Document:

Exhibit 10.1
                                      LEASE

         THIS LEASE, dated March 23, 2001, is made and executed by MINSON
COMPANY, a limited partnership, of which Stuart A. Bartleson and Bartecknon, a
limited partnership, are the General Partners (herein called "Landlord") and:

                        INTERNATIONAL BROADCASTING CORP.

(herein called "Tenant", without regard to gender or number).

                                   WITNESSETH:

1.       USE  (NON-EXCLUSIVE).  The Landlord hereby leases to Tenant and Tenant
hereby hires from  Landlord  certain  premises with  appurtenances  described as
hereinafter set forth, and for no other use without  Landlord's written consent,
for the purpose of conducting therein:

             An Business Office for International Broadcasting Corp.

2. PREMISES. The premises leased to Tenant, together with appurtenances,
hereinafter referred to as the "premises," situated in the Shopping Center known
as Oak Knolls Village North located at the northeast corner of Bradley Road and
Clark Avenue, Santa Maria, California and are more particularly described as
follows:

                            1125 EAST CLARK, SUITE A
                          SANTA MARIA, CALIFORNIA 93455

                      With Approximately 1,200 Square Feet.

3. TERM. The term of this Lease shall be for a period of ONE (1) year,
commencing on APRIL 1, 2001 or on such earlier date as Tenant actually takes
possession of the premises, and ending on MARCH 31, 2002. Provided that if the
term of this shall commence on a dates other than the first day of a calendar
month then the term hereof shall be extended for the number of days between the
commencement date and the end of the month in which that date falls.

3. (a) OPTION TO RENEW. If this lease is not in default, and Tenant notifies
Landlord with an advance notice of 90 days prior to the end of this Lease,
Tenant shall have one Option to renew and extend this Lease with all Terms and
Conditions the same except for the minimum base rent for a period of ONE (1)
year. The monthly rent for this Option period shall be adjusted as per the rent
schedule in section # 4 below.

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4.       RENTAL: Base Rental: ONE THOUSAND AND THREE HUNDRED AND EIGHTY DOLLARS
($1,380) per month.

         Option:           Year 2          Rent  to  increase  by  the CPI-U
                                           (Los Angeles index) for an  inflation
                                           adjustment  but not greater than a 5%
                                           increase. (if Option is  exercised).
                                           When  exercised,  this option period
                                           would commence on April 1, 2002 and
                                           end on March 31, 2003.

         FIRST RIGHT OF REFUSAL            Tenant to have the First Right of
                                           Refusal to Lease space after the
                                           option period expires. Landlord
                                           agrees to present a lease offer on
                                           February 1, 2003 not less than 3
                                           years  with not more than a 5%
                                           increase in rent over the base
                                           monthly rent paid to Landlord in the
                                           option period.

1. Rent Commencing on April 1, 2001.

2. Guaranteed Minimum Monthly Rental. Tenant shall pay to Landlord as minimum
monthly  rental for the premises,  the sum of ONE THOUSAND AND THREE HUNDRED AND
EIGHTY  DOLLARS  ($1,380)  per month  which sum shall be paid in  advance of the
commencement  of the tem of this  Lease and on the  first  day of each  calendar
mouth  thereafter  throughout  the  term of this  Lease.  Said  rental  shall be
prorated for any partial  calendar  month of the term  hereof.  All rental to be
paid by Tenant to  Landlord  shall be in lawful  money of the  United  States of
America and shall be paid without  deduction or offset,  prior notice or demand,
and at such place or places as may be designated  from time to time by Landlord.
On execution and delivery of this Lease,  Tenant shall pay Landlord ONE THOUSAND
AND THREE HUNDRED AND EIGHTY  DOLLARS  ($1,380) per month as minimum  guaranteed
rental for the first mouth of the Lease term.

         LATE RENT/NSF CHARGE: Tenant further agrees to pay a late charge equal
to ten percent (10%) of the monthly rental for all rents received after the 10th
of the month during the term hereof. Rent sent by mail must have arrived in
Landlord's office by the 10th to be exempt from late fee. Any checks returned
Non-Sufficient Funds and not cleared up by the 10th of the month will also be
subject to the 10% late rent charge. With the third NSF check in a 12 mouth
period, Landlord will require Tenant to pay rent or CAM payments with certified
bank checks.

TENANT'S INITIALS    ___________

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4. a   (i)  COST OF LIVING (INFLATION) ADJUSTMENTS.

    The Consumer Price Index to be used is the Los Angeles-Long Beach-Anaheim
Consumer Price Index - all items,  published  monthly by the U.S.  Department of
Labor, Bureau of Labor Statistics. If said Consumer Price Index is discontinued,
then the parties shall  Substitute  therefor any successor index supplied by the
U.S.  Department  of Labor  which  reflects  consumer  price  levels and, if the
parties  cannot  agree on  another  index,  it shall be  determined  by  binding
arbitration.

5.  SECURITY DEPOSIT. A security deposit of ONE THOUSAND THREE HUNDRED & EIGHTY
DOLLARS ($1,380) shall be due when this Lease is submitted to Landlord for it's
signatures; and shall be subsequently retained by the Landlord as a deposit to
secure the faithful performance by Tenant of all of the provisions of this
Lease. Tenant agrees that if the Tenant shall fail to pay the rent when said
rent is due, this security deposit may, at the option of the Landlord, be
applied to any rent due and unpaid, and if Tenant violates any of the other
terms, conditions or covenants of the Lease, the security deposit may be applied
to any damage suffered by Landlord as a result of Tenant's default to the extent
of the amount of damage suffered. Tenants shall immediately on demand pay to
Landlord the portion of the security deposit expended or applied by Landlord as
provided above. Although this security deposit amount equals the equivalent of
the initial term's one month's rent amount, Tenant understands and agrees that
the security deposit is not a rent payment nor is it rent in any form. Tenant
also agrees and understands that if this lease's minimum rent increases by the
CPI as stated in section 4A(i), then this security deposit shall increase by a
figure calculated according to this new rent amount. Tenant agrees to provide
the difference in this new rent amount less the amount of security deposit
already held by Minson Company.

         Nothing contained in this article shall in any way diminish or be
construed to waive any of the Landlord's other remedies as provided by
paragraphs 21 and 22 or by law or in equity. The security deposit shall in no
event be applied to rental except at Landlord's option as herein provided. If
Tenant has fully and faithfully kept and performed all of the terms, covenants
and conditions of this Lease, then Landlord shall return the security deposit to
the Tenant upon expiration of the term hereof. Landlord shall have the right to
commingle said security deposit with other funds of the Landlord. Tenant
understands and agrees that interest will not be paid by Landlord to Tenant on
this deposit.

         Landlord reserves the right to request another month's security deposit
if there are multiple late rents, returned checks with non-sufficient funds
and/or defaults.

6. REAL ESTATE TAXES. In addition to all rentals herein reserved the Tenant
shall pay to Landlord its proportional share of the annual increase in the
building's real estate taxes and assessment levied upon and assessed against the
premises for each year of the term of this Lease over and above the taxes for
the first year of the term hereof during which the premises, including the
improvements thereon, shall have been fully assessed for taxes as completed

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premises by the tax assessor's office. Such increase in taxes shall be payable,
if billed to Tenant, within thirty (30) days after the end of the calendar year
in which each of said fiscal tax years commenced and upon receipt by Tenant of a
statement in writing from Landlord setting forth the amount of such tax
increase. Landlord reserves the right to not bill Tenant annually for these
increases and can, upon election, bill these increases covering several previous
years at one time. Base tax increase billings not paid within thirty (30) days
after billing are subject to interest charges at the rate of ten (10%) percent
per annum.

Landlord agrees to attempt to have the premises separately assessed for tax
purposes, but in the event the premises are not so separately assessed, then and
in such event, the taxes on the premises shall be apportioned according to the
floor area of the premises, including mezzanines, if any, as it relates to the
total floor areas, including mezzanines, of the building or buildings, as the
case may be, for which a separate assessment shall be made, and which building
(or buildings) includes the premises.

Any such tax increase for the year in which this Lease ends shall be apportioned
and adjusted. With respect to any assessment which may be levied against or upon
the premises and which, under the laws then in force, may be evidenced by
improvement or other bonds, or may be paid in annual installments, Tenant shall
be required to pay each year only the amount of such annual installments or
portion thereof constituting a tax increase (with appropriate proration for any
partial year) and shall have no obligation to continue such payments after the
termination of this Lease.

The term "real estate taxes" as used herein shall be deemed to mean all taxes
imposed upon the real property and improvements constituting the premises, and
all assessments levied against said premises, but shall not include personal
income taxes, personal property taxes, inheritance taxes, or franchise taxes
levied against Landlord, but not directly against said property, even though
such taxes shall become a lien against said property.

7. PERSONAL PROPERTY TAXES. During the term hereof Tenant shall pay prior to
delinquency, all taxes assessed against and levied upon fixtures, furnishings,
equipment and all other personal property of Tenant contained in the premises,
and when possible, Tenant shall cause said fixtures, furnishings, equipment and
other personal property to be assessed and billed separately from the real
property of Landlord. In the event any or all of the Tenant's fixtures,
furnishings, equipment and other personal property shall be assessed and taxed
with the Landlord's real property, the Tenant shall pay to Landlord its share of
such taxes within ten (10) days after the delivery to Tenant by Landlord of a
statement in writing setting forth the amount of such taxes applicable to the
Tenant's property.

8. PARKING AND COMMON FACILITIES. Landlord covenants that the common and parking
areas as shown on the attached Exhibit "A" which is made a part hereof, shall be
kept intact and available for the non-exclusive use of Tenant during the full
term of this Lease or any extension of the term hereof, provided that the
condemnation, of any or all of such common and parking areas shall not
constitute a violation of this covenant. Landlord reserves the right to change

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the entrance, exits, traffic lanes, and the boundaries and locations of such
parking area or areas, provided, however, that anything to the contrary
notwithstanding contained in paragraph 8, said parking area or areas shall at
all times provide parking space for not less than 300 vehicles. 1.

1. Prior to the date of Tenant's occupation of the premises, Landlord shall
cause said common and parking area or areas to be graded, blacktopped, lighted,
and appropriately marked and landscaped, and shall cause same to be maintained
in good condition and repair during the entire term thereof.

2. Tenant, for the use and benefit of Tenant, its agents, employees, customers,
licensees and subtenants, shall have the non-exclusive right in common with
Landlord, and other present and future owners, tenants, and their agents,
employees, customers, licensees and subtenants, to use said common and parking
areas during the entire term of this Lease, or any extension thereof, for
ingress and egress, roadway, sidewalk and automobile parking.

3. The Tenant, in the use of said common parking areas, agrees to comply with
such reasonable rules and regulations as the Landlord may adopt from time to
time for the orderly and proper operation of said common and parking areas. Such
rules may include, but not be limited to, the following:

  (1) The restricting of employee parking to a limited, designated area or
areas.  Generally, Landlord requests that employees and proprietors do not park
in the first rows in front of the sidewalks. This allows the customers, clients
and patients of all the tenants easy access to their suites.

  (2) "Service Areas" Tenant agrees that all receiving and delivery of goods and
merchandise and all removal of garbage and refuse shall be made only by way of
the loading areas or such portions of the parking areas as Landlord may
designate from time to time for such use by Tenant, and at such hours as may be
designated by Landlord from time to time.

  (3) Garbage Guidelines: Tenant shall only use shopping center dumpsters for
garbage generated by their normal conduct of business. Garbage from a remodel of
the Tenant's space or from an unusual event shall be removed by Tenant
separately from the normal garbage put into the common dumpsters.

  Any garbage from outside the shopping center brought to the center and dumped
into the common dumpsters, i.e. from the proprietor's or employee's residences,
is absolutely prohibited. Violations of this will result in a breach of lease
being issued.

  (4) Pets: Because of County Ordinances and general health and safety concerns,
no personal pets will be allowed on shopping center property without the express
written permission of Landlord.

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<PAGE>
        (1) CONTRIBUTION OF TENANT TOWARD MAINTENANCE. Tenant shall pay to
Landlord as additional rental hereunder  Tenant's pro-rata share of all expenses
of said common and parking area  facilities and building  common  facilities for
1125 & 1145 E. Clark.  Tenant's pro-rata share of expenses shall be that portion
of all such expenses which is equal to the  proportion  thereof which the number
of square feet of floor area of the premises bears to the total number of square
feet of floor area in the entire Oak Knoll Village North Shopping Center for the
shopping  center  CAM and the  building  CAM  which is  equal to the  proportion
thereof  which the number of square feet of floor area of the premises  bears to
the total number of square feet of floor area in the entire building  located at
1125 & 1145 E.  Clark  Ave.  For the last 24 months,  the  combined  CAM for the
parking lots and the building have  averaged $.20 per foot per month.  This is a
pass-through charge of expenses and may increase or decrease each month.

        It is understood  old agreed the the expense of said common and parking
area  facilities as used herein shall  include,  but not be limited to, all sums
expended by Landlord (excluding  Landlord's overhead) concerning said common and
parking  area  facilities  and all  general  maintenance  and repair  surfacing,
painting,  restriping,  cleaning,  sweeping, and janitorial services,  including
trash  pick-up,   directional  signs  and  other  markers,  lighting  and  other
utilities,  landscapmg  and  ornamental  planting,  real and personal  taxes and
assessments,  adequate public  liability  insurance  (under which Tenant will be
named as additional insured) and all other things necessary to keep and maintain
said common and parking area  facilities in a state of good and sanitary  order,
condition  and repair.  Landlord  shall keep and maintain  accurate and detailed
records of all expenses of said common and parking area  facilities and the same
shall upon demand be made  available  at  reasonable  times at the office of the
Landlord for the  inspection by Tenant.  Common  facilities are due when billed.
Common  facilities  payments not received within thirty (30) days of the date of
billing are subject to a late payment  charge equal to ten percent  (10%) of the
amount billed.

        "Floor Area" means,  separately  with  respect to each  building in the
shopping  center  and  separately  with  respect  to  each  area  leased  by any
particular  lease  executed  by  Landlord  (including  Tenant's  premises),  the
aggregate of the actual number of square feet of area within the exterior  faces
of the exterior walls except party walls as to which the center thereof, instead
of the  exterior,  faces  thereof,  shell be used and except  that the  exterior
building  line shall be used as to all  exterior  entrances  of all  floors.  No
deduction  or  exclusion  shall be made from floor area  otherwise  computed  by
reason of columns, stairs, elevators, escalators, or other interior construction
or equipment within the premises.

9. USES PROHIBITED. Tenant shall not use, or permit said premises, or any part
thereof, to be used for any purpose or purposes other than the purpose or
purposes for which said premises are hereby leased; and no use shall be made or
permitted to be made of said premises, nor acts done, which will increase the
existing rate of insurance upon the building in which said premises will be
located (once said rate is established) or Cause a cancellation of any insurance

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policy covering said building or any part thereof, nor shall Tenant sell or
permit to be kept, used or sold in or about said premises any article which may
be prohibited by standard form of fire insurance policies. Tenant shall at his
sole cost, comply with any and all requirements pertaining to the use of said
premises, of any insurance organization or company necessary for the maintenance
of reasonable fire and public liability insurance, observing said building and
appurtenances. If any act or omission by Tenant causes Landlord's fire insurance
to increase, Tenant shall pay Landlord the cost of such increase.

10. ALTERATIONS. Tenant shall not make, or suffer to be made, any alterations of
the premises, or any part thereof, without the prior witten consent of Landlord,
and any additions to, except movable furniture and trade fixtures, shall become
at once a part of the realty and belong to Lessor. Lessee shall keep the leased
property free from any liens arising out of any work performed, material
furnished, or obligations incurred by Lessee.

    Alterations, once approved by Landlord, must be done in compliance and
with all appropriate and legal building permits from the government agencies
including County and Fire. All to be done by licensed contractors within their
various trades.

TENANTS RESPONSIBILITIES:

1) Phones and Phone System;
2) Interior  Janitorial  Service & Window Cleaning.(Landlord cleans all the
   common areas);
3) Security System (if needed);
4) Furniture & Fixtures.
5) Signs & Signage (Must conform to other center tenants style/design)

11. MAINTENANCE AND/OR REPLACEMENT AND REPAIR. Tenant shall, at all times during
the term hereof, and at Tenant's sole cost and expense, keep, maintain or repair
the suite and other improvements upon the premises in good and sanitary order
and condition (except as hereinafter provided with respect to Landlord's
obligation) including without limitation and regardless ofcause, the
maintenance, replacement and/or repair of any exterior (to your suite only) and
interior doors and locks, door jams, door hardware, door closers, windows
(exterior to your suite only), window casements, glazing; thermostats & service
calls related to merely the incompetent operation thereof, electrical fixtures,
lights & lighting fixtures (60 warranty included), electrical wiring and
conduits within the suite. Tenant hereby waives all rights to make repairs at
the expense of Landlord as provided in Section 1942 of the Civil Code of the
State of California and Tenant hereby waives all rights provided for by Section
1941 of said Civil Code. Tenant shall by no means assume to make repairs or
order repairs to be done and deduct the cost of such repairs from rent or common
area maintenance charges due. Such shortage of rent or CAM shall be deemed a
monetary breach of lease.

         By entering into the premises, Tenant shall be deemed to have accepted
the premises as being in good and sanitary order, condition and repair. Tenant
agrees on the last day of said term, or sooner termination of the Lease, to

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surrender the premises with appurtenances in the same condition as when
received; reasonable use and wear thereof and damage by fire, act of God or by
the elements excepted. Tenant shall periodically sweep and clean the sidewalks
adjacent to the premises, as and when needed.

         Landlord shall at his sole cost and expense, keep and maintain in good
repair the exterior walls, doors, windows, roof, Air-Conditioning and Heating
Systems and sidewalks, provided however, that anything to the contrary
notwithstanding contained in this Lease, the Landlord shall not be requested to
make any repairs to the exterior walls, roof and sidewalks unless and until
Tenant has notified Landlord in writing of the need for such repairs and
Landlord shall have had a reasonable period of time thereafter within which to
commence and complete said repairs. Landlord agrees to use diligence in the
making of said repairs upon receipt of Tenant's notice with regards thereto.
Notwithstanding the above, any damage to the exterior wall, roof and sidewalks
caused by Tenant, his employees or customers, shall be repaired by Tenant at his
cost.

         The plumbing facilities shall not be used for any other purpose than
that for which they are constructed, and no foreign substance of any kind shall
be thrown in the plumbing facilities. The expense of any breakage, stoppage or
damage resulting from a violation of this provision shall be borne by Tenant.

12. COMPLIANCE WITH LAWS. Tenant shall, at his sole cost and expense, comply
with all of the requirements of all municipal, state and federal authorities now
in force or which may hereafter be in force pertaining to the use of said
premises and shall faithfully observe in said use all applicable laws,
regulations and ordinances now in force or hereafter be in force pertaining to
the use of said premises and shall faithfully observe in said use all applicable
laws regulations and ordinances now in force or hereafter be in force.

         Tenant shall not commit, or suffer to be committed, any waste upon the
premises, or any nuisance or other act or thing which may disturb the quiet
enjoyment of any other Tenant in the building in which the premises may be
located or in the shopping center. This includes any sounds, smells or visual
byproducts of tenants business that are exported outside the tenants space.

         NUISANCE: Tenant shall not commit, or suffer to be committed, any waste
upon the premises, or any nuisance or other act or thing which may disturb the
quiet enjoyment of any other Tenant in the building in which the premises may be
located or in the shopping center. This includes any sounds, smells or visual
byproduct of tenants business that are exported outside the tanant's space.

         SOUNDS: Tenant agrees that he/she will control sounds in his/her suite
that may travel to an adjacent tenant. This may include radio or stereo music,
loud talking, arguing, noisy equipment, etc. Upon repeated complaints to
Landlord, tenant shall agree to pay for the cost of sound-proofing to mitigate
the noise or eliminate the source of the problem altogether.

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         ODORS: Tenant agrees that he/she will control odors in his/her suite
that may travel to an adjacent tenant. This may include odors from smoking
(inside or outside if too close to neighboring tenant's door), cooking, etc.
Upon repeated complaints to Landlord, tenant shall agree to pay for the cost of
odor control equipment to mitigate the odors or eliminate the source of the
problem altogether.

13. INDEMNIFICATION OF LANDLORD-LIABILITY INSURANCE BY TENANT. Excepting where
damage or injury to any person or property on the premises at the express or
implied invitation of Tenant proximately results from the negligence of
Landlord, Tenant hereby waives all claims against Landlord for damage to doors,
door hardware, windows, window hardware, goods, wares and merchandise, in, upon,
or about said premises and for injuries to persons in or about said premises,
from any cause arising at any time including damage or injury from a burglary or
holdup or vandalism or rioting or looting; and Tenant will hold Landlord exempt
and harmless from any damage or injury to any person, or the goods, wares and
merchandise of any person; arising from the use of the premises by Tenant, or
fxom the failure of Tenant to keep the premises in good condition and repair, as
herein provided.

         During the entire term of this Lease, the Tenant shall, at the Tenant's
sole cost and expense, but for mutual benefit of Landlord and Tenant, maintain
general public liability insurance against claims for personal injury, death or
property damage occurring in, upon, or about the premises and on sidewalks
directly adjacent to the premises. The limitation of liability of such insurance
shall not be less than five hundred thousand and no/100ths ($500,000.00) dollars
in respect to injury or death of one person, and to the limit of not less than
one million and no/100ths ($1,000,000.00) dollars in respect to any once
accident and to the limit of not less than two hundred fifty thousand and
no/100ths ($250,000.00) dollars in respect to property damage. All such policies
of insurance shall be issued in the name of Tenant and Landlord for mutual and
joint benefit and protection of the parties and shall contain cross-liability
endorsements. Such policies of insurance or copies thereof shall be delivered to
the Landlord and shall contain an endorsement requiring thirty (30) days written
notice from the insurance company to both parties before cancellation or change
in the coverage, people or amount of any policy.

14.      FREE FROM LIENS.  Tenant shall keep the  premises  and the  property in
which the  premises  are situated free from any liens arising out of any work
performed, material furnished, or obligation incurred by Tenant.

15. ABANDONMENT. Tenant shall not vacate or abandon the premises at any time
during the term of this Lease, and if Tenant shall abandon, vacate or surrender
the premises or be dispossessed by process of law, or otherwise, any personal
property belonging to Tenant and left on the premises shall be deemed to be
abandoned, at the option of the Landlord, except such property as may be
mortgaged to Landlord.

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16. SIGNS AND AUCTIONS. Tenant shall not place or permit to be placed any
projecting sign, marquee or awning on the premises without the prior written
consent of Landlord. This includes any painting or posters on or in the windows.
Landlord shall have the right to approve the type and size, location and color
of all signs which Tenant desires to use or place in or upon the premises.
Tenant shall not display or sell merchandise outside the defined exterior walls
and permanent doorways of the premises. Tenant shall maintain the show windows
and signs in a neat and clean condition.

                           TENANTS INITIALS __________

Tenant shall not conduct or permit to be conducted, any sale by auction in, upon
or from the premises, whether said auction be voluntary, involuntary, pursuant
to any bankruptcy or other solvency proceeding.

17. SUBORDINATION. Tenant agrees that this Lease shall be subordinate to any
deeds of trust in the nature of mortgages that may hereafter be placed upon the
premises, to any and all advances made or to be made under them, to the interest
on all obligations secured by them, and to all renewals, replacements, and
extensions of them, provided, however, the beneficiary in such deeds of trust
shall recognize the Lease of Tenant in the event of foreclosure if Tenant is not
in default under the terms of the Lease. If any beneficiary elects to have this
Lease superior to its deed of trust and gives notice of its election to Tenant,
then this Lease shall be superior to the lien of any such deed of trust, whether
this Lease is dated before or after the deed of trust.

18. NEGATION OF  PARTNERSHIP.  Landlord shall not, in any way or for any
purpose,  become a partner of Tenant, in its business or otherwise, or a joint
venturer, or a member of any joint enterprise with Tenant.

19. UTILITIES. Tenant shall before delinquency pay all charges for gas, heat,
electricity, power, telephone services and all other services of utilities used
in, upon or about the premises by Tenant or any of its subtenants, licensees, or
concessionaires during the term and any extension or renewal of the term of this
Lease.

20. INSPECTION. Tenant shall permit Landlord and his agents to enter into and
upon the premises at all reasonable times for the purpose of inspecting the same
or for the purpose of maintaining the building in which said premises are
situated, or for the purpose of making repairs, alterations or additions to any
other portion of said building, including the erection and maintenance of such
scaffolding, canopy, fences and props as may be required, for the purpose of
posting notices of non-liability for alterations, additions or repairs. This
also includes having the building or any portion thereof tented for the purpose
of fumigating the building for several days for various pests. Landlord shall be
permitted to do any of the above without any rebate of rent and without any
liability to Tenant for any loss of occupation or quiet enjoyment of the
premises hereby occasioned. Tenant sahll permit Landlord at any time within 100
days prior to the expiration of this Lease to place upon said premises any usual
or ordinary "For Lease" signs and during such 100 day period, Landlord or his
agents may, during normal business hours, enter upon said premises and exhibit
same to prospective Tenants.

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21. DEFAULT. In the event of any breach of this Lease by Tenant, the Landlord
shall notify the Tenant of such breach in writing and Tenant shall have ten (10)
days in which to cure any such breach as to payments of rent or other sums due
hereunder, and thirty (30) days to cure any other breach, and if Tenant shall
fail to cure such breach or default within such time limit, then Landlord,
besides other rights or remedies Landlord may have, shall have the immediate
right of re-entry and may remove all persons and property from the premises; and
such property may be removed and stored in a public warehouse or elsewhere at
the cost of, and for the account of, Tenant. Should Landlord elect to re-enter,
as herein provided, or should Landlord take possession pursuant to legal
proceedings or pursuant to any notice provided for by Law, Landlord may either
terminate this Lease or may from time to time, without terminating this Lease,
re-let said premises or any part thereof for such term or terms (which may be
for a term extending beyond the term of this Lease) and at such rental or
rentals and upon such other terms and conditions as Landlord in his sole
discretion may deem advisable with the right to make alterations and repairs to
said premises. Upon such re-letting, (a) Tenant shall be immediately liable to
pay to Landlord in addition to any indebtedness other than rent due hereunder,
the cost and expenses of such re-letting and of such alteration and repair
incurred by Landlord and the amount, if any, by which the rent reserved in this
Lease for the period of such re-letting (up to but not beyond the term of this
Lease) exceeds the amount agreed to be paid as rent for the premises for such
periods of such re-letting; or (b) At the option of Landlord, rents received by
such Landlord from such re-letting shall be applied as follows: First, to the
payment of any indebtedness, other than rent, due hereunder from Tenant to
Landlord; Second, to the payment of any costs and expenses of such re-letting
and of such alterations and repairs; Third, to the payment of rent due and
unpaid hereunder and the residue, if any, shall be held by Landlord and applied
in payment of future rent as the same may become due and payable hereunder. If
Tenant has been credited with any rent to be received by such re-letting under
option (a), and such rent shall not be promptly paid to Landlord by the new
Tenant, or if such rentals received for re-letting under option (b) during any
month be less than that to be paid during that month by Tenant hereunder, Tenant
shall pay any such deficiency to Landlord. Such deficiency shall be calculated
and paid monthly. No such re-entry or taking possession of said promises by
Landlord shall be construed as an election on Landlord's part to terminate this
Lease unless a written notice of such intention be given to Tenant or unless the
termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any re-letting without termination, Landlord may at any time
elect to terminate this Lease for any breach, in addition to any other remedies
he may have, Landlord may recover from Tenant all damages incurred by Landlord
by reason of such breach, including the cost of recovering the premises, and
including the worth at the time of such termination of the excess, if any, of
the amount of rent and charges equivalent to rent reserved in this Lease for the
remainder of the stated term of this Lease over the then reasonable rental value
of the premises for the remainder of the stated term, all of which amounts shall
be immediately due and payable from Tenant to Landlord.

                                       11
<PAGE>
21-A.  CHRONIC DEFAULTS.

                  a) Tenant will be in "chronic Default" under this Lease if
Tenant commits more than three (3) defaults (either monetary or non-monetary
defaults) during any three hundred sixty-five (365) day period, even though
these defaults have been cured within the given period.

                  b)  Definitions.  For the purpose of defining a Default.

                           1.  "Monetary  Default"  occurs  if  Tenant  fails to
pay any  sum of  money  when  due (including, but not limited to, Base Rent,
Additional Rent, Percentage Rent, Common Area Maintenance Charges, Utility
Charges or other rent).

                           2.  "Non-monetary  Default"  occurs if Tenant  fails
to perform  any of its  obligations under this Lease other than the timely
payment of money including, but not limited to, the reporting of gross sales and
evidence of current Liability Insurance Rider, naming Minson Company as an
additional insured.

                  c) If a Chronic Default occurs as described above, Landlord,
at its option, shall have the right to terminate Tenant's Option to Extend this
Lease, First Right of Refusal and/or cancel the remaining terms of the Lease.

                          TENANTS INITIALS ____________

22. MAJOR DESTRUCTION OF PREMISES. In the event of (a) a partial destruction by
an earthquake or major fire or other major calamity or act of God upon said
premises or the building containing same during said term, or (b) said premises
or said building being declared unsafe or unfit for occupancy by an authorized
public authority for any reason other than Tenant's act, use or occupation,
which destruction or declaration requires repair to either said premises or said
building, Landlord shall forthwith make such repairs, provided such repairs can
be made within sixty (60) days after the occurrence of said partial destruction
or after said declaration by any authorized public authority and provided said
repairs can be made within said time period under the laws and regulations of
authorized public authorities, but such partial destruction (including any
destruction necessary in order to make repairs required by any such declaration)
shall in no wise annul or void this Lease, except that Tenant shall be entitled
to a proportionate reduction of minimum guaranteed rentals which such repairs
are being made, such proportionate reduction to be based upon the extent to
which the making of such repairs shall interfere with the business carried on by
Tenant in said premises; provided that in making such repairs Landlord may, at
his option (to be exercised within fifteen (15) days after said partial
destruction or declaration by authorized public authority) elect to make same
within a reasonable period of time, and provided Landlord uses due diligence in
making such repairs, this Lease shall continue in full force and effect and the
minimum guaranteed rental shall be proportionately reduced as herein above
provided. In the event repairs called for herein above in this paragraph 22

                                       12
<PAGE>
cannot be made within the aforementioned sixty (60) days and in the event
Landlord does not elect to make same using due diligence and as herein above
provided, then this Lease shall be terminated as of the date Tenant completes
vacation from the premises, with all rentals to be prorated between Landlord and
Tenant as of said date. In respect to any partial destruction (including any
destruction necessary in order to make repairs required by any such declaration
of any authorized public authority) which Landlord is obligated to repair or may
elect to repair under the terms of this paragraph 11, the provisions of Section
1932, Sub-division (2) and Section 1933, Sub-division (4) of the Civil Code of
the State of California are waived by Tenant. Total destruction (including any
destruction required by any authorized public authority) of either said premises
or the building of which the premises are a part shall terminate this Lease.

23. CONDEMNATION. If the leased property or any part thereof be taken by
condemnation proceedings, or by settlement under the threat thereof, the Lessor
shall be entitled to and shall receive the entire award or payment therefor, and
Lessee shall assign, and does hereby assign to Lessor such award or payment as
may be made therefor including any damages whatsoever relating to Lessee's
leasehold interest therein.

         If all of the leased premises are taken, the Lease will terminate. If
only a part of the demised premises is taken, then the Lease shall continue if
the balance is suitable for use and the rental herein reserved shall be
equitably apportioned.

         The foregoing is without prejudice to Lessee's claim against the
condemning authority for loss of Lessee's trade fixtures, movable personal
property, and moving or relocation expenses.

24. ASSIGNMENT AND SUBLETTING. Tenant shall not assign this Lease or any
interest therein, and shall not sublet the premises or any part thereof, or any
right or privilege appurtenant thereto, or permit any other person to occupy or
use the premises, or any portion thereof, to anyone that would be prohibited in
use for the premises under section 1(a).

         Tenant shall not assign this Lease or any interest therein, and shall
not sublet the premises or any part thereof, or any right or privilege
appurtenant thereto, or permit any other person (the agents and servants of
Tenant excepted) to occupy or use the premises, or any portion thereof, without
first obtaining the written consent of Landlord. Said consent shall not be
unreasonably withheld. Consent by Landlord to one assignment, subletting,
occupation or use by another person shall not be deemed to be a consent to any
subsequent assignment, subletting, occupation or use by another person. Consent
to an assignment shall not release the original named Tenant from liability for
the continued performance of the terms and provisions on the part of Tenant to
be kept and performed, unless Landlord specifically releases the original named
Tenant from said liability. Any assignment or subletting without the prior
written consent of Landlord shall be void, and shall, at the option of Landlord,
terminate this Lease. This Lease shall not, nor any interest therein, be
assignable, as to the interest of Tenant, by operation of law, without the prior
written consent of Landlord.

                                       13
<PAGE>
         Prior to the Landlord signing the Agreement to Assign or Sublet the
Lease, a processing and transaction fee of Two Hundred and Twenty-Five Dollars
($225) shall be paid to Landlord. This fee is waived for any affiliate of tenant
or business operated by or under the control of Mr. Daryn Fleming.

25.      BANKRUPTCY  OF TENANT.  If the Tenant  shall  petition to be or be
declared  bankrupt,  the Landlord may  immediately or at any time thereafter and
without further notice or demand,  enter into and upon said premises or any part
thereof and take absolute possession of the same.

26. INSOLVENCY OF TENANT. Tenant agrees that in the event all or substantially
all of its assets be placed in the hands of a receiver or trustee, and in the
event such receivership or trusteeship continue for a period of ten (10) days,
or should Tenant make an assignment for the benefit of creditors, or be
adjudicated a bankrupt, or should Tenant institute any proceedings under any
state or federal bankruptcy act wherein Tenant seeks to be adjudicated a
bankrupt, or seeks to be discharged of its debts, or should any involuntary
proceeding be filed against such Tenant under such bankruptcy laws and Tenant
consents thereto or acquiesces therein by pleading or default, then this Lease
or any interest in and to the premises shall not become an asset in any of such
proceedings and, in any of such events and in addition to any and all rights or
remedies of Landlord hereunder or as provided by law, it shall be lawful for
Landlord at his option to declare the term hereof ended and to re-enter the
premises and take possession thereof and remove all persons therefrom and Tenant
shall have no further claim therein or hereunder.

27. SURRENDER OF LEASE. The voluntary or other surrender of this Lease by Tenant
or a mutual cancellation thereof, shall not work a merger and shall, at the
option Landlord terminate all or any existing subleases or sub-tenancies, or
may, at the option of Landlord, operate as an assignment to him of any or all of
such sub-leases and sub-tenancies.

28. SALE OF PREMISES BY LANDLORD. In the event of any sale of the premises by
Landlord, Landlord shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease arising out of any act, occurrence or omission occurring
after the consummation of such sale; and the purchaser, at such sale or any
subsequent sale of the premises, shall be deemed, without any further agreement
between the parties or their successors in interest or between the parties and
any such purchaser, to have assumed and agreed to carry out any and all of the
covenants and obligations of the Landlord under this Lease.

29. HOURS OF BUSINESS. Tenant shall continuously during the term hereof conduct
and carry on Tenant's business in the premises and shall keep the premises open
for business and cause Tenant's business to be conducted therein during the
usual business hours of each and every business day as is customary for
businesses of like character in the City of Santa Maria. This provision shall
not apply if the premises should be closed and the business of Tenant

                                       14
<PAGE>
temporarily discontinued therein on account of strikes, lockouts, or similar
causes beyond the reasonable control of Tenant, or closed for not more than
three (3) days out of respect to the memory of any deceased officer or employee
of Tenant, or the relative of any such officer or employee. Tenant shall keep
the premises adequately stocked with merchandise, and with sufficient sales
personnel to care for the patronage, and to conduct said business in accordance
with sound business practices.

30. ATTORNEY'S FEES. In case suit shall be brought for an unlawful detainer of
said premises, for the recovery of any rent due under the provisions of this
Lease, or because of the breach of any other covenant or condition herein
contained, on the part of Landlord or Tenant to be kept or performed, the losing
party shall pay to the prevailing party a reasonable attorney fee, which shall
be fixed by the court.

31. HOLDING OVER.  Any holding over after the expiration of the term of this
Lease,  with the written  consent of  Landlord,  shall be construed to be a
tenancy from month to month at a rental of 120% of the last month's lease rental
rate.

32. NOTICES. Wherever in this Lease it shall be required or permitted that
notice and demand be given or served by either party to this Lease to or on the
other such notice or demand shall be given or serviced and shall not be deemed
to have been duly given or served unless in writing and either served personally
or sent by prepaid, registered or certified mail, addressed as follows:

TO LANDLORD AT:

                  1145 East Clark Avenue, Suite E
                  Santa Maria, California  93455

TO TENANT AT:

                  1125 East Clark Avenue, Suite A
                  Santa, Maria, California  93455

Notice shall be deemed communicated within 48 hours from the time of mailing, if
mailed as provided in this paragraph. Either party may change such address by
written notice to the other.

33. SUCCESSORS IN INTEREST.  The covenants herein contained shall,  subject to
the  provisions as to assignment  and  subletting,  apply to and bind the heirs,
successors, executors, administrators and assigns of all the parties hereto; and
all of the parties hereto shall be jointly and severally liable hereunder.

34. PARTIAL  INVALIDITY.  If any term,  covenant or  provision  of this Lease is
held by a court of competent  jurisdiction to be invalid, void or unenforceable,
the remainder of the provisions hereof shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby.

                                       15
<PAGE>
35.  MARGINAL  CAPTIONS.  The various  headings and numbers  herein and the
grouping of the  provisions of this Lease into separate  paragraphs  are for the
purpose of convenience only and shall not be considered a part thereof.

36. TIME. Time is of the essence of this Lease. This blank and unsigned Lease,
as constituting an offer to Lease, if not delivered to Landlord and left
unsigned by Tenant longer than 30 days from the date of this Lease shall expire
as an offer and shall become null and void as a contract unless the date above
is extended by a written notice from Landlord.

37. AMERICAN WITH DISABILITIES ACT. on January 26,1992, new regulations under
Title III of the Americans with Disabilities Act ("ADA") became effective. The
provisions of ADA may require certain modifications, architectural barrier
removal if readily achievable, or steps to make the facilities and goods and/or
services provided therein available to the disabled by readily achievable
alternative methods in the shopping center. In that event, without intending to
suggest that any modifications or barrier removal efforts are required or
mandated by ADA, any such modifications shall be made as follows:

         a.       Lessor agrees to be responsible  for the costs of compliance
                  and all other costs  associated with the  Americans  with
                  Disabilities  Act ("ADA") and any other laws and  regulations
                  affecting or relating  to  access  for the  disabled  to the
                  common  area of the  shopping  center  only,  in accordance
                  with the  provisions  of  Section 8 of the Lease, if required,
                  including, but not limited to, creating  designated accessible
                  parking spaces,  installing ramps,  making curb cuts in
                  sidewalks and entrances, making exterior doors more
                  accessible, eliminating anything that would impede entry by
                  the disabled  onto the Leased Premises and the shopping center
                  where the Leased Premises is located, and any other structural
                  changes or capital improvements thereto.

         b.       Lessee agrees to be responsible for the costs of compliance
                  and all other costs associated with ADA and any other laws and
                  regulations affecting or relating to access for the disabled
                  to the Leased Premises, if required, including, but not
                  limited to, internal door and bathroom modifications,
                  providing communications devices such as TDD's, telephone
                  handset amplifiers, assistive listening devices and digital
                  check-out displays, rearranging temporary or movable
                  structures, such as furniture, equipment and display racks,
                  and repositioning display racks and shelves.

         c.       Lessor further agrees to defend, indemnify and hold harmless
                  Lessee, the Lessee, and all its officers, employees and agents
                  from any and all liability, loss, penalty, claims, damages,
                  injury, death or expense, including court costs and attorney's
                  fees, arising out of or connected in any way with any
                  obligations of Lessor under this paragraph.

                                       16
<PAGE>
         d.       Lessee further agrees to defend, indemnify and hold harmless
                  Lessor and Lessor's lenders, if any, and all their officers,
                  employees, agents, assigns and/or successors, and each of
                  them, from any and all liability, loss, penalty, claims,
                  damages, injury, death or expense, including court costs and
                  attorney' s fees, arising out of or connected in any way with
                  any obligations of Lessee under this paragraph.

38. HAZARDOUS SUBSTANCES. Lessee expressly agrees not to discharge at any point
on the leased premises including into any public sewer, private sewerage
disposal system, street, parking lot, landscaped area, retention basin, or into
the ground, any materials of such nature or temperature as can contaminate any
water supply, interfere with bacterial processes in sewerage treatment or
otherwise cause the perpetuation, increase or dissemination of dangerous or
offensive elements, except in Public Health or such other governmental agency as
has jurisdiction of such activities. LESSEE shall comply with all federal, state
and local laws and all rules and regulations governing the use, storage and
disposal of any hazardous substance; all rules and regulations promulgated by
the Public Works Department, Fire Department or Building Department of the
County of Santa Barbara; and all rules and regulations governing the use,
storage and disposal of any hazardous substance promulgated by the State
Regional Quality Control Board for the central coast region and the Santa
Barbara County Health Care Services Department including, if required by the
County, applying for and obtaining a hazardous waste generator permit from the
County of Santa Barbara. For the purpose of this Lease, hazardous substance(s)
shall include but not be limited to substances defined as "hazardous
substances," "hazardous materials," or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S. C. Section 9601, et seq.; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq.; the Resource Conservation and Recovery Act, 42
U.S. C. Section 6901, et seq.; and those California Health and Safety Code or as
"hazardous substances" in Section 25316 of the California Health and Safety
Code; and in the regulations adopted and publications promulgated to said laws.

39.  ENTIRE AGREEMENT AND BINDING EFFECT. This Lease and any attached exhibits
signed by the parties  constitute  the entire  agreement  between  Landlord  and
Tenant; no prior written nor prior,  contemporaneous or subsequent oral promises
or  representations  shall be binding.  "Not Written-Not Said." This Lease shall
not be amended or changed  except by written  instrument  signed by both parties
hereto.

40. LEASE SUBJECT TO TENANT'S BEING ABLE TO ACQUIRE HIGH SPEED INTERNET LINES &
ACCESS. If within 30 days of the last dated signature below, Tenant has not
acquired its high speed Internet access, Tenant may, at its option, declare this
lease null and void and of no legal effect. Landlord agrees to return the
security deposit and any unamortized rent back to Tenant

                                       17
<PAGE>

41.  BROKER  REPRESENTATION.  It is agreed that Ms. Connie Blackwell of Pacifica
Realty has represented Tenant and will be paid a commission by the Minson
Company under a separate agreement.

IN WITNESS WHEREOF, the parties hereto have duly executed this Lease.

LANDLORD:  MINSON COMPANY, a Limited Partnership
         STUART A. BARTLESON, General Partner

By: /s/ Stuart A. Bartleson
   -------------------------------
         Stuart A. Bartleson

Date:  March 23, 2001

By: /s/ Bill Evans
   -----------------------------
         Bill Evans - for Barteckmon

Date: March 23, 2001

TENANT:  INTERNAT10NAL BROADCASTING CORP.

By: /s/ Daryn Fleming
   -------------------------------------
         Daryn Fleming, President

Date: March 23, 2001

                                       18EXHIBIT 10.3

                               KANEB SERVICES LLC

                                       and

                            THE CHASE MANHATTAN BANK,
                              NATIONAL ASSOCIATION

                                  Rights Agent

                                  ------------

                                RIGHTS AGREEMENT

                            Dated as of June 27, 2001

<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

<S>     <C>                                                                                                      <C>
Section 1.  Certain Definitions...................................................................................1

Section 2.  Appointment of Rights Agent...........................................................................3

Section 3.  Issue of Rights Certificates..........................................................................3

Section 4.  Form of Rights Certificates...........................................................................5

Section 5.  Countersignature and Registration.....................................................................6

Section 6. Transfer,  Split Up,  Combination and Exchange of Rights  Certificates;  Mutilated,  Destroyed,
Lost or Stolen Rights Certificates................................................................................6

Section 7.  Exercise of Rights; Purchase Price; Expiration Date of Rights.........................................7

Section 8.  Cancellation and Destruction of Rights Certificates...................................................8

Section 9.  Listing and Registration of Common Shares.............................................................9

Section 10.  Common Shares Record Date...........................................................................10

Section 11.  Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights.........................10

Section 12.  Certificate of Adjusted Purchase Price or Number of Shares..........................................16

Section 13.  Consolidation, Merger or Sale or Transfer of Assets or Earning Power................................17

Section 14.  Fractional Rights and Fractional Shares.............................................................19

Section 15.  Rights of Action....................................................................................20

Section 16.  Agreement of Rights Holders.........................................................................20

Section 17.  Rights Certificate Holder Not Deemed a Shareholder..................................................21

Section 18.  Concerning the Rights Agent.........................................................................21

Section 19.  Merger or Consolidation or Change of Name of Rights Agent...........................................21

Section 20.  Duties of Rights Agent..............................................................................22

Section 21.  Change of Rights Agent..............................................................................24

Section 22.  Issuance of New Rights Certificates.................................................................24

Section 23.  Redemption and Termination..........................................................................25

Section 24.  Notice of Certain Events............................................................................26

Section 25.  Notices.............................................................................................26

Section 26.  Supplements and Amendments..........................................................................27

Section 27.  Successors..........................................................................................28

Section 28.  Determinations and Actions by the Board of Directors, et............................................28

Section 29.  Benefits of this Agreement..........................................................................28

Section 30.  Severability........................................................................................28

Section 31.  Governing Law.......................................................................................28

Section 32.  Counterparts........................................................................................29

Section 33.  Descriptive Headings................................................................................29

Exhibit A -- Form of Rights Certificate

Exhibit B -- Summary of Rights

</TABLE>

<PAGE>
                                RIGHTS AGREEMENT

     THIS  RIGHTS  AGREEMENT  is  dated as of June 27,  2001  (the  "Agreement")
between  KANEB  SERVICES  LLC,  a  Delaware  limited   liability   company  (the
"Company"),  and The Chase  Manhattan  Bank,  National  Association,  a national
banking association (the "Rights Agent").

                                   WITNESSETH

     WHEREAS, on June 27, 2001 (the "Rights Distribution Declaration Date"), the
Board of  Directors  of the Company (the "Board of  Directors")  authorized  and
declared  a  distribution  of one Right (as  defined  herein)  for each share of
Common Shares of the Company (the "Common  Shares")  outstanding at the close of
business on June 27, 2001 (the "Record  Date"),  and has authorized the issuance
of one Right  (as such  number  may  hereinafter  be  adjusted  pursuant  to the
provisions  of Section  11(o)  hereof) for each Common Share issued  between the
Record Date (whether originally issued or delivered from the Company's treasury)
and the  Distribution  Date,  each  Right  initially  representing  the right to
purchase  one  Common  Share,  upon the  terms  and  subject  to the  conditions
hereinafter set forth (the "Rights");

     NOW, THEREFORE,  in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:

     Section  1.  Certain  Definitions.  For  purposes  of this  Agreement,  the
following terms have the meanings indicated:

          (a)  "Acquiring  Person"  shall mean any Person who or that,  together
     with all Affiliates and Associates of such Person,  shall be the Beneficial
     Owner of 15% or more of the Common Shares then outstanding, or shall become
     such a Beneficial Owner at any time after the date hereof.  Notwithstanding
     the foregoing,  (A) the term  "Acquiring  Person" shall not include (i) the
     Company,  (ii)  until  June 29,  2001,  Kaneb  Services,  Inc.,  (iii)  any
     Subsidiary of the Company, (iv) any employee benefit plan of the Company or
     of any  Subsidiary  of the  Company,  (v) any  Person or entity  organized,
     appointed or established by the Company for or pursuant to the terms of any
     such plan, (vi) any executive  officer of the Company,  but only while such
     person is serving as such,  or (vii) any Person,  who or that together with
     all Affiliates  and Associates of such Person becomes the Beneficial  Owner
     of 15% or more of the  then-outstanding  Common  Shares  as a result of the
     acquisition of Common Shares  directly from the Company,  and (B) no Person
     shall  be  deemed  to be an  "Acquiring  Person"  (X)  as a  result  of the
     acquisition of Common Shares by the Company that, by reducing the number of
     Common  Shares  outstanding,  increases the  proportional  number of shares
     beneficially  owned  by  such  Person  together  with  all  Affiliates  and
     Associates  of such  Person;  except that if (i) a Person  would  become an
     Acquiring Person (but for the operation of this subclause X) as a result of
     the acquisition of Common Shares by the Company,  and (ii) after such share
     acquisition by the Company,  such Person,  or an Affiliates or Associate of
     such Person,  becomes the Beneficial Owner of any additional Common Shares,
     then such Person shall be deemed an Acquiring  Person, or (Y) if (i) within
     seven days after such  Person  would  otherwise  have  become an  Acquiring
     Person (but for the operation of this  subclause  Y), such Person  notifies
     the Board of  Directors  that such  Person  did so  inadvertently  and (ii)
     within  two  business  days  after  such  notification  such  Person is the
     Beneficial Owner of less that 15% of the outstanding Common Shares.

          (b)  "Affiliate" and  "Associate"  shall have the respective  meanings
     ascribed to such terms in Rule 12b-2 of the General  Rules and  Regulations
     under the Securities  Exchange Act of 1934, as amended and in effect on the
     date of this Agreement (the "Exchange Act").

          (c) A Person shall be deemed the  "Beneficial  Owner" of, and shall be
     deemed to "beneficially own," any securities:

               (i)  that  such  Person  or any of such  Person's  Affiliates  or
          Associates,  directly or indirectly, has the right to acquire (whether
          such right is  exercisable  immediately  or only after the  passage of
          time) pursuant to any agreement, arrangement or understanding (whether
          or not in writing) or upon the exercise of conversion rights, exchange
          rights, rights, warrants or options, or otherwise;  provided,  however
          that  a  Person  shall  not  be  the  "Beneficial  Owner"  of,  or  to
          "beneficially  own," (A) securities  tendered  pursuant to a tender or
          exchange offer made by such Person or any of such Person's  Affiliates
          or Associates until such tendered securities are accepted for purchase
          or exchange, or (B) securities issuable upon exercise of Rights at any
          time prior to the occurrence of a Triggering  Event, or (C) securities
          issuable  upon  exercise of Rights from and after the  occurrence of a
          Triggering  Event which Rights were  acquired by such Person or any of
          such Person's  Affiliates or Associates prior to the Distribution Date
          or  pursuant  to  Section  3(a) or Section  22 hereof  (the  "Original
          Rights") or pursuant to Section  11(i)  hereof in  connection  with an
          adjustment made with respect to any Original Rights;

               (ii)  that  such  Person or any of such  Person's  Affiliates  or
          Associates,  directly or indirectly,  has the right to vote or dispose
          of or has  "beneficial  ownership" of (as determined  pursuant to Rule
          13d-3 of the General Rules and  Regulations  under the Exchange  Act),
          including  pursuant to any agreement,  arrangement  or  understanding,
          whether or not in writing; provided,  however, that a Person shall not
          be deemed the  "Beneficial  Owner" of, or to  "beneficially  own," any
          security  under this  subparagraph  (ii) as a result of an  agreement,
          arrangement or  understanding to vote such security if such agreement,
          arrangement or understanding: (A) arises solely from a revocable proxy
          given in  response  to a public  proxy or  consent  solicitation  made
          pursuant to, and in accordance with, the applicable  provisions of the
          General Rules and  Regulations  under the Exchange Act, and (B) is not
          also then reportable by such Person on Schedule 13D under the Exchange
          Act (or any comparable or successor report); or

               (iii) that are beneficially owned, directly or indirectly, by any
          other Person (or any  Affiliate or Associate  thereof) with which such
          Person (or any of such  Person's  Affiliates  or  Associates)  has any
          agreement,  arrangement or understanding  (whether or not in writing),
          for the purpose of acquiring,  holding,  voting (except  pursuant to a
          revocable  proxy as described in the proviso to  subparagraph  (ii) of
          this  paragraph  (c));  or disposing of any voting  securities  of the
          Company;  provided,  however, that nothing in this paragraph (c) shall
          cause a person  engaged in business as an underwriter of securities to
          be the "Beneficial Owner" of, or to "beneficially own," any securities
          acquired  through such person's  participation in good faith in a firm
          commitment  underwriting  until the expiration of forty days after the
          date of such acquisition.

          (d) "Business  Day" shall means any day other than a Saturday,  Sunday
     or a day on which banking  institutions  in the States of New York or Texas
     are authorized or obligated by law or executive order to close.

          (e) "Close of  business"  on any given date shall mean 5:00 P.M.,  New
     York City time, on such date; provided, however, that if such date is not a
     Business  Day it shall  mean 5:00  P.M.,  New York City  time,  on the next
     succeeding Business Day.

          (f)  "Common  Shares"  shall  mean the common  shares of the  Company,
     except that "Common  Shares"  when used with  reference to any Person other
     than the  Company  shall mean the  capital  stock of such  Person  with the
     greatest  voting power,  or the equity  securities or other equity interest
     having power to control or direct the management, of such Person.

          (h) "Person" shall mean any individual, firm, corporation, partnership
     or other equity.

          (j)  "Section  11(a)(ii)  Event"  shall  mean any event  described  in
     Section 11(a)(ii) (A), (B) or (C) hereof.

          (k) "Section 13 Event" shall mean any event  described in clauses (x),
     (y) or (z) of Section 13(a) hereof.

          (l)  "Share  Acquisition  Date"  shall  mean the first  date of public
     announcement  (which,  for  purposes  of this  definition,  shall  include,
     without  limitation,  a report  filed  pursuant to Section  13(d) under the
     Exchange  Act) by the  Company or an  Acquiring  Person  that an  Acquiring
     Person has become such.

          (m) "Subsidiary"  shall mean, with reference to any Person, any entity
     of which an  amount  of voting  securities  sufficient  to elect at least a
     majority of the directors of such entity is beneficially owned, directly or
     indirectly, by such Person, or otherwise controlled by such Person.

          (n) "Triggering  Event" shall mean any Section  11(a)(ii) Event or any
     Section 13 Event.

     Section 2.  Appointment of Rights Agent.  The Company  hereby  appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof,  shall prior to the Distribution  Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof,  and the Rights Agent hereby accepts such  appointment.  The Company may
from time to time  appoint  such  Co-Rights  Agents as it may deem  necessary or
desirable.

     Section 3. Issue of Rights Certificates.

          (a) Until the earlier of (i) the close of  business  on the  fifteenth
     day after the Share  Acquisition Date, or (ii) the close of business on the
     fifteenth  business  day after the date that a tender or exchange  offer by
     any Person  (other than the Company,  any  Subsidiary  of the Company,  any
     employee  benefit plan of the Company or of any  Subsidiary of the Company,
     or any Person or entity organized,  appointed or established by the Company
     for or pursuant to the terms of any such plan) is first  published  or sent
     or given  within the  meaning of Rule  14d-2(a)  of the  General  Rules and
     Regulations  under the Exchange  Act, if upon  consummation  thereof,  such
     Person would be the  Beneficial  Owner of 20% or more of the Common  Shares
     then  outstanding  (the earlier of (i) and (ii) being herein referred to as
     the "Distribution Date"), (x) the Rights shall be evidenced (subject to the
     provisions of paragraph (b) of this Section 3) by the  certificates for the
     Common  Shares  registered in the names of the holders of the Common Shares
     (which   certificates  for  Common  Shares  shall  be  deemed  also  to  be
     certificates  for  Rights) and not by  separate  certificates,  and (y) the
     Rights will be  transferable  only in  connection  with the transfer of the
     underlying Common Shares (including a transfer to the Company).  As soon as
     practicable  after the Rights  Agent has been  notified by the Company that
     the  Distribution  Date  has  occurred,  the  Rights  Agent  shall  send by
     first-class,  insured,  postage  prepaid mail, to each record holder of the
     Common Shares as of the close of business on the Distribution  Date, at the
     address of such  holder  shown on the records of the  Company,  one or more
     right  certificates,  in  substantially  the form of Exhibit A hereto  (the
     "Rights Certificates"), evidencing one Right for each Common Share so held,
     subject to adjustment as provided herein. If an adjustment in the number of
     Rights per Common Share has been made pursuant to Section 11(p) hereof,  at
     the time of distribution of the Right Certificates,  then the Company shall
     make the necessary and appropriate rounding adjustments (in accordance with
     Section 14(a) hereof) so that Rights  Certificates  representing only whole
     numbers  of  Rights  are  distributed  and  cash  is  paid  in  lieu of any
     fractional  Rights. As of and after the Distribution Date, the Rights shall
     be evidenced solely by such Rights Certificates.

          (b) With respect to certificates for the Common Shares  outstanding as
     of the Record  Date,  until the  Distribution  Date,  the  Rights  shall be
     evidenced by such  certificates  for the Common  Shares and the  registered
     holders of the Common  Shares shall also be the  registered  holders of the
     associated  Rights.  Until  the  earlier  of the  Distribution  Date or the
     Expiration Date (as such term is defined in Section 7 hereof), the transfer
     of any certificates  representing  Common Shares in respect of which Rights
     have  been  issued  shall  also  constitute  the  transfer  of  the  Rights
     associated with such Common Shares.

          (c) Rights  shall be issued in respect of all Common  Shares  that are
     issued (whether originally issued or from the Company's treasury) after the
     Record  Date  but  prior to the  earlier  of the  Distribution  Date or the
     Expiration Date. Certificates representing such Common Shares shall also be
     deemed to be certificates for Rights, and shall bear the following legend:

          This  certificate  also  evidences  and entitles the holder  hereof to
          certain  Rights as set forth in the  Rights  Agreement  between  Kaneb
          Services LLC (the  "Company") and the Rights Agent named therein dated
          as of June 27, 2001 (the "Rights  Agreement"),  the terms of which are
          hereby incorporated herein by reference and a copy of which is on file
          at the principal office of the Company, 2435 North Central Expressway,
          Richardson,  Texas 75080,  and at the  principal  office of the Rights
          Agent.  Under  certain  circumstances,  as set  forth  in  the  Rights
          Agreement,  such Rights will be evidenced by separate certificates and
          will no longer be  evidenced by this  certificate.  The Company or the
          Rights Agent will mail to the holder of this certificate a copy of the
          Rights Agreement, as in effect on the date of mailing, without charge,
          promptly after receipt of a written  request  therefor.  Under certain
          circumstances set forth in the Rights Agreement,  Rights issued to, or
          held by, any Person who is, was or becomes an Acquiring  Person or any
          Affiliate  or  Associate  thereof  (as such  terms are  defined in the
          Rights  Agreement),  whether  currently  held by or on  behalf of such
          Person or by any subsequent holder, may become null and void.

     With respect to such certificates  containing the foregoing  legend,  until
     the earlier of (i) the  Distribution  Date or (ii) the Expiration Date, the
     Rights  associated with the Common Shares  represented by such certificates
     shall be evidenced by such  certificates  alone and  registered  holders of
     Common  Shares  shall  also be the  registered  holders  of the  associated
     Rights,  and the transfer of any of such certificates shall also constitute
     the transfer of the Rights associated with the Common Shares represented by
     such certificates.

     Section 4. Form of Rights Certificates.

          (a) The Rights Certificates (and the forms of election to purchase and
     of  assignment  to be  printed  on  the  reverse  thereof)  shall  each  be
     substantially  in the form set forth in  Exhibit A hereto and may have such
     marks of  identification  or  designation  and such  legends,  summaries or
     endorsements printed thereon as the Company may deem appropriate and as are
     not  inconsistent  with  the  provisions  of this  Agreement,  or as may be
     necessary to comply with any  applicable law or with any rule or regulation
     made pursuant  thereto or with any rule or regulation of any stock exchange
     on which the  Rights  may from time to time be  listed,  or to  conform  to
     usage.  Subject to the provisions of Section 11 and Section 22 hereof,  the
     Rights Certificates,  whenever distributed, shall be dated as of the Record
     Date and on their face shall  entitle the holders  thereof to purchase such
     number of Common  Shares  as shall be set  forth  therein  at the price set
     forth therein (such exercise price per Common Share, the "Purchase Price"),
     but the number of Common Shares purchasable upon the exercise of each Right
     and the Purchase  Price  thereof shall be subject to adjustment as provided
     herein.

          (b) Any Rights  Certificate issued pursuant to Section 3(a) or Section
     22 hereof that represents  Rights  beneficially  owned by: (i) an Acquiring
     Person  or any  Associate  or  Affiliate  of an  Acquiring  Person,  (ii) a
     transferee of an Acquiring  Person (or of any such  Associate or Affiliate)
     who becomes a transferee  after the Acquiring Person becomes such, or (iii)
     a transferee of an Acquiring Person (or of any such Associate or Affiliate)
     who becomes a transferee prior to or concurrently with the Acquiring Person
     becoming  such and receives  such Rights  pursuant to either (A) a transfer
     (whether or not for consideration)  from the Acquiring Person to holders of
     equity  interests in such Acquiring  Person or to any Person with whom such
     Acquiring Person has any continuing agreement, arrangement or understanding
     regarding  the  transferred  Rights  or (B) a  transfer  that the  Board of
     Directors of the Company has  determined is part of a plan,  arrangement or
     understanding which has as a primary purpose or effect avoidance of Section
     7(e) hereof,  and any Rights  Certificate  issued  pursuant to Section 6 or
     Section 11 hereof upon transfer, exchange, replacement or adjustment of any
     other Rights  Certificate  referred to in this sentence,  shall contain (to
     the extent feasible) the following legend:

          The  Rights  represented  by  this  Rights  Certificate  are  or  were
          beneficially  owned by a Person who was or became an Acquiring  Person
          or an Affiliate or Associate of an Acquiring Person (as such terms are
          defined in the Rights Agreement). Accordingly, this Rights Certificate
          and the Rights  represented  hereby  may  become  null and void in the
          circumstances specified in Section 7(e) of such Agreement.

     Section 5. Countersignature and Registration.

          (a) The Rights Certificates shall be executed on behalf of the Company
     by its Chairman of the Board,  its President or any Vice President,  either
     manually or by  facsimile  signature,  and shall have  affixed  thereto the
     Company's  seal or a  facsimile  thereof  which  shall be  attested  by the
     Secretary or an Assistant  Secretary of the Company,  either manually or by
     facsimile   signature.   The   Rights   Certificates   shall  be   manually
     countersigned  by the Rights  Agent and shall not be valid for any  purpose
     unless so  countersigned.  If any  officer  of the  Company  who shall have
     signed any of the Rights Certificates shall cease to be such officer of the
     Company  before  countersignature  by the  Rights  Agent and  issuance  and
     delivery by the Company,  such Rights  Certificates,  nevertheless,  may be
     countersigned  by the Rights Agent and issued and  delivered by the Company
     with the same force and effect as though the person who signed  such Rights
     Certificates  had not  ceased to be such  officer of the  Company;  and any
     Rights  Certificates  may be signed on behalf of the  Company by any person
     who, at the actual date of the execution of such Rights Certificate,  shall
     be a  proper  officer  of the  Company  to sign  such  Rights  Certificate,
     although at the date of the  execution  of this Rights  Agreement  any such
     person was not such an officer.

          (b) Following  the  Distribution  Date,  the Rights Agent will keep or
     cause to be kept,  at its  principal  office or offices  designated  as the
     appropriate  place for  surrender of Rights  Certificates  upon exercise or
     transfers,  books for registration and transfer of the Rights  Certificates
     issued  hereunder.  Such books  shall show the names and  addresses  of the
     respective  holders  of the  Rights  Certificates,  the  number  of  Rights
     evidenced  on its face by each of the Rights  Certificates  and the date of
     each of the Rights Certificates.

     Section  6.  Transfer,   Split  Up,  Combination  and  Exchange  of  Rights
Certificates;  Mutilated,  Destroyed,  Lost or Stolen Rights  Certificates.  (a)
Subject to the  provisions of Section 4(b),  Section 7(e) and Section 14 hereof,
at any time after the close of  business  on the  Distribution  Date,  and at or
prior to the close of business on the Expiration Date, any Rights Certificate or
Certificates  may be  transferred,  split up,  combined or exchanged for another
Rights Certificate or Certificates,  entitling the registered holder to purchase
a like  number of  Common  Shares  (or,  following  a  Triggering  Event,  other
securities,  cash or other assets, as the case may be) as the Rights Certificate
or Certificates  surrendered  then entitled such holder (or former holder in the
case of a transfer) to purchase.  Any  registered  holder  desiring to transfer,
split up, combine or exchange any Rights  Certificate or Certificates shall make
such request in writing  delivered to the Rights Agent,  and shall surrender the
Rights  Certificate or  Certificates  to be  transferred,  split up, combined or
exchanged at the principal  office or offices of the Rights Agent designated for
such  purpose.  Neither the Rights  Agent nor the Company  shall be obligated to
take any action  whatsoever with respect to the transfer of any such surrendered
Rights  Certificate  until the registered holder shall have completed and signed
the certificate  contained in the form of assignment on the reverse side of such
Rights  Certificate  and shall have  provided  such  additional  evidence of the
identity of the Beneficial Owner (or former  Beneficial  Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent  shall,  subject  to Section  4(b),  Section  7(e) and  Section 14 hereof,
countersign and deliver to the Person entitled  thereto a Rights  Certificate or
Rights  Certificates,  as the case may be,  as so  requested.  The  Company  may
require payment of a sum sufficient to cover any tax or governmental charge that
may be  imposed  in  connection  with any  transfer,  split up,  combination  or
exchange of Rights Certificates.

          (b) Upon  receipt  by the  Company  and the Rights  Agent of  evidence
     reasonably  satisfactory  to  them  of  the  loss,  theft,  destruction  or
     mutilation  of a  Rights  Certificate,  and,  in case  of  loss,  theft  or
     destruction,  of indemnity or security reasonably satisfactory to them, and
     reimbursement  to the  Company  and  the  Rights  Agent  of all  reasonable
     expenses  incidental  thereto,  and upon  surrender to the Rights Agent and
     cancellation  of the Rights  Certificate  if  mutilated,  the Company  will
     execute  and deliver a new Rights  Certificate  of like tenor to the Rights
     Agent for  countersignature and delivery to the registered owner in lieu of
     the Rights Certificate so lost, stolen, destroyed or mutilated.

     Section 7. Exercise of Rights;  Purchase Price;  Expiration Date of Rights.
(a)  Subject  to  Section  7(e)  hereof,  the  registered  holder of any  Rights
Certificate  may  exercise  the Rights  evidenced  thereby  (except as otherwise
provided   herein   including,   without   limitation,   the   restrictions   on
exercisability  set forth in Section 9(c) and Section  23(a) hereof) in whole or
in part at any time after the  Distribution  Date upon  surrender  of the Rights
Certificate,  with the form of election to purchase and the  certificate  on the
reverse side thereof duly executed,  to the Rights Agent at the principal office
or  offices of the Rights  Agent  designated  for such  purpose,  together  with
payment of the  aggregate  Purchase  Price with  respect to the total  number of
Common Shares as to which such surrendered  Rights are then  exercisable,  at or
prior to the  earlier of (i) the close of  business on June 27, 2011 (the "Final
Expiration Date"), or (ii) the time at which the Rights are redeemed as provided
in Section 23 hereof (the  earlier of (i) and (ii) being  herein  referred to as
the "Expiration Date").

          (b) The Purchase  Price for each Common Share pursuant to the exercise
     of a Right shall  initially be $60.00,  and shall be subject to  adjustment
     from time to time as provided in Sections 11 and 13(a)  hereof and shall be
     payable in accordance with paragraph (c) below.

          (c) Upon  receipt  of a Rights  Certificate  representing  exercisable
     Rights  with the form of  election to  purchase  and the  certificate  duly
     executed,  accompanied by payment, with respect to each Right so exercised,
     of the  Purchase  Price per Common Share to be purchased as set forth below
     and an amount equal to any applicable transfer tax, the Rights Agent shall,
     subject to Section 20(k) hereof, thereupon promptly (i)(A) requisition from
     any transfer agent of the Common Shares (or make  available,  if the Rights
     Agent is the  transfer  agent for such shares)  certificates  for the total
     number of Common Shares to be purchased and the Company hereby  irrevocably
     authorizes its transfer  agent to comply with all such requests,  or (B) if
     the Company shall have elected to deposit the total number of Common Shares
     issuable upon  exercise of the Rights  hereunder  with a depositary  agent,
     requisition from the depositary agent depositary receipts representing such
     number of Common Shares as are to be purchased (in which case  certificates
     for the Common Shares  represented  by such receipts  shall be deposited by
     the transfer agent with the  depositary  agent) and the Company will direct
     the depositary agent to comply with such request, (ii) requisition from the
     Company the amount of cash, if any, to be paid in lieu of fractional shares
     in  accordance  with  Section  14  hereof,  (iii)  after  receipt  of  such
     certificates or depositary  receipts,  cause the same to be delivered to or
     upon  the  order  of the  registered  holder  of such  Rights  Certificate,
     registered in such name or names as may be  designated by such holder,  and
     (iv) after receipt thereof, deliver such cash, if any, to or upon the order
     of the  registered  holder of such Rights  Certificate.  The payment of the
     Purchase  Price  shall be made in cash or by  certified  bank check or bank
     draft  payable to the order of the Company.  If the Company is obligated to
     issue other securities  (including Common Shares) of the Company,  pay cash
     and/or distribute other property pursuant to Section 11(a) hereof, then the
     Company will make all arrangements necessary so that such other securities,
     cash and/or other  property are  available for  distribution  by the Rights
     Agent, if and when appropriate.

          (d) In case the  registered  holder of any  Rights  Certificate  shall
     exercise  less  than  all  the  Rights  evidenced  thereby,  a  new  Rights
     Certificate   evidencing   Rights   equivalent  to  the  Rights   remaining
     unexercised  shall be issued by the Rights Agent and  delivered to, or upon
     the order of, the registered holder of such Rights Certificate,  registered
     in such name or names as may be designated  by such holder,  subject to the
     provisions of Section 14 hereof.

          (e) Notwithstanding  anything in this Agreement to the contrary,  from
     and after the first  occurrence of a Section  11(a)(ii)  Event,  any Rights
     beneficially  owned by (i) an Acquiring Person or an Associate or Affiliate
     of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any
     such Associate or Affiliate)  who becomes a transferee  after the Acquiring
     Person  becomes such,  or (iii) a transferee of an Acquiring  Person (or of
     any such  Associate  or  Affiliate)  who becomes a  transferee  prior to or
     concurrently  with the  Acquiring  Person  becoming  such and receives such
     Rights pursuant to either (A) a transfer (whether or not for consideration)
     from the Acquiring  Person to holders of equity interests in such Acquiring
     Person or to any Person with whom the Acquiring  Person has any  continuing
     agreement, arrangement or understanding regarding the transferred Rights or
     (B) a transfer  that the Board of  Directors  has  determined  is part of a
     plan,  arrangement or understanding that has as a primary purpose or effect
     the avoidance of this Section 7(e),  shall become null and void without any
     further  action  and no  holder  of  such  Rights  shall  have  any  rights
     whatsoever with respect to such Rights, whether under any provision of this
     Agreement or  otherwise.  The Company shall use all  reasonable  efforts to
     insure that the provisions of this Section 7(e) and Section 4(b) hereof are
     complied  with,  but  shall  have no  liability  to any  holder  of  Rights
     Certificates  or  other  Person  as a  result  of its  failure  to make any
     determinations  with  respect  to an  Acquiring  Person or its  Affiliates,
     Associates or transferees hereunder.

         (f)  Notwithstanding  anything  in  this  Agreement  to the  contrary,
     neither the Rights  Agent nor the Company  shall be  obligated to undertake
     any action with respect to a registered  holder upon the  occurrence of any
     purported  exercise as set forth in this  Section 7 unless such  registered
     holder shall have (i) completed and signed the certificate contained in the
     form of election to  purchase  set forth on the reverse  side of the Rights
     Certificate   surrendered  for  such  exercise,   and  (ii)  provided  such
     additional  evidence  of the  identity of the  Beneficial  Owner (or former
     Beneficial Owner) or Affiliates or Associates  thereof as the Company shall
     reasonably request.

     Section 8. Cancellation and Destruction of Rights Certificates.  All Rights
Certificates  surrendered  for the  purpose  of  exercise,  transfer,  split up,
combination  or  exchange  shall,  if  surrendered  to the Company or any of its
agents,  be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent,  shall be cancelled by it, and no Rights
Certificates  shall be issued in lieu thereof  except as expressly  permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement,  and the Rights Agent shall so cancel and
retire,  any other  Rights  Certificate  purchased  or  acquired  by the Company
otherwise  than upon the exercise  thereof.  The Rights Agent shall  deliver all
cancelled Rights  Certificates to the Company,  or shall, at the written request
of the Company,  destroy such cancelled  Rights  Certificates,  and in such case
shall deliver a certificate of destruction thereof to the Company.

     Section 9. Listing and  Registration  of Common Shares.  (a) So long as the
Common Shares  issuable and  deliverable  upon the exercise of the Rights may be
listed on any  national  securities  exchange,  the  Company  shall use its best
efforts to cause,  from and after such time as the  Rights  become  exercisable,
that number of Common Shares that the Company would issue upon the full exercise
of the Rights to be listed on such  exchange  upon  official  notice of issuance
upon such exercise.

          (b) The  Company  shall use its best  efforts to (i) file,  as soon as
     practicable  following the first occurrence of a Section 11(a)(ii) Event, a
     registration  statement under the Securities Act of 1933 (the "Act"),  with
     respect to the Common Shares  purchasable upon exercise of the Rights on an
     appropriate  form,  (ii)  cause  such  registration   statement  to  become
     effective as soon as  practicable  after such filing,  and (iii) cause such
     registration  statement to remain effective (with a prospectus at all times
     meeting the  requirements  of the Act) until the earlier of (A) the date as
     of which the Rights are no longer exercisable for such securities,  and (B)
     the date of the expiration of the Rights.  The Company shall also take such
     action as may be  appropriate  under,  or to ensure  compliance  with,  the
     securities or "blue sky" laws of the various states in connection  with the
     exercisability of the Rights.  The Company may temporarily  suspend,  for a
     period of time not to exceed  ninety  (90) days after the date set forth in
     clause (i) of the first sentence of this Section 9(c),  the  exercisability
     of the Rights to prepare and file such registration statement and permit it
     to become  effective.  Upon any such suspension,  the Company shall issue a
     public announcement  stating that the exercisability of the Rights has been
     temporarily suspended, as well as a public announcement at such time as the
     suspension  is no longer in  effect.  In  addition,  if the  Company  shall
     determine  that  a  registration   statement  is  required   following  the
     Distribution  Date, the Company may temporarily  suspend the exercisability
     of the Rights until such time as a registration statement has been declared
     effective. Notwithstanding any provision of this Agreement to the contrary,
     the Rights shall not be  exercisable in any  jurisdiction  if the requisite
     qualification  in such  jurisdiction  shall  not have  been  obtained,  the
     exercise  thereof  shall  not  be  permitted  under  applicable  law  or  a
     registration statement shall not have been declared effective.

          (c) The Company covenants and agrees that it will take all such action
     as may be  necessary  to  ensure  that all  Common  Shares  delivered  upon
     exercise of Rights shall, at the time of delivery of the  certificates  for
     such shares  (subject to payment of the Purchase Price) be duly and validly
     authorized and issued and fully paid and nonassessable.

          (d) The Company further covenants and agrees that it will pay when due
     and payable any and all federal and state  transfer  taxes and charges that
     may be  payable  in  respect  of the  issuance  or  delivery  of the Rights
     Certificates and of any certificates for a number of Common Shares upon the
     exercise of Rights. The Company shall not, however,  be required to pay any
     transfer  tax that may be payable in respect of any transfer or delivery of
     Rights  Certificates to a Person other than, or the issuance or delivery of
     Common  Shares in respect  of a name  other  than that of,  the  registered
     holder  of  the  Rights  Certificates  evidencing  Rights  surrendered  for
     exercise or to issue or deliver  any  certificates  for Common  Shares in a
     name other than that of the  registered  holder  upon the  exercise  of any
     Rights  until such tax shall have been paid (any such tax being  payable by
     the holder of such Rights Certificate at the time of surrender) or until it
     has been established to the Company's satisfaction that no such tax is due.

     Section  10.  Common  Shares  Record  Date.  Each  person in whose name any
certificate  for a Common  Share is issued upon the exercise of Rights shall for
all  purposes be deemed to have become the holder of record of such Common Share
represented thereby on, and such certificate shall be dated, the date upon which
the Rights  Certificate  evidencing such Rights was duly surrendered and payment
of the Purchase Price (and all applicable  transfer  taxes) was made;  provided,
however, that if the date of such surrender and payment is a date upon which the
Common  Share  transfer  books of the Company are closed,  such Person  shall be
deemed to have become the record holder of such shares (fractional or otherwise)
on, and such  certificate  shall be dated,  the next succeeding  Business Day on
which the  Common  Share  transfer  books of the  Company  are open.  Before the
exercise of the Rights  evidenced  thereby,  the holder of a Rights  Certificate
shall not be entitled to any rights of a shareholder of the Company with respect
to  shares  for  which  the  Rights  shall be  exercisable,  including,  without
limitation,  the right to vote,  to receive  distributions  or to  exercise  any
preemptive  rights,  and shall not be  entitled  to  receive  any  notice of any
proceedings of the Company, except as provided herein.

     Section  11.  Adjustment  of Purchase  Price,  Number and Kind of Shares or
Number of Rights.  The Purchase Price,  the number and kind of shares covered by
each Right and the number of Rights  outstanding  are subject to adjustment from
time to time as provided in this Section 11.

          (a)(i)  If the  Company  shall  at any  time  after  the  date of this
     Agreement (A) declare a distribution on the Common Shares payable in Common
     Shares,  (B)  subdivide  the  outstanding  Common  Shares,  (C) combine the
     outstanding Common Shares into a smaller number of shares, or (D) issue any
     of  its  member  interests  in a  reclassification  of  the  Common  Shares
     (including any such  reclassification in connection with a consolidation or
     merger in which the Company is the continuing or surviving entity),  except
     as otherwise  provided in this Section 11(a) and Section 7(e) hereof,  then
     the  Purchase  Price  in  effect  at the time of the  record  date for such
     distribution or of the effective date of such  subdivision,  combination or
     reclassification,  and the  number  and kind of  Common  Shares  or  member
     interests,   as  the  case  may  be,  issuable  on  such  date,   shall  be
     proportionately  adjusted so that the holder of any Right  exercised  after
     such time shall be entitled to receive,  upon payment of the Purchase Price
     then in effect,  the  aggregate  number and kind of Common Shares or member
     interests,  as the case may be,  that,  if such  Right  had been  exercised
     immediately  prior  to such  date  and at a time  when  the  Common  Shares
     transfer  books of the  Company  were  open,  he would have owned upon such
     exercise  and been  entitled  to  receive  by virtue of such  distribution,
     subdivision, combination or reclassification. If an event occurs that would
     require  an  adjustment  under  both  this  Section  11(a)(i)  and  Section
     11(a)(ii)  hereof,  the  adjustment  provided for in this Section  11(a)(i)
     shall be in addition to, and shall be made before, any adjustment  required
     pursuant to Section 11(a)(ii) hereof.

          (ii) In the event:

                    (A) any  Acquiring  Person or any  Associate or Affiliate of
               any  Acquiring  Person,  at any  time  after  the  date  of  this
               Agreement,  directly  or  indirectly,  (1) shall  merge  into the
               Company or  otherwise  combine  with the  Company and the Company
               shall be the  continuing  or  surviving  entity of such merger or
               combination  and the Common  Shares of the Company  shall  remain
               outstanding  and unchanged,  (2) shall,  in one  transaction or a
               series of transactions,  transfer any assets to the Company or to
               any of its  Subsidiaries  in  exchange  (in whole or in part) for
               Common  Shares,  for  member  interests  of  the  Company  or for
               securities  exercisable for or convertible  into member interests
               of the Company  (Common Shares or otherwise) or otherwise  obtain
               from the Company, with or without  consideration,  any additional
               member  interests or securities  exercisable  for or  convertible
               into  member  interests  (other  than  pursuant  to  a  pro  rata
               distribution  to all holders of Common  Shares),  (3) shall sell,
               purchase,   lease,  exchange,   mortgage,   pledge,  transfer  or
               otherwise  acquire or dispose of, in one  transaction or a series
               of  transactions,  to,  from or with  (as  the  case  may be) the
               Company  or  any  of  its  Subsidiaries,   assets  on  terms  and
               conditions  less  favorable to the Company than the Company would
               be  able  to  obtain  in  arm's   length   negotiation   with  an
               unaffiliated  third party,  other than  pursuant to a transaction
               set forth in Section  13(a)  hereof,  (4) shall  sell,  purchase,
               lease, exchange,  mortgage, pledge, transfer or otherwise acquire
               or dispose of in one transaction or a series of transactions, to,
               from  or with  (as the  case  may be) the  Company  or any of the
               Company's  Subsidiaries  (other than  incidental  to the lines of
               business,  if any,  engaged in as of the date hereof  between the
               Company and such  Acquiring  Person or  Associate  or  Affiliate)
               assets  having  an  aggregate  fair  market  value  of more  than
               $15,000,000,  other than pursuant to a  transaction  set forth in
               Section 13(a) hereof, (5) shall receive any compensation from the
               Company  or  any  of  the  Company's   Subsidiaries   other  than
               compensation  for full-time  employment as a regular  employee at
               rates in accordance  with the  Company's  (or its  Subsidiaries))
               past  practices,  or (6) shall  receive the benefit,  directly or
               indirectly (except proportionately as a shareholder and except if
               resulting from a requirement of law or governmental  regulation),
               of any loans,  advances,  guarantees,  pledges or other financial
               assistance or any tax credits or other tax advantage  provided by
               the Company or any of its Subsidiaries, or

                    (B) any Person  (other than the Company,  any  Subsidiary of
               the Company,  Kaneb  Services,  Inc.  (until June 29, 2001),  any
               employee  benefit plan of the Company or of any Subsidiary of the
               Company,  or  any  Person  or  entity  organized,   appointed  or
               established  by the  Company  for or pursuant to the terms of any
               such plan), alone or together with its Affiliates and Associates,
               shall,  at any time  after the  Rights  Distribution  Declaration
               Date,  become the  Beneficial  Owner of 20% or more of the Common
               Shares  then  outstanding,  unless  the  event  causing  the  20%
               threshold  to be  crossed is a  transaction  set forth in Section
               13(a) hereof, or is an acquisition of Common Shares pursuant to a
               tender  offer or an  exchange  offer for all  outstanding  Common
               Shares at a price and on terms  determined by at least a majority
               of the members of the Board of Directors  who are not officers of
               the Company and who are not representatives, nominees, Affiliates
               or Associates of an Acquiring Person, after receiving advice from
               one or more  investment  banking firms, to be (a) at a price that
               is fair to  shareholders  of the Company (taking into account all
               factors  which  such  members  of the  Board  of  Directors  deem
               relevant  including,   without  limitation,   prices  that  could
               reasonably  be achieved if the Company or its assets were sold on
               an  orderly  basis  designed  to realize  maximum  value) and (b)
               otherwise   in  the  best   interests  of  the  Company  and  its
               shareholders, or

                    (C) during such time as there is an  Acquiring  Person there
               shall  be  any  reclassification  of  securities  (including  any
               reverse stock split), or  recapitalization of the Company, or any
               merger  or   consolidation   of  the  Company  with  any  of  its
               Subsidiaries  or any other  transaction or series of transactions
               involving  the Company or any of its  Subsidiaries,  other than a
               transaction  or  transactions  to which the provisions of Section
               13(a) apply  (whether or not with or into or otherwise  involving
               an Acquiring Person) that has the effect, directly or indirectly,
               of  increasing  by more  than 1% the  proportionate  share of the
               outstanding  shares  of any  class of  equity  securities  of the
               Company or any of its Subsidiaries that is directly or indirectly
               beneficially  owned by any  Acquiring  Person or any Associate or
               Affiliate of any Acquiring Person,

     then,  promptly following five (5) days after the date of the occurrence of
     an event described in Section  11(a)(ii)(B)  hereof and promptly  following
     the  occurrence  of any event  described  in  Section  11(a)(ii)(A)  or (C)
     hereof,  each holder of a Right  (except as  provided  below and in Section
     7(e) hereof)  shall  thereafter  have the right to receive,  upon  exercise
     thereof at the then-current  Purchase Price in accordance with the terms of
     this Agreement,  such number of Common Shares of the Company as shall equal
     the result obtained by (x) multiplying the  then-current  Purchase Price by
     the  then-number  of  Common  Shares  for  which  a Right  was  exercisable
     immediately prior to the first occurrence of a Section 11(a)(ii) Event, and
     (y) dividing that product (which,  following such first  occurrence,  shall
     thereafter  be referred to as the  "Purchase  Price" for each Right and for
     all  purposes  of  this  Agreement)  by  50% of the  current  market  price
     (determined  pursuant to Section 11(d) hereof) per Common Share on the date
     of such first occurrence (such number of shares, the "Adjustment Shares").

          (b) In case the Company  shall fix a record  date for the  issuance of
     rights,  options or warrants to all holders of Common Shares entitling them
     to subscribe for or purchase (for a period expiring within  forty-five (45)
     calendar   days  after  such  record  date)  Common  Shares  or  securities
     convertible or  exercisable  into Common Shares at a price per Common Share
     (or having a conversion  price per share, if a security is convertible into
     Common Shares) less than the current  market price (as determined  pursuant
     to Section  11(d)  hereof) per Common Share on such record  date,  then the
     Purchase  Price to be in effect after such record date shall be  determined
     by  multiplying  the  Purchase  Price in effect  immediately  prior to such
     record date by a fraction,  the  numerator  of which shall be the number of
     Common Shares  outstanding  on such record date,  plus the number of Common
     Shares  that the  aggregate  offering  price of the total  number of Common
     Shares so to be offered (and/or the aggregate  initial  conversion price of
     the convertible securities so to be offered) would purchase at such current
     market price,  and the  denominator  of which shall be the number of Common
     Shares  outstanding  on such  record  date,  plus the number of  additional
     Common Shares to be offered for subscription or purchase (or into which the
     convertible securities so to be offered are initially convertible). In case
     such  subscription  price may be paid by delivery of consideration  part or
     all of  which  may  be in a  form  other  than  cash,  the  value  of  such
     consideration  shall  be as  determined  in  good  faith  by the  Board  of
     Directors, whose determination shall be described in a statement filed with
     the Rights  Agent and shall be binding on the Rights  Agent and the holders
     of the  Rights.  Common  Shares  owned  by or held for the  account  of the
     Company  shall  not be  deemed  outstanding  for the  purpose  of any  such
     computation.  Such adjustment  shall be made  successively  whenever such a
     record date is fixed, and if such rights or warrants are not so issued, the
     Purchase  Price shall be adjusted to be the Purchase  Price that would then
     be in effect if such record date had not been fixed.

          (c) In case the Company shall fix a record date for a distribution  to
     all  holders of Common  Shares  (including  any such  distribution  made in
     connection  with a  consolidation  or merger in which  the  Company  is the
     continuing  entity) of  evidences  of  indebtedness,  cash  (other than the
     regular  quarterly  cash  distribution  made pursuant to Section 8.3 of the
     Company's  Limited  Liability  Company  Agreement),  assets or subscription
     rights or warrants  (excluding  those referred to in Section 11(b) hereof),
     the  Purchase  Price  to be in  effect  after  such  record  date  shall be
     determined by multiplying the Purchase Price in effect immediately prior to
     such record date by a fraction, the numerator of which shall be the current
     market price (as  determined  pursuant to Section  11(d) hereof) per Common
     Share on such record  date,  less the fair market value (as  determined  in
     good  faith  by the  Board  of  Directors,  whose  determination  shall  be
     described in a statement filed with the Rights Agent) of the portion of the
     cash,  assets or evidences of  indebtedness so to be distributed or of such
     subscription  rights  or  warrants  applicable  to a Common  Share  and the
     denominator  of which shall be such  current  market  price (as  determined
     pursuant to Section  11(d)  hereof) per Common  Share on such record  date.
     Such adjustments shall be made successively  whenever such a record date is
     fixed, and in the event that such distribution is not so made, the Purchase
     Price shall be adjusted to be the  Purchase  Price which would have been in
     effect if such record date had not been fixed.

          (d) For the purpose of any computation hereunder,  the "current market
     price"  per Common  Share on any date shall be deemed to be the  average of
     the daily closing  prices per Common Share for the thirty (30)  consecutive
     Trading Days (as such term is  hereinafter  defined)  immediately  prior to
     such date;  provided,  however,  that in the event that the current  market
     price  per  Common  Share  is  determined  during a  period  following  the
     announcement  by the issuer of such Common Share of (A) a  distribution  on
     such Common Share payable in Common Shares or securities  convertible  into
     Common Shares (other than the Rights), or (B) any subdivision,  combination
     or  reclassification  of Common Shares,  and prior to the expiration of the
     requisite  thirty (30) Trading Day or ten (10)  Trading Day period,  as set
     forth above, after the ex-distribution  date for such distribution,  or the
     record date for such subdivision,  combination or  reclassification,  then,
     and in each  such  case,  the  "current  market  price"  shall be  properly
     adjusted to take into account  ex-distribution trading so as to include the
     value of the distribution. The closing price for each day shall be the last
     sale price,  regular way, or, in case no such sale takes place on such day,
     the  average of the closing bid and asked  prices,  regular  way, in either
     case as reported in the principal consolidated transaction reporting system
     with  respect to  securities  listed or admitted to trading on the New York
     Stock  Exchange  or, if the Common  Shares are not  listed or  admitted  to
     trading  on the New York  Stock  Exchange,  as  reported  in the  principal
     consolidated transaction reporting system with respect to securities listed
     on the principal  national  securities  exchange on which the Common Shares
     are listed or admitted  to trading or, if the Common  Shares are not listed
     or admitted to trading on any national securities exchange, the last quoted
     price  or,  if not so  quoted,  the  average  of the high bid and low asked
     prices  in  the  over-the-counter  market,  as  reported  by  the  National
     Association  of  Securities   Dealers,   Inc.  Automated  Quotation  System
     ("NASDAQ")  or such other  system then in use,  or, if on any such data the
     Common Shares are not quoted by any such  organization,  the average of the
     closing bid and asked prices as furnished  by a  professional  market maker
     making a market in the Common Shares  selected by the Board of Directors of
     the Company.  If on any such date no market maker is making a market in the
     Common Shares,  the fair value of such shares on such date as determined in
     good faith by Board of  Directors  shall be used.  The term  "Trading  Day"
     shall mean a day on which the  principal  national  securities  exchange on
     which the Common  Shares are listed or  admitted to trading is open for the
     transaction of business, if the Common Shares are not listed or admitted to
     trading on any national securities  exchange, a Business Day. If the Common
     Shares are not publicly  held or not so listed or traded,  "current  market
     price" per share shall mean the fair value per share as  determined in good
     faith by the Board of Directors,  whose determination shall be described in
     a statement  filed with the Rights  Agent and shall be  conclusive  for all
     purposes.

          (e) Anything herein to the contrary notwithstanding,  no adjustment in
     the Purchase Price shall be required unless such  adjustment  would require
     an increase or decrease of at least one percent (1%) in the Purchase Price;
     provided,  however,  that any  adjustments  that by reason of this  Section
     11(e) are not  required to be made shall be carried  forward and taken into
     account in any subsequent  adjustment.  All calculations under this Section
     11 shall be made to the nearest  cent or to the  nearest  tenth of a Common
     Share.  Notwithstanding  the first  sentence  of this  Section  11(e),  any
     adjustment  required  by this  Section  11 shall be made no later  than the
     earlier  of (i)  three  (3)  years  from the date of the  transaction  that
     mandates such adjustment, or (ii) the Expiration Date.

          (f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
     or Section 13(a) hereof, the holder of any Right thereafter exercised shall
     become  entitled to receive any member  interests other than Common Shares,
     thereafter  the number of such other member  interests so  receivable  upon
     exercise of any Right and the Purchase  Price  thereof  shall be subject to
     adjustment from time to time in a manner and on terms as nearly  equivalent
     as  practicable  to  the  provisions  with  respect  to the  Common  Shares
     contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j) and (l), and
     the  provisions  of Sections 7, 9, 10, 13 and 14 hereof with respect to the
     Common Shares shall apply on like terms to any such other shares.

          (g) All Rights  originally  issued by the Company after any adjustment
     made to the Purchase Price  hereunder shall evidence the right to purchase,
     at the adjusted  Purchase  Price,  the number of Common Shares  purchasable
     from time to time  hereunder  upon  exercise of the Rights,  all subject to
     further adjustment as provided herein.

          (h) Unless the Company  shall have  exercised its election as provided
     in Section 11(i), upon each adjustment of the Purchase Price as a result of
     the  calculations  made in Sections  11(b) and (c), each Right  outstanding
     immediately  prior  to the  making  of  such  adjustment  shall  thereafter
     evidence the right to purchase, at the adjusted Purchase Price, that number
     of  Common  Shares  (calculated  to  the  nearest  tenth)  obtained  by (i)
     multiplying (x) the number of Common Shares covered by a Right  immediately
     prior to this adjustment,  by (y) the Purchase Price in effect  immediately
     prior to such  adjustment  of the  Purchase  Price,  and (ii)  dividing the
     product so obtained by the Purchase Price in effect  immediately after such
     adjustment of the Purchase Price.

          (i) The  Company may elect on or after the date of any  adjustment  of
     the  Purchase  Price  to  adjust  the  number  of  Rights,  in  lieu of any
     adjustment in the number of Common Shares  purchasable upon the exercise of
     a Right. Each of the Rights  outstanding after the adjustment in the number
     of Rights shall be exercisable  for the number of Common Shares for which a
     Right was exercisable immediately prior to such adjustment. Each Right held
     of record before such  adjustment of the number of Rights shall become that
     number of Rights (calculated to the nearest tenth) obtained by dividing the
     Purchase  Price in effect  immediately  prior to adjustment of the Purchase
     Price by the Purchase Price in effect  immediately  after adjustment of the
     Purchase  Price.  The  Company  shall  make a  public  announcement  of its
     election to adjust the number of Rights, indicating the record date for the
     adjustment,  and, if known at the time,  the amount of the adjustment to be
     made.  This  record  date may be the date on which  the  Purchase  Price is
     adjusted or any day thereafter,  but, if the Rights  Certificates have been
     issued,  shall be at least ten (10) days  later than the date of the public
     announcement. If Rights Certificates have been issued, upon each adjustment
     of the number of Rights pursuant to this Section 11(i),  the Company shall,
     as promptly as practicable, cause to be distributed to holders of record of
     Rights  Certificates  on such record date Rights  Certificates  evidencing,
     subject to Section 14 hereof,  the additional  Rights to which such holders
     shall be entitled as a result of such adjustment,  or, at the option of the
     Company,  shall  cause to be  distributed  to such  holders  of  record  in
     substitution  and  replacement  for the  Rights  Certificates  held by such
     holders prior to the date of  adjustment,  and upon surrender  thereof,  if
     required by the Company, new Rights Certificates  evidencing all the Rights
     to which such  holders  shall be  entitled  after such  adjustment.  Rights
     Certificates   so  to  be  distributed   shall  be  issued,   executed  and
     countersigned  in the  manner  provided  for herein  (and may bear,  at the
     option of the Company, the adjusted Purchase Price) and shall be registered
     in the names of the holders of record of Rights  Certificates on the record
     date specified in the public announcement.

          (j)  Irrespective of any adjustment or change in the Purchase Price or
     the number of Common Shares  issuable upon the exercise of the Rights,  the
     Rights  Certificates  theretofore  and  thereafter  issued may  continue to
     express the Purchase Price per Common Share and the number of Common Shares
     that were expressed in the initial Rights Certificates issued hereunder.

          (k) In any  case in  which  this  Section  11  shall  require  that an
     adjustment in the Purchase  Price be made effective as of a record date for
     a specified  event,  the Company may elect to defer until the occurrence of
     such event the  issuance  to the holder of any Right  exercised  after such
     record date the number of Common  Shares  issuable  upon such exercise over
     and above the number of Common  Shares  issuable  upon such exercise on the
     basis of the Purchase Price in effect prior to such  adjustment;  provided,
     however,  that the  Company  shall  deliver  to  holder a due bill or other
     appropriate  instrument  evidencing  such  holder's  right to receive  such
     additional  shares   (fractional  or  otherwise)  or  securities  upon  the
     occurrence of the event requiring such adjustment.

          (l) Anything in this Section 11 to the  contrary  notwithstanding  the
     Company shall be entitled to make such reductions in the Purchase Price, in
     addition to those adjustments expressly required by this Section 11, as and
     to the extent that in their good faith  judgment  the Board of Directors of
     the Company shall  determine to be advisable so that any (i)  consolidation
     or subdivision of the Common Shares,  (ii) issuance  wholly for cash of any
     Common Shares at less than the current market price,  (iii) issuance wholly
     for cash of Common Shares or securities that by their terms are convertible
     into or  exchangeable  for  Common  Shares,  (iv)  distributions  of member
     interests  or (v)  issuance of rights,  options or warrants  referred to in
     this  Section  11,  hereafter  made by the Company to holders of its Common
     Shares shall not be taxable to such shareholders.

          (m) The  Company  covenants  and agrees that it shall not, at any time
     after the Distribution Date, (i) consolidate with or merge with or into any
     other Person, or (ii) sell or transfer (or permit any Subsidiary to sell or
     transfer), in one transaction, or a series of related transactions,  assets
     or earning power  aggregating  more than 50% of the assets or earning power
     of the Company and its Subsidiaries  (taken as a whole) to any other Person
     or Persons,  if (x) at the time of or immediately after such consolidation,
     merger or sale  there are any  rights,  warrants  or other  instruments  or
     securities  outstanding  or agreements in effect which would  substantially
     diminish or otherwise eliminate the benefits intended to be afforded by the
     Rights or (y) prior  to,  simultaneously  with or  immediately  after  such
     consolidation,   merger  or  sale,  the  shareholders  of  the  Person  who
     constitutes,  or would  constitute,  the "Principal  Party" for purposes of
     Section  13(a)  hereof  shall  have  received  a  distribution   of  Rights
     previously  owned by such Person or any of its Affiliates  and  Associates,
     provided,  however,  that  this  Section  11(m)  shall  not  apply  to  any
     consolidation or merger with or into a Subsidiary of the Company or sale to
     the Company and/or any of its Subsidiaries if such transactions comply with
     Section 11(n) hereof.

          (n) The Company  covenants  and agrees  that,  after the  Distribution
     Date, it will not,  except as permitted by Section 23 or Section 26 hereof,
     take (or  permit  any  Subsidiary  to take) any  action if at the time such
     action is taken it is reasonably foreseeable that such action will diminish
     substantially or otherwise  eliminate the benefits  intended to be afforded
     by the Rights.

          (o) Anything in this Agreement to the contrary notwithstanding, in the
     event that the  Company  shall at any time  after the  Rights  Distribution
     Declaration  Date  and  prior  to  the  Distribution  Date  (i)  declare  a
     distribution  on the  outstanding  Common Shares  payable in Common Shares,
     (ii)  subdivide  the  outstanding  Common  Shares,  or  (iii)  combine  the
     outstanding  Common Shares into a smaller  number of shares,  the number of
     Rights  associated  with each Common Share then  outstanding,  or issued or
     delivered   thereafter  but  prior  to  the  Distribution  Date,  shall  be
     proportionately adjusted so that the number of Rights thereafter associated
     with each  Common  Share  following  any such event  shall equal the result
     obtained by multiplying  the number of Rights  associated  with each Common
     Share  immediately prior to such event by a fraction the numerator of which
     shall be the total number of Common Shares outstanding immediately prior to
     the occurrence of the event and the denominator of which shall be the total
     number of Common Shares outstanding immediately following the occurrence of
     such event.

     Section 12.  Certificate  of Adjusted  Purchase  Price or Number of Shares.
Whenever an  adjustment is made as provided in Section 11 and Section 13 hereof,
the  Company  shall  (a)  promptly  prepare a  certificate  setting  forth  such
adjustment and a brief  statement of the facts  accounting for such  adjustment,
(b) promptly  file with the Rights Agent,  and with each transfer  agent for the
Common Shares, a copy of such certificate,  and (c) mail a brief summary thereof
to each holder of a Rights  Certificate (or, if prior to the Distribution  Date,
to each holder of a certificate  representing  Common Shares) in accordance with
Section 25 hereof.  The Rights Agent shall be fully  protected in relying on any
such certificate and on any adjustment therein contained.

     Section 13. Consolidation,  Merger or Sale or Transfer of Assets or Earning
          Power.

          (a) In the event that,  following the Share Acquisition Date, directly
     or  indirectly,  (x) the Company shall  consolidate  with, or merge with or
     into,  any other  Person,  and the Company  shall not be the  continuing or
     surviving  entity of such  consolidation  or merger,  (y) any Person  shall
     consolidate with, or merge with or into, the Company, and the Company shall
     be the continuing or surviving entity of such  consolidation or merger and,
     in  connection  with  such  consolidation  or  merger,  all or  part of the
     outstanding  Common  Shares shall be changed into or exchanged for stock or
     other securities of any other Person or cash or any other property,  or (z)
     the  Company  shall  sell  or  otherwise  transfer  (or  one or more of its
     Subsidiaries  shall sell or otherwise  transfer),  in one  transaction or a
     series of related  transactions,  assets or earning power  aggregating more
     than 50% of the assets or earning power of the Company and its Subsidiaries
     (taken as a whole) to any Person or  Persons,  then,  and in each such case
     (except as may be contemplated by Section 13(d) hereof),  proper  provision
     shall be made so that:  (i) each  holder of a Right,  except as provided in
     Section 7(e) hereof,  shall thereafter have the right to receive,  upon the
     exercise thereof at the then-current  Purchase Price in accordance with the
     terms of this  Agreement,  such  number of validly  authorized  and issued,
     fully  paid,  non-assessable  and  freely  tradeable  Common  Shares of the
     Principal Party (as such term is hereinafter  defined),  not subject to any
     liens,  encumbrances,  rights of first refusal or other adverse claims,  as
     shall be equal to the result obtained by (1)  multiplying the  then-current
     Purchase  Price  by the  number  of  Common  Shares  for  which a Right  is
     exercisable immediately prior to the first occurrence of a Section 13 Event
     (or,  if a  Section  11(a)(ii)  Event  has  occurred  prior  to  the  first
     occurrence  of a Section 13 Event,  multiplying  the number of such  Common
     Shares  for which a Right was  exercisable  immediately  prior to the first
     occurrence  of a Section  11(a)(ii)  Event by the Purchase  Price in effect
     immediately prior to such first occurrence),  and (2) dividing that product
     (which,  following  the first  occurrence  of a Section 13 Event,  shall be
     referred to as the "Purchase  Price" for each Right and for all purposes of
     this Agreement) by 50% of the current market price (determined  pursuant to
     Section  11(d)(i)  hereof) per Common Share of such Principal  Party on the
     date of  consummation  of such Section 13 Event;  (ii) such Principal Party
     shall thereafter be liable for, and shall assume, by virtue of such Section
     13 Event,  all the obligations  and duties of the Company  pursuant to this
     Agreement;  (iii) the term "Company" shall thereafter be deemed to refer to
     such Principal Party, it being specifically intended that the provisions of
     Section 11 hereof shall apply only to such  Principal  Party  following the
     first  occurrence of a Section 13 Event;  (iv) such  Principal  Party shall
     take such steps in connection with the consummation of any such transaction
     as may be necessary to assure that the provisions  hereof shall  thereafter
     be  applicable,  as nearly as reasonably  may be, in relation to its Common
     Shares thereafter  deliverable upon the exercise of the Rights; and (v) the
     provisions of Section  11(a)(ii) hereof shall be of no effect following the
     first  occurrence  of any Section 13 Event,  provided,  however,  that this
     Section 13(a) shall not apply to the transactions set forth in clauses (x),
     (y) and (z) above if (1) in the case of  clauses  (x) and (y),  such  other
     Person is a Subsidiary  of the Company and the  transaction  complies  with
     Section 11(n) hereof, and (2) in the case of clause (z), such person is the
     Company  and/or  any  Subsidiary  of the  Company  and the  transaction  or
     transactions comply with Section 11(n) hereof.

          (b) "Principal Party" shall mean

               (i) in the case of any transaction described in clause (x) or (y)
          of the first sentence of Section 13(a),  the Person that is the issuer
          of  any  securities  into  which  Common  Shares  of the  Company  are
          converted in such merger or consolidation, and if no securities are so
          issued,  the  Person  that  is the  other  party  to  such  merger  or
          consolidation; and

               (ii) in the case of any  transaction  described  in clause (z) of
          the first  sentence  of Section  13(a),  the Person  that is the party
          receiving  the  greatest  portion  of  the  assets  or  earning  power
          transferred pursuant to such transaction or transactions;

     provided,  however, that in any such case, (1) if the Common Shares of such
     Person is not at such time and has not been continuously over the preceding
     twelve (12) month period  registered  under Section 12 of the Exchange Act,
     and such Person is a direct or indirect  Subsidiary  of another  Person the
     Common  Shares of which is and has been so  registered,  "Principal  Party"
     shall  refer  to  such  other  Person;  and (2) in case  such  Person  is a
     Subsidiary,  directly or  indirectly,  of more than one Person,  the Common
     Shares of two or more of which are and have been so registered,  "Principal
     Party" shall refer to whichever of such Persons is the issuer of the Common
     Shares having the greatest aggregate market value.

          (c) The Company shall not consummate any such  consolidation,  merger,
     sale or transfer unless the Principal Party shall have a sufficient  number
     of its  authorized  Common Shares that have not been issued or reserved for
     issuance to permit the  exercise in full of the Rights in  accordance  with
     this  Section 13 and unless  prior  thereto the Company and such  Principal
     Party shall have executed and delivered to the Rights Agent a  supplemental
     agreement  providing for the terms set forth in  paragraphs  (a) and (b) of
     this Section 13 and further providing that as soon as practicable after the
     date of any consolidation,  merger or sale of assets mentioned in paragraph
     (a) of this Section 13, the Principal Party will

               (i) prepare and file a registration statement under the Act, with
          respect to the Rights and the securities  purchasable upon exercise of
          the Rights on an  appropriate  form,  and will use its best efforts to
          cause such  registration  statement (A) to become effective as soon as
          practicable  after  such  filing and (B) to remain  effective  (with a
          prospectus at all times meeting the requirements of the Act) until the
          Expiration Date; and

               (ii) will deliver to holders of the Rights  historical  financial
          statements for the Principal  Party and each of its  Affiliates  which
          comply in all respects with the  requirements for registration on Form
          10 under the Exchange Act.

The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. If a Section 13 Event shall occur at
any time after the  occurrence  of a Section  11(a)(ii)  Event,  then the Rights
which have not theretofore been exercised shall thereafter become exercisable in
the manner described in Section 13(a).

          (d)  Notwithstanding  anything  in  this  Agreement  to the  contrary,
     Section  13  shall  not  be  applicable  to  a  transaction   described  in
     subparagraphs  (x) and (y) of  Section  13(a)  if (i) such  transaction  is
     consummated with a Person or Persons who acquired Common Shares pursuant to
     a cash tender offer for all  outstanding  Common  Shares that complies with
     the provisions of Section 11(a)(ii)(B) hereof (or a wholly owned subsidiary
     of any such Person or Persons)  (ii) the price per Common Share  offered in
     such  transaction  is not less than the price per Common  Share paid to all
     holders of Common Shares whose shares were purchased  pursuant to such cash
     tender  offer and  (iii) the form of  consideration  being  offered  to the
     remaining holders of Common Shares pursuant to such transaction is the same
     as the form of consideration  paid pursuant to such cash tender offer. Upon
     consummation  of any such  transaction  contemplated by this Section 13(d),
     all Rights hereunder shall expire.

     Section 14. Fractional Rights and Fractional Shares.

          (a) The Company  shall not be required to issue  fractions  of Rights,
     except prior to the Distribution  Date as provided in Section 11(o) hereof,
     or to distribute Rights  Certificates that evidence  fractional  Rights. In
     lieu of such  fractional  Rights,  there  shall  be paid to the  registered
     holders of the Rights  Certificates  with  regard to which such  fractional
     Rights would  otherwise  be  issuable,  an amount in cash equal to the same
     fraction of the current market value of a whole Right. For purposes of this
     Section  14(a),  the  current  market  value of a whole  Right shall be the
     closing  price of the Rights for the Trading Day  immediately  prior to the
     date on which such  fractional  Rights would have been otherwise  issuable.
     The  closing  price of the Rights for any day shall be the last sale price,
     regular  way, or, in case no such sale takes place on such day, the average
     of the  closing  bid and asked  prices,  regular  way,  in  either  case as
     reported in the principal  consolidated  transaction  reporting system with
     respect to  securities  listed or admitted to trading on the New York Stock
     Exchange or, if the Rights are not listed or admitted to trading on the New
     York Stock Exchange, as reported in the principal consolidated  transaction
     reporting  system  with  respect  to  securities  listed  on the  principal
     national  securities exchange on which the Rights are listed or admitted to
     trading,  or if the  Rights are not  listed or  admitted  to trading on any
     national securities  exchange,  the last quoted price or, if not so quoted,
     the  average of the high bid and low asked  prices in the  over-the-counter
     market,  as reported  by NASDAQ or such other  system then in use or, if on
     any such  date the  Rights  are not  quoted by any such  organization,  the
     average of the closing bid and asked prices as furnished by a  professional
     market  maker  making a  market  in the  Rights  selected  by the  Board of
     Directors  of the  Company.  If on any such  date no such  market  maker is
     making a market in the Rights, the fair value of the Rights on such date as
     determined  in good faith by the Board of Directors of the Company shall be
     used.

          (b) The Company  shall not be required  to issue  fractions  of Common
     Shares  upon  exercise  of the Rights or to  distribute  certificates  that
     evidence fractional Common Shares. In lieu of fractional Common Shares that
     are not integral  multiples of whole Common Shares,  the Company may pay to
     the registered  holders of Rights  Certificates at the time such Rights are
     exercised as herein  provided an amount in cash equal to the same  fraction
     of the current market value of Common Shares.  For purposes of this Section
     14(b), the current market value of Common Shares shall be the closing price
     of Common Shares (as  determined  pursuant to Section ll(d) hereof) for the
     Trading Day immediately prior to the date of such exercise.

          (c) Following the occurrence of a Triggering  Event, the Company shall
     not be required to issue  fractions of Common  Shares upon  exercise of the
     Rights or to  distribute  certificates  which  evidence  fractional  Common
     Shares.  In lieu of fractional  Common  Shares,  the Company may pay to the
     registered  holders  of Rights  Certificates  at the time such  Rights  are
     exercised as herein  provided an amount in cash equal to the same  fraction
     of the current  market value of one (1) Common Share.  For purposes of this
     Section  14(c),  the current  market value of one Common Share shall be the
     closing price of one Common Share (as determined  pursuant to Section ll(d)
     hereof) for the Trading Day immediately prior to the date of such exercise.

          (d) The holder of a Right by the  acceptance  of the Rights  expressly
     waives his right to receive any fractional  Rights or any fractional shares
     upon exercise of a Right, except as permitted by this Section 14.

     Section  15.  Rights of  Action.  All  rights of action in  respect of this
Agreement  are  vested  in the  respective  registered  holders  of  the  Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares);  and any registered holder of any Rights  Certificate (or, prior
to the  Distribution  Date,  of the Common  Shares),  without the consent of the
Rights Agent or of the holder of any other Rights  Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit,  enforce, and may institute and maintain any suit, action or proceeding
against  the Company to enforce,  or  otherwise  act in respect of, his right to
exercise the Rights evidenced by such Rights  Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or  any  remedies  available  to  the  holders  of  Rights,  it is  specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this  Agreement and shall be entitled to specific  performance
of the obligations  hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.

     Section  16.  Agreement  of  Rights  Holders.  Every  holder  of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:

          (a) prior to the  Distribution  Date, the Rights will be  transferable
     only in connection with the transfer of Common Shares;

          (b)  after  the  Distribution   Date,  the  Rights   Certificates  are
     transferable  only on the registry books of the Rights Agent if surrendered
     at the principal  office or offices of the Rights Agent designated for such
     purposes,  duly endorsed or accompanied by a proper  instrument of transfer
     and with the appropriate forms and certificates fully executed;

          (c) subject to Section 6(a) and Section  7(f) hereof,  the Company and
     the  Rights  Agent  may deem and treat  the  person in whose  name a Rights
     Certificate  (or, prior to the  Distribution  Date,  the associated  Common
     Shares  certificate) is registered as the absolute owner thereof and of the
     Rights  evidenced  thereby  (notwithstanding  any notations of ownership or
     writing  on  the  Rights  Certificates  or  the  associated  Common  Shares
     certificate  made by anyone other than the Company or the Rights Agent) for
     all  purposes  whatsoever,  and neither  the Company nor the Rights  Agent,
     subject to the last  sentence of Section 7(e) hereof,  shall be required to
     be affected by any notice to the contrary; and

          (d)  notwithstanding  anything  in  this  Agreement  to the  contrary,
     neither the Company nor the Rights  Agent shall have any  liability  to any
     holder of a Right or other  Person as a result of its  inability to perform
     any of its obligations under this Agreement by reason of any preliminary or
     permanent  injunction  or other order decree or ruling issued by a court of
     competent  jurisdiction or by a governmental,  regulatory or administrative
     agency or commission,  or any statute,  rule, regulation or executive order
     promulgated  or  enacted  by any  governmental  authority,  prohibiting  or
     otherwise restraining  performance of such obligation;  provided,  however,
     the Company  must use its best  efforts to have any such  order,  decree or
     ruling lifted or otherwise overturned as soon as possible.

     Section 17. Rights Certificate Holder Not Deemed a Shareholder.  No holder,
as  such,  of  any  Rights  Certificate  shall  be  entitled  to  vote,  receive
distributions  or be deemed for any  purpose  the holder of the number of Common
Shares  that  may  at  any  time  be  issuable  on the  exercise  of the  Rights
represented  thereby,  nor shall  anything  contained  herein  or in any  Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter  submitted to  shareholders  at any
meeting thereof, or to give or withhold consent to any action of the Company, or
to receive notice of meetings or other actions affecting shareholders (except as
provided  in Section 24 hereof),  or to receive  distributions  or  subscription
rights,  or  otherwise,  until  the  Right or Rights  evidenced  by such  Rights
Certificate shall have been exercised in accordance with the provisions hereof.

     Section 18. Concerning the Rights Agent.

          (a)  The  Company  agrees  to  pay  to  the  Rights  Agent  reasonable
     compensation  for all services  rendered by it hereunder  and, from time to
     time, on demand of the Rights Agent,  its  reasonable  expenses and counsel
     fees  and   disbursements   and  other   disbursements   incurred   in  the
     administration  and  execution  of  this  Agreement  and the  exercise  and
     performance of its duties  hereunder.  The Company also agrees to indemnify
     the Rights Agent for, and to hold it harmless against, any loss, liability,
     or expense, incurred without negligence, bad faith or willful misconduct on
     the part of the Rights  Agent,  for anything  done or omitted by the Rights
     Agent  in  connection  with  the  acceptance  and  administration  of  this
     Agreement,  including the costs and expenses of defending against any claim
     of liability in the premises.

          (b) The Rights Agent shall be  protected  and shall incur no liability
     for or in  respect  of any  action  taken,  suffered  or  omitted  by it in
     connection with its  administration  of this Agreement in reliance upon any
     Rights Certificate or certificate for Common Shares or for other securities
     of the Company,  instrument of  assignment or transfer,  power of attorney,
     endorsement affidavit,  letter, notice,  direction,  consent,  certificate,
     statement,  or other paper or document  believed by it to be genuine and to
     be signed, executed and, where necessary,  verified or acknowledged, by the
     proper Person or Persons.

     Section 19. Merger or Consolidation or Change of Name of Rights Agent.

          (a) Any  corporation  into  which the  Rights  Agent or any  successor
     Rights  Agent may be merged or with  which it may be  consolidated,  or any
     corporation  resulting from any merger or consolidation to which the Rights
     Agent or any successor  Rights Agent shall be a party,  or any  corporation
     succeeding  to the  corporate  trust  business  of the Rights  Agent or any
     successor  Rights  Agent,  shall be the successor to the Rights Agent under
     this Agreement  without the execution or filing of any paper or any further
     act on the part of any of the parties hereto; provided,  however, that such
     corporation  would be eligible for appointment as a successor  Rights Agent
     under  the  provisions  of  Section  21  hereof.  In case at the time  such
     successor  Rights  Agent  shall  succeed  to the  agency  created  by  this
     Agreement, any of the Rights Certificates shall have been countersigned but
     not   delivered,   any  such   successor   Rights   Agent   may  adopt  the
     countersignature  of a  predecessor  Rights  Agent and deliver  such Rights
     Certificates so  countersigned;  and in case at that time any of the Rights
     Certificates shall not have been countersigned,  any successor Rights Agent
     may  countersign  such  Rights  Certificates  either  in  the  name  of the
     predecessor or in the name of the successor  Rights Agent;  and in all such
     cases such Rights  Certificates  shall have the full force  provided in the
     Rights Certificates and in this Agreement.

          (b) In case at any time the name of the Rights  Agent shall be changed
     and  at  such  time  any  of  the  Rights   Certificates  shall  have  been
     countersigned   but  not   delivered,   the  Rights  Agent  may  adopt  the
     countersignature  under its prior name and deliver Rights  Certificates  so
     countersigned;  and in case at that  time  any of the  Rights  Certificates
     shall not have been  countersigned,  the Rights Agent may countersign  such
     Rights Certificates either in its prior name or in its changed name; and in
     all such cases such Rights  Certificates shall have the full force provided
     in the Rights Certificates and in this Agreement.

     Section 20. Duties of Rights Agent.  The Rights Agent undertakes the duties
and  obligations  imposed  by  this  Agreement  upon  the  following  terms  and
conditions,  by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:

          (a) The Rights Agent may consult with legal  counsel (who may be legal
     counsel for the Company), and the opinion of such counsel shall be full and
     complete  authorization and protection to the Rights Agent as to any action
     taken or omitted by it in good faith and in accordance with such opinion.

          (b) Whenever in the performance of its duties under this Agreement the
     Rights Agent shall deem it  necessary or desirable  that any fact or matter
     (including,  without  limitation,  the identity of any Acquiring Person and
     the  determination  of "current  market price") be proved or established by
     the Company prior to taking or suffering any action hereunder, such fact or
     matter  (unless other  evidence in respect  thereof be herein  specifically
     prescribed)  may be deemed to be  conclusively  proved and established by a
     certificate  signed by the Chairman of the Board,  the President,  any Vice
     President,  the Treasurer,  any Assistant  Treasurer,  the Secretary or any
     Assistant  Secretary of the Company and delivered to the Rights Agent;  and
     such  certificate  shall be full  authorization to the Rights Agent for any
     action taken or suffered in good faith by it under the  provisions  of this
     Agreement in reliance upon such certificate.

          (c) The  Rights  Agent  shall  be  liable  hereunder  only for its own
     negligence, bad faith or willful misconduct.

          (d) The  Rights  Agent  shall not be liable for or by reason of any of
     the  statements of fact or recitals  contained in this  Agreement or in the
     Rights  Certificates  or be required  to verify the same  (except as to its
     countersignature on such Rights Certificates),  but all such statements and
     recitals are and shall be deemed to have been made by the Company only.

          (e) The Rights Agent shall not be under any  responsibility in respect
     of the validity of this  Agreement  or the  execution  and delivery  hereof
     (except the due execution  hereof by the Rights Agent) or in respect of the
     validity   or   execution   of   any   Rights   Certificate   (except   its
     countersignature  thereof);  nor shall it be responsible  for any breach by
     the Company of any covenant or condition  contained in this Agreement or in
     any Rights  Certificate;  nor shall it be  responsible  for any  adjustment
     required  under  the  provisions  of  Section  11 or  Section  13 hereof or
     responsible for the manner,  method or amount of any such adjustment or the
     ascertaining  of the  existence  of  facts  that  would  require  any  such
     adjustment  (except  with  respect to the  exercise of Rights  evidenced by
     Rights Certificates after actual notice of any such adjustment);  nor shall
     it by any act hereunder be deemed to make any representation or warranty as
     to the  authorization  or  reservation  of any  Common  Shares to be issued
     pursuant to this  Agreement or any Rights  Certificate or as to whether any
     Common Shares will, when so issued, be validly authorized and issued, fully
     paid and nonassessable.

          (f) The Company agrees that it will perform, execute,  acknowledge and
     deliver or cause to be performed, executed,  acknowledged and delivered all
     such further and other acts,  instruments  and assurances as may reasonably
     be required by the Rights Agent for the carrying out or  performing  by the
     Rights Agent of the provisions of this Agreement.

          (g) The  Rights  Agent is hereby  authorized  and  directed  to accept
     instructions  with respect to the performance of its duties  hereunder from
     the  Chairman  of  the  Board,  the  President,  any  Vice  President,  the
     Secretary,   any  Assistant  Secretary,  the  Treasurer  or  any  Assistant
     Treasurer  of the  Company,  and to apply to such  officers  for  advice or
     instructions in connection with its duties,  and it shall not be liable for
     any action taken or suffered to be taken by it in good faith in  accordance
     with instructions of any such officer.

         (h) The Rights Agent and any shareholder, director officer or employee
     of the  Rights  Agent may buy,  sell or deal in any of the  Rights or other
     securities  of  the  Company  or  become  pecuniarily   interested  in  any
     transaction  in which the Company may be  interested,  or contract  with or
     lend money to the Company or otherwise act as fully and freely as though it
     were not Rights Agent under this  Agreement.  Nothing herein shall preclude
     the Rights  Agent from acting in any other  capacity for the Company or for
     any other legal entity.

          (i) The Rights  Agent may  execute and  exercise  any of the rights or
     powers hereby vested in it or perform any duty  hereunder  either itself or
     by or through its  attorneys  or agents,  and the Rights Agent shall not be
     answerable or accountable  for any act,  default,  neglect or misconduct of
     any such attorneys or agents or for any loss to the Company  resulting from
     any such act, default, neglect or misconduct; provided, however, reasonable
     care was exercised in the selection and continued employment thereof.

          (j) No provision of this  Agreement  shall require the Rights Agent to
     expend or risk its own funds or otherwise incur any financial  liability in
     the  performance  of any of its duties  hereunder or in the exercise of its
     rights if there shall be reasonable grounds for believing that repayment of
     such funds or adequate  indemnification  against  such risk or liability is
     not reasonably assured to it.

          (k) If,  with  respect  to any Right  Certificate  surrendered  to the
     Rights Agent for exercise or transfer, the certificate attached to the form
     of  assignment  or form of  election to  purchase,  as the case may be, has
     either not been completed or indicates an affirmative  response to clause 1
     and/or 2 thereof,  the Rights Agent shall not take any further  action with
     respect to such  requested  exercise of transfer  without first  consulting
     with the Company.

     Section  21.  Change of Rights  Agent.  The Rights  Agent or any  successor
Rights Agent may resign and be discharged  from its duties under this  Agreement
upon  thirty (30) days'  notice in writing  mailed to the  Company,  and to each
transfer agent of the Common Shares, by registered or certified mail, and to the
holders of the Rights  Certificates by first-class  mail. The Company may remove
the Rights Agent or any successor  Rights Agent upon thirty (30) days' notice in
writing,  mailed to the Rights Agent or successor  Rights Agent, as the case may
be, and to each transfer agent of the Common Shares,  by registered or certified
mail, and to the holders of the Rights  Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise  become  incapable of
acting,  the Company  shall  appoint a  successor  to the Rights  Agent.  If the
Company shall fail to make such appointment  within a period of thirty (30) days
after giving  notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Rights  Certificate (who shall, with such notice,  submit his
Rights Certificate for inspection by the Company), then any registered holder of
any Rights Certificate may apply to any court of competent  jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court,  shall be a  corporation  organized and doing
business  under the laws of the United States or of the State of New York (or of
any other state of the United States so long as such  corporation  is authorized
to do  business  as a banking  institution  in the State of New  York),  in good
standing,  having  a  principal  office  in the  State  of New  York,  which  is
authorized under such laws to exercise  corporate trust powers and is subject to
supervision or  examination  by federal or state  authority and which has at the
time of its  appointment  as Rights  Agent a combined  capital and surplus of at
least  $100,000,000.  After  appointment,  the  successor  Rights Agent shall be
vested with the same power,  rights,  duties and  responsibilities  as if it had
been  originally  named as Rights  Agent  without  further act or deed;  but the
predecessor  Rights  Agent shall  deliver and transfer to the  successor  Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance,  conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such  appointment,  the Company shall file notice
thereof in writing with the predecessor  Rights Agent and each transfer agent of
the Common  Shares,  and mail a notice  thereof  in  writing  to the  registered
holders of the Rights  Certificates.  Failure to give any notice provided for in
this Section 21, however,  or any defect therein,  shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.

     Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary,  the Company may,
at its option,  issue new Rights Certificates  evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number of Common Shares  purchasable under the Rights
Certificates  made in  accordance  with the  provisions  of this  Agreement.  In
addition, in connection with the issuance or sale of Common Shares following the
Distribution  Date and prior to the redemption or expiration of the Rights,  the
Company (a) shall,  with respect to Common  Shares so issued or sold pursuant to
the exercise of stock options or under any employee plan or arrangement, or upon
the exercise,  conversion or exchange of  securities  hereinafter  issued by the
Company,  and (b) may, in any other case, if deemed  necessary or appropriate by
the Board of Directors of the Company,  issue Rights  Certificates  representing
the  appropriate  number of Rights in  connection  with such  issuance  or sale;
provided,  however,  that (i) no such Rights Certificate shall be issued if, and
to the extent that,  the Company  shall be advised by counsel that such issuance
would create a  significant  risk of material  adverse tax  consequences  to the
Company or the Person to whom such Rights  Certificate would be issued, and (ii)
no  such  Rights  Certificate  shall  be  issued  if,  and to the  extent  that,
appropriate  adjustment  shall  otherwise have been made in lieu of the issuance
thereof.

     Section 23. Redemption and Termination.

          (a) The Board of Directors  of the Company may, at its option,  at any
     time prior to the  earlier of (i) the close of  business  on the  fifteenth
     calendar  day  following  the  Share  Acquisition  Date,  or (ii) the Final
     Expiration  Date,  redeem  all but not less  than all the  then-outstanding
     Rights at a redemption  price of $.01 per Right in cash,  or by delivery of
     or  exchange  for  Common  Shares  (including  fractional  shares) or other
     consideration  (including but not limited to depository units  representing
     Common  Shares or  fractions  thereof)  deemed in good faith to have a fair
     market  value  equal to $.01 per Right by the Board of  Directors,  as such
     amount  may  be   appropriately   adjusted  to  reflect  any  stock  split,
     distribution of member interests or similar transaction occurring after the
     date hereof (such  redemption  price being  hereinafter  referred to as the
     "Redemption  Price");  provided  further,  however,  that if, following the
     occurrence of a Share  Acquisition Date and following the expiration of the
     right of redemption  hereunder  but prior to any  Triggering  Event,  (i) a
     Person who is an  Acquiring  Person  shall have  transferred  or  otherwise
     disposed  of a number of  Common  Shares  in one  transaction  or series of
     transactions,  not directly or  indirectly  involving the Company or any of
     its  Subsidiaries,  that did not result in the  occurrence  of a Triggering
     Event such that such Person is thereafter a Beneficial Owner of 10% or less
     of the  outstanding  Common  Shares,  and (ii) there are no other  Persons,
     immediately  following the occurrence of the event described in clause (i),
     who are Acquiring Persons, then the right of redemption shall be reinstated
     and   thereafter  be  subject  to  the   provisions  of  this  Section  23.
     Notwithstanding  anything contained in this Agreement to the contrary,  the
     Rights shall not be  exercisable  after the first  occurrence  of a Section
     11(a)(ii)  Event  until  such  time as the  Company's  right of  redemption
     hereunder has expired.  The Company may, at its option,  pay the Redemption
     Price in cash,  Common  Shares  (based on the "current  market  price",  as
     defined  in  Section  11(d)  hereof,  of the  Common  Shares at the time of
     redemption) or any other form of  consideration  deemed  appropriate by the
     Board of Directors.

          (b)  Immediately  upon the  action  of the Board of  Directors  of the
     Company ordering the redemption of the Rights, evidence of which shall have
     been filed with the Rights Agent and without any further action and without
     any notice,  the right to exercise the Rights will  terminate  and the only
     right  thereafter  of  the  holders  of  Rights  shall  be to  receive  the
     Redemption  Price for each Right so held.  Promptly after the action of the
     Board of Directors ordering the redemption of the Rights, the Company shall
     give notice of such  redemption  to the Rights Agent and the holders of the
     then outstanding  Rights by mailing such notice to all such holders at each
     holder's  last address as it appears upon the registry  books of the Rights
     Agent or, prior to the  Distribution  Date,  on the  registry  books of the
     Transfer  Agent for the Common  Shares.  Any notice  which is mailed in the
     manner herein  provided  shall be deemed  given,  whether or not the holder
     receives the notice.  Each such notice of redemption  will state the method
     by which the payment of the Redemption Price will be made.

     Section 24. Notice of Certain Events.

          (a) In  case  the  Company  shall  propose,  at  any  time  after  the
     Distribution Date, (i) to make any distribution payable in member interests
     of any  class to the  holders  of the  Common  Shares  or to make any other
     distribution  to the  holders of the Common  Shares  (other  than a regular
     quarterly cash  distribution  made pursuant to Section 8.3 of the Company's
     Limited  Liability Company  Agreement),  or (ii) to offer to the holders of
     Common  Shares  rights or warrants  to  subscribe  for or to  purchase  any
     additional  Common Shares or shares of member interests of any class or any
     other   securities,   rights   or   options,   or  (iii)  to   effect   any
     reclassification  of its Common Shares or (iv) to effect any  consolidation
     or merger into or with any other  Person  (other than a  Subsidiary  of the
     Company in a transaction  that complies with Section 11(n)  hereof),  or to
     effect  any  sale  or  other  transfer  (or to  permit  one or  more of its
     Subsidiaries to effect any sale or other transfer), in one transaction or a
     series of related  transactions,  of more than 50% of the assets or earning
     power of the Company and its  Subsidiaries  (taken as a whole) to any other
     Person or Persons (other than the Company and/or any of its Subsidiaries in
     one or more transactions each of which complies with Section 11(n) hereof),
     or (v) to effect the liquidation, dissolution or winding up of the Company,
     then, in each such case,  the Company shall give to each holder of a Rights
     Certificate,  to the extent  feasible  and in  accordance  with  Section 25
     hereof,  a notice of such proposed  action,  which shall specify the record
     date  for  the  purposes  of  such   distribution   of  member   interests,
     distribution   of  rights  or   warrants,   or  the  date  on  which   such
     reclassification,   consolidation,  merger,  sale,  transfer,  liquidation,
     dissolution,  or winding up is to take place and the date of  participation
     therein  by the  holders of the  Common  Shares,  if any such date is to be
     fixed,  and such notice shall be so given in the case of any action covered
     by clause (i) or (ii) above at least  twenty  (20) days prior to the record
     date for  determining  holders of the Common  Shares for  purposes  of such
     action, and in the case of any such other action, at least twenty (20) days
     prior to the date of the  taking  of such  proposed  action  or the date of
     participation  therein by the holders of the Common Shares  whichever shall
     be the earlier.

          (b) In case any of the events set forth in  Section  11(a)(ii)  hereof
     shall  occur,  then,  in any  such  case,  the  Company  shall  as  soon as
     practicable thereafter give to each holder of a Rights Certificate,  to the
     extent feasible and in accordance  with Section 25 hereof,  a notice of the
     occurrence of such event, that shall specify the event and the consequences
     of the event to holders of Rights under Section 11(a)(ii) hereof.

     Section 25. Notices.  Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights  Certificate to
or on the Company  shall be  sufficiently  given or made if sent by  first-class
mail postage prepaid,  addressed (until another address is filed in writing with
the Rights Agent) as follows:

                  Kaneb Services LLC
                  2435 North Central Expressway
                  Richardson, Texas 75080
                  Attention:        President

Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement  to be given or made by the  Company  or by the  holder of any  Rights
Certificate  to or on the Rights  Agent shall be  sufficiently  given or made if
sent by first-class mail,  postage prepaid,  addressed (until another address is
filed in writing with the Company) as follows:

                  The Chase Manhattan Bank, National Association
                  Chase Tower
                  600 Travis St.
                  Suite 1150
                  Houston, Texas 77002
                  Attention: Corporate Trust Department

Notices  or  demands  authorized  by this  Agreement  to be given or made by the
Company or the Rights  Agent to the holder of any  Rights  Certificate  (or,  if
prior to the  Distribution  Date,  to the  holder of  certificates  representing
Common Shares) shall be sufficiently  given or made if sent by first-class mail,
postage  pre-paid,  addressed  to such  holder at the  address of such holder as
shown on the registry books of the Company.

     Section 26. Supplements and Amendments. Prior to the Distribution Date, the
Company and the Rights Agent  shall,  if the Company so directs,  supplement  or
amend any  provision  of this  Agreement  without the approval of any holders of
certificates  representing  Common Shares.  From and after the Distribution Date
and subject to the penultimate  sentence of this Section 26, the Company and the
Rights  Agent  shall,  if the  Company  so  directs,  supplement  or amend  this
Agreement without the approval of any holders of Rights Certificates (i) to cure
any ambiguity, (ii) to correct or supplement any provision contained herein that
may be defective or  inconsistent  with any other  provisions  herein,  (iii) to
shorten or lengthen any time period  hereunder,  or (iv) to change or supplement
the  provisions  hereunder in any manner that the Company may deem  necessary or
desirable  and that shall not  adversely  affect the interests of the holders of
Rights Certificates (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring  Person);  provided,  this Agreement may not be  supplemented or
amended to  lengthen,  pursuant  to clause  (iii) of this  sentence,  (A) a time
period  relating  to when the Rights may be  redeemed at such time as the Rights
are not then redeemable, or (B) any other time period unless such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights.  Upon the delivery of a certificate  from an
appropriate  officer of the Company that states that the proposed  supplement or
amendment is in  compliance  with the terms of this Section 26, the Rights Agent
shall execute such supplement or amendment.  Notwithstanding  anything contained
in this  Agreement to the  contrary,  from and after the  Distribution  Date, no
supplement or amendment  shall be made that changes Section 23, this Section 26,
the  Redemption  Price,  the Final  Expiration  Date,  the Purchase Price or the
number  of  Common  Shares  for  which  a Right  is  exercisable.  Prior  to the
Distribution  Date,  the  interests  of the  holders  of Rights  shall be deemed
coincident with the interests of the holders of Common Shares.

     Section 27. Successors.  All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.

     Section 28. Determinations and Actions by the Board of Directors,  etc. For
all purposes of this  Agreement,  any calculation of the number of Common Shares
outstanding at any particular  time,  including for purposes of determining  the
particular  percentage of such outstanding  Common Shares of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i)  of the General Rules and Regulations under the Exchange Act. The
Board of Directors of the Company shall have the  exclusive  power and authority
to administer this Agreement and to exercise all rights and powers  specifically
granted to the Board or to the  Company,  or as may be necessary or advisable in
the administration of this Agreement,  including,  without limitation, the right
and power to (i) interpret the provisions of this  Agreement,  and (ii) make all
determinations  deemed  necessary or advisable  for the  administration  of this
Agreement  (including a  determination  to redeem or not redeem the Rights or to
amend  the  Agreement).  All such  actions,  calculations,  interpretations  and
determinations  (including, for purposes of clause (y) below, all omissions with
respect to the  foregoing)  which are done or made by the Board of  Directors in
good  faith,  shall (x) be final,  conclusive  and binding on the  Company,  the
Rights Agent,  the holders of the Rights and other parties,  and (y) not subject
the Board of Directors to any liability to the holders of the Rights.

     Section 29. Benefits of this Agreement.  Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered  holders of the Rights  Certificates  (and, prior to the Distribution
Date,  registered  holders of the Common  Shares) any legal or equitable  right,
remedy or claim under this  Agreement;  but this Agreement shall be for the sole
and  exclusive  benefit  of the  Company,  the Rights  Agent and the  registered
holders  of the  Rights  Certificates  (and,  prior  to the  Distribution  Date,
registered holders of the Common Shares).

     Section 30. Severability.  If any term, provision,  covenant or restriction
of this  Agreement  is  held  by a court  of  competent  jurisdiction  or  other
authority  to be invalid,  void or  unenforceable,  the  remainder of the terms,
provisions,  covenants and  restrictions  of this Agreement shall remain in full
force and  effect  and shall in no way be  affected,  impaired  or  invalidated;
provided,  however,  that  notwithstanding  anything  in this  Agreement  to the
contrary, if any such term,  provision,  covenant or restriction is held by such
court  or  authority  to be  invalid,  void or  unenforceable  and the  Board of
Directors of the Company determines in its good faith judgment that severing the
invalid  language  from this  Agreement  would  adversely  affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be  reinstated  and shall not expire  until the close of  business  on the
tenth day following the date of such determination by the Board of Directors.

     Section  31.  Governing  Law.  This  Agreement,  each Right and each Rights
Certificate  issued  hereunder  shall be deemed to be a contract  made under the
laws of the State of  Delaware  and for all  purposes  shall be  governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be  performed  entirely  within  such  State,  except that the rights and
obligations  of the Rights  Agent  shall be governed by the laws of the State of
Texas.

     Section 32.  Counterparts.  This Agreement may be executed in any number of
counterparts and each of such  counterparts  shall for all purposes be deemed to
be an original,  and all such counterparts shall together constitute but one and
the same instrument.

     Section  33.  Descriptive  Headings.  Descriptive  headings  of the several
Sections of this  Agreement  are  inserted  for  convenience  only and shall not
control or affect the meaning or construction of any of the provisions hereof.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed and their  respective  corporate seals to be hereunto  affixed and
attested, all as of the day and year first above written.

Attest:                              KANEB SERVICES LLC

By                                   By              //s//
Name:                                       Howard C. Wadsworth
Title:                                         Vice President

Attest:                              THE CHASE MANHATTAN BANK,
                                     NATIONAL ASSOCIATION,
                                     as Rights Agent
By
Name:                                By               //s//
Title:                               Name:
                                     Title:

<PAGE>

                          [Form of Rights Certificate]

Certificate No. R-                                               ________ Rights

NOT EXERCISABLE AFTER JUNE 27, 2011, OR EARLIER IF REDEEMED BY THE COMPANY.  THE
RIGHTS ARE  SUBJECT TO  REDEMPTION,  AT THE OPTION OF THE  COMPANY,  AT $.01 PER
RIGHT  ON  THE  TERMS  SET  FORTH  IN  THE  RIGHTS   AGREEMENT.   UNDER  CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS  AGREEMENT) AND ANY  SUBSEQUENT  HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS  REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY  OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING  PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS  AGREEMENT).   ACCORDINGLY,   THIS  RIGHTS  CERTIFICATE  AND  THE  RIGHTS
REPRESENTED  HEREBY MAY BECOME NULL AND VOID IN THE  CIRCUMSTANCES  SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]1

                               Rights Certificate

                               Kaneb Services LLC

<PAGE>

     This certifies that  _____________________,  or registered  assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement,  dated as of June 27, 2001 (the "Rights  Agreement"),  between  Kaneb
Services LLC, a Delaware  limited  liability  company (the  "Company"),  and The
Chase Manhattan Bank, National Association,  a national banking association (the
"Rights  Agent"),  to  purchase  from the Company at any time prior to 5:00 P.M.
(New York City  time) on June 27,  2011,  at the office or offices of the Rights
Agent designated for such purpose,  or its successors as Rights Agent, one fully
paid,  non-assessable  Common Share (the "Common  Shares") of the Company,  at a
purchase price of $60.00 per share (the "Purchase Price"), upon presentation and
surrender of this Rights  Certificate  with the Form of Election to Purchase and
related Certificate duly executed. The number of Rights evidenced by this Rights
Certificate  (and the  number  of shares  that may be  purchased  upon  exercise
thereof) set forth above,  and the Purchase Price per share set forth above, are
the number and Purchase Price as of June 27, 2001, based on the Common Shares as
constituted at such date.

     Upon the occurrence of a Section  11(a)(ii)  Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially  owned by (i) an  Acquiring  Person or an Affiliate or Associate of
any such Acquiring  Person (as such terms are defined in the Rights  Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer,  became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person,  such Rights shall become null and void and no
holder  hereof  shall have any right with  respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.

     As provided in the Rights Agreement,  the Purchase Price and the number and
kind of Common  Shares  that may be  purchased  upon the  exercise of the Rights
evidenced by this Rights  Certificate are subject to modification and adjustment
upon the happening of certain events, including Triggering Events.

     This  Rights  Certificate  is subject to all of the terms,  provisions  and
conditions of the Rights Agreement,  which terms,  provisions and conditions are
hereby  incorporated  herein by  reference  and made a part  hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations,  duties and  immunities  hereunder  of the
Rights  Agent,  the Company and the  holders of the Rights  Certificates,  which
limitations of rights include the temporary  suspension of the exercisability of
such Rights under the specific  circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned  office of the
Rights Agent and are also available upon written request to the Rights Agent.

     This Rights Certificate,  with or without other Rights  Certificates,  upon
surrender at the principal  office or offices of the Rights Agent designated for
such  purpose,  may be  exchanged  for  another  Rights  Certificate  or  Rights
Certificates  of like tenor and date evidencing  Rights  entitling the holder to
purchase a like aggregate number of Common Shares as the Rights evidenced by the
Rights Certificate or Rights  Certificates  surrendered shall have entitled such
holder to purchase.  If this Rights  Certificate shall be exercised in part, the
holder  shall be  entitled  to receive  upon  surrender  hereof  another  Rights
Certificate or Rights Certificates for the number of whole Rights not exercised.

     Subject to the provisions of the Rights Agreement,  the Rights evidenced by
this  Certificate  may be redeemed by the Company at its option at a  redemption
price  of $.01  per  Right at any time  prior  to the  earlier  of the  close of
business on (i) the fifteenth day following the Share  Acquisition Date (as such
time period may be  extended  pursuant  to the Rights  Agreement),  and (ii) the
Final  Expiration  Date.  After the  expiration of the  redemption  period,  the
Company's  right of redemption may be reinstated if an Acquiring  Person reduces
his beneficial  ownership to 10% or less of the  outstanding  Common Shares in a
transaction or series of transactions not involving the Company.

     No  fractional  Common Shares will be issued upon the exercise of any Right
or Rights evidenced hereby,  but in lieu thereof a cash payment will be made, as
provided in the Rights Agreement.

     No holder of this Rights  Certificate  shall be entitled to vote or receive
distributions  or be deemed for any purpose the holder of Common Shares that may
at any time be issuable on the exercise hereof,  nor shall anything contained in
the Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter  submitted to  shareholders  at any
meeting thereof,  or to give or withhold  consent to any action,  or, to receive
notice of meetings or other actions affecting  shareholders  (except as provided
in the Rights Agreement), or to receive distributions or subscription rights, or
otherwise,  until the Right or Rights evidenced by this Rights Certificate shall
have been exercised as provided in the Rights Agreement.

     This Rights  Certificate  shall not be valid or obligatory  for any purpose
until it shall have been countersigned by the Rights Agent.

     WITNESS the facsimile  signature of the proper  officers of the Company and
its corporate seal.

Dated as of __________, ______

ATTEST:

Secretary

KANEB SERVICES LLC

By        //s//
     Howard C. Wadsworth
     Vice President

Countersigned:

THE CHASE MANHATTAN BANK,
NATIONAL ASSOCIATION,
as Rights Agent

By    //s//
  Authorized Signature

<PAGE>

                  [Form of Reverse Side of Rights Certificate]

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
               holder desires to transfer the Rights Certificate.)

     FOR VALUE  RECEIVED  __________________________  hereby sells,  assigns and
transfers  unto  (Please  print name and  address  of  transferee)  this  Rights
Certificate,  together  with all right,  title and  interest  therein,  and does
hereby  irrevocably  constitute  and appoint  ___________________  Attorney,  to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.

Dated:_______________, ______

                                    Signature

Signature Guaranteed:

<PAGE>

                                   Certificate

     The undersigned hereby certifies by checking the appropriate boxes that:

          (1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
     transferred  by or on behalf of a Person who is or was an Acquiring  Person
     or an Affiliate or  Associate of any such  Acquiring  Person (as such terms
     are defined pursuant to the Rights Agreement);

          (2) after due inquiry and to the best knowledge of the undersigned, it
     [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
     from any Person who is, was or subsequently  became an Acquiring  Person or
     an Affiliate or Associate of an Acquiring Person.

Dated:                                  , 20
                                                              Signature

Signature Guaranteed:

                                     NOTICE

     The signature to the foregoing  Assignment and Certificate  must correspond
to the  name as  written  upon  the  face of this  Rights  Certificate  in every
particular, without alteration or enlargement or any change whatsoever.

<PAGE>

                          FORM OF ELECTION TO PURCHASE

                  (To be executed if holder desires to exercise
                  Rights represented by the Rights Certificate)

To:  KANEB SERVICES LLC

     The undersigned  hereby  irrevocably  elects to exercise  __________ Rights
represented by this Rights  Certificate  to purchase the Common Shares  issuable
upon the exercise of the Rights and requests that  certificates  for such shares
be issued in the name of and delivered to:

Please insert social security
or other identifying number

                                           (Please print name and address)

     If such  number of Rights  shall not be all the  Rights  evidenced  by this
Rights  Certificate,  a new Rights  Certificate  for the  balance of such Rights
shall be registered in the name of and delivered to:

Please insert social security
or other identifying number

                                           (Please print name and address)

Dated: _______________, ______

                                    Signature

Signature Guaranteed:

<PAGE>

                                   Certificate

     The undersigned hereby certifies by checking the appropriate boxes that:

          (1) the Rights  evidenced by this Rights  Certificate  [ ] are [ ] are
     not being  exercised by or on behalf of a Person who is or was an Acquiring
     Person or an Affiliate or Associate of any such  Acquiring  Person (as such
     terms are defined pursuant to the Rights Agreement);

          (2) after due inquiry and to the best knowledge of the undersigned, it
     [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
     from any Person who is, was or became an  Acquiring  Person or an Affiliate
     or Associate of an Acquiring Person.

Dated: ________________, ______
                                    Signature

Signature Guaranteed:

                                     NOTICE

     The signature to the foregoing  Election to Purchase and  Certificate  must
correspond  to the name as written upon the face of this Rights  Certificate  in
every particular, without alteration or enlargement or any change whatsoever.

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