Northern Ethanol, Inc.

Corporate Governance Guideline

Purpose

The following Corporate Governance Guidelines, hereinafter referred to as the “Guidelines” have been adopted by the Board of Directors, hereinafter referred to as the “Board” of Northern Ethanol, Inc., hereinafter referred to as the “Company” to assist the Board in the exercise of its responsibilities and to promote the effective functioning of the Board and its committees. These Corporate Governance Guidelines are not intended to change or interpret any federal or state law or regulation, including the Delaware Business Corporation Act, or the Amended and Restated Articles of Incorporation or the Amended and Restated Bylaws of the Company.  These Corporate Governance Guidelines are subject to modification from time to time by the Board and will be reviewed by the Corporate Governance Committee at least annually.

Section 1.

1. The Board’s Goals

The business and affairs of the Company shall be managed by or under the direction of the Board. The Board’s goal is to oversee and direct management in building long-term value for the Company’s shareholders.  In pursuing this goal, one of the Board’s principal roles is to select and oversee a well-qualified and responsible Chief Executive Officer and executive team to manage the Company.  In addition to serving the long-term interests of shareholders, the Board’s goal is to assure the vitality of the Company for its customers, employees and the communities in which it operates, which goal includes the promotion of the highest ethical standards.

To achieve these goals the Board monitors both the performance of the Company (in relation to its goals, strategy and competitors) and the performance of the Chief Executive Officer and the executive team.

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Section 2.

1. Role of Directors

A director is expected to spend the time and effort necessary to properly discharge such director’s responsibilities.   Accordingly, a director is expected to regularly attend meetings of the Board and committees on which he or she serves and to review in advance of meetings material distributed for such meetings. In addition, a director should be sufficiently familiar with the business of the Company, including its financial statements and capital structure, and the risks and the competition it faces, to ensure active and effective participation in the deliberations of the Board and the committees on which he or she serves.

A director is also expected to comply with the Company’s Code of Business Ethics and Conduct (the “Code”).   Certain portions of the Code deal with the activities of directors, particularly with respect to potential conflicts of interest, the taking of corporate opportunities for personal use, and transactions in the securities of the Company.
Directors should be familiar with the Code’s provisions in these areas and should consult with the Company’s General Legal Counsel in the event of any issues.

Section 3.  Board of Directors

1. Selection of the Chairman of the Board

The Board shall be free to choose its Chairman of the Board in any way that it deems best for the Company at any given point in time.  The Board currently does not require the separation or the combination of the offices of the Chairman of the Board and the Chief Executive Officer.

3.1  Size of the Board

The Board believes that it should generally have no fewer than 3 and no more than 15 directors.  This range permits diversity of experience without hindering effective discussion or diminishing individual accountability.  The size of the Board could, however, be increased or decreased if determined to be appropriate by the Board.

3.2  Selection of New Directors

The Board shall be responsible for nominating members for election to the Board and for filling vacancies on the Board that may occur between annual meetings of shareholders.  The Nominating Committee is responsible for identifying, screening and recommending candidates to the Board for Board membership.  When formulating its Board membership recommendations, the Nominating Committee shall also consider advice and recommendations from others as it deems appropriate.  The Nominating Committee will consider candidates recommended by shareholders.  In considering candidates submitted by shareholders, the Nominating Committee will take into consideration the needs of the Board and the qualifications of the candidate.  The Nominating Committee may establish procedures, from time to time, regarding shareholder submission of candidates.

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3.3  Board Membership Criteria

The Nominating Committee shall be responsible for assessing the appropriate balance of criteria required of Board members. The Nominating Committee may apply several criteria in selecting nominees.  The Nominating Committee shall consider all factors it deems appropriate, including whether each such nominee has the experience, knowledge or skills useful to the oversight of the Company’s business, and the nominee’s reputation for honesty and ethical conduct in his or her personal and professional activities.  Additional factors which the Nominating Committee may consider include a candidate’s specific experiences and skills, relevant industry background and knowledge, time availability in light of other commitments, potential conflicts of interest, material relationships with the Company and independence from management and the Company.  The Nominating Committee also may seek to have the Board represent a diversity of backgrounds and experience.

Section 4.

1. Other Public Company Directorships

While the Board recognizes that other directorships may add to the diversity of its members’ experiences and skill sets, it believes such benefits may be offset by the difficulties inherent in balancing the competing time demands of multiple directorships.  Directors should advise the Chairman of the Nominating Committee before accepting a seat on the board of another corporation, particularly those that may result in significant time commitments or a change in the director’s relationship to the Company. In addition, no member of the Audit Committee may serve simultaneously on the audit committees of more than two other public companies, unless the Board determines that such simultaneous service would not impair the ability of such director to effectively serve on the Committee.

Section 5.

1. Independence of the Board

Within 12 months of the Listing Date, the Board shall be comprised of a majority of directors who qualify as independent directors (“Independent Directors”) in accordance with the NASDAQ Marketplace Rules. Audit Committee members have additional independence requirements pursuant to Securities and Exchange Commission and NASDAQ Marketplace Rules.

The Board shall review annually the relationships that each director has with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company).  Following such annual review, only those directors who the Board affirmatively determines have no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) will be considered Independent Directors, subject to additional qualifications prescribed under the NASDAQ Marketplace Rules or under applicable law. In the event that a director becomes aware of any change in circumstances that may result in such director no longer being considered independent under the NASDAQ Marketplace Rules or under applicable law, the directors shall promptly inform the Chairman of the Nominating and Corporate Governance Committee.

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Section 6.

1. Board Compensation

A director who is also an officer of the Company shall not receive additional compensation for such service as a director.  The Company believes that compensation for non-employee directors should be competitive and, in order to more closely align the interests of directors with those of shareholders, should encourage increased ownership of the Company’s common stock through the payment of a portion of director compensation in Company stock, options to purchase Company stock or similar compensation.  The Compensation Committee will periodically review the level and form of the Company’s director compensation, including how such compensation relates to director compensation of companies of comparable size, industry and complexity and make recommendations to the Board with respect thereto.  Such review will also include a review of both direct and indirect forms of compensation to the Company’s directors, including any charitable contributions by the Company to organizations in which a director is affiliated and consulting or other similar arrangements between the Company and a director.  The full Board shall set the level and form of director compensation, taking into account the recommendations of the Compensation Committee. 

Director’s fees (including any additional amounts paid to chairs of committees and to members of committees of the Board) are the only compensation a member of the Audit Committee may receive from the Company; provided, however, that a member of the Audit Committee may also receive fixed amounts of compensation under a retirement plan (including deferred compensation) from the Company for prior service with the Company so long as such compensation is not contingent in any way on continued service.

Section 7.

1. Strategic Direction of the Company

Normally it is management’s responsibility to formulate, propose and implement strategic choices and the Board’s role to approve strategic direction and evaluate strategic results.  As a practical matter, the Board and management will be better able to carry out their respective strategic responsibilities if there is an ongoing dialogue among the Chief Executive Officer, other members of management and other Board members.  To facilitate such discussions, members of senior management who are not directors may be invited to participate in Board meetings when appropriate.

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Section 8.

1. Board Access to Management

Board members shall have access to the Company’s management and, as appropriate, to the Company’s outside advisors.  In addition, the Board encourages management to bring into Board meetings from time to time (or otherwise make available to Board members) individuals who can provide additional insight into the items being discussed because of personal involvement and substantial knowledge in those areas or individuals with future potential who senior management believes should be given exposure to the Board.

Section 9.

1. Board Materials Distributed in Advance

Information and materials that are important to the Board’s or a committee’s understanding of the agenda items and other topics to be considered at a Board or committee meeting should, to the extent practicable, be distributed sufficiently in advance of the meeting to permit prior review by the directors.  In the event of a pressing need for the Board or a committee to meet on short notice or if such materials would otherwise contain highly confidential or sensitive information, it is recognized that written materials may not be available in advance of the meeting.

Section 10.

1. Board Interaction with Institutional Investors, Analysts, Press and Customers

The Board believes that under ordinary circumstances management should speak for the Company.  It is suggested that each director shall refer all inquiries from institutional investors, analysts, the press or customers to the Chief Executive Officer or his or her designee.

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Section 11.

1. Board Orientation and Continuing Education

The Company shall provide new directors with a director orientation program to familiarize such directors with, among other things, the Company’s business, strategic plans, significant financial, accounting and risk management issues, compliance programs, conflicts policies, code of business conduct and ethics, corporate governance guidelines, principal officers, internal auditors and independent auditors.  Directors are encouraged to attend, at the Company’s expense, continuing educational programs to further their understanding of the Company’s business and enhance their performance on the Board.

Section 12.

1. Director Attendance at Annual Meetings of Shareholders

Directors are expected to attend the Company’s annual meeting of shareholders.

Section 13  Board Meetings

1. Frequency of Meetings

The Board shall meet as frequently as needed for directors to discharge their responsibilities.  Without limiting the foregoing, the Board shall endeavour to hold regular meetings at least six times per year and special meetings as required. At least one regularly scheduled meeting of the Board shall be held quarterly.

1. Selection of Agenda Items for Board Meetings

The Chairman of the Board, shall prepare the agenda for each Board meeting.  Each committee chairperson, in consultation with the appropriate members of the committee and with management, shall prepare the agenda for each committee meeting.  Any Board member may suggest inclusion of additional items on the agenda and may raise at any Board meeting subjects that are not specifically on the agenda for that meeting.

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Section 14.  Committee Matters

1. Number and Names of Board Committees

The Company shall have four standing committees: Audit, Nominating, Corporate Governance, and Compensation.  The purpose and responsibilities for each committee shall be outlined in committee charters adopted by the Board.  The Board may want, from time to time, to form a new committee or disband a current committee depending on circumstances.  In addition, the Board may determine to form ad hoc committees from time to time, and determine the composition and areas of competence of such committees.

1. Independence of Board Committees

Each of the Audit Committee, the Nominating, Corporate Governance and the Compensation Committee (the “Independent Committees”) shall be composed of at least one Independent Director on the Listing Date and shall be composed of a majority of Independent Directors within 90 days of the Listing Date.  Within 12 months of the Listing Date, the Independent Committees shall each be composed entirely of Independent Directors satisfying applicable legal, regulatory and NASDAQ stock market requirements necessary for an assignment to any such committee.

1. Assignment and Rotation of Committee Members

The Nominating Committee shall be responsible for making recommendations to the Board with respect to the assignment of Board members to various committees.  After reviewing the Nominating Committee’s recommendations, the Board shall be responsible for appointing the chairman and members to the committees on an annual basis.

The Nominating Committee shall annually review the committee assignments and shall consider the rotation of the chairman and members with a view toward balancing the benefits derived from continuity against the benefits derived from the diversity of experience and viewpoints of the various directors.

Section 15.  Leadership Development

15.0  Evaluation of Chief Executive Officer

The Board, acting through the Compensation Committee, will annually conduct an evaluation of the performance of the Chief Executive Officer.  The Compensation Committee shall establish policies, principles and procedures for the evaluation of the Chief Executive Officer. Such evaluation shall be based on objective criteria, including the Company’s performance and relative shareholder return, the value of similar awards to chief executive officers of comparable companies and the awards given to the Chief Executive Officer of the Company in past years. The evaluation shall solicit the views of the Independent Directors regarding the Chief Executive Officer’s performance.  The Chairman of the Compensation Committee shall communicate the conclusions of the evaluation to the Chief Executive Officer.

15.1  Succession Planning

On an annual basis, the Board shall review a management succession plan, developed by the Chief Executive Officer, which plan shall include emergency Chief Executive Officer succession, Chief Financial Officer succession in the ordinary course of business and succession for other members of senior management. The plan shall include an assessment of senior manager experience, performance, skills and planned career paths.

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