[SAFETY-KLEEN LOGO]
January 6, 1998
Dear Safety-Kleen Shareholder:
We, the Board of Directors, realize the enormous responsibility of
evaluating the offers for your Company. We believe that the $27 all-cash
merger agreement we have approved (the "Xxxxxx Xxxxxx") offers Safety-Kleen
shareholders value superior to the Xxxxxxx Environmental proposal. The Xxxxxx
Xxxxxx Agreement was entered into after your Board carefully evaluated the
risks and benefits of the alternatives available and unanimously agreed the
Xxxxxx Xxxxxx Agreement is in the best interests of the shareholders and other
constituencies which your Board considered.
Xxxxxxx Environmental Services claims that the offer it made on November 20
is worth $30 per share, consisting of $15 in Xxxxxxx Environmental stock and
$15 cash, subject to certain adjustments. We firmly believe that it is not
worth $30 per share.
As more fully discussed in clauses (v), (vii) and (viii) of "Item 4. The
Solicitation Or Recommendation--(b)(2) Reasons For The Recommendation" and
"--(b)(1) Background" in the attached Schedule 14D-9:
. The stock portion of their offer is uncertain and could be worth
significantly less than its claimed $15 value. Consider the following:
--Xxxxxxx says it expects to achieve an estimated $100-130 million of
"synergies". However, there is little overlap between Safety-Xxxxx's
core service business and Xxxxxxx'x landfill and incineration
business. As a result, we do not believe that Xxxxxxx can accomplish
even $50 million of synergies without significant reductions in
service quality, revenue and profit.
--The value of the stock portion of Xxxxxxx Environmental's offer is
dependent upon its stock trading above $4.29 per share. As recently as
December 17th and 18th, the stock closed below the minimum level.
--We believe that Xxxxxxx Environmental has materially underestimated
the charges for depreciation and amortization that would result from
its transaction. Accordingly, Xxxxxxx'x future earnings would be
significantly reduced.
--Up to approximately 200 million Xxxxxxx Environmental shares would be
issued in the transaction, which could quadruple the stock available
in the public markets. It is questionable whether the market could
absorb this substantial stock issuance without adversely affecting
Xxxxxxx'x stock price.
. Xxxxxxx Environmental provides no guaranty as to how much will be paid in
cash to Safety-Kleen shareholders. The nominal $15 in cash portion is
subject to reduction, which Xxxxxxx has estimated could amount to $1.17
per share.
. Considering the conditions in Xxxxxxx'x offer, it is unlikely that its
proposed transaction would close before mid-1998 at the earliest.
Your Board also carefully considered the significant differences between the
business operations of Safety-Xxxxx and Xxxxxxx Environmental. Safety-Kleen
recycles; Xxxxxxx incinerates and puts wastes in the ground. The latter
results in much greater potential environmental liability. As a result of the
transaction, Xxxxxxx Inc., the parent company, would no longer own more than
50% of Xxxxxxx Environmental and therefore would remove from its balance sheet
the potential liabilities and environmental risks of Xxxxxxx Environmental,
which are discussed in clause (ix) of "Item 4. The Solicitation or
Recommendation--(b)(2) Reasons For The Recommendation" in the attached
Schedule 14D-9. Safety-Kleen shareholders, who could become owners of more
than 50% of Xxxxxxx Environmental if the transaction were completed, would
become subject to those risks.
We have called a special meeting of shareholders to approve the Xxxxxx
Xxxxxx which will be held on February 11, 1998. Detailed information
concerning this merger is set forth in the Proxy Statement enclosed herewith.
The Board of Directors and management team at Safety-Xxxxx has, and will
continue to act with your best interests in mind. We appreciate your support
and confidence and will keep you fully informed of the process.
Sincerely,
/s/ Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
Founder, Chairman and Chief
Executive Officer
For the Board of Directors
