Exhibit 10.4

April 22, 1996



__________________________
__________________________
__________________________
__________________________


         Re: Repricing of Certain "Underwater" Stock Options
             Agreement of ______________,__________ Shares, Exercise Price $____

Dear  Mr._________________________:

On April 20, 1996, the Compensation  Committee of Kaneb Services Inc.'s Board of
Directors  approved a program  whereby  certain  previously  issued stock option
agreements having an exercise price significantly above recent market prices may
be amended to reflect an exercise  price of $2.625,  the closing market price on
April 22, 1996 which is the effective date of the program.

Your stock option agreement dated ________________, referenced above is eligible
to be amended  under this  program.  Under the terms of the  agreement,  you are
currently  vested in  ______________  option  shares with an  exercise  price of
$_______ per share. The remaining shares covered by this agreement are currently
scheduled  to vest between the date of this letter and  __________________.  The
ability to exercise shares under this agreement is currently scheduled to expire
no later than ____________________.

Should you choose to amend the existing agreement, in the manner contemplated by
the Compensation  Committee,  you will forfeit any and all vesting rights to the
__________________   vested   shares  shown  above.   Further,   all   remaining
_____________  unvested shares will not vest according to the schedule set forth
in the original agreement,  the exercise price on all __________________  shares
will be changed to $2.625 per share and the  expiration  date  (excluding  other
forfeiture  provisions of the original agreement which remain unchanged) will be
April 21, 2006.  The option shares in the amended  agreement  will not be vested
(you will have no exercise rights in any of the ______________ option shares) on
the  date of  amendment.  Vesting  may  occur  under  one of the  two  following
schedules:

1. You will be  eligible  to  receive  vesting  at the rate of 20% per year from
April 22, 1996, the effective date of the amendment. Vesting will occur when the
30  consecutive  day  average of the  closing  price of the stock is equal to or
above the exercise  price of the  original  agreement  ($______ on  ____________
shares) as shown above.  Time of achievement  of the 30 consecutive  day average
required  for vesting  will apply to the year (from  April 22 through  April 21)
during which the first day of the 30 consecutive day average occurs. When and if
such  stock  price  level  is  achieved,  you  will  vest  cumulatively  on  the
corresponding option shares pursuant to the following schedule:


            Time of Achievement                                 Percent Vested
       (of 30 consecutive day average)                            (Cumulative)
       -------------------------------                           -------------
       a.  April 22, 1996 through April 21, 1997                        0%
       b.  April 22, 1997 through April 21, 1998                       20%
       c.  April 22, 1998 through April 21, 1999                       40%
       d.  April 22, 1999 through April 21, 2000                       60%
       e.  April 22, 2000 through April 21, 2001                       80%
       f.  After April 21, 2001                                       100%

For example,  assume the following  scenario,  the vesting  criteria is achieved
from April 22, 1998  through  April 21, 1999 (two but less than three years from
the effective date of amendment) and the 30 consecutive day average  requirement
is not met again until after April 21, 2000 but before April 22, 2001, (four but
less than five years from the effective date of the amendment) and finally,  the
vesting criteria is not met again until after 5 years.

In this example the option holder would become 40% vested on the last day of the
30-day period during which the Company's  common stock closing price averaged an
amount equal to or greater than the exercise  price of the  agreement  which was
amended (i.e.,  during period (c), identified above) and would remain 40% vested
until the vesting  criteria was again met between the 4th and 5th  anniversaries
(period (e) above),  at which time he would  become 80% vested.  He would remain
80%  vested  until the  criteria  was again met after 5 years,  at which time he
would be 100% vested.

2. In any event,  regardless  of the above  schedule and vesting  criteria,  the
amended  grant (if still  outstanding)  will  become  exercisable  in full (100%
vested),   ten  (10)  years  from  the  date  of   amendment   or  upon   death,
life-threatening  disability,  Change of Control or Potential  Change of Control
(as defined in the original agreement) or normal retirement after age 65.

As you are currently vested in __________________ of the ________________ shares
covered by the existing  agreement,  your decision  whether or not to amend this
agreement is entirely voluntary. If you amend your original agreement,  you will
forfeit all original vesting rights in all  _______________  shares,  whether or
not currently vested in such shares. After the amendment, if item 2 above (which
will  substantially  delay vesting) is not met, shares in the amended  agreement
will not be vested unless the 30 consecutive day average of the closing price of
the  stock is  equal  to or  above  the  original  agreement  exercise  price of
$________  per share.  Even then,  only a portion of shares may be vested due to
the date the  criteria  is met as  described  in item 1.  Please  consider  your
decision  whether  or not to amend  the  agreement  carefully.  The  company  is
entirely  neutral  regarding  your  decision,  but  wants to make  this  program
available to you on a voluntary basis.

Only the terms  specifically  contained in this letter will amend and  supersede
those terms in the  original  agreement.  All other  provisions  of the original
agreement  will  remain  unchanged.  In order to  effect  the  amendment  of the
original  agreement under the terms provided herein,  please execute one copy of
this  letter in the  space  provided  below and  return it to me within 30 days.
Please retain the additional  copy of the letter for your file.  Should you have
any questions  regarding  this  amendment or the  applicable  agreement,  please
contact me.

Very truly yours,


William H. Kettler, Jr.
Director of Human Resources

For and in consideration of the mutual covenants and conditions described above,
I hereby agree to voluntarily amend the ___________ share stock option agreement
of ____________ to incorporate the terms described herein.


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