Filed by: Deluxe Corporation
Pursuant to Rule 425 under the Securities Act of 1933
Commission File No.: 0-30791
Subject Company: eFunds Corporation
Deluxe Corporation included the following language in its Form 10-Q for the
quarter ended June 30, 2000. The Form 10-Q was filed with the Securities and
Exchange Commission on July 28, 2000:
"WE URGE INVESTORS AND SECURITY HOLDERS TO READ EFUND CORPORATION'S
REGISTRATION STATEMENT ON FORM S-4, INCLUDING THE PROSPECTUS RELATING TO THE
EXCHANGE OFFER DESCRIBED HEREIN, WHEN IT BECOMES AVAILABLE, BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. WHEN THESE AND OTHER DOCUMENTS RELATING TO THE
TRANSACTION ARE FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION, THEY MAY
BE OBTAINED FREE AT THE SEC'S WEB SITE AT www.sec.gov. HOLDERS OF DELUXE COMMON
STOCK MAY ALSO OBTAIN EACH OF THESE DOCUMENTS (WHEN THEY BECOME AVAILABLE) FOR
FREE BY DIRECTING YOUR REQUEST TO DELUXE CORPORATION, C/O SHAREOWNER SERVICES,
P.O. BOX 64873, SAINT PAUL, MINNESOTA 55164-0873. THIS COMMUNICATION SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL
THERE BY ANY SALE OF SECURITIES IN ANY STATE IN WHICH THE OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE. NO OFFERING OF SECURITIES SHALL BE MADE
EXCEPT BY MEANS OF A PROSPECTUS MEETING THE REQUIREMENTS OF SECTION 10 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
. . .In January 2000, we announced that our board of directors approved a plan
to operate the eFunds segment as a separate, independent, publicly traded
company to be called eFunds Corporation. eFunds issued 5.5 million shares of its
common stock to the public in June 2000. Subsequent to this initial public
offering, we continued to own 40 million shares of eFunds common stock,
representing 87.9% of eFunds' total outstanding common shares. Proceeds from the
offering, based on the offering price of $13.00 per share, totaled $71.5 million
($62.0 million, net of offering expenses). A gain of $30.1 million was
recognized during the second quarter of 2000 for the difference between the
offering price and the carrying amount of our investment in eFunds.
Additionally, we recorded charges of $7.2 million for payments due to certain
officers under change of control and executive employment agreements.
We have announced that we plan to distribute all of our shares of eFunds
common stock to our shareholders through an exchange offer under which our
shareholders will be given the opportunity to tender all or some of their Deluxe
Corporation common shares in exchange for eFunds common shares (the Split-off).
Our plans for the Split-off are subject to receiving a private letter ruling
from the Internal Revenue Service that the Split-off will be tax-free to our
Company and our shareholders for U.S. federal income tax purposes. We have the
sole discretion to determine whether to proceed with the Split-off based on the
best interests of our shareholders and to decide what will be the timing,
structure and terms of the Split-off. Subject to these conditions, we plan to
complete the Split-off prior to December 31, 2000. We have submitted a private
letter ruling request to the Internal Revenue Service. We cannot be certain when
or whether we will receive a favorable tax ruling from the Internal Revenue
Service, or that the distribution will be completed. If consummated, the
Split-off could result in a substantial decrease in our total common shares
outstanding. Additionally, we would recognize an additional gain on the exchange
of subsidiary stock and would reflect eFunds results of operations as
discontinued operations in our consolidated financial statements. If we do not
complete the Split-off, we will continue to control eFunds and we may not
realize the anticipated benefits from the separation of the two companies. We
will incur additional costs and expenses associated with the Split-off. A
portion of these costs will be expensed in future periods and a portion is
expected to be netted against the gain recognized at the time of the Split-off.
In connection with eFunds' initial public offering and the anticipated
Split-off, we have entered into various agreements with eFunds that address the
allocation of assets and liabilities between us and that define our relationship
after the separation. The agreements relate to matters such as consummation of
the initial public offering and the Split-off, our registration rights,
intercompany loans, information technology consulting and business process
management services, indemnification, data sharing, real estate matters, tax
sharing and transition services. For transition services, eFunds will compensate
us for providing services and will negotiate for such services with
third-parties at mutually agreed upon rates after the transition arrangements
terminate. The transition period varies depending on the agreement, but many
transition services will terminate upon completion of the Split-off. Some of the
transition agreements may be extended beyond the initial transition period.
Additionally, we have agreed to indemnify eFunds for future losses arising from
any litigation based on the conduct of the EBT and medical eligibility
verification businesses prior to eFunds' initial public offering in June 2000,
and from future losses on identified loss contracts in excess of our $29.2
million accrual for contract losses as of April 30, 2000. The indemnification
obligation does not apply to losses covered by the existing reserves. The
maximum amount of litigation and contract losses for which we will indemnify
eFunds is $14.6 million. After the Split-off, any indemnification payments will
be recorded as other expense in our consolidated statements of income. Prior to
the Split-off, any indemnification payments will be treated as capital
contributions."
