unusual press release by sen, page-2

Unsolicited correspondence from shareholder group
On behalf of the Company and the Board, I am writing to you in relation to
correspondence you may have received from a small group of shareholders and to
update you on the results of the Company’s Annual General Meeting (AGM).
The Board is again disappointed that the continuing actions of this small group of
shareholders require us to write to you. However, we consider that it is important that
you are kept informed of the affairs of the company.
1 AGM Results
At the Company’s AGM, the two current members of the Board were re-elected with
significant majorities (over 70% of the votes cast) and each of the four external Board
candidates was unsuccessful. Please refer to the Company’s website at
www.senetas.com for full details of the voting results.
2 Unauthorised proxy form
The Company is aware that, despite the results of the AGM, a number of shareholders
have received correspondence from this small group of shareholders, calling
themselves the “Senetas Shareholders Action Group” (“SSAG”) in relation to the
extraordinary general meeting (EGM) of the Company scheduled for 6 December
2005.
Enclosed with that correspondence was a proxy form which used Senetas
Corporation’s letterhead. The Company wishes to make it very clear that the use of
the Company’s letterhead on this proxy form was not authorised by the Company or
the Board of Directors. The completed voting directions on that proxy form are in fact
contrary to the Board’s recommendation.
Mr Galbally and Mr Cook continue to have the full support of the Senetas Board and
the Board reiterates its recommendation that shareholders vote against each of the
resolutions to be considered at the EGM.
If you have unintentionally completed the unauthorised proxy form which was sent to
you by the shareholder group, or you wish to appoint a proxy to vote on your behalf at
the EGM and have not already done so, please complete the enclosed proxy form,
which is endorsed by the Company. Completing this proxy form will effectively
override any earlier voting instructions you have given.
3 Inaccurate correspondence from the SSAG
If you have received correspondence from the SSAG, please be aware of the
following points.
• First, the Company was required under the Corporations Act to provide details
of your shareholding and registered address to the SSAG.
• The SSAG is not any in way affiliated or endorsed by the Company or any
member of the Company’s Board of Directors.
• The Company and the Board continue to fully comply with all of their
obligations under the Corporations Act, the ASX Listing Rules and the
Company’s Constitution, despite certain inaccurate assertions contained in the
correspondence sent by the SSAG.
• The Company considers a number of the statements made in the
correspondence are misleading and wishes to clarify some of these assertions
as follows.
4 Clarification regarding some specific inaccurate claims
4.1 Incorrect assertions regarding SafeNet sales forecasts
Senetas has contractual arrangements with a US-based company called SafeNet Inc,
under which SafeNet sells products which incorporate Senetas’s technology and
SafeNet pays Senetas royalty fees in return.
The correspondence sent by the shareholder group claims that SafeNet has issued a
sales forecast of US$250 million per annum for its SONET range of products and also
issued a similar sales forecast for its soon to be released Ethernet range of products.
This is simply wrong. SafeNet has commented that it regards the total addressable
market to be approximately US$250 million in each case. This is the market for all
products made by all manufacturers, not just SafeNet and its products.
There is clearly a significant difference between the size of a potential market and a
sales forecast for a participant in that market.
As previously disclosed at the Company’s AGM, Senetas Corporation’s forecast
operating profit for the financial year ending 30 June 2006 is A$11 million.
4.2 Nomination of Board candidates for the EGM
Correspondence from the shareholder group incorrectly claims that the purported
Board candidates, who were proposed in the request to hold the EGM, had complied
with the necessary requirements to be eligible for election as directors.
The Company’s Constitution clearly sets out the requirements for eligibility for
election and is intended to treat all candidates fairly and equally and to ensure that any
person who is nominated for election to the Board is willing to act in that capacity.
These requirements are in addition to the obligations under the Corporations Act, but
are in no way inconsistent with those obligations.
None of the four purported candidates satisfied the requirements of the Company’s
Constitution and therefore the Company was not permitted to include them as
candidates, as they were ineligible for election at the EGM.
Relevantly, despite being proposed for election in the request to hold the EGM, two of
the proposed candidates have contacted the Company and confirmed that they would
no longer be seeking election.
4.3 Proposed resolution relating to restriction of Board’s powers
The correspondence from the SSAG also incorrectly claimed that the Company has
‘censored’ a resolution which purported to restrict the Board’s ability to make certain
loans.
The Company’s Constitution clearly provides that the management and control of the
Company’s business and affairs is vested in the directors. This provision is an
altogether standard provision in a constitution for a listed company such as Senetas.
This provision ensures that the Board has the necessary power to fulfil its duties. The
resolution proposed could not have been passed as it was framed because it would
have contradicted this rule of the Company’s Constitution.
____________________________
Rest assured that despite the unwelcome distraction posed by this small group of
shareholders, the Company’s management team and the Board continue to focus on
shareholder wealth creation by continuing to develop the company’s technologies and
by exploiting opportunities to grow the company.
Please contact myself or Mr Stephen Munday on 03 9868 4555 if you have any
queries in relation to this letter or correspondence from the SSAG.
Yours faithfully
Ron Lunt
Director