Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT TO

Section 13 or 15(d) of the

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): May 21, 2024

Alerus Financial Corporation

(Exact Name of Registrant as Specified in Charter)

Delaware

001-39036

45-0375407

(State or Other Jurisdiction of

Incorporation)

(Commission File Number)

(IRS Employer Identification No.)

401 Demers Avenue

Grand Forks, North Dakota 58201

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (701) 795-3200

N/A

(Former Name or Former Address, if Changed Since Last Report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol		Name of each exchange on which registered
Common Stock, $1.00 par value per share		ALRS		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b–2 of the Securities Exchange Act of 1934 (§ 240.12b–2 of this chapter).

Emerging growth company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 5.02.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Long Term Incentive Plan and Award Agreement

On May 21, 2024, the Board of Directors (the “Board”) of Alerus Financial Corporation (the “Company”) and the Board’s Compensation Committee (the “Compensation Committee”) acted to adopt the Alerus Financial Long Term Incentive Plan (the “LTIP”). The LTIP is an equity incentive program providing a framework pursuant to which the opportunity to receive restricted stock units (“RSUs”) may be awarded annually to executives of the Company. If issued, awards of RSUs under the LTIP shall be granted pursuant to, and in accordance with the terms of, the Alerus Financial Corporation 2019 Equity Incentive Plan, as amended (the “2019 Equity Plan”), which was approved by the Company’s stockholders on May 6, 2019, or such other equity incentive plan as the Company may from time to time maintain.

The LTIP permits the Compensation Committee the discretion to designate between time-based RSUs and performance-based RSUs and, with respect to such RSUs, to establish, where applicable, performance goals and to determine the level at which such goals are achieved. The RSUs will generally vest based on continued employment over a three-year period or Company performance over a three-year period. Upon the death or disability of a participant, generally the RSUs will become fully and immediately vested, with performance-based RSUs vesting as if the Company had achieved the target performance goal. In the instance of a retirement (as defined in the LTIP), a participant’s performance-based RSUs will be eligible for vesting and settlement based on actual performance during the performance period, and time-based RSUs will become fully and immediately vested; notwithstanding, however, in either case, if a retirement occurs within six months following the grant date of an RSU, there shall be no additional vesting with respect to such RSU upon such retirement. The LTIP, and a form of performance-based award agreement pursuant thereto, are attached as Exhibits 10.1 and 10.2, respectively, to this Form 8-K and are incorporated herein by reference.

Amendment to Alerus Financial Corporation 2019 Equity Incentive Plan

On May 21, 2024, the Board and the Compensation Committee acted to amend the 2019 Equity Plan to exclude from the previously established one-year minimum vesting period (applicable to awards solely subject to time-based vesting) the following types of awards: (a) any replacement awards granted in connection with awards that are assumed, converted or substituted pursuant to a merger, acquisition or similar transaction entered into by the Company or any of its subsidiaries; (b) any stock delivered in lieu of fully vested cash obligations; (c) any awards to director participants that vest on the earlier of the one-year anniversary of the grant date and the next annual meeting of shareholders which is at least fifty (50) weeks after the immediately preceding year’s annual meeting; and (d) any additional awards the Compensation Committee may grant, up to a maximum of five percent (5%) of the total share reserve set forth in the 2019 Equity Plan (collectively, the “Amendment”). Per the Amendment, the Compensation Committee also retains the discretion to provide for accelerated exercisability or vesting of any award, including in the cases of retirement, death, disability or a corporate transaction. The 2019 Equity Plan will continue to be administered by the Compensation Committee, which has the authority to select award recipients from the eligible participants, determine the types of awards to be granted and determine the applicable terms, conditions, restrictions and other provisions of such awards. The full text of the Amendment is attached as Exhibit 10.3 to this Form 8-K and is incorporated herein by reference.

Executive Severance Agreement

On May 21, 2024, the Board and the Compensation Committee acted to have the Company enter into an Executive Severance Agreement (the “Severance Agreement”) with Katie A. Lorenson, the President and Chief Executive Officer of the Company. Subject to Ms. Lorenson’s execution of a release of claims in favor of the Company, the Severance Agreement provides for payments to Ms. Lorenson if, (i) prior to a Change in Control (as defined in the Severance Agreement) Ms. Lorenson’s employment is terminated by the Company other than for Cause (as defined in the Severance Agreement) or (ii) within 24 months following a Change in Control Ms. Lorenson’s employment is terminated by the Company other than for Cause or by the officer for Good Reason (as defined in the Severance Agreement). The term “Change in Control” includes a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company. The Severance Agreement’s term is always twenty-four months.

In the event of a termination pursuant to (i) above, Ms. Lorenson shall be entitled to an amount equal to one times the sum of her annual base salary, the average of her past three years of short-term bonuses, and the Company’s portion of 12 months’ premiums under any health, disability and life insurance plan or program in which Ms. Lorenson was entitled to participate in immediately prior to the termination date (collectively, the “Severance Pay”), to be paid over 12 months. In the event of a termination pursuant to (ii) above, Ms. Lorenson shall be entitled to receive an amount equal to 2.99 times the Severance Pay, paid in a lump sum. A copy of the Severance Agreement is attached as Exhibit 10.4 to this Form 8-K and is incorporated herein by reference.

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.		Description

10.1		Alerus Financial Corporation Long Term Incentive Plan

10.2		Form of Alerus Financial Corporation Long Term Incentive Plan Award Agreement

10.3		First Amendment to the Alerus Financial Corporation 2019 Equity Incentive Plan

10.4		Executive Severance Agreement, by and between Alerus Financial Corporation and Katie Lorenson, dated May 21, 2024

104		Cover Page Interactive Data File (embedded within the inline XBRL document)

SignatureS

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: May 28, 2024	Alerus Financial Corporation

	By:	/s/ Katie A. Lorenson
	Name:	Katie A. Lorenson
	Title:	President and Chief Executive Officer

Exhibit 10.1

ALERUS FINANCIAL

LONG TERM INCENTIVE PLAN

Purpose of the Plan

The Alerus Financial (“Alerus” or “Company”) Executive Compensation Philosophy drives all aspects of compensation payable to the key executives of Alerus, particularly incentive compensation. The Compensation Philosophy states that executive compensation practices are designed to attract, motivate, and retain key talent. Our pay-for-performance system ties compensation to shareholder value and core Alerus values, utilizing a mix of base salary, short and long term incentives (including cash and equity), benefits, and perquisites. The purpose of the Long Term Incentive Plan (“LTIP” or “Plan”) is to:

	·	Enhance performance consistent with Alerus’ corporate strategic goals;
	·	Focus on long-term performance results consistent with the Company’s long-term strategic plan;
	·	Strengthen the link between performance and pay by delivering awards based on measurable goals for Alerus and the Participant; and
	·	Strengthen the link between executives and investors through the use of equity grants to enhance shareholder value.

Plan Overview

The LTIP is a performance-based equity incentive plan whereby restricted stock units (“RSUs”) are granted annually to Participants. Depending on Company performance or the passage of time, these RSUs may vest and be earned after 3 years. Upon vesting, each RSU converts to one share of Company stock. A Participant’s target award is determined as a percentage of base salary. All rights, privileges and limitations of a Participant’s awards are governed by and subject to the terms of the Alerus Financial Corporation 2019 Equity Incentive Plan (the “Equity Plan”), or other such equity plan in place at the time of the incentive award as adopted by the Board of Directors. To the extent this LTIP is in conflict with the Equity Plan or the terms of any award agreements thereunder, the terms of the Equity Plan and/or such award agreements shall control.

Eligibility for Participation

The Compensation Committee (“Committee”), with management input, will determine which executives are eligible to participate in the LTIP. Participation in one plan or one year does not guarantee or entitle a Participant to participation in any other incentive plan enacted or maintained in the future.

Target Incentive Award

A Participant’s equity award under the LTIP is targeted at a specified percentage of base salary. The Committee has the authority and sole discretion to modify the target percentage on an annual basis.

The Committee generally will provide a target award consisting of two components: (1) an award of time-based RSUs, which will represent approximately 40% of the total award and will vest, if at all, on or around the third anniversary of the grant date; and (2) an award of performance-based RSUs, which will represent approximately 60% of the total award and will vest, if at all, in an amount determined by the Company’s achievement of certain performance measures described below.

With respect to such performance-based RSUs, two equally weighted performance goals based on relative performance against the companies in the KBW Regional Bank Index at the start of the performance period will be established: (1) relative 3-year Cumulative EPS CAGR Growth; and, (2) relative 3-year Average Return on Equity. Threshold, target, and maximum goals will be established for each performance goal. If Company performance during such three-year period is below the threshold goal, no performance-based RSUs shall vest. So long as Company performance meets or exceeds the threshold goal, a number of performance-based RSUs will vest based upon actual performance, ranging between 50% and 150% of the award based upon linear interpolation relative to the target goal. See Exhibit A for an example calculation.

In determining the achievement of any performance goal upon which vesting may, in whole or in part, be based, the Committee may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to any performance goal. Such adjustments may include, but are not limited to, one or more of the following: (i) items related to a change in accounting principle; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) items related to acquisitions; (v) items attributable to the business operations of any entity acquired by the Company during the performance period; (vi) items related to the disposal or sale of a business or segment of the business; (vii) items related to discontinued operations that do not qualify as a segment of a business under applicable accounting standards; (viii) items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the performance period; (ix) any other items of significant income or expense which are determined to be appropriate adjustments; (x) items relating to unusual or infrequently occurring corporate transactions, events or developments; (xi) items related to amortization of acquired intangible assets; (xii) items that are outside the scope of the Company’s core, on-going business activities; (xiii) items relating to changes in tax laws; (xiv) items relating to asset impairment charges; (xv) items relating to gains or losses for litigation, arbitration and contractual settlements; or (xvi) items relating to any other unusual or nonrecurring events or charges in applicable laws, accounting principles or business conditions.

Vesting of Incentive Awards

As described, each annual award will likely consist of two components with different vesting conditions:

1.	Time-Based Vesting: For the award of time-based RSUs, the RSUs will vest, if at all, upon the third anniversary of the grant date (subject to continuing employment requirements).

Performance-Based Vesting: For the award of performance-based RSUs, the RSUs will vest, if at all, upon certification by the Committee in a number determined by the Company’s performance during the applicable performance period. The target level of performance is the 50^thpercentile as compared to the KBW Regional Bank Index. The number of performance-based RSUs earned will reflect actual performance compared to target performance, with a threshold (minimum) of 50% of the number of RSUs awarded for achievement of the 25^th percentile as compared to the KBW Regional Bank Index, and a maximum of 150% of the number of RSUs awarded for achievement of the 75^th percentile as compared to the KBW Regional Bank Index. See Exhibit A for an example calculation.

Vested RSUs shall be settled in Company stock as specified in the applicable award agreements, generally within thirty days of vesting.

Dividend Equivalents

As part of the award, a Participant will receive “dividend equivalents” during the vesting periods for each tranche of RSUs. The number of dividend equivalents will equal the amount of dividends declared by the Company for one common share of stock during the vesting periods, multiplied by the number of RSUs granted for each type of award subject to such vesting periods.

Changes in Employment Status

A Participant must be actively employed by Alerus at the time awards are made. If an employee is a new Participant in the LTIP for less than a full year, the measure of his or her award will be prorated for the period of actual service. Generally, employees hired during the fourth quarter are not eligible to participate in that year’s LTIP. The Committee has the authority and sole discretion to determine whether and at what level, if any, an employee may participate in the LTIP.

In the event a Participant separates from service with the Company (other than due to death, disability or retirement) before his or her RSUs vest, the RSUs shall be forfeited in their entirety. However, in the event of a termination due to death or disability, an executive officer’s RSUs will become immediately and fully vested (with the outstanding performance-based RSUs vesting as if the Company were to achieve the target performance goal). In the event of a retirement (defined as: (a) attainment of age 60 with 5 years of service; or (b) attainment of age 62), an executive officer’s performance-based RSUs will vest and be settled at the conclusion of the performance period based on actual performance during the performance period, and his or her time-based RSUs will become fully and immediately vested; provided, however, in either case if a retirement occurs within the first 6 months following the grant date for any RSUs, there shall be no vesting in accordance with this sentence and any unvested RSUs shall instead be forfeited.

For non-executive officers, in the event of a termination due to death or disability, a pro rata portion of the RSUs will become immediately and fully vested based upon the number of full fiscal months during the vesting periods during which the Participant was actively employed (with performance-based RSUs vesting as if the Company were to achieve target performance). In the event of a retirement, a pro rata portion of the performance-based RSUs will vest and be settled at the conclusion of the performance period based on actual performance during the performance period, and a pro rata portion of the time-based RSUs will also become fully and immediately vested, in each case based upon the number of full fiscal months during the vesting periods during which the Participant was actively employed; provided, however, in either case if a retirement occurs within the first 6 months following the grant date for any RSUs, there shall be no vesting in accordance with this sentence and any unvested RSUs shall instead be forfeited.

Plan Administration

The Board has assigned authority for LTIP administration to the Compensation Committee. The Committee has the responsibility and authority to:

Design the basics of the Plan and the implementation process, and submit to the Board for final approval;

Review and recommend for the Board’s approval appropriate modifications to the Plan;

Review and revise Company performance metrics, target award percentages, vesting arrangements and other performance-based triggers;

Approve an accrual adequate to fund Board approved payments and adjusting as appropriate per the LTIP during the plan period;

Approve a determination and assessment of actual performance for the plan period;

Approve any performance-based adjustments or adjustments due to unforeseen extraordinary events to incentive awards where appropriate;

Correct any defect, supply any omission, reconcile any inconsistency and otherwise interpret and administer the LTIP and any instrument or award agreement relating to the LTIP or any award hereunder;

Establish, amend, suspend, or waive such rules, regulations and procedures that the Committee may establish in the administration of the LTIP, and appoint such agents as it shall deem appropriate for the proper administration of the LTIP; and

Make any other determination and take any other action that the Committee deems necessary or desirable for the proper administration of the LTIP.

The Committee may also delegate to any member of the Board or committee of Board members such of its powers as it deems appropriate, including the power to sub-delegate; except that, pursuant to such delegation or sub-delegation, only a member of the Board (or a committee thereof) may grant awards.

Acting within the authority conferred on the Committee by the Board through the Committee’s Charter and unless otherwise expressly provided in the LTIP, all designations, determinations, adjustments, interpretations, and other decisions under or with respect to the LTIP, any award or award agreement shall be within the discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon the Company and any Participant. No member of the Committee shall be liable for any action, determination or interpretation made in good faith, and all members of the Committee shall, in addition to their rights as Directors, be fully protected by Alerus with respect to any such action, determination or interpretation.

Modification and Termination

The Compensation Committee has sole authority and discretion to interpret the terms of the LTIP, along with all powers conferred to the Committee pursuant to the terms of the Equity Plan. The LTIP is offered and maintained at the discretion of Alerus. Nothing within the Plan or the Equity Plan shall be construed as creating an employment contract or other guarantee of employment between any Participant and Alerus. Alerus has the exclusive right to modify the LTIP, in whole or in part, or to terminate the LTIP entirely. The LTIP is not an ERISA plan. The LTIP is intended to be a long-term incentive award bonus program.

Exhibit A: Incentive Award Example

(For Illustration Only)

LTIP Award

Grant Date: February 2024

Participant’s target award percentage (as established by the Committee): 10% of base salary

Participant’s total target award: $10,000 (with base salary of $100,000)

Time-based RSU award component: $4,000 (40% of total award)

Performance-based RSU award component: $6,000 (60% of total award)

Performance vesting period: calendar years 2024-2026

Vesting date: February 2027 (three years from Grant Date)

Performance is based on relative performance against the companies in the KBW Regional Bank Index at the beginning of the performance period.

Performance goal:

Relative 3-year Cumulative EPS CAGR Growth (50% weighting);

Relative 3-year Average Return on Equity (50% weighting).

Threshold level for performance:	25^th percentile (50% of performance RSUs are earned)
Target Level for Performance:	50^th percentile (100% of performance RSUs are earned)
Maximum level for performance:	75^th percentile (150% of performance RSUs are earned)

Exhibit 10.2

Senior Executive Officers

alerus financial corporation

2019 Equity Incentive Plan

Performance-based Restricted Stock unit Award Agreement

The Participant specified below is hereby granted a restricted stock unit award (the “Award”) by Alerus Financial Corporation, a Delaware corporation (the “Company”), under the Alerus Financial Corporation 2019 Equity Incentive Plan (the “Plan”). The Award shall be subject to the terms of the Plan and the terms set forth in this Performance-Based Restricted Stock Unit Award Agreement (“Award Agreement”).

Section 1.            Award. The Company hereby grants to the Participant the Award of restricted stock units (each such unit, an “RSU”), where each RSU represents the right of the Participant to receive one Share in the future, subject to the terms of this Award Agreement and the Plan.

Section 2.            Terms of Restricted Stock Unit Award. The following words and phrases relating to the Award shall have the following meanings:

(a)         The “Participant” is ______________________________.

(b)         The “Grant Date” is ______________________________.

(d)         The “Performance Period” begins on __________ and concludes on __________.

Except for words and phrases otherwise defined in this Award Agreement, any capitalized word or phrase in this Award Agreement shall have the meaning ascribed to it in the Plan.

Section 3.            Performance Measurement and Vesting.

(a)         General. The Committee has established one or more performance objectives for the Performance Period. On a date following the conclusion of the Performance Period (the “Certification Date”), the Committee shall certify the level of performance for each applicable performance objective and the number of RSUs subject to this Award that shall become vested, if any, as set forth in Schedule A to this Award Agreement; provided that such Certification Date shall occur no later than March 15 of the calendar year immediately following the conclusion of the Performance Period. Unless otherwise provided in this Section 3, the Participant shall forfeit all right, title and interest in and to the RSUs that do not become vested as of the Certification Date.

(b)         Termination of Service. Except as otherwise provided in Section 3(c), Section 3(d), or Section 3(e), if the Participant’s Termination of Service occurs prior to the Certification Date, the Participant shall forfeit all right, title and interest in and to the RSUs as of such Termination of Service.

(c)         Disability or Death. Upon the Participant’s Termination of Service due to the Participant’s Disability or death, the number of RSUs that would vest as of the Certification Date if the Committee were to certify a target level of performance for each performance objective during the Performance Period shall become immediately vested. For the purposes of this Section 3(c), “Disability” (1) has the meaning provided in the then-effective employment agreement, if any, between the Participant and the Company, or, in absence thereof, (2) means a medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months, where such impairment causes the Participant to be unable to perform the duties of the Participant’s position of employment or any substantially similar position of employment.

(d)         Retirement. Upon the Participant’s Termination of Service due to the Participant’s Retirement, the Participant will remain eligible to vest in the number of RSUs that would otherwise vest as of the Certification Date pursuant to Section 3(a) as if the Participant had continued in active employment with the Company through such Certification Date; provided, however, if a Participant’s Termination of Service due to Retirement occurs during the first six (6) months following the Grant Date, no part of the RSUs shall vest in accordance with this Section 3(d). For the purposes of this Section 3(d), “Retirement” means the Participant’s voluntary Termination of Service following the Participant’s attainment of: (i) age sixty (60), provided that the Participant has been employed with the Company for at least five (5) years prior to such Termination of Service; or (ii) age sixty-two (62).

(e)         Change in Control. If a Change in Control occurs prior to the conclusion of the Performance Period, a portion of the RSUs shall immediately vest (i) if prior to the Change in Control, the Committee determines that this Award will not continue after the Change in Control or that the successor entity (or its parent) will not agree to provide at the time of the Change in Control for the assumption or replacement of this Award with a comparable equity-based award covering shares of the successor entity (or its parent) that would equitably preserve the compensation element of the Award (the date of such determination by the Committee, the “Determination Date”); or, (ii) if the foregoing is inapplicable, if within one (1) year following the Change in Control the Participant incurs a Termination of Service by the Company other than for Cause or by the Participant for Good Reason. The portion of RSUs subject to accelerated vesting pursuant to this Section 3(e) shall equal the number of RSUs that would vest as of the Certification Date if the Committee were to certify a target level of performance for each performance objective during the Performance Period, multiplied by a fraction, the numerator of which is the number of days between the Grant Date and, as applicable, the Determination Date or the date of the qualifying Termination of Service, and the denominator of which is the number of days in the Performance Period.

For the purposes of this Section 3(e), “Cause” (1) has the meaning provided in the then-effective employment agreement, if any, between the Participant and the Company, or, in absence thereof, (2) means (A) the Participant’s commission of any act constituting a felony or the Participant’s conviction or guilty or no contest plea to any criminal misdemeanor involving fraud, misrepresentation, or theft; (B) gross misconduct or any act of fraud, disloyalty, or dishonesty by the Participant related to or in connection with the Participant’s employment with the Company, or otherwise likely to cause material harm to the Company or its reputation; (C) a material violation by the Participant of the Company’s policies or codes of conduct; or (D) the willful or material breach by the Participant of any agreement between the Participant and the Company. “Good Reason” (1) has the meaning provided in the then-effective employment agreement, if any, between the Participant and the Company, or, in absence thereof, (2) means any of the following conditions arising without the consent of the Participant, provided that the Participant has notified the Company in writing of the existence of such condition within ninety (90) days of its first occurrence, and the Company has failed to remedy such condition within thirty (30) days of such notice: (A) a material diminution in the Participant’s base salary, authority, duties, or responsibilities; (B) relocation of the Participant’s principal office more than fifty (50) miles from its location as of the Grant Date; or (C) any other action or inaction that constitutes a material breach by the Company or any terms or conditions of any agreement between the Participant and the Company, which breach has not been caused by the Participant.

Section 4.            Settlement of RSUs. Delivery of Shares or other amounts under this Award Agreement and the Plan shall be subject to the following:

(a)         Delivery of Shares. The Company shall deliver to the Participant one Share free and clear of any restrictions in settlement of each of the vested and unrestricted RSUs within thirty (30) days of the Certification Date (or, if earlier, the date upon which the RSUs become vested pursuant to Section 3(c) or Section 3(e)).

(b)        Compliance with Applicable Laws. Notwithstanding any other term of this Award Agreement or the Plan, the Company shall have no obligation to deliver any Shares or make any other distribution of benefits under this Award Agreement or the Plan unless such delivery or distribution complies with all applicable laws and the applicable rules of any securities exchange or similar entity.

(c)        Certificates Not Required. To the extent that this Award Agreement and the Plan provide for the issuance of Shares, such issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any securities exchange or similar entity.

Section 5.            Withholding. All deliveries of Shares pursuant to the Award shall be subject to withholding of all applicable taxes. The Company shall have the right to require the Participant (or if applicable, permitted assigns, heirs and Designated Beneficiaries) to remit to the Company an amount sufficient to satisfy any tax requirements prior to the delivery date of any Shares in connection with the Award. Except as otherwise provided by the Committee, such withholding obligations may be satisfied (a) through cash payment by the Participant, (b) through the surrender of Shares that the Participant already owns or (c) through the surrender of Shares to which the Participant is otherwise entitled under the Plan; provided, however, that except as otherwise specifically provided by the Committee, such Shares under clause (c) may not be used to satisfy more than the maximum individual statutory tax rate for each applicable tax jurisdiction, or such lesser amount as may be established by the Company. In the instance the withholding obligation is satisfied through the surrender of Shares, the Company will not deliver fractional Shares, and it will pay, in lieu thereof, the Fair Market Value of such fractional Shares.

Section 6.            Dividend Equivalents. The Participant shall be entitled to receive a payment in cash upon the conclusion of the Performance Period in an amount equal in value to any dividends and distributions paid with respect to the RSUs (other than dividends and distributions that may be issued with respect to Shares by virtue of any corporate transaction, to the extent adjustment is made pursuant to Section 3.4 of the Plan) during the Performance Period (“Dividend Equivalents”); provided, however, that no Dividend Equivalents shall be payable to or for the benefit of the Participant with respect to record dates for such dividends or distributions occurring before the Grant Date or on or after the date, if any, on which the Participant has forfeited the RSUs. Dividend Equivalents shall be credited at the time the respective dividends or distributions are paid and shall be accumulated, without interest, and shall be subject to the same restrictions applicable to the underlying RSUs.

Section 7.            Restrictive Covenants.

(a)         Confidential Information. Except as permitted by the Company, the Participant shall not at any time divulge, furnish or make accessible to anyone or use in any way other than in the ordinary course of the business of the Company or its affiliates, any confidential, proprietary, or secret knowledge or information of the Company or its affiliates that the Participant has acquired or will acquire about the Company or its affiliates, whether developed by himself or herself or by others, concerning (i) any trade secrets; (ii) any confidential, proprietary, or secret designs, programs, processes, formulate, plans devices, or material (whether or not patented or patentable) directly or indirectly useful in any aspect or the business of the Company or of its affiliates; (iii) any customer or supplier lists; (iv) any confidential, proprietary, or secret development or research work; (v) any strategic or other business, marketing, or sales plans; (vi) any financial data or plans; or (vii) any other confidential, proprietary, or secret information about any aspect or the business of the Company or of its affiliates. The Participant acknowledges that the knowledge and information described above constitutes a unique and valuable asset of the Company and represents a substantial investment of time and expense by the Company and that any disclosure or other use of such knowledge or information other than for the sole benefit of the Company or its affiliates would be wrongful and would cause irreparable harm to the Company. The Participant shall not intentionally commit any act that would materially reduce the value of such knowledge or information to the Company or its affiliates. The foregoing obligations or confidentially shall not apply to any knowledge or information that (i) is now or subsequently becomes generally publicly known, other than as a direct or indirect result of the breach of this Award Agreement, (ii) is independently made available to the Participant in good faith by a third party who has not violated a confidential relationship with the Company or its affiliates, or (iii) is required to be disclosed by law or legal process. The Participant’s obligations under this Award Agreement to maintain the confidentiality of the Company’s confidential, proprietary, and secret information are in addition to any obligations of the Participant under any other agreement between the Participant and the Company, and any applicable statutory or common law.

(b)         Return of Records and Property. Upon the Participant’s Termination of Service, or at any time upon the Company’s request, the Participant shall promptly deliver to the Company all Company and affiliate records and all Company and affiliate property in his or her possession or under his or her control, including without limitation manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, printouts, computer disks, computer tapes, sources codes, data, tables, or calculations, and all copies thereof; documents that in whole or in part contain any trade secrets or confidential, proprietary, or other secret information of the Company or its affiliates and all copies thereof; and keys, access cards, access codes, passwords, credit cards, personal computers, telephones and other electronic equipment belonging to the Company or an affiliate.

Section 8.            Non-Transferability of Award. The Award, or any portion thereof, is not transferable except as designated by the Participant by will or by the laws of descent and distribution or pursuant to a domestic relations order. Except as provided in the immediately preceding sentence, the Award shall not be assigned, transferred, pledged, hypothecated or otherwise disposed of by the Participant in any way whether by operation of law or otherwise, and shall not be subject to execution, attachment or similar process. Any attempt at assignment, transfer, pledge, hypothecation or other disposition of the Award contrary to the provisions hereof, or the levy of any attachment or similar process upon the Award, shall be null and void and without effect.

Section 9.            No Rights as Shareholder. Notwithstanding the Participant’s right to receive dividend equivalents pursuant to Section 6, the Participant shall not have any rights of a Shareholder with respect to the RSUs, including but not limited to, voting rights, prior to the settlement of the RSUs pursuant to Section 4(a) above.

Section 10.         Heirs and Successors. This Award Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring all or substantially all of the Company’s assets or business. If any rights of the Participant or benefits distributable to the Participant under this Award Agreement have not been settled or distributed at the time of the Participant’s death, such rights shall be settled for and such benefits shall be distributed to the Designated Beneficiary in accordance with the provisions of this Award Agreement and the Plan. The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form as the Committee may require. The Participant’s designation of beneficiary may be amended or revoked from time to time by the Participant in accordance with any procedures established by the Committee. If a Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any benefits that would have been provided to the Participant shall be provided to the legal representative of the estate of the Participant. If a Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the provision of the Designated Beneficiary’s benefits under this Award Agreement, then any benefits that would have been provided to the Designated Beneficiary shall be provided to the legal representative of the estate of the Designated Beneficiary.

Section 11.         Administration. The authority to manage and control the operation and administration of this Award Agreement and the Plan shall be vested in the Committee, and the Committee shall have all powers with respect to this Award Agreement as it has with respect to the Plan. Any interpretation of this Award Agreement or the Plan by the Committee and any decision made by the Committee with respect to this Award Agreement or the Plan shall be final and binding on all persons.

Section 12.         Plan Governs. Notwithstanding any provision of this Award Agreement to the contrary, this Award Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the General Counsel of the Company. This Award Agreement shall be subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time. Notwithstanding any provision of this Award Agreement to the contrary, in the event of any discrepancy between the corporate records of the Company and this Award Agreement, the corporate records of the Company shall control.

Section 13.         Not an Employment Contract. Neither the Award nor this Award Agreement shall confer on the Participant any rights with respect to continuance of employment or other service with the Company or a Subsidiary, nor shall they interfere in any way with any right the Company or a Subsidiary may otherwise have to terminate or modify the terms of the Participant’s employment or other service at any time.

Section 14.         Amendment. Without limitation of Section 17 and Section 18 below, this Award Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended in writing by the Participant and the Company without the consent of any other person.

Section 15.         Governing Law. This Award Agreement, the Plan and all actions taken in connection herewith and therewith shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws, except as superseded by applicable federal law.

Section 16.         Validity. If any provision of this Award Agreement is determined to be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Award Agreement shall be construed and enforced as if such illegal or invalid provision had never been included herein.

Section 17.         Section 409A Amendment. The Award is intended to be exempt from Code Section 409A and this Award Agreement shall be administered and interpreted in accordance with such intent. The Committee reserves the right (including the right to delegate such right) to unilaterally amend this Award Agreement without the consent of the Participant in order to maintain an exclusion from the application of, or to maintain compliance with, Code Section 409A; and the Participant hereby acknowledges and consents to such rights of the Committee.

Section 18.         Clawback. The Award and any amount or benefit received under the Plan shall be subject to potential cancellation, recoupment, rescission, payback or other action in accordance with the terms of any applicable Company or Subsidiary clawback policy (the “Policy”) or any applicable law, as may be in effect from time to time. The Participant hereby acknowledges and consents to the Company’s or a Subsidiary’s application, implementation and enforcement of (a) the Policy and any similar policy established by the Company or a Subsidiary that may apply to the Participant, whether adopted prior to or following the date of this Award Agreement and (b) any provision of applicable law relating to cancellation, rescission, payback or recoupment of compensation, and agrees that the Company or a Subsidiary may take such actions as may be necessary to effectuate the Policy, any similar policy and applicable law, without further consideration or action.

*     *     *     *     *

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed in its name and on its behalf, and the Participant acknowledges understanding and acceptance of, and agrees to, the terms of the Plan and this Award Agreement, all as of the Grant Date.

	Alerus Financial Corporation

	By:
	Name:	Katie Lorenson
	Title:	President & CEO

	Participant

	Name:

PERFORMANCE-BASED
RESTRICTED STOCK UNIT AWARD AGREEMENT

schedule a

Performance-Based Objectives

The determination of the number of RSUs that will vest on the Certification Date as provided in Section 3(a) of the Award Agreement will be determined as follows:

1.            The Committee will determine the Company’s level of performance, on a relative basis, as compared to the performance of the companies in the KBW Nasdaq Bank Index at the start of the three-year Performance Period. The two performance measures are (1) relative 3-year Cumulative EPS CAGR Growth (50% weighting), and (2) relative 3-year Average Return on Equity (50% weighting), each as measured for the Performance Period subject to any adjustment in accordance with the guidelines set forth in the Alerus Financial Long Term Incentive Plan, as may be in effect from time to time.

2.            Based on the Company’s relative performance during the Performance Period, the Committee will determine the Performance Factor for the Performance Period based upon the following table, specifically by determining where the Company’s performance falls relative to the goals specified in the applicable column of the table, and then by selecting the corresponding Performance Factor. If the Company’s performance for the Performance Period is between two amounts shown in the applicable column of the table, the corresponding Performance Factor will be determined by linear interpolation between the two relevant Performance Factors shown in the table. If the Company’s performance for the Performance Period is less than the Threshold Goal specified, the Performance Factor is zero. The Maximum Performance Factor is 150% regardless of Company’s performance in in excess of the Maximum Goal.

Actual Performance Factor		Target Relative Performance Rank	Executive LTI Payout in $$ Value
50%	Threshold	25^thPercentile	50%
100%	Target	50^thPercentile	100%
150%	Maximum	75^thPercentile	150%

3.            The number of Units that will vest as of the Certification Date will be the number of RSUs specified in Section 2(c) multiplied by the Performance Factor.

*     *     *     *     *

As an example, to compute the number of Units that will vest on the Certification Date, assume the following facts: (i) the number of RSUs awarded is 500; and (ii) the Company’s actual Performance for the Performance Period was half-way between the Threshold Goal (i.e., 25^th percentile) and the Target Goal (i.e., 50^th percentile). Under these facts, the Performance Factor would be 75% (half-way between 50% and 100%), and the number of RSUs vesting on the Certification Date would be 375.

Exhibit 10.3

FIRST AMENDMENT OF
ALERUS FINANCIAL CORPORATION
2019 EQUITY INCENTIVE PLAN

THIS INSTRUMENT, amending the Alerus Financial Corporation 2019 Equity Incentive Plan (the “Plan”), is adopted by Alerus Financial Corporation, a Delaware corporation, (the “Company”) and shall be effective as of the date specified herein.

RECITALS

WHEREAS, the Company sponsors and maintains the Plan;

WHEREAS, pursuant to Article 6 of the Plan, the Board of Directors of the Company (the “Board”) may amend the Plan at any time, subject to the conditions set forth in such article; and

WHEREAS, the Board desires to amend the Plan;

NOW, THEREFORE, the Plan is hereby amended as follows effective May 21, 2024, except as otherwise indicated:

1.             Section 2.3 of the Plan is deleted in its entirety and replaced with the following new Section 2.3:

Section 2.3      Minimum Vesting Period. If the right to become vested in an Award granted to a Participant is solely conditioned on the completion of a specified period of service with the Company or its Subsidiaries, without achievement of performance measures or other performance objectives (whether or not related to the performance measures) being required as a condition of vesting, then the required period of service for full vesting shall not be less than one year; provided, that the following Awards shall not be subject to the foregoing minimum vesting requirement: (a) any replacement Award granted in connection with awards that are assumed, converted or substituted pursuant to a merger, acquisition or similar transaction entered into by the Company or any of its Subsidiaries; (b) any Stock delivered in lieu of fully vested cash obligations; (c) any Awards to Director Participants that vest on the earlier of the one-year anniversary of the grant date and the next annual meeting of Shareholders which is at least fifty (50) weeks after the immediately preceding year’s annual meeting; and (d) any additional Awards the Committee may grant, up to a maximum of five percent (5%) of the total Share reserve set forth in Section 3.2(a); provided, further, that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any Award, including in the cases of retirement, death, Disability or a corporate transaction, in the terms of the Award Agreement or otherwise.

2.             Except as modified by this First Amendment, the Plan shall be and remain in full force and effect.

IN WITNESS WHEREOF, the Company has caused this First Amendment to be executed by the undersigned officer, who has been duly authorized by the Board, effective as of the date specified herein.

	ALERUS FINANCIAL CORPORATION

	By:	/s/ Missy Keney
	Its: Executive Vice President and Chief Engagement Officer
	Date: May 21, 2024

Exhibit 10.4

EXECUTIVE SEVERANCE AGREEMENT

This Executive Severance Agreement (“Agreement”) is made and entered into between Alerus Financial Corporation, a Delaware corporation (the “Company”), and Katie Lorenson (the “Employee”).

WHEREAS Employee is a key member of the management of the Company and has provided guidance, leadership, and direction in the growth, management, and development of the Company and has learned trade secrets, confidential procedures and information, and sensitive business plans of the Company;

WHEREAS the Company desires to continue to employ the Employee, and Employee desires to continue employment with the Company; and

WHEREAS the Company desires to recognize the significant personal contribution that the Employee has made to further the best interests of the Company and its stockholders;

NOW THEREFORE, in consideration of these premises, the mutual promises and undertakings set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Employee and the Company hereby agree as follows.

DEFINITIONS. As used in this Agreement, certain terms shall have the following meanings:

Affiliate shall mean the Company and any entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Company

Cause shall mean and be limited to: (i) willful and gross neglect of duties by the Employee, (ii) an act or acts committed by the Employee constituting a felony and substantially detrimental to the Company or its reputation, (iii) any action or inaction detrimental to the Company or its reputation that results in regulatory enforcement action, whether or not such enforcement action is subject to direct enforcement under 12 U.S.C § 1818(i)(l), by any regulatory authorities having authority over the Company, or (iv) any violation of Employee’s obligations under this Agreement, including, without limitation, the obligations set forth in Section 3.

Change in Control shall mean a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, as such change is defined under the default definition in Treasury Regulation §1.409A-3(i)(5) or any subsequently applicable Treasury Regulation.

Code shall mean the Internal Revenue Code of 1986, as amended, or any successor statute, rule or regulation of similar effect.

Disability or Disabled shall mean the Employee: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months or (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, is receiving income replacement benefits for a period of not less than three (3) months under a disability plan covering employees of the Company.

Good Reason shall mean: (i) without the Employee’s express written consent, a material diminution in authority, duties or responsibilities (except after the Employee attains Retirement Age or in connection with the termination of the Employee’s employment for Disability, death, Cause, or by the Employee other than for Good Reason); (ii) any material reduction by the Company in the Employee’s Base Salary; (iii) any failure of the Company to obtain the assumption of, or the agreement to perform, this Agreement by any successor as contemplated in Section 13 hereof; (iv) the Company’s material breach of this Agreement; or (v) the Company requiring the Employee to be permanently assigned to a location more than 35 miles from Employee’s current work location, except for required travel on Company business, or, in the event the Employee consents to any relocation, and such relocation is more than 35 miles from the Employee’s previous location, the failure by the Company to pay (or reimburse the Employee) for all reasonable moving expenses incurred by the Employee relating to a change of the Employee’s principal residence in connection with such relocation and to indemnify the Employee against any loss realized on the sale of the Employee’s principal residence in connection with any such change of residence. Employee must notify Company in writing of any Event that constitutes Good Reason hereunder within thirty days following Employee’s initial knowledge of the existence of such Event or such Event shall not constitute Good Reason under this Agreement. Employee must provide prior written notification in accordance with Section 4 of his intention to terminate his employment for Good Reason and the Termination Date and Company shall have thirty days from the date of receipt of such notice to effect a cure of the condition constituting Good Reason, and, upon cure thereof by the Company, such event shall no longer constitute Good Reason.

Retirement Age shall mean the attainment of age 65.

Specified Employee shall mean an employee who at the time of termination of employment is a key employee of the Company, if any stock of the Company is publicly traded on an established securities market or otherwise. For purposes of this Agreement, an employee is a key employee if the employee meets the requirements of Code section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding section 416(i)(5)) at any time during the 12-month period ending on December 31 (the “identification period”). If the employee is a key employee during an identification period, the employee is treated as a key employee for purposes of this Agreement during the twelve (12) month period that begins on the first day of January following the close of the identification period.

TERM. The term of this Agreement shall commence upon the date this Agreement is executed by all parties (the “Effective Date”) and will continue for an initial term of twenty four months. Thereafter, the term of this Agreement will automatically renew each day after the Effective Date for one additional day so that the term of the Agreement shall always be twenty four months. Notwithstanding the forgoing, prior to a Change in Control, this Agreement may be terminated upon 120 days’ written notice of intent not to renew by either party; after a Change in Control, this Agreement shall automatically terminate upon the second anniversary of the closing on the event constituting the Change in Control.

NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.

Except as permitted in writing by the Company, the Employee shall not at any time divulge, furnish or make accessible to anyone, or use in any way other than in the ordinary course of the business of the Company or its Affiliates, any confidential, proprietary, or secret knowledge or information of the Company or its Affiliates that the Employee has acquired or will acquire about the Company or its Affiliates, whether developed by himself or herself or by others, concerning (i) any trade secrets; (ii) any confidential, proprietary, or secret designs, programs, processes, formulae, plans, devices, or material (whether or not patented or patentable) directly or indirectly useful in any aspect of the business of the Company or of its Affiliates; (iii) any customer or supplier lists; (iv) any confidential, proprietary, or secret development or research work; (v) any strategic or other business, marketing, or sales plans; (vi) any financial data or plans; or (viii) any other confidential, proprietary, or secret information about any aspect of the business of the Company or of its Affiliates (collectively “Confidential Information”).

The Employee acknowledges that the knowledge and information described above constitutes a unique and valuable asset of the Company and represents a substantial investment of time and expense by the Company and that any disclosure or other use of such knowledge or information other than for the sole benefit of the Company or its Affiliates would be wrongful and would cause irreparable harm to the Company. The Employee shall not intentionally commit any act that would materially reduce the value of such knowledge or information to the Company or its Affiliates. The Employee's obligations under this Agreement to maintain the confidentiality of the Company's confidential, proprietary, and secret information are in addition to any obligations of the Employee under applicable statutory or common law. The obligations of the Employee under this Section 3 shall survive the termination of this Agreement and the termination of the Employee’s employment with the Company.

The foregoing obligations of confidentiality shall not apply to any knowledge or information that: (i) is now or subsequently becomes generally publicly known, other than as a direct or indirect result of the breach of this Agreement; (ii) is independently made available to the Employee in good faith by a third party who has not violated a confidential relationship with the Company or its Affiliates or any other entity; or (iii) is required to be disclosed by law or legal process.

If the Employee breaches any of the covenants in this Section 3, the Employee’s right to any of the payments specified in Section 5 after the date of the breach shall be forever forfeited and the right of the Employee’s designated beneficiary or estate to any payments under this Agreement shall likewise be forever forfeited. This forfeiture is in addition to and not instead of any injunctive or other relief that may be available to the Company.

TERMINATION OF EMPLOYMENT. During the Term, the Employee’s employment with the Company shall terminate upon:

the date specified in written notice from the Company to Employee notifying him of the termination of his employment for any reason, provided that if Employee’s employment is terminated by the Company without Cause (defined below), then the Company shall provide Employee at least thirty days’ notice of termination or pay in lieu of notice;

Employee providing to the Company not less than sixty nor more than ninety days’ prior written notice of his resignation of employment, including for Good Reason, effective at the end of such period, provided that the Company may in its sole discretion elect to relieve Employee from his duties and place him on paid leave during all or any portion of the notice period; or

Employee’s death or Disability.

SEVERANCE PAYMENTS.

Except as provided in Section 5(b), upon the termination of Employee’s employment by the Company other than for Cause prior to a Change in Control, the Employee shall be entitled to an amount equal to the aggregate of one times: (i) the annual rate of base salary then being paid to the Employee, plus (ii) the average of the past three years short term bonus pay, plus (iii) the Company’s portion of 12 months’ premiums under any health, disability and life insurance plan or program in which the Employee was entitled to participate immediately prior to the Termination Date (the aggregated amount, the “Severance Pay”), which shall be paid to Employee by the Company over a period of 12 months from the Termination Date in accordance with the Company’s regular payroll cycle, commencing on the first regular payroll date of the Company that occurs more than 60 days after the Termination Date (and including any installment that would have otherwise been paid on regular payroll dates during the period of 60 days following the Termination Date), provided the conditions specified in Section 5(c) have been satisfied.

Notwithstanding Section 5(a) and subject to the limitation in Section 5(e), if (i) the Employee’s employment is terminated by the Company without Cause or by the Employee for Good Reason, and (ii) the Termination Date occurs within 24 months immediately following a Change in Control, the Employee shall receive 2.99 times the Severance Pay calculated in accordance with Section 5(a), which shall be paid to Employee by the Company in a lump sum on the later of 60th day following the Termination Date or the closing on the event constituting the Change in Control, provided the conditions specified in Section 5(c) have been satisfied.

Notwithstanding the foregoing provisions of Section 5(a) and (b), the Company will not be obligated to make any payments to or on behalf of Employee under Section 5(a) and (b), as applicable, unless (i) Employee signs a release of claims in favor of the Company in a form as prepared by the Company (the “Release”) and delivered to Employee no later than five business days after the Termination Date, (ii) all applicable consideration periods and rescission periods provided by law with respect to the Release have expired without Employee rescinding the Release, and (iii) Employee is in strict compliance with the terms of this Agreement as of the dates of the payments. The cessation of these payments will be in addition to, and not as an alternative to, any other remedies at law or in equity available to the Company, including without limitation the right to seek specific performance or an injunction.

If, when the Employee’s termination of employment occurs, the Employee is a specified employee within the meaning of section 409A of the Code, and if the Severance Pay would be considered deferred compensation under section 409A of the Code, and finally if an exemption from the six-month delay requirement of section 409A(a)(2)(B)(i) of the Code is not available, the Employee’s Severance Pay payments for the first six months following separation from service shall be paid to the Employee in a single lump sum on the first day of the seventh month after the month in which the Employee’s separation from service occurs.

In the event that the vesting, acceleration and payment of any equity awards or other compensation or benefits, together with all other payments and the value of any benefit received or to be received by the Employee under this Agreement would result in all or a portion of such payment being subject to excise tax under Section 4999 of the Code, then the amounts due under Section 5(b) that the Company shall pay to the Employee shall be either (i) the full payment or (ii) such lesser amount determined by the Company in accordance with this Section 5(e) that would result in no portion of the payment being subject to excise tax under Section 4999 of the Code (the “Excise Tax”), whichever of the foregoing amounts, taking into account the applicable Federal, state, and local employment taxes, income taxes, and the Excise Tax, results in the receipt by the Employee, on an after-tax basis, of the greatest amount of the payment notwithstanding that all or some portion of the payment may be taxable under Section 4999 of the Code. In the event the amounts due under Section are reduced, the amounts shall be reduced in the following order of priority: first, with respect to any amount that does not constitute the “deferral of compensation” under Section 409A of the Code and regulations promulgated thereunder, disregard the acceleration in the time of payment and then disregard the acceleration of vesting as a result of a Change in Control and second, with respect to any amount that constitutes the “deferral of compensation” under Section 409A of the Code and regulations promulgated thereunder, disregard the acceleration in the time of payment and then disregard the acceleration of vesting as a result of a Change in Control first with respect to Company funded amounts and then the Employee’s deferrals, in each case only to the extent necessary to satisfy (ii) above. All determinations required to be made under this Section 5(e) shall be made by a nationally recognized accounting firm that is the Company’s outside auditor immediately prior to the event triggering the payments that are subject to the Excise Tax (the “Accounting Firm”). The Company shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Company and Employee. Notice must be given to the Accounting Firm within 15 business days after an event entitling Employee to an amount due under this Agreement. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The Accounting Firm’s determinations must be made with substantial authority (within the meaning of Section 6662 of the Code). For the purposes of all calculations under Section 280G of the Code and the application of this Section 5.1, all determination as to present value shall use 120 percent of the applicable Federal rate (determined under Section 1274(d) of the Code) compounded based on the nature of the payment, as in effect on the Date of Termination, but if not otherwise specified, compounded on a semiannual basis. The determination by the Accounting Firm shall be final and binding on the Company and the Employee.

If Employee’s employment with the Company is terminated by the Company for Cause or for any reason not covered by Section 5(a) or 5(b), then the Company shall pay to Employee only his base salary and any accrued but unused vacation or PTO earned through the Termination Date.

In addition to the benefits otherwise provided in Section 5, the Employee shall be entitled to the following benefits and payments upon the Employee’s termination of employment: (i) the payment of the Employee’s base salary and any other form or type of compensation earned, vested and payable through the Date of Termination; (ii) the right to receive all benefits to which the Employee is vested on the Date of Termination in accordance with the terms under the Company pension and welfare benefit plans or any successor of such plan and any other plan or agreement relating to retirement benefits; and (iii) the right to exercise and to receive all rights in which the Employee is vested on the Date of Termination, in accordance with the terms of all awards under any Company stock purchase and stock incentive plans or programs, or any successor to any such plans or programs.

POST TERMINATION OBLIGATIONS.

Upon the Employee's termination of employment for any reason, or at any time upon the Company's request, the Employee shall promptly deliver to the Company all Company and Affiliate records and all Company and Affiliate property in the Employee’s possession or the Employee’s control, including without limitation manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, printouts, computer disks, computer tapes, source codes, data, tables or calculations, and all copies thereof; documents that in whole or in part contain any Confidential Information of the Company or its Affiliates and all copies thereof; and keys, access cards, access codes, passwords, credit cards, personal or laptop computers, telephones, PDAs, smart phones, and other electronic equipment belonging to the Company or an Affiliate.

Unless otherwise requested by the Company in writing, upon Employee’s termination of employment with the Company for any reason Employee shall automatically resign as of the Termination Date from all titles, positions and appointments Employee then holds with the Company and any and all Affiliates, whether as an officer, director, trustee, fiduciary or employee (without any claim for compensation related thereto), and Employee hereby agrees to take all actions necessary to effectuate such resignations.

During the Term and thereafter during the 24 month period following termination of employment for any reason, to the fullest extent permitted by law, the Employee shall not make any statement that is disparaging or reflects negatively upon the Company or its Affiliates, or any of their officers, directors or employees, to, or that is likely to come to the attention of, (a) any customer, vendor, supplier, distributor or other trade related business relation of the Company or any of its Affiliates, (b) any employee of the Company or its Affiliates, or (c) any member of the media. Nothing herein shall prevent the Employee from responding truthfully to any inquiry from a governmental entity, engaging in any protected activities and/or from communicating with the Board and/or those employees with a need to know about personnel issues involving Company officers, directors and/or employees.

Following termination of Employee’s employment with the Company for any reason, Employee will, upon reasonable request of the Company or its designee and provided the Company is not in material breach of any provision of this Agreement, respond to inquiries and cooperate with the Company in connection with the transition of his duties and responsibilities for the Company for up to six months following the Termination Date; and be reasonably available at mutually convenient times, with or without subpoena, to be interviewed, review documents or things, give depositions, testify, or engage in other reasonable activities in connection with any litigation or investigation, with respect to matters that Employee then has or may have knowledge of by virtue of his employment by or service to the Company or any of its Affiliates. In connection with such cooperation requested by the Company, the Company shall reimburse Employee for reasonable out-of-pocket costs incurred as a result of his compliance with his obligations, and, with respect to such cooperation provided by Employee during any period for which he is not receiving payments under Section 5(a), the Company shall compensate Employee at a daily rate comparable to his regular base salary rate in effect as of the Termination Date. The Company will endeavor to schedule such activities taking into account other obligations Employee may have and so as not to materially interfere with Employee’s then-current employment or other business activities.

Remedies. Employee agrees that if Employee fails to fulfill Employee’s obligations under this Agreement, including, without limitation, the obligations set forth in Section 3, the damages to the Company or any of its Affiliates would be very difficult or impossible to determine. Therefore, in addition to any other rights or remedies available to the Company at law, in equity or by statute, Employee hereby consents to the specific enforcement by the Company of this Agreement through an injunction or restraining order issued by an appropriate court, without the necessity of proving actual damages, and Employee hereby waives as a defense to any equitable action the allegation that the Company has an adequate remedy at law. The provisions of this Section shall not diminish the right of the Company to claim and recover damages or to obtain any equitable remedy in addition to injunctive relief to which the Company may otherwise be entitled. The Employee understands and agrees that the Employee will also be responsible for all costs and attorney’s fees incurred by the Company in enforcing any of the provisions of this Agreement including, but not limited to, expert witness fees and deposition costs.

Severability. If, for any reason, any Section or portion of this Agreement shall be held by a court to be invalid or unenforceable, it is agreed that such holding shall not affect any other section or portion of this Agreement. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Agreement is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

Entire Agreement. This Agreement constitutes the entire agreement between Company and the Employee concerning the subject matter and supersedes all prior agreements between the parties, including, without limitation, the Executive Severance Agreement, executed October 21, 2018. No rights are granted to the Employee under this Agreement other than those specifically set forth herein.

10.

No Employment Agreement. This Agreement is not an employment policy or contract. It does not give the Employee the right to remain an employee of the Company, nor does it interfere with the Company’s right to discharge the Employee. It also does not require the Employee to remain an employee or interfere with the Employee’s right to separate from service at any time.

11.

AMENDMENTS. The parties agree that no modification of the Agreement may be made except by means of a written agreement signed by the parties. However, if the Company determines to its reasonable satisfaction that an alteration or amendment of this Agreement is necessary or advisable so that the Agreement complies with the Code or any other applicable tax law, then, upon written notice to Employee, the Company may unilaterally amend this Agreement in such manner and to such extent as the Company reasonably considers necessary or advisable to ensure compliance with the Code or other applicable tax law. Nothing in this Section shall be deemed to limit the Company’s right to terminate this Agreement at any time and without stated cause.

12.

Assignment of Rights; Spendthrift Clause. None of the Employee, the Employee’s estate, or the Employee’s beneficiary shall have any right to sell, assign, transfer, pledge, attach, encumber, or otherwise convey the right to receive any payment hereunder. To the extent permitted by law, benefits payable under this Agreement shall not be subject to the claim of any creditor of the Employee, the Employee’s estate, or the Employee’s designated beneficiary or subject to any legal process by any creditor of the Employee, the Employee’s estate, or the Employee’s designated beneficiary.

13.

Binding Effect. This Agreement shall bind the Employee, the Company, and their beneficiaries, survivors, executors, successors and assigns, administrators, and transferees.

14.

Successors; Binding Agreement. By an assumption agreement in form and substance satisfactory to the Employee, the Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform this Agreement had no succession occurred.

15.

Tax Withholding. If taxes are required by the Code or other applicable tax law to be withheld by the Company from payments under this Agreement, the Company shall withhold any taxes that are required to be withheld.

16.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota.

17.

Notices. All notices, requests and demands given to or made pursuant hereto shall be in writing and shall be delivered or mailed to any such party at its address which:

In the case of the Company shall be:

Alerus Financial Corporation

401 DeMers Avenue

PO Box 6001

Grand Forks, North Dakota 56206-6001

Attention: General Counsel

In the case of the Employee shall be:

Either party may, by notice hereunder, designate a changed address. Any notice, if mailed properly addressed, postage prepaid, registered or certified mail, shall be deemed to have been given on the registered date or that date stamped on the certified mail receipt.

18.

Severability. In the event that any portion of this Agreement is held to be invalid or unenforceable for any reason, it is hereby agreed that such invalidity or unenforceability shall not affect the other portions of this Agreement and that the remaining covenants, terms and conditions or portions hereof shall remain in full force and effect, and any court of competent jurisdiction may so modify the objectionable provision as to make it valid, reasonable and enforceable.

19.

Compliance with Code Section 409A. The Company and the Employee intend that their exercise of authority or discretion under this Agreement shall comply with section 409A of the Code. Notwithstanding anything herein to the contrary in this Agreement, to the extent that any benefit under this Agreement that is nonqualified deferred compensation (within the meaning of section 409A of the Code) payable upon Employee’s termination of employment, such payment(s) shall be made only upon Employee’s “Separation from Service” pursuant to the default definition in Treasury Regulation section 1.409A-1(h).

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

Date:	May 21, 2024		/s/ Katie Lorenson
			Employee

		Accepted for Alerus Financial Corporation:

Date:	May 21, 2024	By:	/s/ Missy Keney
			Missy Keney
		Its	Executive Vice President and Chief Engagement Officer

Cover	May 21, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	May 21, 2024
Entity File Number	001-39036
Entity Registrant Name	ALERUS FINANCIAL CORP
Entity Central Index Key	0000903419
Entity Tax Identification Number	45-0375407
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	401 Demers Avenue
Entity Address, City or Town	Grand Forks
Entity Address, State or Province	ND
Entity Address, Postal Zip Code	58201
City Area Code	701
Local Phone Number	795-3200
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $1.00 par value per share
Trading Symbol	ALRS
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false

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