ -0- $ -0-
Edward D. Doherty -0- -0- 250,000 -0- -0- -0-
Jere M. Denton -0- -0- 183,936 -0- 18,750 -0-
Howard C. Wadsworth -0- -0- 65,000 30,000 -0- 15,000
Tony M. Regan -0- -0- 15,000 10,000 -0- -0-
</TABLE>
(1) There were no options or SAR's exercised by the named executive officers
during 1995.
DIRECTORS' FEES
In 1995, each member of the Board 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. Additionally, as of March 29,
1996, outside Directors had been granted non- qualified options to purchase a
total of 190,000 shares of Common Stock at an average price of $3.11 per share,
representing 100% of the fair market value of the Common Stock on the
respective dates of grant. These options each provide for the expiration of
such options 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, whichever is
sooner. At March 29, 1996, Messrs. Ahn, Peak and Whatley held options to
purchase
6
<PAGE> 9
50,000 shares each, Mr. Rehm held options to purchase 30,000 shares and Mr. Cox
held options to purchase 10,000 shares of the Company's Common Stock.
CERTAIN TRANSACTIONS
During 1995, Mr. Rehm, who is currently a Director of the Company and is
standing for reelection, performed special foreign and other assignments on
behalf of certain of the Company's subsidiaries. Mr. Rehm was paid a total of
$54,500 in 1995 as remuneration for such services and he was reimbursed for
appropriate travel expenses.
TERMINATION AGREEMENTS
From time to time, the Company has entered into termination agreements with
key employees of the Company and its subsidiaries which provide 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 are 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 the Company's Common Stock, or (ii) any shareholder or
other person or corporation makes a tender offer for shares of the Company's
Common Stock. 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 the Company's Common Stock is 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, Doherty, Lahey and Wadsworth
have termination agreements which provide that in the event that their
employment is terminated as a consequence of a change of 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, a total of nine officers and other employees of the Company and its
subsidiaries have entered into such termination agreements with the Company. If
a change of control of the Company (as defined above) were to occur at the
present time, an aggregate of $3,678,000 would be payable to these individuals.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Whatley and Rehm are both former executive officers 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. The Compensation Committee (the "Committee") is composed of three
independent, non-employee Directors, though Messrs. Whatley and Rehm have
previously served as officers 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 (the "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
Exchange Act of 1934.
In the Committee's opinion, levels of executive compensation should
generally be based upon the performance of the Company, the contributions of
individual officers to such performance and in comparison to persons with
comparable responsibilities in business enterprises similar in size or nature
to the Company. The Committee believes that compensation plans should align
executive compensation with returns to stockholders, giving due consideration
to the
7
<PAGE> 10
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 executive officers of the Company consists
primarily of base salaries and the opportunity to participate in certain
incentive arrangements, including the 1994 Stock Incentive Plan (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 ("Series
C Preferred"). Certain executive officers have also previously participated in
the Company's 1984 Stock Option Plan (the "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.
Further, consistent with 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. The plan also provides an incentive to employees of the
Company, including the Named Executive Officers, who elect to tie their own
financial interests, in part, to those of the Company's stockholders by
offering larger employer-matching contributions to employee contributions to
the plan that are invested in the Company's Common Stock than employee
contributions that are invested in other options provided under the plan.
The base salaries of the Company's executive officers are based upon an
assessment of each individual's performance, experience and other factors which
are believed to be relevant in comparison with compensation data contained in
published and well recognized surveys. The Committee believes that the
salaries and total compensation of the Company's executive officers ranks
within close proximity to the median level of most of the comparative data.
In addition to the foregoing, three of the Company's executive officers,
Messrs. Denton, Doherty and Lahey, are each eligible to receive, on a year to
year basis, an incentive bonus based upon the actual results achieved, as
compared to budget, in a given fiscal year by the subsidiaries of the Company
that are under their respective direct supervision. These incentive
arrangements have been extended to such executive officers for 1996. The
Committee believes that an improvement in earnings from the prior year and a
comparison of actual performance versus budget are appropriate standards for
measuring subsidiary performance and directly links the individual
participant's total potential remuneration with the accomplishment of
established growth targets.
As stated above, the Company's compensation system for its executive
officers provides additional incentive for stock growth and total stockholder
return through the use of plans whose benefits depend upon the performance of
the Company's Common Stock. Stock options have been granted, from time to
time, to executive officers and other employees of the Company pursuant to the
1984 Option Plan and the 1994 Stock Incentive Plan, primarily based upon the
executive's or employee's ability to further the Company's future business
objectives. The 1994 Stock Incentive Plan was adopted by the Company and
approved by the stockholders to replace the 1984 Option Plan, which expired in
1994. Accordingly, while options under the 1984 Option Plan remain
outstanding, no new options have been granted since 1994. Stock options under
the 1994 Stock Incentive Plan were granted in 1995 to two of the Named
Executive Officers, Messrs. Wadsworth and Regan, after the Committee had
reviewed and taken into consideration their respective relative accountability,
anticipated performance requirements and contributions to the Company. All
outstanding options that have been granted pursuant to these plans 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. Additionally, shares of the Company's
Series C Preferred Stock were issued to certain executive officers of the
Company in 1991, but no further awards have been made since then. 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.
Compensation Committee
James R. Whatley, Chairman
Charles R. Cox
Ralph A. Rehm
8
<PAGE> 11
PERFORMANCE GRAPH
The following graph compares, for the period January 1, 1991 to
December 31, 1995, the cumulative total stockholder return on the Common Stock
of the Company with the New York Stock Exchange Market Index, an industry-base
index prepared by Media General Financial Services, Inc. and a "peer group"
index that had been used for stock performance graph comparison purposes in the
Company's Proxy Statement for the 1994 and prior fiscal years. The
industry-based index is comprised of companies that share the same Standard
Industrial Classification ("SIC") code as the Company, which consists of
companies that offer a diverse array of services and have comparable market
capitalization to the Company. The former "peer group" companies are ABM
Industries, Buckeye Partners LP, GATX Corp., Safety-Kleen Corp., Santa Fe
Pacific Pipe Line Partners, L.P. and Team, Inc. The Company determined the
selected SIC comparison to be more appropriate for inclusion in the stock
performance graph as a result of the increased contribution by the Company's
industrial services segment and the sale in 1995 of a portion of the units held
by the Company (through its subsidiaries) in the pipeline and terminaling
services partnership controlled by the Company. The graph assumes an initial
investment of $100 and the reinvestment of all dividends.
[GRAPH]
<TABLE>
<CAPTION>
Kaneb Services, Inc. MYSE Market Index "Peer Group" Index Industry Index
<S> <C> <C> <C> <C>
100.00 100.00 100.00 100.00
1991 117.24 129.41 108.59 121.82
1992 89.66 135.50 114.44 101.05
1993 79.31 153.85 113.75 95.86
1994 58.62 150.86 114.70 67.44
1995 67.41 195.61 128.87 84.51
</TABLE>
MARKET PRICE OF COMMON SHARES
The closing price of the Company's Common Stock on the New York Stock
Exchange on March 15, 1996 was $2.50 per share.
9
<PAGE> 12
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, 1996. Price Waterhouse, the
Company's independent auditors for the calendar year ended December 31, 1995,
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
1997 must be received by the Company, addressed to Howard C. Wadsworth, Vice
President, Treasurer and Secretary of the Company, 2435 North Central
Expressway, Richardson, Texas 75080, no later than December 1, 1996 to be
included in the Proxy Statement and form of proxy relating to that meeting. If
the date of the 1997 annual meeting is advanced by more than 30 calendar days
or delayed by more than 90 calendar days from the date of the 1996 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 judgment on such matters. A
copy of the Company's 1995 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 12, 1996
10
<PAGE> 13
KANEB SERVICES, INC.
PROXY - ANNUAL MEETING OF STOCKHOLDERS - MAY 30, 1996
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 30, 1996 at 9:00 a.m., Mountain Time, at 321
Seventeenth Street, Denver, Colorado 80202 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.
<TABLE>
<S> <C>
1. Election of the six directors who are to be elected by the holders of Common Stock: Sangwoo Ahn, John R. Barnes,
Charles R. Cox, Preston A. Peak, Ralph A. Rehm and James R. Whatley
[ ] FOR ALL NOMINEES [ ] WITHOUT AUTHORITY TO
(except as marked below) VOTE FOR ALL NOMINEES LISTED
WITHHELD FOR THE FOLLOWING ONLY (WRITE THE NAME OF THE NOMINEE(S) ON THE SPACE BELOW)
----------------------------------------------------------------------------------
2. 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 12, 1996, relating to such meeting, receipt of which is
hereby acknowledged.
The shares represented by this proxy will be voted as directd by the stockholder. If no direction is made, this proxy will be
voted FOR all Nominees.
--------------------------------------------------
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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 stockholder is
a corporation, please sign the full corporate
name, by duly authorized officer. If shares are
held jointly, each stockholder named should sign.
Dated , 1996
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