EXHIBIT 99.1
November 20, 2006
Dear AEC1 Shareholders,
Re: Dividend of Alternate Energy Corporation Common Stock
As you are aware, your Board of Directors previously approved
a dividend in kind (the "Dividend"), of the shares (the "Dividend Shares"), of
the class of common stock of Alternate Energy Corporation that are held by AEC1,
Inc. The Dividend Shares represent approximately 58.6% of the outstanding shares
of the common stock of Alternate Energy Corporation, and will be freely
transferable by the holders thereof except for affiliates of AEC1. The Dividend
is being made on a pro rata basis to all AEC1 shareholders based on a
one-for-one ratio. That is, you will receive one Dividend Share for each share
of AEC1 common stock that you hold of record as of the record date.
Please be advised that we have looked into the possible tax
consequents of this dividend and have concluded that there is no tax payable on
this in the United States. We did not go to the expense of obtaining an opinion
in writing because we did not feel that it was necessary. We were obliged to
include the following tax information as a matter of course.
Attached is a brief description of the U.S. income tax
implications of the Dividend Shares that you will be receiving. This summary
does not address the particular federal income tax consequences applicable to
shareholders other than U.S. individuals nor does it address state or local tax
consequences. The tax consequences discussed herein may affect shareholders
differently depending on their particular tax situations unrelated to the
Dividend, and accordingly, this summary is not a substitute for careful tax
planning on an individual basis. You are urged to contact your own tax and
financial advisers in connection with evaluating the tax consequences to you of
receiving the Dividend Shares.
Please feel free to call Michael Mulshine (Investor Relations)
at 732-292-0982 if you have any questions in this regard. Thank you very much
for your patience and support.
Sincerely,
/s/ Blaine Froats
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Blaine Froats
Chairman of the Board
Attachment
IMPORTANT U.S. TAX INFORMATION FOR AEC1, INC. SHAREHOLDERS REGARDING THE
SPIN-OFF OF ALTERNATE ENERGY CORPORATION.
The Distribution:
The special Dividend to AEC1, Inc. ("AEC1") shareholders of record on March 17,
2006 of Dividend Shares of common stock in Alternate Energy Corp. ("Alternate
Energy") will be made within 60 days of receipt of the letter mailed to
shareholders, dated November 20, 2006. The Company will distribute one Dividend
Share of Alternate Energy common stock for every one share of AEC1 common stock
you held at the close of the market on March 17, 2006. There were no fractional
shares issued as this was a one-for-one distribution. You now own shares in
AEC1, a reporting company whose shares are not publicly traded, and in Alternate
Energy which is traded on the Over The Counter Bulletin Board ("OTCBB") under
the symbol ARGY.
Consult Your Tax Advisor:
The tax information provided below is provided to guide you through the
potential tax consequences of the spin-off distribution. It is our
interpretation of the federal tax regulations in the United States. The tax
information provided below does not address state income tax regulations or
those of any government outside the United States. We are not offering legal or
tax advice with respect to your specific taxable position of your tax return.
You should consult your tax advisor if you have any questions.
Federal Income Tax Consequences:
AEC1 and Alternate Energy intend for the distribution to be tax free for U.S.
federal income tax purposes. Neither AEC1 nor Alternate Energy have sought or
received opinions from their counsel or independent public accountants as to the
U.S. federal income tax or other tax consequences of the receipt of the
Alternate Energy shares by AEC1 shareholders. In addition, neither AEC1 nor
Alternate Energy has requested an advance ruling from the Internal Revenue
Service ("IRS") as to the tax consequences of the distribution. While our
research has led us to believe this will be a tax free distribution for U.S.
federal income tax purposes, we recognize that there are various types of
shareholders such as corporations, partnerships and trusts and therefore no
assurance can be given that the IRS or the courts will agree that the
distribution is tax free.
Tax Basis Determination:
If you sell your shares in Alternate Energy or AEC1 following the distribution
you may have to pay taxes. To determine your tax basis in your AEC1 shares, you
must first determine the original cost of the shares that you owned in
Environmental Products Group Inc. ("EPG"). These shares would have been acquired
at prices ranging from $0.50 to $5.00 per share and you will need to check your
own records to verify the cost of those shares. The AEC1 shares were a spin-off
from EPG and each shareholder was given 5 AEC1 shares for each share held in
EPG. Therefore, the tax basis for the shares you currently own in AEC1 would be
the gross amount paid for your EPG shares divided by 5. For example, if you
purchased 1 share in EPG for $5.00, you would have received 5 shares in AEC1,
each with a tax basis of $1.00. Once you have determined your tax basis for your
AEC1 shares, the tax basis for your Alternate Energy shares will be exactly the
same since you own the same number of AEC1 shares as Alternate Energy shares.
Holding Period:
The holding period of your Alternate Energy shares is the same as your AEC1
shares for the purpose of determining whether a capital gain or capital loss on
a sale of Alternate Energy shares is short term or long term.
The information regarding the U.S. federal income tax consequences of the
spin-off presented in this letter is for general reference only and does not
purport to cover all U.S. federal income tax consequences that may apply to all
categories of shareholders. All shareholders should consult their own tax
advisors regarding the particular federal, foreign, state and local tax
consequences of the spin-off to them.
Shareholder Statement to be Filed with U.S. Tax Return:
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U.S. Treasury Department regulations require that if you are a "significant
distributee", within the meaning of ss.1.355-5T, that you sign and attach to the
U.S. federal income tax return a statement setting forth certain prescribed
information about the distribution. An individual is a "significant distributee"
if (1) he or she is a holder of stock of a AEC1 (the "Distributing Corporation")
that receives a distribution and immediately before the distribution, such
holder: (i) owned at least 5% (by vote or value) of the total outstanding stock
of the Distributing Corporation if the stock owned by such holder is publicly
traded, or (ii) owned 1% (by vote or value) of the total outstanding stock of
such Distributing Corporation if the stock owned by such holder is not publicly
traded; or (2) a holder of AEC1 securities that receives stock of Alternate
Energy and immediately before the distribution of the stock, such holder owned
securities in AEC1 with a basis of $1,000,000 or more.
AEC1 is not a publicly traded company.
We are enclosing a proposed statement that you may want to consider for this
purpose after consulting your tax advisor.
If you have any questions, please contact Michael Mulshine (Investor Relations)
at (732)292-0982
Sincerely,
/s/ Sean Froats
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Sean Froats
Corporate Secretary
FORM OF INFORMATION STATEMENT
TO BE PROVIDED TO INTERNAL REVENUE SERVICE BY SHAREHOLDERS
"STATEMENT PURSUANT TO ss.1.355-5T(b) BY
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[INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER],
A SIGNIFICANT DISTRIBUTEE"
1. The undersigned, a shareholder owning shares in AEC1, Inc. as of March 17,
2006, received a distribution of stock in a controlled corporation
pursuant to Section 355 of the Internal Revenue Code on
_____________
(Date)
2. The name, address and employer identification number of the corporations
involved are as follows:
AEC1, Inc. (Distributing Corporation)
3325 North Service Road, Unit 105
Burlington, Ontario
Canada L7N 3G2
Employer ID # 36-4452773
Alternate Energy Corporation (Controlled Corporation)
3325 North Service Road, Unit 105
Burlington, Ontario
Canada L7N 3G2
Employer ID # 86-0884116
3. The aggregate basis, determined immediately before the exchange, of any
stock ort 0 6 securities transferred by the significant distribute in the
exchange, and the aggregate fair market value, determined immediately
before the distribution or exchange, of the stock, securities or other
property (including money) received by the significant distribute in the
distribution or exchange:
Shareholder's Signature:
---------------------------
Name: _____________________
Spouse's Signature:
___________________________ (if stock held jointly)
Name: _____________________