CERTIFICATION OF THE DESIGNATION,
 PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS,

AND THE QUALIFICATIONS, LIMITATIONS OR  RESTRICTIONS THEREOF, WHICH HAVE
NOT BEEN SET FORTH IN THE CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT

                                 THEREOF, OF THE

          ADJUSTABLE RATE CUMULATIVE CLASS A PREFERRED STOCK, SERIES F
                               (WITHOUT PAR VALUE)

                                       OF

                              KANEB SERVICES, INC.
                         PURSUANT TO SECTION 151 OF THE

                GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

    The undersigned  DOES HEREBY CERTIFY that the following  resolution has been
typographically  corrected  to  accurately  reflect the  resolution  as was duly
adopted by the Board of Directors of the Corporation, at a meeting duly convened
and held on June 12, 1997, at which a quorum was present and acting throughout:

         "RESOLVED,  that  1,000  shares  of  the  total  authorized  amount  of
5,000,000  shares of the Class A Preferred Stock of the Corporation be issued in
and constitute a single series  designated  "Adjustable  Rate Cumulative Class A
Preferred Stock,  Series F" (hereinafter  called "the Series" or "this Series"),
the shares of the Series to have the voting  powers,  designations,  preferences
and   relative,   participating,   optional  or  other   special   rights,   and
qualifications,  limitations  or  restrictions  set forth in the  Certificate of
Incorporation  of the  Corporation,  as it may be amended from time to time, and
hereinafter set forth:

         (a)  Designation and Rank.

         (1) The designation of the series of Class A Preferred Stock created by
    this  resolution  shall be  "Adjustable  Rate  Cumulative  Class A Preferred
    Stock,  Series F" and the number of shares constituting this Series shall be
    1,000.  Shares of this Series  shall have a stated value of $1.00 per share.
    The  number of  authorized  shares of this  Series may be reduced by further
    resolution  duly  adopted  by the Board and by the  filing of a  certificate
    pursuant to the  provisions of the General  Corporation  Law of the State of
    Delaware stating that such reduction has been so authorized,  but the number
    of authorized shares of this Series shall not be increased.

         (2)  This  Series  shall  rank  on  a  parity  with  the  Corporation's
    outstanding   Adjustable  Rate  Cumulative  Class  A  Preferred  Stock,  12%
    Convertible  Class  A  Preferred  Stock,   Series  D,  and  Adjustable  Rate
    Cumulative Class A Preferred Stock, Series C, as to payment of dividends and
    distribution  of assets upon the  dissolution,  liquidation or winding up of
    the Corporation.

         (b)  Dividends.

         (1) The Annual  Dividend  (as  hereinafter  defined)  per share of this
    Series for the 1997 calendar year shall be determined as of January 1, 1998,
    and as of each  succeeding  January 1 for  subsequent  calendar  years  (the
    "Determination Date").

         (2) Accrued dividends on the shares of this Series shall be cumulative.
    The first Annual  Dividend,  for calendar year 1997, shall accrue on January
    1, 1998, and the Annual Dividend for 1998 and each succeeding  calendar year
    shall accrue on the January 1 next succeeding such year.  Accrued  dividends
    shall be  payable,  when and as  declared  by the Board,  on April 1 of each
    year,  commencing  April 1, 1998 (a "Dividend  Payment Date").  Each of such
    dividends shall be paid to the holders of record of shares of this Series as
    they appear on the stock  register of the  Corporation  on such record date,
    not exceeding 30 days preceding the payment date thereof,  as shall be fixed
    by the Board.  Accrued and unpaid  dividends may be declared and paid at any
    time,  without reference to any regular Dividend Payment Date, to holders of
    record on such date,  not  exceeding  45 days  preceding  the  payment  date
    thereof, as may be fixed by the Board.

         (3) In  addition  to  dividends  with  respect to shares of this Series
    accruing pursuant to Section 0, additional  cumulative cash dividends at the
    Prime Rate (as  hereinafter  defined)  shall accrue daily on any accrued and
    unpaid Annual Dividend from and after the Dividend Payment Date with respect
    thereto,  and such additional  dividends shall be payable  contemporaneously
    with the payment of such Annual Dividend.  As used herein,  the "Prime Rate"
    means the annual  interest rate charged from time to time by Texas  Commerce
    Bank,  National  Association,  Houston for  unsecured  90-day loans to large
    responsible commercial or industrial borrowers.

         (4) No full  dividends  shall  be  declared  or paid or set  apart  for
    payment on Class A Preferred Stock of any series  ranking,  as to dividends,
    on a parity  with or  junior  to this  Series  for any  period  unless  full
    cumulative dividends have been or contemporaneously are declared and paid or
    declared  and a sum  sufficient  for the payment  thereof set apart for such
    payment on this Series for all dividends accruing on or prior to the date of
    payment of such full  cumulative  dividends.  When dividends are not paid in
    full, as  aforesaid,  upon the shares of this Series and of any other series
    of Class A Preferred  Stock  ranking on a parity as to  dividends  with this
    Series,  all dividends  declared upon shares of this Series and of any other
    series of Class A Preferred  Stock ranking on a parity as to dividends  with
    this  Series  shall be  declared  pro rata so that the  amount of  dividends
    declared per share on this Series and such other series of Class A Preferred
    Stock  shall in all cases bear to each  other the same  ratio  that  accrued
    dividends  per share on the shares of this  Series and such other  series of
    Class A Preferred Stock bear to each other. Holders of shares of this Series
    shall not be entitled to any dividend,  whether payable in cash, property or
    stock, in excess of full cumulative  dividends,  as herein provided, on this
    Series.

         (5) Any dividend payment made hereunder shall first be credited against
    the earliest unpaid dividend hereunder.

         (6)  Following  the  end of  each  calendar  year  of  the  Corporation
    commencing with the year ending December 31, 1998, the Corporation shall add
    to the Cumulative  Deficiency Per Preferred Share account one one-thousandth
    of one percent (0.00001) of EPCS Deficiency, if any, for such calendar year.
    The Annual  Dividend shall be reduced (but not below zero) by the balance of
    the Cumulative  Deficiency  Per Preferred  Share account as reflected on the
    books  of the  Corporation  at the  date  of  determination,  and  any  such
    reduction in the Annual  Dividend  shall be subtracted  from the  Cumulative
    Deficiency Per Preferred Share account on the books of the Corporation.

         (c)  Redemption Upon Dividend Default or Change of Control.

         (1) In the event  that a  Dividend  Default  (as  hereinafter  defined)
    exists,  or upon the  occurrence  of a Change  of  Control  (as  hereinafter
    defined),  each holder of shares of this Series shall have the right, at his
    option (the  "Option"),  to require the  Corporation to redeem the shares of
    this Series owned by such holder at a redemption  price equal to 120% of the
    Redemption Price Per Share.

         (2) The Option  shall be exercised by a holder of shares of this Series
    by surrendering  certificates (the  "Certificates")  representing  shares of
    this  Series  to  the  Corporation  at  its  office  in  Richardson,  Texas,
    accompanied  by a notice  to the  Corporation  that  such  holder  elects to
    exercise the option. The Certificates so surrendered shall be accompanied by
    proper assignments  thereof to the Corporation.  As soon as practicable (and
    in no  event  later  than 10 days)  after  the  receipt  of such  Notice  of
    Exercise,  the Corporation shall issue and shall deliver a certified or bank
    cashier's check in an amount equal to 120% of the Redemption Price Per Share
    (as hereinafter  defined)  multiplied by the number of shares represented by
    the Certificates so surrendered. Such check shall be issued and delivered at
    the Corporation's  principal office in Richardson,  Texas, to the person for
    whose account the Certificates were so surrendered, or on his written order.
    The shares so presented for redemption shall be deemed to have been redeemed
    upon delivery to the holder thereof of full payment of the Redemption  Price
    Per Share.

         (d) Redemption  upon  Liquidation,  Merger  or  Authorization  of Prior
    Preferred.

         (1) The shares of this Series shall be  redeemable,  in whole only,  at
    the option of each holder of shares of this Series,  at the Redemption Price
    Per Share, for a period of 90 days after the Board shall have approved (i) a
    liquidation  of the  Corporation,  (ii) a  merger  or  consolidation  of the
    Corporation  into or with any other  corporation in which the Corporation is
    not the surviving corporation or (iii) the creation,  authorization or issue
    of any shares of any class of stock of the Corporation  ranking prior to the
    shares of this Series as to dividends or distributions upon liquidation,  or
    the  reclassification  of any authorized  stock of the Corporation  into any
    such prior shares, or the creation, authorization or issue of any obligation
    or security  convertible  into or evidencing  the right to purchase any such
    prior shares.  Notice of any such event shall be given by the Corporation by
    first class mail,  postage  prepaid,  mailed not more than 10 days following
    such  approval,  to each holder of record of shares of this Series,  at such
    holder's  address  as  the  same  appears  on  the  stock  register  of  the
    Corporation.

         (2) The option  provided in Section  (d)(1) be exercised by a holder of
    shares of this Series by surrendering Certificates to the Corporation at its
    office in Richardson, Texas, accompanied by a notice to the Corporation that
    such holder elects to exercise such option.  The Certificates so surrendered
    shall be accompanied by proper  assignments  thereof to the Corporation.  As
    soon as  practicable  (and in no event later than 10 days) after the receipt
    of such Notice of Exercise,  the Corporation shall issue and shall deliver a
    certified or bank cashier's check in an amount equal to the Redemption Price
    Per Share multiplied by the number of shares represented by the Certificates
    so   surrendered.   Such  check  shall  be  issued  and   delivered  at  the
    Corporation's principal office in Richardson, Texas, to the person for whose
    account the Certificates  were so surrendered,  or on his written order. The
    shares so presented  for  redemption  shall be deemed to have been  redeemed
    upon delivery to the holder thereof of full payment of the Redemption  Price
    Per Share.

         (e) Mandatory Redemption after January 1, 2002.

         (1) Subject to the further  provisions of this Section  (e)(1),  at any
    time after  January 1, 2002,  the shares of this Series shall be redeemed in
    whole at the Redemption Price Per Share determined as of January 1, 2002. If
    the  Adjusted  Earnings  Delta for the  Corporation's  calendar  year ending
    December 31, 2001 is fifteen  percent  (15%) or more,  then the  Corporation
    shall give notice of such  redemption on such date prior to April 1, 2002 as
    the Corporation's Board of Directors shall determine; otherwise, such notice
    of  redemption  shall be given on such  date  prior to April 1,  2003 as the
    Corporation's Board of Directors shall determine.

         (2) In the event that less than all of the  outstanding  shares of this
    Series are to be redeemed  pursuant to Section (e)(1),  the number of shares
    to be redeemed  shall be determined  by the Board,  and such shares shall be
    redeemed pro rata.

         (3) At such time as the Corporation shall redeem shares of this Series,
    notice  of such  redemption  shall be given by  first  class  mail,  postage
    prepaid,  mailed  not  less  than 30 nor  more  than 60  days  prior  to the
    redemption  date, to each holder of record of the shares to be redeemed,  at
    such  holder's  address  as the same  appears on the stock  register  of the
    Corporation. Each such notice shall state: (i) the redemption date; (ii) the
    number of shares of this  Series to be  redeemed  and, if fewer than all the
    shares held by such holder are to be redeemed,  the number of such shares to
    be redeemed from such holder;  (iii) the Redemption Price Per Share (and the
    factors used in calculating such amount); and (iv) the place or places where
    certificates  for such  shares  are to be  surrendered  for  payment  of the
    redemption price.

         (4)  Notice  having  been  mailed  as  aforesaid,  from and  after  the
    redemption  date  (unless  default  shall  be  made  by the  Corporation  in
    providing  money for the payment of the redemption  price)  dividends on the
    shares of this Series so called for  redemption  shall cease to accrue,  and
    said shares shall no longer be deemed to be  outstanding,  and all rights of
    the holders thereof as stockholders of the Corporation  (except the right to
    receive from the  Corporation  the redemption  price plus accrued and unpaid
    dividends to the redemption date) shall cease.  Upon surrender in accordance
    with said notice of the  certificates  for any shares so redeemed  (properly
    endorsed or  assigned  for  transfer,  if the Board shall so require and the
    notice shall so state),  such shares shall be redeemed by the Corporation at
    the  redemption  price  aforesaid.   In  case  fewer  than  all  the  shares
    represented by any such certificate are redeemed, a new certificate shall be
    issued  representing  the  unredeemed  shares  without  cost  to the  holder
    thereof.

         (5) Any  shares  of this  Series  which  shall  at any time  have  been
    redeemed or purchased by the Corporation shall, after such redemption,  have
    the status of  authorized  but unissued  shares of Class A Preferred  Stock,
    without  designation as to series until such shares are once more designated
    as part of a particular series by the Board.

    (f)  Liquidation Rights.

         (1) Upon the dissolution, liquidation or winding up of the Corporation,
    whether  voluntary or involuntary,  the holders of the shares of this Series
    shall be entitled to receive  out of the assets of the  Corporation,  or the
    proceeds thereof, cash in the amount of the aggregate stated value per share
    of the  outstanding  shares of this Series plus a sum equal to all dividends
    (whether or not declared) on such shares  accrued and unpaid  thereon to the
    date of final  distribution  before any payment or  distribution of any kind
    shall be made on the  Common  Stock or on any other  class of stock  ranking
    junior to the Class A Preferred Stock as to assets.

         (2)  Neither  the  sale of all or  substantially  all the  property  or
    business  of  the  Corporation,  nor  the  merger  or  consolidation  of the
    Corporation   into  or  with  any  other   corporation   or  the  merger  or
    consolidation of any other  corporation into or with the Corporation,  shall
    be deemed to be a  dissolution,  liquidation  or winding  up,  voluntary  or
    involuntary, for the purposes of this Section.

         (3) After the  payment to the  holders of the shares of this  Series of
    the full preferential  amounts provided for in this Section,  the holders of
    this  Series as such  shall  have no right or claim to any of the  remaining
    assets of the Corporation.

         (4)  In  the  event  the  assets  of  the  Corporation   available  for
    distribution  to the holders of shares of this Series upon any  dissolution,
    liquidation  or  winding  up  of  the  Corporation,   whether  voluntary  or
    involuntary,  shall be insufficient to pay in full all amounts to which such
    holders are entitled pursuant to Section (f)(1), no such distribution  shall
    be made on  account  of any  shares of any other  class or series of Class A
    Preferred Stock ranking on a parity with the shares of this Series upon such
    dissolution,  liquidation  or winding up unless  proportionate  distributive
    amounts shall be paid on account of the shares of this Series,  ratably,  in
    proportion to the full  distributable  amounts for which holders of all such
    parity shares are respectively  entitled upon such dissolution,  liquidation
    or winding up.

         (g) Ranking of Classes of Stock.  Shares of this Series shall rank on a
    parity as to dividends and upon liquidation with shares of the Corporation's
    Adjustable Rate Cumulative Class A Preferred Stock, 12% Convertible  Class A
    Preferred  Stock,  Series D and Adjustable Rate Cumulative Class A Preferred
    Stock, Series C. For purposes of this resolution,  any stock of any class or
    classes of the Corporation shall be deemed to rank:

         (1) prior to the shares of this Series,  either as to dividends or upon
    liquidation, if the holder of such class or classes shall be entitled to the
    receipt  of  dividends  or  of  amounts   distributable   upon  dissolution,
    liquidation  or  winding  up of the  Corporation,  as the  case  may be,  in
    preference of or priority to the holders of shares of this Series;

         (2) on a parity with shares of this  Series,  either as to dividends or
    upon liquidation,  whether or not the dividend rates, dividend payment dates
    or redemption or liquidation prices per share or sinking fund provisions, if
    any, are different  from those of this Series,  if the holders of such stock
    shall be entitled to the receipt of  dividends  or of amounts  distributable
    upon dissolution,  liquidation or winding up of the Corporation, as the case
    may be, in  proportion to their  respective  dividend  rates or  liquidation
    prices,  without  preference  or  priority,  one over the other,  as between
    holders of such stock and the holders of shares of this Series; and

         (3) junior to shares of this  Series,  either as to  dividends  or upon
    liquidation, if such class shall be Common Stock or if the holders of shares
    of this  Series  shall be  entitled  to receipt of  dividends  or of amounts
    distributable   upon   dissolution,   liquidation   or  winding  up  of  the
    Corporation, as the case may be, in preference of or priority to the holders
    of shares of such class or classes.

         (h) Issuance of Common Stock Upon Redemption.  Notwithstanding anything
    to the contrary herein, at the sole and exclusive option of the Corporation,
    up to  one-half of any  redemption  payment  that may be made under  Section
    (c)(2),  Section  (d)(2)  or  Section  (e) may be  made  in the  form of the
    issuance  and  delivery  to the holder of shares of this Series of shares of
    the Common Stock, no par value, of the Corporation;  provided however,  that
    the Corporation  shall not have such option in the case of any redemption of
    shares of this  Series  resulting  from a Change of  Control.  Any shares of
    Common Stock of the  Corporation  so issued and  delivered  pursuant to this
    Section (h) shall be deemed to have a cash value equal to the last  reported
    sales price thereof in the primary  trading  market  therefor on the trading
    day next  preceding (i) the date of surrender of  certificates  representing
    shares of this Series  pursuant to Section  (c)(2)or  Section (d)(2) or (ii)
    the delivery of a notice of redemption  pursuant to Section  (e)(3),  as the
    case may be. Any  shares of Common  Stock of the  Corporation  so issued and
    delivered  must be  registered  under  the  Securities  Act of the 1933 (the
    "Act") so that such  shares  may be resold  without  the  imposition  of any
    holding period under Rule 144 under the Act or any successor to such rule.

         (i) Conversion or Exchange.  The holders of shares of this Series shall
    not have any rights  herein to convert  such shares  into or  exchange  such
    shares  for shares of any other  class or classes or of any other  series of
    any class or classes of capital stock of the Corporation.

         (j) Voting.  The shares of this Series shall not have any voting powers
    either  general or special,  except that,  unless the vote or consent of the
    holders of a greater  number of shares  shall then be required  by law,  the
    affirmative vote or consent of the holders of at least 66-2/3% of all of the
    shares of this Series at the time outstanding,  given in person or by proxy,
    either in writing or by a vote at a meeting  called for the purpose at which
    the  holders  of shares of this  Series  shall vote  together  as a separate
    class,  shall be necessary  for  authorizing,  effecting or  validating  the
    amendment,  alteration or repeal of any of the provisions of the Certificate
    of  Incorporation or of any certificate  amendatory  thereof or supplemental
    thereto (including any Certificate of Designation, Preferences and Rights or
    any similar  document  relating  to any series of Class A  Preferred  Stock)
    which would adversely affect the powers,  preferences,  privileges or rights
    of this Series.

         (k) Definitions.  For the purposes hereof, the following terms have the
    following respective meanings:

         "Adjusted  Earnings" for a calendar year of the  Corporation  means (i)
    EPCS for such year multiplied by (ii) 33,334,951.

         "Adjusted  Earnings Delta" for a calendar year of the Corporation means
    the percentage  increase or decrease in the Adjusted  Earnings for such year
    over the  Adjusted  Earnings  for the next  preceding  calendar  year of the
    Corporation.

         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.

         "Annual  Dividend" means (A) the product of (i) one  one-thousandth  of
    one percent  (0.00001)  multiplied  by (ii) the amount by which EPCS for the
    calendar year of the Corporation immediately preceding the year in which the
    determination  is made exceeds EPCS for the next preceding  calendar year of
    the  Corporation  multiplied  by (iii)  33,334,951,  minus (B) any reduction
    required by Section (b)(6) hereof.

         An  "Associate"  of a  specified  Person  is  (i)  any  corporation  or
    organization   (other  than  the   Corporation  or  any  Subsidiary  of  the
    Corporation)  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  Corporation  or any  Subsidiary  or
    Parent (defined below) of the Corporation.

         "Average Adjusted Earnings Delta Factor" means the percentage  obtained
    by  subtracting  20  percentage  points  from the  arithmetical  mean of the
    Adjusted  Earnings  Delta for each calendar year of the  Corporation  in the
    period  commencing with the year ending December 31, 1997, and ending on the
    December 31 next preceding the date of determination.

         A Person is a "Beneficial  Owner" of Securities of the  Corporation  if
    such Person or any of such Person's  Affiliates or Associates 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
    Corporation or the power to dispose or direct the  disposition of Securities
    of the Corporation.  A Person shall be the "Beneficial  Owner" of Securities
    of the  Corporation of which such Person or any of such Person's  Affiliates
    or Associates has the right to become the  "Beneficial  Owner" (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.

         "Change  of  Control"  means the  occurrence  of any one or more of the
    following events:

               (i) any Person becomes the Beneficial  Owner of Securities of the
         Corporation  having 20% or more of the total votes that may be cast for
         the election of directors of the Corporation; or

               (ii) the  stockholders  of the  Corporation  approve  the sale or
         other  disposal  of all or  substantially  all  of  the  assets  of the
         Corporation  (including a plan of  liquidation or  dissolution)  or the
         merger  or  consolidation  of the  Corporation  with  or  into  another
         corporation in which the Corporation is not the surviving  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 Corporation  immediately prior
         to  such  event  shall  cease  to   constitute   the  majority  of  the
         Corporation's Board of Directors; or

               (iv)  entering  into  an  agreement  by  the   Corporation,   the
         consummation of which would result in an event specified in clause (i),
         (ii) or (iii) of this sentence.

         "Cumulative  Adjusted  Earnings" means the sum of the Adjusted Earnings
    for each calendar year of the Corporation in the period  commencing with the
    year ending  December 31, 1997, and ending on the December 31 next preceding
    the date of determination.

         "Cumulative Deficiency Per Preferred Share" means the balance from time
    to time of the account by that name to be maintained by the  Corporation  in
    accordance with Section (b)(6).

         A "Dividend Default" shall exist whenever an Annual Dividend shall have
    accrued  and remain  unpaid  for more than 10 days  following  the  Dividend
    Payment Date with respect thereto.

         "EPCS" for a calendar year of the  Corporation  means the fully diluted
    earnings  per common  share of the  Corporation  as  reported in the audited
    financial  statements  of the  Corporation  for such year,  as  adjusted  to
    exclude the effects on fully  diluted  earnings  per common  share of (i)any
    gains or losses in excess of $1.0 million resulting from the sale of capital
    assets,  or  (ii)  any  gains  or  losses  from  the  sale of any  class  of
    partnership interests in Kaneb Pipe Line Partners,  L.P., a Delaware limited
    partnership.

         "EPCS Deficiency" means the product of (i) the amount, if any, by which
    EPCS  for a  calendar  year of the  Corporation  is less  than  EPCS for the
    immediately  preceding  calendar year of the Corporation  multiplied by (ii)
    33,334,951.

         A "Parent"  of a  specified  Person is an  Affiliate  controlling  such
    Person directly, or indirectly through one or more intermediaries.

         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
    Corporation  shall be deemed a "Person".  Excluded  from the  definition  of
    "Person" are the Corporation and any Affiliates of the Corporation,  whether
    individually or in any combination.

         "Redemption Price Per Share" means (A)(i) Cumulative  Adjusted Earnings
    multiplied by (ii) the Average Adjusted  Earnings Delta Factor multiplied by
    (iii) seven and  one-half  basis  points  (.00075)  plus (B) any accrued and
    unpaid  dividends  on a share of this  Series;  provided  however,  that the
    Redemption  Price Per Share  shall  not be less  that the  stated  value per
    share.

         "Securities"  of the  Corporation  means,  unless the context  requires
    otherwise,  equity securities of the Corporation or any Subsidiary or Parent
    or any other securities or instruments  that entitle the holder thereof,  by
    trust,  proxy  or any  other  agreement,  arrangement  or  understanding  or
    otherwise,  to  vote  in the  election  of  directors  of  the  Corporation.
    "Securities"  shall also include any securities or instruments  that entitle
    the  holder  thereof to  acquire,  upon  exercise,  exchange  or  conversion
    thereof, Securities of the Corporation.

         (l) Adjustment Upon Change in Common Stock. Notwithstanding anything to
    the contrary herein,  the Annual Dividend and the Redemption Price Per Share
    shall  be  proportionately  adjusted  as  the  Board  of  Directors  of  the
    Corporation  shall from time to time determine in its sole  discretion to be
    equitably  required  to exclude the  effects of any stock  dividends,  stock
    split-ups,  or subdivisions or  consolidations  of shares of Common Stock of
    the Corporation  effected  subsequent to January 1, 1997. Any  determination
    under this Section (1) shall be final and conclusive.

    IN WITNESS WHEREOF, Kaneb Services, Inc. has caused its corporate seal to be
hereunto  affixed and the certificate to be signed by Howard C.  Wadsworth,  its
vice  president,  and the same to be attested by Renata  Fancher,  its assistant
secretary, this 13th day of June, 1997.

                              KANEB SERVICES, INC.

                              By  Howard C. Wadsworth, Vice President

[Corporate Seal]

ATTEST:

Renata Fancher, Assistant Secretary